<PAGE>
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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to ______________
Commission file number: 0-15714
JONES CABLE INCOME FUND 1-C, LTD.
---------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1010419
-------- ----------
(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
- ---------------------------------------------------- --------------
(Address of principal executive office and Zip Code) (Registrant's telephone
no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes X No
--- ---
Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((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
---
DOCUMENTS INCORPORATED BY REFERENCE: None
(34071)
<PAGE>
Certain 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
events or results may differ materially from those discussed in the forward-
looking statements as a result of various factors.
PART I.
-------
ITEM 1. BUSINESS
-----------------
THE PARTNERSHIP. Jones Cable Income Fund 1-C, Ltd. (the
"Partnership") is a Colorado limited partnership that was formed pursuant to the
public offering of limited partnership interests in the Jones Cable Income Fund
1 Limited Partnership Program (the "Program"), which was sponsored by Jones
Intercable, Inc. (the "General Partner"). Jones Cable Income Fund 1-A, Ltd. and
Jones Cable Income Fund 1-B, Ltd. ("Fund 1-B") are the other partnerships that
were formed pursuant to the Program. The Partnership and Fund 1-B formed a
general partnership known as Jones Cable Income Fund 1-B/C Venture (the
"Venture") in which the Partnership owns a 60 percent interest and Fund 1-B owns
a 40 percent interest. The Partnership and the Venture were formed for the
purpose of acquiring and operating cable television systems
The Partnership does not directly own any cable television systems.
The Partnership's only asset is its 60 percent interest in the Venture. The
Venture owns the cable television systems serving the communities of
Canyonville, Myrtle Creek, Riddle and Winston, Oregon (the "Myrtle Creek
System"), South Sioux City, Nebraska (the "South Sioux City System") and Three
Rivers, Schoolcraft/Vicksburg, Constantine/White Pigeon, Dowagiac, Watervliet
and Vandalia, Michigan (the "Southwestern Michigan System"). The Myrtle Creek
System, South Sioux City System and the Southwestern Michigan System may
hereinafter collectively be referred to as the "Systems." It is the General
Partner's publicly announced policy that it intends to liquidate its managed
partnerships, including the Partnership, as opportunities for sales of
Partnership cable systems arise in the marketplace. In accordance with this
policy, the Venture sold one of its systems in 1997 and another in January 1998.
The Partnership has entered into an agreement to sell the Southwestern Michigan
System and the General Partner is continuing to market the Myrtle Creek System
and the South Sioux City System.
One of the primary objectives of the Venture has been to provide
quarterly cash distributions to its partners, primarily from cash generated
through operating activities of the Venture. The Venture's partners in turn
have sought to provide quarterly cash distributions to their partners. The
Venture used cash generated from operations to fund capital expenditures and did
not declare quarterly cash flow distributions during 1997, although it did make
a distributions of $15,000,000 to its partners from the proceeds of the sale of
the Colorado Systems during the first quarter of 1997 and a distribution of
$11,000,000 to its partners from the proceeds of the sale of the Clearlake
System in February 1998, as described below. The Venture does not anticipate
resuming cash flow distributions.
DISPOSITIONS OF CABLE TELEVISION SYSTEMS.
Colorado Systems. On January 24, 1997, the Venture sold the cable
----------------
television systems serving the cities of Broomfield and Brighton, the town of
Lochbuie, and portions of unincorporated Adams, Boulder and Weld Counties, all
in the State of Colorado (the "Colorado Systems") to an unaffiliated party for a
sales price of $35,000,000. The Venture distributed a total of $15,000,000 to
the Partnership and Fund 1-C in February 1997, which amount represents the net
sale proceeds following the Venture's repayment of a portion of the balance
outstanding on its credit facility and the payment of a brokerage fee to The
Jones Group, Ltd. ("The Jones Group"), a subsidiary of the General Partner,
totaling $875,000, representing 2.5 percent of the sales price, for acting as a
broker in this transaction. The Partnership received $9,034,640 and Fund 1-B
received $5,965,360 of such distribution. The Partnership, in turn, distributed
the $9,034,640 (approximately $212 per each $1,000
2
<PAGE>
invested in the Partnership) to the limited partners of the Partnership. Because
the distribution to the limited partners of the Partnership together with all
prior distributions did not return the amount initially contributed by the
limited partners to the Partnership plus the preferred return provided by the
Partnership's limited partnership agreement, the General Partner did not receive
a general partner distribution from the sale proceeds. Because the sale of the
Colorado Systems 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.
Clearlake System. On January 9, 1998, the Venture sold the cable
----------------
television system serving subscribers in the communities of Clearlake and Lake
Port, all in the State of California (the "Clearlake System") to an unaffiliated
party for a sales price of $21,400,000, subject to customary closing
adjustments. In February 1998, the Venture distributed approximately
$11,000,000 to the Partnership and Fund 1-B, which amount represented the net
sale proceeds following the Venture's payment of a 2.5 percent brokerage fee to
The Jones Group totaling approximately $535,000 and the repayment of $9,600,000
outstanding under the Venture's credit facility. The Partnership received
$6,625,300 of such distribution and in turn distributed such amount
(approximately $156 per each $1,000 invested in the Partnership) to its limited
partners. Because the distribution to the limited partners of the Partnership
together with all prior distributions have not returned the amount initially
contributed by the limited partners to the Partnership plus the preferred return
provided by the Partnership's limited partnership agreement, the General Partner
did not receive a general partner distribution from the sale proceeds. Because
the sale of the Clearlake 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.
Taking into account prior distributions to limited partners from the
Partnership's operating cash flow and from the net proceeds from the sales of
the Colorado Systems and the Clearlake System, the limited partners of the
Partnership will received a total of $29,792,852 or $700 per each $1,000
invested in the Partnership.
PROPOSED DISPOSITION OF CABLE TELEVISION SYSTEM.
Southwestern Michigan System. On January 30, 1998, the Venture
-----------------------------
entered into three purchase and sale agreements with unaffiliated parties
providing for the sale of the Southwestern Michigan System to three separate
unaffiliated parties for a total sales price of $31,250,000, subject to
customary closing adjustments. The closing of this transaction, which is
expected to occur in the second or third quarter of 1998, is subject to the
consents of governmental authorities and third parties with whom the Venture has
contracted that are necessary for the transfer of the Southwestern Michigan
System, and termination or expiration of the statutory waiting period applicable
to the purchase and sale agreements and the transactions contemplated thereby
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Because the sale of the Southwestern Michigan System will not represent a sale
of all or substantially all of the Partnership's assets, no vote of the limited
partners of the Partnership will be required to approve this sale.
Upon consummation of the proposed sale of the Southwestern Michigan
System, the Venture will pay a brokerage fee to The Jones Group totaling
approximately $781,250 and repay $11,300,000 outstanding under the Venture's
credit facility, and then the Venture will distribute the net sales proceeds of
approximately $19,000,000 to the Partnership and Fund 1-B. The Partnership will
receive approximately $11,443,800 and Fund 1-B will receive approximately
7,556,200 of such distribution. The Partnership, in turn, will distribute the
$11,443,800 (approximately $270 for each $1,000 invested in the Partnership) to
the limited partners of the Partnership. Because the distribution to the
limited partners of the Partnership together with all prior distributions will
not return the amount initially contributed by the limited partners to the
Partnership plus the preferred return provided by the Partnership's limited
partnership agreement, the General Partner of the Partnership will not receive a
general partner distribution from the sale proceeds. Because the sale of the
Southwestern Michigan System will not represent a sale of all or substantially
all of the Partnership's assets, no vote of the limited partners will be
required to approve this sale.
Taking into account prior distributions to limited partners from the
Partnership's operating cash flow and from the net proceeds of the sales of the
Colorado Systems and the Clearlake System and the anticipated distribution from
the net proceeds of the proposed sale of the Southwestern Michigan System, the
limited partners
3
<PAGE>
of the Partnership will have received a total of $41,236,652 or $970 for each
$1,000 invested in the Partnership after the sale of the Southwestern Michigan
System.
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
national television networks broadcast by their local affiliates, various
independent and educational television stations (both VHF and UHF) and certain
signals received from satellites. Basic service also usually includes programs
originated locally by the system, which may consist of music, news, weather
reports, stock market and financial information and live or videotaped programs
of a public service or entertainment nature. FM radio signals are also
frequently distributed to subscribers as part of the basic service.
The Systems offer tier services on an optional basis to its
subscribers. A tier generally includes most of the cable networks such as
Entertainment and Sports Programming Network (ESPN), Cable News Network (CNN),
Turner Network Television (TNT), Family Channel, Discovery and others, and the
cable television operators buy tier programming from these networks. The
Systems also offer a package that includes the basic service channels and the
tier services.
The Systems also offer premium services to subscribers, which consist
of feature films, sporting events and other special features that are presented
without commercial interruption. The cable television operators buy premium
programming from suppliers such as HBO, Showtime, Cinemax, Encore and others at
a cost based on the number of subscribers served by the cable operator. The per
service cost of 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, 1997,
the Systems' monthly basic service rates ranged from $7.03 to $16.99, monthly
basic and tier ("basic plus") service rates ranged from $16.99 to $26.03 and
monthly premium services ranged from $4.00 to $10.95 per premium service. In
addition, the Venture earns revenues from the Systems' pay-per-view programs and
advertising fees. Related charges may include a nonrecurring installation fee
that ranges from $5.00 to $45.00; however, from time to time the Systems have
followed the common industry practice of reducing or waiving the installation
fee during promotional periods. Commercial subscribers such as hotels, motels
and hospitals are charged a nonrecurring connection fee that usually covers the
cost of installation. Except under the terms of certain contracts with
commercial subscribers and residential apartment and condominium complexes, the
subscribers are free to discontinue the service at any time without penalty.
For the year ended December 31, 1997, of the total fees received by the Systems,
basic service and tier service fees accounted for approximately 75 percent of
total revenues, premium service fees accounted for approximately 13 percent of
total revenues, pay-per-view fees were approximately 1 percent of total
revenues, advertising fees were approximately 4 percent of total revenues and
the remaining 7 percent of total revenues came principally from equipment
rentals, installation fees and program guide sales. The Venture is dependent
upon the timely receipt of service fees to provide for maintenance and
replacement of plant and equipment, current operating expenses and other costs
of the Systems.
FRANCHISES. The Systems are constructed and operated under non-
exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. These franchises typically contain many conditions, such as time
limitations on commencement and completion of construction, conditions of
service, including the number of channels, types of programming and
4
<PAGE>
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 Venture holds 48 franchises relating to the Systems. These
franchises provide for the payment of fees to the issuing authorities and
generally range from 3 percent to 5 percent 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 percent of gross revenues and also
permits the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances.
The Venture has never had a franchise revoked. The Venture is
currently negotiating the renewal of two franchises that are operating under
extensions, and the General Partner has no reason to believe that such
franchises will not be renewed in due course. The General Partner recently has
experienced lengthy negotiations with some franchising authorities for the
granting of franchise renewals. Some of the issues involved in recent renewal
negotiations include rate regulation, customer service standards, cable plant
upgrade or replacement and shorter terms of franchise agreements.
COMPETITION. Cable television systems currently experience
competition from several sources.
Broadcast Television. Cable television systems have traditionally
---------------------
competed 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 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 certain of the
systems owned or managed by the General Partner but not in the Systems.
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-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. 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 faces technical and legal obstacles to
offering its customers local broadcast programming, although at least one DBS
provider is now attempting to do so. 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.
5
<PAGE>
Telephone and Utilities. Federal cross-ownership restrictions
-----------------------
historically limited 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. 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 cable television
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. The local electric utility in the Washington D.C. area recently
announced plans to participate in RCN, a planned video competitor.
Private Cable. Additional competition is provided by private cable
-------------
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, the Venture has been
unable to provide cable television service to buildings in which private
operators have secured exclusive contracts to provide video and telephony
services. The Venture is interested in providing these same services, but
expects that the market to install and provide these services in multi-unit
buildings will continue to be highly competitive.
MMDS. Cable television systems also compete with wireless program
----
distribution services such as multichannel, multipoint distribution service
("MMDS") systems, commonly called wireless cable, which are licensed to serve
specific areas. MMDS uses low-power microwave frequencies to transmit
television programming over-the-air to paying subscribers. The MMDS industry is
less capital intensive than the cable television industry, and it is therefore
more practical to construct MMDS systems in areas of lower subscriber
penetration. Wireless cable systems are now in direct competition with cable
television systems in several areas of the country, including the system in Pima
County, Arizona owned by the General Partner. Telephone companies have acquired
or invested in wireless companies, and may use MMDS systems to provide services
within their service areas in lieu of wired delivery systems. Enthusiasm for
MMDS has waned in recent months, however, as Bell Atlantic and NYNEX have
suspended their investment in two major MMDS companies. To date, the Venture
has not lost a significant number of subscribers, nor a significant amount of
revenue, to MMDS operators competing with the Venture's 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. In addition, Local Multipoint Distribution Services ("LMDS"),
could also pose a significant threat to the cable television industry, if and
when it becomes established. 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
- --------------------------
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
6
<PAGE>
subject of cable regulation. Future legislative and regulatory changes could
adversely affect the Venture's operations and there has been a recent increase
in calls to maintain or even tighten cable regulation in the absence of
widespread effective competition. This section briefly summarizes key laws and
regulations affecting the operation of the Venture's Systems and does not
purport to describe all present, proposed, or possible laws and regulations
affecting the Venture.
Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate
---------------------
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 percent) by the incumbent cable operator, appreciable penetration
(more than 15 percent) 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.
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. certain critics of the cable
television industry have called for a delay in the regulatory sunset and some
have even urged more rigorous rate regulation in the interim, including a limit
on operators passing through to their customers increased programming costs.
The 1996 Telecom Act also relaxes existing uniform rate requirements by
specifying that uniform rate requirements do not apply where the operator faces
"effective competition," and by exempting bulk discounts to multiple dwelling
units, although complaints about predatory pricing still may be made to the FCC.
Cable Entry Into Telecommunications. The 1996 Telecom Act provides
-----------------------------------
that no 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
7
<PAGE>
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. In July 1997, the Eighth
Circuit Court of Appeals vacated certain aspects of the FCC's initial
interconnection order. That decision is now on appeal to the U.S. Supreme
Court.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act
---------------------------------------------
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, an 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. RCN and affiliates of local power companies recently
have been certified to provide OVS service in areas encompassing the General
Partner's cable systems in suburban Maryland and Virginia. This OVS potential
competition is not yet operational.
Although LECs and cable operators can now expand their offerings
across traditional service boundaries, the general prohibition remains on LEC
buyouts (i.e., any ownership interest exceeding 10 percent) of co-located cable
systems, cable operator buyouts of co-located LEC systems, and joint ventures
between cable operators and LECs in the same market. The 1996 Telecom Act
provides a few limited exceptions to this buyout prohibition, including a
carefully circumscribed "rural exemption." The 1996 Telecom Act also provides
the FCC with the limited authority to grant waivers of the buyout prohibition
(subject to LFA approval).
Electric Utility Entry Into Telecommunications/Cable Television. The
---------------------------------------------------------------
1996 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
---------------------------------
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 percent 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
percent of all domestic cable subscribers has been stayed pending further
judicial review, although the FCC recently expressed an interest in reviewing
and reimposing this limit.
8
<PAGE>
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. The investment of BCI Telecom Holding Inc. ("BTH") in the
General Partner could, therefore, adversely affect any plan to acquire FCC
broadcast or common carrier licenses. The Venture, however, does not currently
plan to acquire such licenses.
Must Carry/Retransmission Consent. The 1992 Cable Act contains
---------------------------------
broadcast 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 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 WGN). The burden associated with "must
carry" may increase substantially if broadcasters proceed with planned
conversion to digital transmission and the FCC determines that cable systems
must carry all analogue and digital broadcasts in their entirety.
Access Channels. LFAs can include franchise provisions requiring
---------------
cable 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 percent 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 mandating a modest rate reduction. The reduction sparked some
interest in part-time use, but did not make commercial leased access
substantially more attractive to third party programmers. Certain of those
programmers have now appealed the revised rules to the D.C. Court of Appeals.
Should the courts and the FCC ultimately determine that an additional reduction
in access ratesis required, cable operators could lose programming control of a
substantial number of cable channels.
Access to Programming. To spur the development of independent cable
---------------------
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. Recently there has been increased
interest in further restricting the marketing practices of cable programmers,
including subjecting programmers who are not affiliated with cable operators to
all of the existing program access requirements.
Inside Wiring. The FCC recently determined that an incument cable
-------------
operator can be required by the owner of a multiple dwelling unit ("MDU")
complex to remove, abandone or sell the "home run" wiring it initially provided.
In addition, the FCC is reviewing the enforceability of contracts to provide
exclusive video service within a MDU complex. The FCC has proposed abrogating
all such contracts held by incumbent cable operators, but allowing such
contracts when held by new entrants. These changes, and others now being
considered by the FCC, would, if implemented, make it easier for a MDU complex
owner to terminate service from an incumbent cable operator in favor of a new
entrant and leave the already competitive MDU sector even more challenging for
incumbent cable operators.
Other FCC Regulations. In addition to the FCC regulations noted
---------------------
above, 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
9
<PAGE>
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. Federal requirements governing
Emergency Alert Systems and Closed Captioning adopted in 1997 will impose
additional costs on the operation of cable systems. The FCC is currently
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. 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.
Internet Access. Many cable operators have begun offering high speed
---------------
internet service to their customers. At this time, there is no significant
federal or local regulation of this service. However, as internet services
develop, it is possible that new regulations could be imposed.
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 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
percent of the system's gross revenues, cannot dictate the particular technology
used by the system, and cannot specify video programming other than identifying
broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises.
GENERAL. The 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 Venture's business. The Systems have had
some subscribers who later terminated the service. Terminations occur primarily
because people move
10
<PAGE>
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
Venture's policy with regard to past due accounts is basically one of
disconnecting service before a past due account becomes material.
The Venture does not depend to any material extent on the availability
of raw materials; it carries no significant amounts of inventory and it has no
material backlog of customer orders. 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 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
Venture.
ITEM 2. PROPERTIES
-------------------
The cable television systems owned by the Venture are described below:
<TABLE>
<CAPTION>
SYSTEM ACQUISITION DATE
------ ----------------
<S> <C>
Myrtle Creek System December 1987
South Sioux City System February 1988
Southwestern Michigan System September 1988
</TABLE>
The following sets forth (i) the monthly basic plus service rates
charged to subscribers and (ii) the number of basic subscribers and pay units
for the Systems. The monthly basic service rates set forth herein represent,
with respect to systems with multiple headends, the basic service rate charged
to the majority of the 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, 1997, the South Sioux City System operated cable
plant passing approximately 9,000 homes, with an approximate 68 percent
penetration rate, the Myrtle Creek System operated cable plant passing
approximately 9,100 homes, with an approximate 73 percent penetration rate, and
the Southwestern Michigan System operated cable plant passing approximately
27,500 homes, with an approximate 63 percent penetration rate. Figures for
numbers of subscribers and homes passed are compiled from the General Partner's
records and may be subject to adjustments.
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------------
MYRTLE CREEK SYSTEM 1997 1996 1995
- ------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Monthly basic plus service rate $23.06 $22.07 $21.23
Basic subscribers 6,665 6,582 6,500
Pay units 3,926 3,957 3,966
</TABLE>
<TABLE>
<CAPTION>
SOUTH SIOUX CITY SYSTEM At December 31,
- ----------------------- -------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Monthly basic plus service rate $23.84 $22.99 $22.06
Basic subscribers 6,157 6,302 5,944
Pay units 4,299 4,094 4,028
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SOUTHWESTERN MICHIGAN SYSTEM At December 31,
- ---------------------------- ----------------------------------------------------------------------
1997 1996 1995
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Monthly basic plus service rate $ 26.03 $ 24.43 $ 22.75
Basic subscribers 17,332 16,923 16,717
Pay units 9,581 10,001 11,098
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
--------------------------
Wayne H. and Joan Brower and Kenneth and Lola Palmer v. Jones Cable
-------------------------------------------------------------------
Income Fund 1-C, Ltd. and Jones Intercable, Inc. (Circuit Court of Jackson
- ------------------------------------------------
County, Missouri, Case No. CV96-30254). On December 18, 1996, plaintiffs filed
this action in a Missouri state court alleging misrepresention of the prospects
for growth of the Partnership and the liquidity of the limited partnership
interests. Plaintiffs also alleged that the General Partner breached its
fiduciary duty to the Partnership and its limited partners. The Partnership and
the General Partner filed an Answer denying all allegations and asserting
various affirmative defenses. The case was settled in July 1997, and the action
has been dismissed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
PART II.
--------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
While the Partnership is publicly held, there is no public market for the
limited partnership interests, and it is not expected that a market will develop
in the future. During 1997, a limited partner of the Partnership conducted a
"limited tender offer" for interests in the Partnership at a price of $200 per
interest. As of February 16, 1998, the approximate number of equity security
holders in the Partnership was 4,785.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------------
Jones Cable Income Fund 1-C, Ltd./(a)/ 1997 1996 1995 1994 1993
- ------------------------------------------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $18,338,834 $24,624,270 $22,867,228 $21,121,787 $20,350,776
Depreciation and Amortization 5,414,431 7,919,508 8,951,345 8,632,481 8,787,240
Operating Income (Loss) 536,176 161,479 (1,244,929) (2,243,001) (2,397,832)
Consolidated Income (Loss) 17,422,414/(b)/ (2,980,092) (4,371,145) (4,902,676) (4,409,310)
Minority Interest in Consolidated Income (Loss) (6,928,894) 1,185,182 1,738,404 1,949,794 1,753,583
Net Income (Loss) 10,493,520 (1,794,910) (2,632,741) (2,952,822) (2,655,727)
Net Income (Loss) per Limited Partnership Unit 119.47/(b)/ (20.89) (30.64) (34.37) (30.91)
Distributions per Limited Partnership Unit 106.22/(b)/ - - - 30.59
Weighted Average Number of
Limited Partnership Units Outstanding 85,059 85,059 85,059 85,059 85,059
General Partner's Deficit (6,448) (337,889) (319,940) (293,613) (264,084)
Limited Partners' Capital 3,122,252 1,994,813 3,771,774 6,378,188 9,301,541
Total Assets 30,514,718 47,556,243 50,844,037 54,545,774 58,148,834
Debt 23,624,588 42,559,250 43,104,090 42,383,339 36,298,318
General Partner Advances - 284,390 109,893 66,224 4,068,472
</TABLE>
/(a)/ This financial information includes the consolidated operations of Jones
Cable Income Fund 1-C, Ltd., which includes the operations of Jones Cable
Income Fund 1-B/C Venture, in which Jones Cable Income Fund 1-C, Ltd. has an
interest of approximately 60 percent.
/(b)/ Consolidated income and distributions resulted primarily from the sale of
the Colorado Systems by Jones Cable Income Fund 1-B/C Venture in January 1997.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------
JONES CABLE INCOME FUND 1-C, LTD.
---------------------------------
The following discussion of financial condition and results of operations
of Jones Cable Income Fund 1-C, Ltd. (the "Partnership") and Jones Cable Income
Fund 1-B/C 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
- -------------------
The Partnership owns a 60 percent interest in the Venture. The
accompanying financial statements include 100 percent of the accounts of the
Partnership and those of the Venture systems reduced by the 40 percent minority
interest in the Venture.
It is the General Partner's publicly announced policy that it intends to
liquidate its managed partnerships, including the Partnership, as opportunities
for sales of partnership cable television systems arise in the marketplace over
the next several years. In accordance with the General Partner's policy, the
Venture sold the Colorado Systems in January 1997, sold the Clearlake System in
January 1998 and has entered into a contract to sell the Southwestern Michigan
System. No specific dates or terms have yet been set for the sale of the
Venture's remaining systems. There can be no assurance as to the timing or
terms of any sale.
The Venture's financial condition is significant to the Partnership and
should be reviewed in conjunction with this discussion.
On January 24, 1997, the Venture sold the Colorado Systems to an
unaffiliated party for a sales price of $35,000,000. The Venture distributed a
total of $15,000,000 to the Partnership and Jones Cable Income Fund 1-B, Ltd.
("Fund 1-B") in February 1997, which amount represents the net sale proceeds
following the Venture's repayment of a portion of the balance outstanding of its
credit facility and the payment of a brokerage fee to The Jones Group, Ltd., a
subsidiary of the General Partner ("The Jones Group"), totaling $875,000,
representing 2.5 percent of the sales price, for acting as a broker in this
transaction. The Partnership received $9,034,640 and Fund 1-B received
$5,965,360 of such distribution. The Partnership, in turn, distributed the
$9,034,640 (approximately $212 per each $1,000 invested in the Partnership) to
the limited partners of the Partnership. Because the distribution to the
limited partners of the Partnership together with all prior distributions will
not return the amount initially contributed by the limited partners to the
Partnership plus the preferred return provided by the Partnership's limited
partnership agreement, the General Partner did not receive a general partner
distribution from the sale proceeds. Because the sale of the Colorado Systems
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 January 9, 1998, the Venture sold the Clearlake System to an
unaffiliated party for a sales price of $21,400,000, subject to customary
closing adjustments. The Venture distributed in February 1998, $11,000,000 to
the Partnership and Fund 1-B, which amount represents the net sale proceeds
following the Venture's repayment of $9,600,000 outstanding under the Venture's
credit facility and the payment of a 2.5 percent brokerage fee to The Jones
Group totaling approximately $535,000. The Partnership received approximately
$6,625,300 and Fund 1-B received approximately $4,374,700 of such distribution.
The Partnership, in turn, distributed the $6,625,300 (approximately $156 per
each $1,000 invested in the Partnership) to the limited partners of the
Partnership. Because the distribution to the limited partners of the
Partnership together with all prior distributions will not have returned the
amount initially contributed by the limited partners to the Partnership plus the
preferred return provided by the Partnership's limited partnership agreement,
the general partner of the Partnership did not receive a general partner
distribution from the sale proceeds. Because the sale of the Clearlake 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.
Taking into account the prior distributions to limited partners from the
Partnership's operating cash flow, the distribution from the sale of the
Colorado Systems and the distribution from the sale of the Clearlake System, the
limited
14
<PAGE>
partners of the Partnership have received a total of $350 for each $500 limited
partnership interest, or $700 for each $1,000 invested in the Partnership.
On January 30, 1998, the Venture entered into three purchase and sale
agreements with unaffiliated parties providing for the sale of the Southwestern
Michigan System to three separate unaffiliated parties for a total sales price
of $31,250,000, subject to customary closing adjustments. The closing of this
transaction, which is expected to occur in the second or third quarter of 1998,
is subject to the consents of governmental authorities and third parties with
whom the Venture has contracted that are necessary for the transfer of the
Southwestern Michigan System, and termination or expiration of the statutory
waiting period applicable to the purchase and sale agreements and the
transactions contemplated thereby under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. Because the sale of the Southwestern
Michigan System does not represent a sale of all or substantially all of the
Partnership's assets, no vote of the limited partners of the Partnership will be
required to approve this sale.
Upon consummation of the proposed sale of the Southwestern Michigan System,
the Venture will pay a brokerage fee to The Jones Group totaling approximately
$781,250 and repay $11,300,000 under the Venture's credit facility, and then the
Venture will distribute the net sales proceeds of approximately $19,000,000 to
the Partnership and Fund 1-B. The Partnership will receive approximately
$11,443,800 and Fund 1-B will receive approximately $7,556,200 of such
distribution. The Partnership, in turn, will distribute the $11,443,800
(approximately $135 for each $500 limited partnership interest, or approximately
$270 for each $1,000 invested in the Partnership) to the limited partners of the
Partnership. Because the distribution to the limited partners of the
Partnership together with all prior distributions will not return the amount
initially contributed by the limited partners to the Partnership plus the
preferred return provided by the Partnership's limited partnership agreement,
the General Partner of the Partnership will not receive a general partner
distribution from the sale proceeds.
Taking into account the prior distributions to limited partners from the
Partnership's operating cash flow, the distribution from the sale of the
Colorado Systems, the distribution from the sale of the Clearlake System and the
expected distribution from the sale of the Southwestern Michigan System, the
limited partners of the Partnership will have received a total of $485 for each
$500 limited partnership interest, or $970 for each $1,000 invested in the
Partnership after the sale of the Southwestern Michigan System.
For the year ended December 31, 1997, the Venture generated net cash from
operating activities totaling $3,716,919, which is available to fund capital
expenditures and non-operating costs. During 1997, capital expenditures within
the Venture's systems totaled approximately $4,155,000. Approximately 37
percent was for the construction of service drops to subscribers' homes and
approximately 20 percent of these expenditures was for the construction of new
cable plant related to new homes passed. The remaining expenditures were used
to maintain the value of the Venture's systems. Funding for these expenditures
was provided by cash on hand, cash generated from operations, and borrowings
available under the Venture's credit facility. Budgeted capital expenditures
for 1998 are approximately $2,474,000. Construction of service drops to homes
will account for approximately 48 percent of the anticipated expenditures and
construction of new cable plant related to new homes passed will account for
approximately 30 percent of the anticipated expenditures. The remaining
expenditures will be used to maintain the value of the Venture's systems until
they are sold. As a result of the sale of the Southwestern Michigan System, the
budgeted capital expenditures for the Southwestern Michigan System for 1998 will
be only for various enhancements necessary to maintain the value of the
Southwestern Michigan System until it is sold. Funding for these expenditures
is expected to come from cash on hand, cash generated from operations and
available borrowings under the Venture's credit facility.
At December 31, 1997, the Venture's $27,500,000 credit facility had
$23,300,000 outstanding. On January 9, 1998, as required by the credit
facility, the Partnership used a portion of the proceeds of the sale of the
Clearlake System to repay $9,600,000 of the balance outstanding. At the same
time the commitment on the credit facility was reduced to $19,900,000, leaving
$6,200,000 available for future borrowings. Upon the sale of the Southwestern
Michigan System, the Venture will repay $11,300,000 of the then-outstanding
balance and the commitment will be reduced. On September 30, 2000, the maximum
amount available begins to reduce quarterly until June 30, 2005 when the amount
available will be zero. Interest on outstanding principal is calculated at the
Venture's option of the Base Rate plus 1/8 percent, or the Euro-Rate plus 1-1/8
percent. The effective interest rate on amounts outstanding as of December 31,
1997 and 1996 was 6.89 percent and 7.03 percent, respectively.
One of the primary objectives of the Venture has been to provide quarterly
cash distributions to the Venture partners, primarily from cash generated
through operating activities of the Venture. The Venture's partners in turn have
15
<PAGE>
sought to provide quarterly cash distributions to their partners. The Venture
used cash generated from operations to fund capital expenditures and did not
declare quarterly cash flow distributions during 1997, although it did make a
distribution of $15,000,000 to its partners from the proceeds of the sale of the
Colorado Systems during the first quarter of 1997 and a distribution of
$11,000,000 to its partners from the proceeds of the sale of the Clearlake
System in February 1998. The Venture does not anticipate resuming cash flow
distributions.
The General Partner believes that the Venture has sufficient sources of
capital available from cash on hand, cash generated from operations and from
borrowings available under its credit facility to meet its anticipated needs for
the next year.
Year 2000 Issue
- ---------------
The Year 2000 issue is the result of many computer programs being written
such that they will malfunction when reading a year of "00." This problem could
cause system failure or miscalculations causing disruptions of business
processes.
The General Partner has initiated an assessment of its computer
applications to determine the extent of the problem. Based on this assessment,
the General Partner has determined that the majority of its computer
applications supporting business processes, including accounting and billing,
are designed to handle the Year 2000 appropriately.
The General Partner is currently focusing its efforts on the impact of the
Year 2000 issue on service delivery. The General Partner has established an
internal team to address this issue. The General Partner is identifying and
testing all date-sensitive equipment involved in delivering service to the
Venture's customers. In addition, the General Partner will assess its options
regarding repair or replacement of affected equipment during this testing. The
General Partner currently has no definitive estimate of the cost or the extent
of the impact, if any, this problem will have on service delivery; however, the
General Partner does not believe that the impact will be material. The General
Partner anticipates completion of its testing in 1998, at which time it will
determine the financial impact on the Venture.
RESULTS OF OPERATIONS
- ---------------------
All of the Partnership's operations are represented by its approximate 60
percent interest in the Venture.
1997 Compared to 1996-
Revenues of the Venture decreased $6,285,436, or approximately 26 percent,
to $18,338,834 in 1997 from $24,624,270 in 1996. This decrease was a result of
the sale of the Colorado Systems. Disregarding the effect of the sale of the
Colorado Systems, revenues would have increased $760,134, or approximately 5
percent, to $17,806,829 in 1997 compared to $17,046,695 in 1996. Basic service
rate increases accounted for approximately 87 percent of the increases in
revenues in 1997. No other single factor significantly affected these increases
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 expenses decreased $3,288,654, or approximately 24 percent, to
$10,395,892 in 1997 from $13,684,546 in 1997. This decrease was a result of the
sale of the Colorado Systems. Disregarding the effect of the sale of the
Colorado Systems, operating expenses would have increased $181,787, or
approximately 2 percent, to $9,552,282 in 1997 compared to $9,370,495 in 1996.
This increase in operating expenses was due primarily to increases in
programming fees. No other individual factor was significant to this increase
in operating expenses. Operating expenses represented 54 percent of revenues in
1997 compared to 56 percent in 1996.
The cable television industry generally measures the financial performance
of a cable television system in terms of operating cash flow (revenues less
operating expenses). 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 cash
16
<PAGE>
flow decreased $2,996,782, or approximately 27 percent, to $7,942,942 in 1997
compared to $10,939,724 in 1996. This decrease was a result of the sale of the
Colorado Systems. Disregarding the effect of the sale of the Colorado Systems,
operating cash flow would have increased $578,347, or approximately 8 percent,
to $8,254,547 in 1997 compared to $7,676,200 in 1996. This increase was due to
the increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from the General Partner decreased
$866,401, or approximately 30 percent, to $1,992,335 in 1997 compared to
$2,858,736 in 1996. This decrease was as a result of the sale of the Colorado
Systems. Disregarding the effect of the sale of the Colorado Systems,
management fees and allocated overhead would have decreased $57,578, or
approximately 3 percent, to $1,938,591 in 1997 compared to $1,996,169 in 1996.
This decrease was primarily due to a decrease in allocated overhead from the
General Partner.
Depreciation and amortization expense decreased $2,505,077, or
approximately 32 percent, to $5,414,431 in 1997 from $7,919,508 in 1996. This
decrease was a result of the sale of the Colorado Systems. Disregarding the
effect of the sale of the Colorado Systems, depreciation and amortization
expense would have decreased $321,866, or approximately 6 percent, to $5,268,978
in 1997 compared to $5,590,844 in 1996. This decrease was due to the maturation
of a portion of the Venture's depreciable asset base.
The Venture's operating income increased $374,697 to $536,176 in 1997 from
$161,479 in 1996. Disregarding the effect of the sale of the Colorado Systems,
operating income would have increased $957,791, to $1,046,978 in 1997 from
$89,187 in 1996. This increase was a result of the increase in operating cash
flow and the decrease in depreciation and amortization expense.
Interest expense decreased $1,589,296, or approximately 51 percent, to
$1,521,275 in 1997 compared to $3,110,571 in 1996. This decrease was primarily
due to the lower outstanding balances on the Venture's interest bearing
obligations, as a result of a portion of the proceeds from the sale of the
Colorado Systems being used to repay a portion of the outstanding loan principal
balance.
The Venture reported a gain on the sale of the Colorado Systems of
$18,493,041 in 1997. No similar gain was reported in 1996.
The Venture reported net income of $17,422,414 in 1997 compared to a net
loss of $2,980,092 in 1996. This change was primarily due to the fact that the
Venture reported a gain on the sale of the Colorado Systems in 1997 and no
similar gain was reported in 1996.
1996 Compared to 1995-
Revenues of the Venture increased $1,757,042, or approximately 8 percent,
to $24,624,270 in 1996 from $22,867,228 in 1995. The increase in revenues was
primarily a result of basic service rate increases and an increase in the number
of basic subscribers. Basic service rate increases accounted for approximately
32 percent of the increase in revenues. An increase in the number of basic
subscribers accounted for approximately 22 percent of the increase in revenues.
The number of basic subscribers totaled 66,002 at December 31, 1996, compared to
64,738 at December 31, 1995, an increase of 1,264, or approximately 2 percent.
No other individual factor contributed significantly to the increase in
revenues.
Operating expenses increased $1,334,639, or approximately 11 percent, to
$13,684,546 in 1996 from $12,349,907 in 1995. The increase in operating
expenses was due primarily to increases in programming fees. No other
individual factor was significant to the increase in operating expenses.
Operating expenses represented 56 percent of revenue in 1996 compared to 54
percent in 1995.
Operating cash flow increased $422,402, or approximately 4 percent, to
$10,939,724 in 1996 from $10,517,321 in 1995. This increase was the result of
the increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from the General Partner increased
$47,832, or approximately 2 percent, to $2,858,737 in 1996 from $2,810,905 in
1995, due to the increase in revenues, upon which such fees are based.
Depreciation and amortization expense decreased $1,031,837, or
approximately 12 percent, to $7,919,508 in 1996 from $8,951,345 in 1995. This
decrease was due to the decrease in the Venture's depreciable asset base.
17
<PAGE>
The Venture reported operating income of $161,479 in 1996 compared to an
operating loss of $1,244,929 in 1995. This change was a result of the increase
in operating cash flow and decrease in depreciation and amortization expense
exceeding the increase in management fees and allocated overhead from the
General Partner.
Interest expense decreased $280,784, or approximately 8 percent, to
$3,110,571 in 1996 from $3,391,355 in 1995. This decrease was due to lower
outstanding balances on interest bearing obligations and lower interest rates on
outstanding obligations.
Net loss decreased $1,391,053, or approximately 32 percent, to $2,980,092
in 1996 from $4,371,145 in 1995. This loss was due to the factors discussed
above.
ITEM 8. FINANCIAL STATEMENTS
- -----------------------------
The audited financial statements of the Partnership for the year ended
December 31, 1997 follow.
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Jones Cable Income Fund 1-C, Ltd.:
We have audited the accompanying consolidated balance sheets of JONES CABLE
INCOME FUND 1-C, LTD. (a Colorado limited partnership) as of December 31, 1997
and 1996, and the related consolidated statements of operations, partners'
capital (deficit) and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
General Partner's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jones Cable Income Fund 1-C,
Ltd. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 13, 1998.
19
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
---------------------------------
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31,
----------------------------
ASSETS 1997 1996
------ ------------ -------------
<S> <C> <C>
CASH $ 454,501 $ 702,640
TRADE RECEIVABLES, less allowance for doubtful
receivables of $42,753 and $87,075 at December 31, 1997
and 1996, respectively 362,472 530,025
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 45,101,407 65,758,352
Less- accumulated depreciation (24,222,527) (32,628,107)
------------ ------------
20,878,880 33,130,245
Franchise costs and other intangible assets, net of accumulated
amortization of $33,614,162 and $38,696,513 at
December 31, 1997 and 1996, respectively 8,342,217 12,801,757
------------ ------------
Total investment in cable television properties 29,221,097 45,932,002
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 476,648 391,576
------------ ------------
Total assets $ 30,514,718 $ 47,556,243
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
20
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
---------------------------------
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31,
----------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1997 1996
------------------------------------------- ------------ -------------
<S> <C> <C>
LIABILITIES:
Debt $ 23,624,588 $ 42,559,250
General Partner advances - 284,390
Trade accounts payable and accrued liabilities 1,443,578 1,645,902
Subscriber prepayments 204,337 246,900
------------ ------------
Total liabilities 25,272,503 44,736,442
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
MINORITY INTEREST IN JOINT VENTURE 2,126,411 1,162,877
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated earnings (deficit) 105,995 (225,446)
Distributions (113,443) (113,443)
------------ ------------
(6,448) (337,889)
------------ ------------
Limited Partners-
Net contributed capital (85,059 units outstanding at
December 31, 1997 and 1996) 34,909,262 34,909,262
Accumulated deficit (10,384,724) (20,546,803)
Distributions (21,402,286) (12,367,646)
------------ ------------
3,122,252 1,994,813
------------ ------------
Total liabilities and partners' capital (deficit) $ 30,514,718 $ 47,556,243
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
21
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
---------------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $18,338,834 $24,624,270 $22,867,228
COSTS AND EXPENSES:
Operating expenses 10,395,892 13,684,546 12,349,907
Management fees and allocated overhead from
General Partner 1,992,335 2,858,737 2,810,905
Depreciation and amortization 5,414,431 7,919,508 8,951,345
----------- ----------- -----------
OPERATING INCOME (LOSS) 536,176 161,479 (1,244,929)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,521,275) (3,110,571) (3,391,355)
Gain on sale of cable television system 18,493,041 - -
Other, net (85,528) (31,000) 265,139
----------- ----------- -----------
Total other income (expense) 16,886,238 (3,141,571) (3,126,216)
----------- ----------- -----------
CONSOLIDATED INCOME (LOSS) 17,422,414 (2,980,092) (4,371,145)
MINORITY INTEREST IN CONSOLIDATED
INCOME (LOSS) (6,928,894) 1,185,182 1,738,404
----------- ----------- -----------
NET INCOME (LOSS) $10,493,520 $(1,794,910) $(2,632,741)
=========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 331,441 $ (17,949) $ (26,327)
=========== =========== ===========
Limited Partners $10,162,079 $(1,776,961) $(2,606,414)
=========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $119.47 $(20.89) $(30.64)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 85,059 85,059 85,059
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
22
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
---------------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
GENERAL PARTNER:
Balance, beginning of year $ (337,889) $ (319,940) $ (293,613)
Net income (loss) for year 331,441 (17,949) (26,327)
----------- ----------- -----------
Balance, end of year $ (6,448) $ (337,889) $ (319,940)
=========== =========== ===========
LIMITED PARTNERS:
Balance, beginning of year $ 1,994,813 $ 3,771,774 $ 6,378,188
Distributions (9,034,640) - -
Net income (loss) for year 10,162,079 (1,776,961) (2,606,414)
----------- ----------- -----------
Balance, end of year $ 3,122,252 $ 1,994,813 $ 3,771,774
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
23
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
---------------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,493,520 $(1,794,910) $(2,632,741)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 5,414,431 7,919,508 8,951,345
Gain on sale of cable television system (18,493,041) - -
Minority interest in consolidated income (loss) 6,928,894 (1,185,182) (1,738,404)
Amortization of interest rate protection contract - - 48,500
Decrease (increase) in trade receivables 167,553 (5,285) (65,328)
Increase in deposits, prepaid
expenses and deferred charges (265,161) (186,604) (148,623)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments (244,887) 62,641 (95,012)
Increase (decrease) in advances from General Partner (284,390) 174,497 43,669
------------ ----------- -----------
Net cash provided by operating activities 3,716,919 4,984,665 4,363,406
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (4,155,396) (4,617,913) (4,513,277)
Proceeds from sale of cable television system,
net of brokerage fee 34,125,000 - -
------------ ----------- -----------
Net cash provided by (used in) investing activities 29,969,604 (4,617,913) (4,513,277)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 17,215,086 273,404 898,199
Repayment of debt (36,149,748) (818,244) (177,448)
Distribution to Venture Partner (5,965,360) - -
Distribution to Limited Partners (9,034,640) - -
------------ ----------- -----------
Net cash provided by (used in)
financing activities (33,934,662) (544,840) 720,751
------------ ----------- -----------
Increase (decrease) in cash (248,139) (178,088) 570,880
Cash, beginning of year 702,640 880,728 309,848
------------ ----------- -----------
Cash, end of year $ 454,501 $ 702,640 $ 880,728
============ =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,680,766 $ 3,132,265 $ 3,389,425
============ =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
24
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
---------------------------------
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Jones Cable Income Fund 1-C, Ltd. (the "Partnership"), a Colorado limited
partnership, was formed on February 9, l987, under a public program sponsored by
Jones Intercable, Inc. ("Intercable"). The Partnership was formed to acquire,
develop and operate cable television systems. Intercable is the "General
Partner" and manager of the Partnership. The General Partner and its
subsidiaries also own and operate cable television systems. In addition, the
General Partner manages cable television systems for other limited partnerships
for which it is general partner and, also, for other affiliated entities.
On October 31, 1987, Jones Cable Income Fund 1-B, Ltd. ("Fund 1-B") and the
Partnership formed a Colorado general partnership known as Jones Cable Income
Fund 1-B/C Venture (the "Venture") by making capital contributions of
$24,220,000 and $36,681,000, respectively (approximately 40 and 60 percent,
respectively). The Venture was formed to acquire, develop and operate cable
television systems. During 1988 and 1987, the Venture acquired various cable
television systems serving the areas in and around the cities of Brighton and
Broomfield, the town of Lochbuie, and portions of unincorporated Adams, Boulder
and Weld Counties, all in the State of Colorado (the "Colorado Systems");
Clearlake and Lakeport, California (the "Clearlake System"); Myrtle Creek,
Oregon; South Sioux City, Nebraska; and Three Rivers, Schoolcraft, Vicksburg,
Constantine, White Pigeon, Dowagiac, Watervliet and Vandalia, all in the State
of Michigan (the "Southwestern Michigan System").
Sales of Cable Television Systems
---------------------------------
On January 24, 1997, the Venture sold the Colorado Systems to an
unaffiliated party for a sales price of $35,000,000. The Venture distributed a
total of $15,000,000 to the Partnership and Jones Cable Income Fund 1-B, Ltd.
("Fund 1-B") in February 1997, which amount represents the net sale proceeds
following the Venture's repayment of a portion of the balance outstanding of its
credit facility and the payment of a brokerage fee to The Jones Group, Ltd., a
subsidiary of the General Partner ("The Jones Group"), totaling $875,000,
representing 2.5 percent of the sales price, for acting as a broker in this
transaction. The Partnership received $9,034,640 and Fund 1-B received
$5,965,360 of such distribution. The Partnership, in turn, distributed the
$9,034,640 (approximately $212 per each $1,000 invested in the Partnership) to
the limited partners of the Partnership. Because the distribution to the
limited partners of the Partnership together with all prior distributions will
not return the amount initially contributed by the limited partners to the
Partnership plus the preferred return provided by the Partnership's limited
partnership agreement, the General Partner did not receive a general partner
distribution from the sale proceeds. Because the sale of the Colorado Systems
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 January 9, 1998, the Venture sold the Clearlake System to an
unaffiliated party for a sales price of $21,400,000, subject to customary
closing adjustments. The Venture distributed, in February 1998, $11,000,000 to
the Partnership and Fund 1-B, which amount represents the net sale proceeds
following the Venture's repayment of $9,600,000 outstanding under the Venture's
credit facility and the payment of a 2.5 percent brokerage fee to The Jones
Group totaling approximately $535,000. The Partnership received approximately
$6,625,300 and Fund 1-B received approximately $4,374,700 of such distribution.
The Partnership, in turn, distributed the $6,625,300 (approximately $156 per
each $1,000 invested in the Partnership) to the limited partners of the
Partnership. Because the distribution to the limited partners of the
Partnership together with all prior distributions will not have returned the
amount initially contributed by the limited partners to the Partnership plus the
preferred return provided by the Partnership's limited partnership agreement,
the general partner of the Partnership did not receive a general partner
distribution from the sale proceeds. Because the sale of the Clearlake 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.
25
<PAGE>
The pro forma effect of the sale of the Colorado Systems and the
Clearlake System on the results of the Venture's operations for the years ended
December 31, 1997 and 1996, assuming the transactions had occurred at the
beginning of the year, is presented in the following unaudited tabulation:
For the Year Ended December 31, 1997
------------------------------------
<TABLE>
<CAPTION>
Pro Forma Unaudited
As Reported Adjustments Pro Forma
----------- ------------- -----------
<S> <C> <C> <C>
Revenues $18,338,834 $ (6,488,066) $11,850,768
=========== ============ ===========
Operating Income $ 536,176 $ (392,466) $ 143,710
=========== ============ ===========
Consolidated Income (Loss) $17,422,414 $(17,329,856) $ 92,558
=========== ============ ===========
</TABLE>
For the Year Ended December 31, 1996
------------------------------------
<TABLE>
<CAPTION>
Pro Forma
As Reported Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
Revenues $24,624,270 $(13,397,931) $11,226,339
=========== ============ ===========
Operating Income (Loss) $ 161,479 $ (467,993) $ (306,514)
=========== ============ ===========
Consolidated Loss $(2,980,092) $ 1,223,408 $(1,756,684)
=========== ============ ===========
</TABLE>
On January 30, 1998, the Venture entered into three purchase and sale
agreements with unaffiliated parties providing for the sale of the Southwestern
Michigan System to three separate unaffiliated parties for a total sales price
of $31,250,000, subject to customary closing adjustments. The closing of this
transaction, which is expected to occur in the second or third quarter of 1998,
is subject to the consents of governmental authorities and third parties with
whom the Venture has contracted that are necessary for the transfer of the
Southwestern Michigan System, and termination or expiration of the statutory
waiting period applicable to the purchase and sale agreements and the
transactions contemplated thereby under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. Because the sale of the Southwestern
Michigan System does not represent a sale of all or substantially all of the
Partnership's assets, no vote of the limited partners of the Partnership will be
required to approve this sale.
Upon consummation of the proposed sale of the Southwestern Michigan System,
the Venture will pay a 2.5 percent brokerage fee to The Jones Group totaling
approximately $781,250 and repay $11,300,000 under the Venture's credit
facility, and then the Venture will distribute the net sales proceeds of
approximately $19,000,000 to the Partnership and Fund 1-B. The Partnership will
receive approximately $11,443,800 and Fund 1-B will receive approximately
$7,556,200 of such distribution. The Partnership, in turn, will distribute the
$11,443,800 (approximately $135 for each $500 limited partnership interest, or
approximately $270 for each $1,000 invested in the Partnership) to the limited
partners of the Partnership. Because the distribution to the limited partners
of the Partnership together with all prior distributions will not return the
amount initially contributed by the limited partners to the Partnership plus the
preferred return provided by the Partnership's limited partnership agreement,
the General Partner of the Partnership will not receive a general partner
distribution from the sale proceeds.
Contributed Capital
-------------------
The capitalization of the Partnership is set forth in the accompanying
consolidated statements of partners' capital (deficit). No limited partner is
obligated to make any additional contributions to partnership capital.
The General Partner purchased its interest in the Partnership by
contributing $1,000 to partnership capital.
All profits and losses of the Partnership are allocated 99 percent to the
limited partners and 1 percent to the General Partner, except for income or gain
from the sale or disposition of cable television properties, which will be
26
<PAGE>
allocated to the partners based upon the formula set forth in the Partnership
Agreement and interest income earned prior to the first acquisition by the
Partnership of a cable television system, which was allocated 100 percent to the
limited partners.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting Records
------------------
The accompanying consolidated 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
-------------------------
Venture acquisitions were accounted for as purchases with the purchase
prices allocated as follows: first, to the fair value of net tangible assets
acquired; second, to the value of subscriber lists, franchise costs and a
noncompete agreement; and third, to costs in excess of interests in net assets
purchased. Brokerage fees paid to a subsidiary of the General Partner's parent
were allocated to intangible assets based upon the relative value of these
assets at acquisition. Other system acquisition costs were capitalized and
included in the cost of distribution systems.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include 100 percent of
the accounts of the Partnership and those of the Venture, reduced by Jones Cable
Income Fund 1-B, Ltd.'s 40 percent minority interest in the Venture.
All interpartnership accounts and transactions have been eliminated.
Property, Plant and Equipment
-----------------------------
Depreciation of property, plant and equipment is provided primarily using
the straight-line method over the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 - 7 years
Office furniture and equipment 3 - 5 years
Buildings 30 years
Vehicles 3 - 4 years
Replacements, renewals and improvements are capitalized and maintenance and
repairs are charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated
depreciation are written off as certain assets become fully depreciated and are
no longer in service.
27
<PAGE>
Intangible Assets
-----------------
Costs assigned to franchises, a noncompete agreement and costs in excess of
interests in net assets purchased are amortized using the straight-line method
over the following remaining estimated useful lives:
Franchise costs 1 - 14 years
Noncompete agreement 1 - 2 years
Costs in excess of interests in net
assets purchased 32 years
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
The General Partner manages the Partnership and 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 the General Partner by the Venture during the years
ended December 31, 1997, 1996 and 1995 were $916,942, $1,231,213 and $1,143,361,
respectively.
Any partnership distributions made from cash flow (defined as cash receipts
derived from routine operations, less debt principal and interest payments and
cash expenses) are allocated 99 percent to the limited partners and 1 percent to
the General Partner. Distributions resulting from the sale or refinancing of a
system or upon dissolution of the Partnership will be made as follows: first,
to the limited partners in an amount which together with all prior
distributions, other than those made regularly from cash flow, will equal their
initial capital contribution; second, payment to the limited partners of a
liquidation preference equal to a 12 percent cumulative return on their initial
capital contribution, reduced by all prior distributions from cash flow; and the
balance, 75 percent to the limited partners and 25 percent to the General
Partner.
The Venture reimburses the General Partner for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Venture. Such services, and their related costs, are necessary to the
operations 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 the General Partner 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 the General Partner and certain of its subsidiaries.
Systems owned by the General Partner and all other systems owned by partnerships
for which Intercable is the general partner are also allocated a proportionate
share of these expenses. The General Partner believes that the methodology of
allocating overhead and administrative expenses is reasonable. Overhead and
administrative expenses allocated to the Venture by the General Partner during
the years ended December 31, 1997, 1996 and 1995 were $1,075,393, $1,627,524 and
$1,667,544, respectively.
The Venture is charged interest at a rate which approximates Intercable's
weighted average cost of borrowing on any amounts due Intercable. No interest
was charged to the Venture by Intercable in 1997. Total interest charged to the
Venture by Intercable was $25,331 and $14,252 during 1996 and 1995,
respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Venture receives or has received programming from Superaudio, Knowledge
Tv, Inc., Jones Computer Network, Ltd., Great American Country, Inc. and Product
Information Network, all of which are affiliates of the General Partner.
28
<PAGE>
Payments to Superaudio totaled $31,780, $40,317 and $33,947 in 1997, 1996
and 1995, respectively. Payments to Knowledge Tv, Inc. totaled $30,775, $41,468
and $38,592 in 1997, 1996 and 1995, respectively. Payments to Jones Computer
Network, Ltd., whose service was discontinued in April 1997, totaled $15,656,
$56,465 and $47,377 in 1997, 1996 and 1995, respectively. Payments to Great
American Country, Inc., which initiated service in 1996, totaled $23,695 and
$37,518 in 1997 and 1996, respectively.
The Venture receives a commission from Product Information Network based on
a percentage of advertising revenues and number of subscribers. Product
Information Network paid commissions to the Venture totaling $59,075, $59,288
and $80,014 in 1997, 1996 and 1995, respectively.
(4) DISTRIBUTIONS FROM CASH FLOW
----------------------------
One of the primary objectives of the Venture has been to provide quarterly
cash distributions to the Venture partners, primarily from cash generated
through operating activities of the Venture. The Venture's partners in turn
have sought to provide quarterly cash distributions to their partners. The
Venture used cash generated from operations to fund capital expenditures and did
not declare quarterly cash flow distributions during 1997, although it did make
a distribution of $15,000,000 to its partners from the proceeds of the sale of
the Colorado Systems during the first quarter of 1997 and a distribution of
$11,000,000 to its partners from the proceeds of the sale of the Clearlake
System in February 1998. The Venture does not anticipate resuming cash flow
distributions.
A primary objective of the Partnership is to provide quarterly cash
distributions to its partners from distributions it receives from the Venture.
The Partnership declared no distributions in 1997, 1996 or 1995. The General
Partner has agreed to defer its portion of cash distributions until the
Partnership is liquidated.
(5) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1997 and 1996, consisted
of the following:
December 31,
----------------------------
1997 1996
------------- -------------
Cable distribution systems $ 41,179,861 $ 61,006,749
Equipment and tools 1,535,589 2,091,493
Office furniture and equipment 807,056 908,509
Buildings 421,023 453,488
Vehicles 1,044,028 1,126,171
Land 113,850 171,942
------------ ------------
45,101,407 65,758,352
Less- accumulated depreciation (24,222,527) (32,628,107)
------------ ------------
$ 20,878,880 $ 33,130,245
============ ============
(6) Debt
----
Debt consists of the following: December 31,
------------
1997 1996
------------ ------------
Lending institutions -
Revolving credit agreement $ 23,300,000 $ 42,200,000
Capital lease obligations 324,588 359,250
------------ ------------
$ 23,624,588 $ 42,559,250
============ ============
At December 31, 1997, the Venture's $27,500,000 credit facility had
$23,300,000 outstanding. On January 9, 1998, as required by the credit
facility, the Partnership used a portion of the proceeds of the sale of the
Clearlake System
29
<PAGE>
to repay $9,600,000 of the balance outstanding. At the same time the commitment
on the credit facility was reduced to $19,900,000, leaving $6,200,000 available
for future borrowings. Upon the sale of the Southwestern Michigan System, the
Venture will repay $11,300,000 under the then-outstanding balance and the
commitment will be reduced. On September 30, 2000, the maximum amount available
begins to reduce quarterly until June 30, 2005 when the amount available will be
zero. Interest on outstanding principal is calculated at the Venture's option of
the Base Rate plus 1/8 percent, or the euro-rate plus 1-1/8 percent. The
effective interest rate on amounts outstanding as of December 31, 1997 and 1996
was 6.89 percent and 7.03 percent, respectively.
Installments due on debt principal for each of the five years in the period
ending December 31, 2002 and thereafter, respectively, are $133,685, $133,685,
$57,218, $1,300,000, $5,500,000 and $16,500,000. As of December 31, 1997,
substantially all of the Venture's assets secured the above indebtedness.
At December 31, 1997, 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.
(7) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying consolidated
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 consolidated statements of operations due to the difference in depreciation
recognized under generally accepted accounting principles and the expense
allowed for tax purposes under the Modified Accelerated Cost Recovery System
(macrs). There are no other significant differences between taxable income or
loss and the net income or loss reported in the consolidated statements of
operations.
(8) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Venture rents office and other facilities under various long-term lease
arrangements. Rent paid under such lease arrangements totaled $35,636, $93,161
and $93,192, respectively, for the years ended December 31, 1997, 1996 and 1995.
Minimum commitments under operating leases for each of the five years in the
period ending December 31, 2002, and thereafter are as follows:
1998 $ 23,087
1999 22,375
2000 23,465
2001 23,620
2002 24,845
Thereafter 239,827
--------
$357,219
========
30
<PAGE>
(9) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
Supplementary profit and loss information for the respective years is
presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $ 140,994 $ 186,433 $ 209,529
========== ========== ==========
Taxes, other than income and payroll taxes $ 459,969 $ 494,974 $ 505,916
========== ========== ==========
Advertising $ 219,240 $ 361,437 $ 327,980
========== ========== ==========
Depreciation of property, plant and equipment $3,458,105 $4,709,869 $4,347,554
========== ========== ==========
Amortization of intangible assets $1,956,326 $3,209,639 $4,603,791
========== ========== ==========
</TABLE>
31
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The Partnership itself has no officers or directors. Certain information
concerning the directors and executive officers of the General Partner is set
forth below. Directors of the General Partner serve until the next annual
meeting of the General Partner and until their successors shall be elected and
qualified.
<TABLE>
<S> <C> <C>
Glenn R. Jones 68 Chairman of the Board and Chief Executive Officer
James B. O'Brien 48 President and Director
Ruth E. Warren 48 Group Vice President/Operations
Kevin P. Coyle 46 Group Vice President/Finance
Christopher J. Bowick 42 Group Vice President/Technology
Cheryl M. Sprague 45 Group Vice President/Human Resources
Cynthia A. Winning 46 Group Vice President/Marketing
Elizabeth M. Steele 46 Vice President/General Counsel/Secretary
Larry W. Kaschinske 38 Vice President/Controller
Robert E. Cole 65 Director
William E. Frenzel 69 Director
Josef J. Fridman 52 Director
Donald L. Jacobs 59 Director
Robert Kearney 61 Director
James J. Krejci 56 Director
Raphael M. Solot 64 Director
Howard O. Thrall 50 Director
Siim A. Vanaselja 41 Director
Sanford Zisman 58 Director
Robert B. Zoellick 44 Director
</TABLE>
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and
Chief Executive Officer of the General Partner since its formation in 1970, and
he was President from June 1984 until April 1988. Mr. Jones is the sole
shareholder, President and Chairman of the Board of Directors of Jones
International, Ltd. He is also Chairman of the Board of Directors of the
subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business in
various capacities since 1961, and he is a member of the Board of Directors and
of the Executive Committee of the National Cable Television Association. In
addition, Mr. Jones is a member of the Board of Education Council of the
National Alliance of Business. Mr. Jones is also a founding member of the James
Madison Council of the Library of Congress. Mr. Jones has been the recipient of
several awards including: the Grand Tam Award in 1989, the highest award from
the Cable Television Administration and Marketing Society; the President's Award
from the Cable Television Public Affairs Association in recognition of Jones
International's educational efforts through Mind Extension University (now
Knowledge TV); the Donald G. McGannon Award for the advancement of minorities
and women in cable from the United Church of Christ Office of Communications;
the STAR Award from American Women in Radio and Television, Inc. for exhibition
of a commitment to the issues and concerns of women in television and radio; the
Cableforce 2000 Accolade awarded by Women in Cable in recognition of the General
Partner's innovative employee programs; the Most Outstanding Corporate
Individual Achievement Award from the International Distance Learning Conference
for his contributions to distance education; the Golden Plate Award from the
American Academy of Achievement for his advances in distance education; the Man
of the Year named
32
<PAGE>
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. James B. O'Brien, the General Partner's President, joined the General
Partner in January 1982. Prior to being elected President and a Director of the
General Partner in December 1989, Mr. O'Brien served as a division manager,
director of operations planning/assistant to the CEO, Fund Vice President and
Group Vice President/Operations. Mr. O'Brien was appointed to the General
Partner's Executive Committee in August 1993. As President, he is responsible
for the day-to-day operations of the cable television systems managed and owned
by the General Partner. Mr. O'Brien is a board member of Cable Labs, Inc., the
research arm of the U.S. cable television industry. He also serves as the
Chairman of the Board of Directors of the Cable Television Administration and
Marketing Association and as a director and a 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 marketing manager,
director of marketing, assistant division manager, regional vice president 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. Prior 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. Bowick also has served
since 1995 as President of Jones Futurex, Inc., a wholly owned subsidiary of the
General Partner that manufactures and markets data encryption products.
Ms. Cheryl M. Sprague joined the General Partner in November 1997 as
Group Vice President/Human Resources. Prior to November 1997 and since December
1995, Ms. Sprague served as Director, Human Resources for Westmoreland Coal
Company, where she was responsible for human resources management for said
company and three of its subsidiaries. From October 1993 to December 1995, Ms.
Sprague served as President of Peak Executive Resources, where she provided
consulting services in organizational development and human resources to
businesses experiencing organizational transition. From April 1992 to October
1993, Ms. Sprague was Vice President, Human Resources for Penrose-St. Francis
Healthcare System, where she was responsible for management of all human
resources activities. Ms. Sprague serves as an adjunct instructor at Regis
University and has earned the professional designation as a Senior Professional
in Human Resources from the Society for Human Resource Management and its
affiliate, the Human Resources Certification Board. Ms. Sprague is a past
president of the Colorado Human Resource Association and was named by that
association as the Colorado Human Resources Administrator of the Year in 1986.
Ms. Sprague also serves as a director on the Area VI Board for the Society for
Human Resource Management.
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.
33
<PAGE>
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. Josef J. Fridman was appointed a Director of the General Partner in
February 1998. Mr. Fridman is currently senior vice-president, law and
corporate secretary of BCE Inc., Canada's largest telecommunications company.
Mr. Fridman joined Bell Canada, a wholly owned subsidiary of BCE Inc., in 1969,
and has held increasingly senior positions with Bell Canada and BCE Inc. since
such time. Mr. Fridman has held his current position since January 1991. Mr.
Fridman's directorships include Telesat Canada, TMI Communications, Inc.,
Telebec Itee, BCI Telecom Holding Inc. and BCE Corporate Services Inc. He is a
member of the Quebec Bar Association, the Canadian, American and International
Bar Associations and the Lord Reading Law Society. Mr. Fridman is a governor of
the Quebec Bar Association.
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. Robert Kearney was appointed a director of the General Partner in July
1997. Mr. Kearney is a retired executive officer of Bell Canada. Prior to his
retirement in December 1993, Mr. Kearney was the President and Chief Executive
Officer of Bell Canada. He served as Chairman of BCE Canadian Telecom Group in
1994 and as Deputy Chairman of BCI Management Limited in 1995. During his
career, Mr. Kearney served in a variety of capacities in the Canadian, American
and International Standards organizations, and he has served on several
corporate, professional and civic boards.
Mr. James J. Krejci is President and CEO of Imagelink Technologies, Inc., a
privately financed company with leading technology in the desktop or personal
computer videoconferencing market. Prior to joining
34
<PAGE>
Imagelink Technologies in July 1996, Mr. Krejci was President of the
International Division of International Gaming Technology, the world's largest
gaming equipment manufacturer, with headquarters in Reno, Nevada. 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 started his career as an electronics
research engineer with the Allen-Bradley Company, then moved to the 3M Company,
General Electric and Becton Dickinson until March 1985 when he joined Jones
International, Ltd. Mr. Krejci has been a director of the General Partner since
August 1987.
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 34 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 a management and
international marketing consultant, having active assignments with First
National Net, Inc., LEP Technologies, Cheong Kang Associates (Korea), Aero
Investment Alliance, Inc. and Western Real Estate Partners, among others. From
September 1993 through July 1996, Mr. Thrall 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. Siim A. Vanaselja was appointed a Director of the General Partner in
August 1996. He is the Executive Vice President and Chief Financial Officer of
Bell Canada International Inc. and Vice President of BCI Telecom Holding Inc.
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 Executive Vice President and 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 principal in the law firm of Zisman & Ingraham, P.C. of
Denver, Colorado and he has practiced law for 32 years, specializing in the
areas of tax, business and estate planning and probate administration. Mr.
Zisman was a member of the Board of Directors of Saint Joseph Hospital, the
largest hospital in Colorado, serving at various times as Chairman of the Board,
Chairman of the Finance Committee and Chairman of the Strategic Planning
Committee. Since 1982, 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 the John M. Olin Professor at the U.S. Naval
Academy for the 1997-1998 term. From 1993 through 1997, he was an Executive
Vice President at 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 currently serves on the boards of Alliance Capital and
Said Holdings.
35
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
Neither the Partnership nor the Venture has any employees; however, various
personnel are required to operate the cable television systems owned by the
Venture. Such personnel are employed by the General Partner and, the cost of
such employment is charged by the General Partner to the Venture as a direct
reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of February 16, 1998, 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 Venture. The General Partner believes that the terms of such transactions
are generally as favorable as could be obtained 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 from unaffiliated parties.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges the Venture a 5 percent 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 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 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 from time to time also advances funds to the Venture
and charges interest on the balance payable. The interest rate charged
approximates the General Partner's weighted average cost of borrowing.
TRANSACTIONS WITH AFFILIATES
Knowledge TV, Inc., a company owned 67 percent by Jones Education Group,
Ltd., 7 percent by Mr. Jones and 26 percent by the General Partner, operates the
television network JEC Knowledge TV. JEC Knowledge TV provides programming
related to computers and technology; business, careers and finance; health and
wellness; and global culture and languages. Knowledge TV. Inc. sells its
programming to the Systems.
Jones Computer Network, Ltd., a wholly owned subsidiary of Jones Education
Group, Ltd., a company owned 64 percent by Jones International, Ltd., 16 percent
by the General Partner, 12 percent by BTH and 8 percent by Mr. Jones, operated
the television network Jones Computer Network. This network provided
programming focused primarily on computers and technology. Jones Computer
Network sold its programming to the Systems. Jones Computer Network, Ltd.
terminated its programming in April 1997.
The Great American Country network provides country music video programming
to the cable television systems owned by the Venture. This network, owned and
operated by Great American Country, Inc., a
36
<PAGE>
subsidiary of Jones International Networks, Ltd., an affiliate of the General
Partner, commenced service in 1996 in the Systems.
Jones Galactic Radio, Inc. is a subsidiary of Jones International Networks,
Ltd., an affiliate of the General Partner. Superaudio, a joint venture between
Jones Galactic Radio, Inc. and an unaffiliated entity, provides audio
programming to the Systems.
The Product Information Network Venture (the "PIN Venture") is a venture
among a subsidiary of Jones International Networks, Ltd., an affiliate of the
General Partner, 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 percent of its
net advertising revenue to the cable systems that carry its programming. The
Venture's Systems carry PIN for all or part of each day. Revenues received by
the Venture from the PIN Venture relating to the Venture's Systems totaled
approximately $59,075 for the year ended December 31, 1997.
The charges to the Venture for related party transactions are as follows
for the periods indicated:
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1997 1996 1995
---------------------- --------------------- ---------------------
<S> <C> <C> <C>
Management fees $ 916,942 $1,231,213 $1,143,361
Allocation of expenses 1,075,393 1,627,524 1,667,544
Interest expense 0 25,331 223
Amount of notes and advances outstanding 0 284,390 109,893
Highest amount of notes and advances outstanding 0 284,390 109,893
Programming fees:
Knowledge TV, Inc. 30,775 41,468 38,592
Jones Computer Network, Ltd. 15,656 56,465 47,377
Great American Country 23,695 37,518 0
Superaudio 31,780 40,317 33,947
</TABLE>
37
<PAGE>
PART IV.
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
-------------------------------------------------
AND REPORTS ON FORM 8-K
------------------------
<TABLE>
<CAPTION>
<C> <C> <S>
(a) 1. See index to financial statements for a list of financial
statements and exhibits thereto filed as a part of this
report.
3. The following exhibits are filed herewith:
4.1 Limited Partnership Agreement of Jones Cable Income Fund
1-C, Ltd. (1)
4.2 Joint Venture Agreement of Jones Cable Income Fund 1-B/C
Venture. (1)
10.1.1 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Township of Brady, Michigan. (3)
10.1.2 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Township of Calvin, Michigan. (4)
10.1.3 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Village of Centreville, Michigan.
10.1.4 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the City of Coloma, Michigan. (5)
10.1.5 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Township of Coloma, Michigan. (2)
10.1.6 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Township of Constantine, Michigan. (5)
10.1.7 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Village of Constantine, Michigan. (5)
10.1.8 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the City of Dowagiac, Michigan. (5)
10.1.9 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the County of Elkhart, Michigan. (5)
10.1.10 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Township of Fabius, Michigan. (5)
10.1.11 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Township of Flowerfield, Michigan. (Fund 1-B/C).
(5)
10.1.12 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Township of Hagar, Michigan. (Fund 1-B/C) (3)
10.1.13 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the Township of Hartford, Michigan. (Fund 1-B/C) (4)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.1.14 Copy of a franchise and related documents thereto
granting a community antenna television system franchise
for the County of LaGrange, Michigan. (Fund 1-B/C) (3)
10.1.15 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Lockport, Michigan. (Fund 1-B/C) (3)
10.1.16 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Mendon, Michigan. (Fund 1-B/C) (3)
10.1.17 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Mottville, Michigan. (Fund 1-B/C) (3)
10.1.18 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Newberg, Michigan. (4)
10.1.19 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Nottawa, Michigan. (5)
10.1.20 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Park, Michigan. (5)
10.1.21 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Pavillion, Michigan. (5)
10.1.22 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Penn, Michigan. (6)
10.1.23 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Pipestone, Michigan. (4)
10.1.24 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Pokagon, Michigan. (4)
10.1.25 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Porter, Michigan. (6)
10.1.26 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Schoolcraft, Michigan. (4)
10.1.27 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Sherman, Michigan. (6)
10.1.28 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Silvercreek, Michigan. (5)
10.1.29 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Three Rivers, Michigan. (5)
10.1.30 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of Vandalia, Michigan. (2)
10.1.31 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of Vicksburg, Michigan. (5)
</TABLE>
39
<PAGE>
<TABLE>
<C> <S>
10.1.32 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Watervliet, Michigan. (5)
10.1.33 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Watervliet, Michigan. (5)
10.1.34 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of Wayne, Michigan. (5)
10.1.35 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Township
of White Pigeon, Michigan. (5)
10.1.36 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of White Pigeon, Michigan. (5)
10.1.37 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for Dakota City,
Nebraska. (1)
10.1.38 Copy of Service Permit granted by Dakota County, Nebraska
Board of County Commissioners. (1)
10.1.39 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of Homer, Nebraska. (1)
10.1.40 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for South Sioux
City, Nebraska. (1)
10.1.41 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of Walthill, Nebraska. (2)
10.1.42 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of Walthill, Nebraska. (1)
10.1.43 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Canyonville, Oregon. (1)
10.1.44 Copy of resolution amending the franchise for the City of
Canyonville, Oregon. (2)
10.1.45 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Myrtle Creek, Oregon. (1)
10.1.46 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Riddle, Oregon. (2)
10.1.47 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Winston, Oregon. (1)
10.2.1 Credit Agreement dated 8/5/88 between Jones Cable Income Fund
1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2)
10.2.2 Amendment No. 1 dated 7/21/89 to Credit Agreement dated 8/5/88
between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin
National Bank of Milwaukee. (2)
</TABLE>
40
<PAGE>
<TABLE>
<C> <C> <S>
10.2.3 Amendment No. 2 dated 10/15/90 to Credit Agreement dated
8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First
Wisconsin National Bank of Milwaukee. (2)
10.2.3 Amendment No. 3 dated 6/30/92 to Credit Agreement dated 8/5/88
between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin
National Bank of Milwaukee. (2)
10.2.4 Second Amended and Restated Revolving Credit Agreement dated
May 7, 1997, among Corestates Bank, N.A., for itself and as
Agent, dresdner Bank AG and PNC Bank, National Association
10.3.1 Asset Purchase Agreement dated September 13, 1996 between
Jones Cable Income Fund 1-B/C Venture and Tele-Vue Systems,
Inc. (8)
10.3.2 Asset Purchase Agreement dated September 17, 1997, between
Jones Cable Income Fund 1-B/C Venture and Mediacom California
LLC. (9)
10.3.3 Asset Purchase Agreement dated as of January 30, 1998, between
Tempo Cable, Inc. and Jones Cable Income Fund 1-B/C Venture.
10.3.4 Asset Purchase Agreement dated as of January 30, 1998, between
TCI Cablevision of Texas, Inc. and Jones Cable Income Fund 1-
B/C Venture.
10.3.5 Asset Purchase Agreement dated as of January 30, 1998, between
Television Cable Service, Inc. and Jones Cable Income Fund 1-
B/C Venture.
27 Financial Data Schedule
____________
(1) Incorporated by reference from Registrant's Report on Form
10-K for the fiscal year ended December 31, 1987.
(2) Incorporated by reference from Registrant's Report on Form
10-K for the fiscal year ended December 31, 1992.
(3) Incorporated by reference from Registrant's Report on Form
10-K for the fiscal year ended December 31, 1993.
(4) Incorporated by reference from Registrant's Report on Form
10-K for the fiscal year ended December 31, 1990.
(5) Incorporated by reference from Registrant's Report on Form
10-K for the fiscal year ended December 31, 1988.
(6) Incorporated by reference from Registrant's Report on Form
10-K for the fiscal year ended December 31, 1989.
(7) Incorporated by reference from Registrant's Report on Form
10-K for the fiscal year ended December 31, 1994.
(8) Incorporated by reference from Registrant's Current Report
on Form 8-K dated September 26, 1996
(9) Incorporated by reference from Registrant's Current Report
on Form 8-K dated January 21, 1998.
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
(b) Reports on Form 8-K.
A Current Report on Form 8-K (Commission File No. 0-14906),
dated March 13. 1996. describing the sale of the Orangeburg
System was filed with the Securities and Exchange Commission
on March 14, 1996.
</TABLE>
42
<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.
JONES CABLE INCOME FUND 1-C, 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 23, 1998 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 23, 1998 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 23, 1998 (Principal Financial Officer)
By: /s/ Larry Kaschinske
--------------------
Larry Kaschinske
Vice President/Controller
Dated: March 23, 1998 (Principal Accounting Officer)
By: /s/ James B. O'Brien
--------------------
James B. O'Brien
Dated: March 23, 1998 President and Director
By: /s/ Robert E. Cole
------------------
Robert E. Cole
Dated: March 23, 1998 Director
By: /s/ William E. Frenzel
----------------------
William E. Frenzel
Dated: March 23, 1998 Director
43
<PAGE>
By: --------------------------
Josef J. Fridman
Dated: March 23, 1998 Director
By: --------------------------
Donald L. Jacobs
Dated: March 23, 1998 Director
By: --------------------------
Robert Kearney
Dated: March 23, 1998 Director
By: /s/ James J. Krejci
--------------------------
James J. Krejci
Dated: March 23, 1998 Director
By: /s/ Raphael M. Solot
--------------------------
Raphael M. Solot
Dated: March 23, 1998 Director
By: /s/ Howard O. Thrall
--------------------------
Howard O. Thrall
Dated: March 23, 1998 Director
By: --------------------------
Siim A. Vanaselja
Dated: March 23, 1998 Director
By: /s/ Sanford Zisman
--------------------------
Sanford Zisman
Dated: March 23, 1998 Director
By: /s/ Robert B. Zoellick
--------------------------
Robert B. Zoellick
Dated: March 23, 1998 Director
44
<PAGE>
EXHIBIT 10.1.3
ORDINANCE NO. 153
CENTREVILLE C.A.T.V. ORDINANCE
VILLAGE OF CENTREVILLE
ST. JOSEPH COUNTY, MICHIGAN
An ordinance to amend C.A.T.V. ORD 127 effective May 16, 1981 a community
antenna television system franchise in the Village of Centreville, County of St.
Joseph, State of Michigan, to grant a non-exclusive franchise to Jones Cable
Income Fund 1-B/C Venture for the establishment and operation thereof.
The Village of Centreville hereby ordains:
SECTION 1. DEFINITIONS.
------------
"COMMUNITY ANTENNA TELEVISION SYSTEM", "C.A.T.V.", or "SYSTEM" shall mean
any facility that receives over the air or by other means, and amplifies or
otherwise modifies the signals broadcast by television or radio stations as well
as signals containing other information, and distributes such signals by cable
and/or other means to the public.
"VILLAGE" is the Village of Centreville, Michigan.
"VILLAGE COUNCIL" is the council of the Village of Centreville.
"COMPANY" shall mean Jones Cable Income Fund 1-B/C Venture doing business
as Jones Intercable, or anyone who succeeds the company in accordance with the
provisions contained herein.
"PUBLIC WAYS" shall mean streets, avenues, highways, boulevards,
concourses, driveways, bridges, tunnels, parks, parkways, waterways, alleys, all
other public rights of way, and public grounds or waters within or belonging to
the Village of Centreville.
"SUBSCRIBER" shall mean a purchaser of any service delivered over the
system to an individual dwelling unit, where the service is not to be utilized
in connection with a business, trade, or profession.
- 1 -
<PAGE>
"BASIC SERVICE" shall mean the provision by the Company to television
receivers of all signals of over-the-air television stations required by the
Federal Communications Commission (hereafter F.C.C.), public channels, and
additional channels at the option of the Company.
"VILLAGE CHANNEL" shall mean a channel on the system which is reserved for
use by the Village or for public access.
"COMPANY CHANNEL" shall mean a channel on the system which is reserved for
the carriage of program material originated by the Company or by another person.
"FRANCHISE" shall mean the grant of authority to the Company to operate a
C.A.T.V. system in the Village.
"GROSS REVENUES" shall mean the total revenues received by the Company from
all cable related services to the Village.
SECTION 2. GRANT OF FRANCHISE.
-------------------
A. There is hereby awarded to the Company a non-exclusive franchise for
the occupation or use of the public ways within the Village for the
construction, operation, and maintenance of a C.A.T.V. system.
B. This franchise shall remain effective for ten (10) years, unless
sooner revoked as herein provided in Section 3 hereof.
C. Nothing in the franchise shall affect the right of the Village to
grant to any other person a franchise to occupy and use the public ways for the
construction, operation, and maintenance of C.A.T.V. or similar facilities,
within the Village. Nothing contained in this franchise shall prohibit the
Company from appearing before the Village council and being heard on any
application for any additional franchise to another.
SECTION 3. REVOCATION OF FRANCHISE.
------------------------
A. If the Company should violate any of the terms, conditions or
provisions of this Ordinance, or if the Company should fail to comply with any
reasonable provisions of any ordinance of the Village of F.C.C. regulations, and
should the Company continue to violate the same for a period of thirty (30) days
after the Company shall have been notified in writing by the Village to desist
from
- 2 -
<PAGE>
such violation, the Company may, at the Village's option, be deemed to have
forfeited and annulled all the rights and privileges of this franchise grant.
B. Any franchise granted hereunder shall be subject to all applicable
provisions of Village ordinances, any amendments thereto.
C. Any franchise granted hereunder shall be subject to all applicable
state and federal laws, including rules and regulations established by the
F.C.C.
SECTION 4. LIMITATION OF FRANCHISE.
------------------------
A. This franchise applies only to the operation of a C.A.T.V. system as
provided herein, and does not take the place of any other franchise, license or
permit which might be required by federal, state and local law.
B. In the operation of its system, the Company shall not deprive an
inhabitant of any building, by contract or otherwise, or any existing right to
use an individual or master antenna for the purpose of receiving television
signals.
SECTION 5. CHANGE OF OWNERSHIP.
--------------------
The Company shall not transfer, sell nor assign the rights granted to it by
this franchise grant without the express consent of the Village council. The
Village council shall not, however, unreasonably withhold its consent to the
assignment to a concern competent and responsible in the field of community
antenna television. The transfer, sale, or assignment of this franchise to a
company, which is a parent, subsidiary or division of the Company, shall not be
considered a transfer, sale or assignment requiring the consent of the Village
council.
SECTION 6. CONSTRUCTION AND INSTALLATION OF SYSTEM.
----------------------------------------
Subject to the provisions and restrictions of this franchise and the
ordinances of the Village, the Company shall have the right, subject to the
prior approval of the Village Superintendent:
A. To construct, erect, operate and maintain in, upon, along, across,
above, over and under the public ways, poles, cables, underground conduits,
manholes and other conductors and fixtures necessary for the maintenance and
operation of a C.A.T.V. system in the Village.
- 3 -
<PAGE>
B. To lease, rent or in any other lawful manner, obtain the use of
towers, poles, lines, cables, and other equipment and facilities from any and
all holders of public licenses and franchises within the limits of the Village,
including but not limited to, Consumers Power Company and General Telephone
Company, and to use same on such terms as agreed upon. Existing poles used for
the Company's distribution system shall be those erected and maintained by
Consumers Power Company, General Telephone Company, or the Village, when and
where applicable, providing mutually satisfactory rental arrangements can be
entered into with said utilities or Village.
C. The Company shall obtain, prior to the commencement of the
construction and installation of the system, necessary and proper bonds to
guarantee the performance of the contract or contracts, and such labor and
material bonds as may be required by law, in such amount and such forms as may
be approved by the Village council.
SECTION 7. CONDITIONS ON PUBLIC WAY OCCUPANCY.
-----------------------------------
A. All transmissions and distribution structures, lines and equipment
erected by the Company within the Village shall be so located as to cause
minimum interference with the rights and reasonable convenience of property
owners who adjoin any of the said public ways.
B. In case of disturbances of any public way or paved area, the Company
shall at its own cost and expense replace and restore such public way or paved
area in as good a condition as it was in before the work involving such
disturbance was done.
C. If, at any time during the period of this franchise, the Village shall
lawfully elect to alter or change the grade of any public way, the Company, upon
reasonable notice by the Village shall remove and relocate its poles, wires,
cables, underground conduits, manholes and other fixtures at its own expense.
D. Any poles or other fixtures placed in any public way by the Company
shall be placed in such manner as not to interfere with the usual travel on such
public way.
E. The Company shall, on request of any person holding a building-moving
permit issued in the Village, temporarily raise or lower its wires to permit the
moving of buildings. The expense of such temporary raising or lowering of wires
shall be paid by the person requesting the same, and the Company shall
- 4 -
<PAGE>
have the authority to require such payment in advance. The Company shall be
given not less than 48 hours advance notice to arrange for such temporary wire
changes. The Village, or any other non-profit organization, including historical
societies, shall be exempt from any charges.
F. The Company shall, after giving notice to the Village, have the
authority to trim trees upon and hanging over public ways and places in the
Village so as to prevent the branches of such trees from coming in contact with
the wires and cables of the C.A.T.V. system.
G. In all sections of the Village where all existing cable or other like
facilities of utility companies are presently or subsequently placed
underground, the Company shall place its cables or other like facilities
underground.
SECTION 8. SAFETY REQUIREMENTS.
--------------------
A. The Company shall at all times employ ordinary care, and shall install
and maintain in use, commonly accepted methods and devices for preventing
failures and accidents which are likely to cause damage, injuries, or nuisances
to the public.
B. The Company shall install and maintain its cables, fixtures, and other
equipment in accordance with all applicable federal, state, and other local
laws, ordinances, codes, rules and regulations, and in such manner that they
will not interfere with any installations of the Village or of a public utility
serving the Village.
C. All structures and all lines, equipment, and connections in, over,
under, and upon the public ways or places in the Village, wherever situated or
located, shall at all times be kept and maintained in a safe, suitable condition
and in good order and repair.
SECTION 9. ERECTION, REMOVAL AND COMMON USE OF POLES.
------------------------------------------
A. Poles or other wire holding structures shall be erected by the Company
only with prior approval of the Village council.
B. Where a public utility serving the Village desires to make use of the
poles or other wire holding structures of the Company, but agreement therefore
with the Company cannot be reached, the Village may require the Company to
- 5 -
<PAGE>
permit such use for reasonable and just compensation, provided that such use
would not unduly interfere with the Company's operation.
SECTION 10. RIGHTS RESERVED TO THE VILLAGE.
------------------------------
A. The Village shall have the right to install and maintain free of
charge upon the poles and cables of the Company any wire and pole fixtures
necessary for a police or fire alarm system, on the condition that such wire or
pole fixtures do not interfere with the C.A.T.V. operation of the Company, and
that such installations shall be installed in a safe manner, in conformance with
state and Village regulations.
B. At the expiration of this franchise or upon its revocation, as
provided for herein, the Village shall have the right to require the Company to
remove at its own expense all portions of the C.A.T.V. system from all public
ways and places within the Village.
SECTION 11. MAPS, PLATS, AND REPORTS.
-------------------------
The Company shall, on or before the first day of April of each year, file
with the Village clerk, true and accurate maps or plats, showing the location of
all existing cables, whether leased or owned outright. Attached to such maps or
plats shall be a list by address of current subscribers.
SECTION 12. CARRIAGE OF SIGNALS.
-------------------
A. The Company shall comply with all rules and regulations of the F.C.C.
with respect to the reception, carriage, and distribution of signals.
B. Minimum channel compliment shall include all V.H.F. channels
significantly viewed, public, community, and education channels as required by
the F.C.C.
C. The Company shall transmit and deliver over Village channels the
signals designated therefore by the Village council at such times as the Village
council shall determine.
SECTION 13. SIGNAL QUALITY REQUIREMENTS.
---------------------------
A. The Company shall operate facilities capable of distributing color
television signals, free from ghost images, interferences, or distortions, and
- 6 -
<PAGE>
accompanied with proper sound, state of the art television sets in good repair
without interfering with other electrical or electronic system.
B. For the purposes of this Section, the standards to be applied in
determining whether or not the Company is producing a good picture or
transmitting signals of adequate strength to produce same are those acceptable
standards as set forth in the rules and regulations of the F.C.C. relative to
C.A.T.V. systems.
C. The Company shall demonstrate by instruments or otherwise to
subscribers, upon request that a signal of adequate strength and quality is
being delivered. Such demonstration shall be made by taking a standard
production state-of-the-art television set with a screen sufficient area as to
clearly demonstrate the relative merit of the delivered signal.
SECTION 14. OPERATION AND MAINTENANCE OF SYSTEM.
------------------------------------
A. The Company shall maintain an office in the area which shall be open
during all normal business hours, have a listed local telephone, and be so
operated that complaints and requests for repairs or adjustment may be received
at any time, 24 hours per day.
B. The Company shall render efficient service, make repairs promptly, and
interrupt service only for good cause and for the shortest time possible. Such
interruptions, insofar as is possible, shall be preceded by notice, and shall
occur during periods of minimum use of the system.
C. The Company shall limit failures to a minimum by locating and
correcting malfunctions promptly, but in no event longer than twenty-four (24)
hours after receiving notice of same, except as provided herein.
D. Should it be impossible or impractical to correct any malfunctions
within twenty-four (24) hours or less, then each subscriber whose television
reception is so disrupted shall receive a rebate from the Company in the amount
of one-thirtieth of such subscriber's monthly charge for every additional
twenty-four (24) hour period that said subscriber's television reception is so
disrupted, unless said disruption in service was entirely beyond its control.
E. Any rebate made to any subscriber under this Section, in any month,
shall not exceed said subscriber's normal monthly fee paid to the Company.
- 7 -
<PAGE>
F. Complaint procedures shall be given to each new subscriber by the
Company at the time of initial subscription to the C.A.T.V. system. In the
instance of existing subscribers, changes in complaint procedures shall be
included with the next monthly billing.
SECTION 15. RATES.
------
A. The initial rates and charges for television and radio signals
distributed within the Village shall not exceed the rates specified below.
1. "Basic Service": $24.43 per month; includes all channels with the
exception of HBO and Showtime.
2. Installation charge for "Basic Service": $45.00 underground;
$40.00 aerial.
3. Each additional outlet at time of installation: $15.00.
4. Monthly charge of additional outlet: No charge.
5. Reconnection within 30 days after disconnection due to subscriber
non-payment: $25.00
6. No greater rates or charges may be charged by the Company, its
agents and assigns for any of the above services unless made in
conformance with federal law related to such rate regulation.
B. Company also agrees to provide at least thirty (30) days prior written
notice to the Village and the Company's customers prior to instituting any rate
increase. If, in the future, the State of Michigan regulates the rates of the
Company for the services provided under this franchise, those portions of this
Section so regulated by the State of Michigan shall be of no effect during such
State regulation to the extent of any conflict therewith.
C. Where an unusually difficult or abnormal installation is encountered
or requested, the Company reserves the right to require additional charges to
reasonably recover the Company's costs. Such charges may, at the subscriber's
request, be added to the subscriber's monthly charges over a negotiable period
of time.
- 8 -
<PAGE>
SECTION 16. CAPACITY AND COMMENCEMENT OF SYSTEM.
------------------------------------
A. The Company shall extend the installation of cables, amplifiers, and
related equipment throughout the Village as rapidly as is practicable.
B. Within one (1) year from the date of certification from the F.C.C.,
the Company shall be capable of providing "Basic Service" on a regular basis to
at least twenty-five per cent (25%) of the Village residences.
C. Company shall provide a minimum channel capacity of at least fifty-one
(51) channels. Initial channel capacity of the system shall be no less than
eighteen (18) channels.
D. The Company shall provide "Basic Service" to one outlet on each floor
of all existing or future police and fire stations, the Village Hall, and all
public and private schools located within 300 feet of the Company's cables
within the Village without any charge therefore.
E. The Company also agrees to make available one Village channel with
access from one location mutually agreed upon by the Village council and the
Company. The Village shall retain an option to have a second access channel if a
review of the circumstances indicates a need therefore.
F. In the event of an emergency situation, the Village may interrupt
signals otherwise being distributed by the Company for the delivery of signals
necessitated by such emergency (Emergency Broadcast System).
SECTION 17. LIABILITY INSURANCE AND INDEMNIFICATION.
----------------------------------------
A. The Company shall maintain throughout the term of its franchise,
liability insurance insuring the Village and the Company with regard to all
damages for which the Village and/or the Company may be liable, including, but
not limited to, damages arising from the installation, operation, maintenance or
removal of the Company's C.A.T.V. system, whether or not any act or omission
complained of is authorized, allowed or prohibited by the franchise.
B. The liability insurance referred to in this Section shall be in the
following amounts:
- 9 -
<PAGE>
1. $500,000 for bodily injury or death to any one person, with a
limit of $1,000,000.00 for bodily injury or death resulting from
any one accident;
2. $500,000 for property damage resulting from any one accident;
3. $500,000 for all other types of liability.
C. The Company shall indemnify and save the Village harmless from any and
all liability arising out of or by granting of this franchise or the operation
of the system hereunder. The Company shall pay for all expenses incurred by the
Village in defending itself with regard to all damages and penalties which the
Village may be required to pay as a result of this franchise, including, but not
limited to, all reasonable investigation, witness and attorney fees.
SECTION 18. ANNUAL FRANCHISE FEE.
---------------------
Commencing one year from the effective date of this Ordinance, and each
year thereafter, the Company shall pay to the Village treasurer a franchise fee
equal to three percent (3%) of the Company's gross revenues derived from all
cable services within the Village, or $250.00, whichever is greater.
In keeping with the above, and as of the close of business at the end of
each calendar year, the Company shall compile a report of annual gross receipts,
certified by a certified public accountant. The report, together with the amount
due, shall be delivered to the Village clerk within ninety (90) days following
the close of such calendar year.
The Company shall keep full and accurate books and records of account. The
duly authorized agent of the Village shall have the right, power and authority
to inspect and audit the current records of gross revenues of the Company at any
reasonable time. The Village shall have the right, at its own expense, to
audit the records of gross revenue of the Company for any annual period at any
reasonable time within three (3) years after expiration of such annual period.
No payments provided herein by the Company to the Village shall be considered in
lieu of taxes.
- 10 -
<PAGE>
SECTION 19. SEVERABILITY.
-------------
If any Section, subsection, sentence, clause, phrase, or portion of this
Ordinance is for any reason held invalid or unconstitutional, by any court of
competent jurisdiction, such portion shall be deemed a separate, distinct, and
independent provision and such holding shall not affect the validity of the
remaining portions thereof.
SECTION 20. EFFECTIVE DATE.
---------------
This ordinance shall take effect immediately upon publication as provided
by law.
This Ordinance adopted at the Regular Meeting of the Village council held
January 20, 1997.
/s/ Catherine J. Peacock
------------------------
President
/s/ Tammy Mosher
------------------------
Clerk
(#27435)
1, Tamny Mosher, Village Clerk, hereby certify that a copy of the above
Ordinance was duly published in the Three Rivers Commercial, as required by law
on January 31, 1997.
/s/ Tammy Mosher
---------------------------
Tammy Mosher, Village Clerk
- 11 -
<PAGE>
EXHIBIT 10.2.4
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
By and Among
CORESTATES BANK, N.A., for itself
and as Agent
DRESDNER BANK AG, and
PNC BANK, NATIONAL ASSOCIATION
and
JONES CABLE INCOME FUND I-B/C VENTURE
May 7, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<C> <S> <C>
ARTICLE I - LOANS AND NOTE................................................ 2
1.1. Revolving Credit Facility ..................................... 2
1.2. Use of Proceeds................................................ 4
1.3. Commitment Fee................................................. 4
1.4. Facility Fee................................................... 4
1.5. Termination or Reduction of the Commitment..................... 4
1.6. Prepayment .................................................... 5
1.7. Rate of Interest............................................... 6
(a) Prime Rate Loans........................................... 6
(b) Eurodollar Loans........................................... 6
1.8. Interest Periods............................................... 6
1.9. Funding Costs.................................................. 7
1.10. Other Increased Costs.......................................... 7
1.11. Payments....................................................... 8
1.12. Special Provisions Applicable to Eurodollar Loans.............. 8
(a) Change of LIBO Rate........................................ 8
(b) Unavailability of Eurodollar Funds......................... 9
1.13. Taxes.......................................................... 9
ARTICLE II - ADMINISTRATION OF CREDIT.....................................11
2.1. Borrowing Procedure............................................11
2.2. Computations; Non-Business Days................................11
2.3. Application of Payments........................................12
2.4. Pro Rata, Treatment............................................12
2.5. Deposits; Set Off..............................................12
SECTION 2A - LETTERS OF CREDIT............................................13
2A.1 Availability of Credit.........................................13
2A.2 Conunitment Availability.......................................13
2A.3 Approval and Issuance..........................................13
2A.4 Obligations of the Company.....................................14
2A.5 Payment by Banks on Letters of Credit..........................15
</TABLE>
-i-
<PAGE>
<TABLE>
<C> <S> <C>
2A.6 Collateral Security................................. 15
2A.7 General Terms of Credits............................ 16
ARTICLE III - CONDITIONS PRECEDENT OF BORROWING................ 17
3.1. Representations..................................... 17
3.2. Subordination....................................... 17
3.3. Security Agreement.................................. 17
3.4. Insurance Certificate............................... 18
3.5. Counsel Opinion..................................... 18
3.6. Proceedings Satisfactory............................ 18
ARTICLE IV - REPRESENTATIONS AND WARRANTIES.................... 18
4.1. Organization........................................ 18
4.2. Authority........................................... 18
4.3. Investment Company Act of 1940...................... 19
4.4. Employee Retirement Income Security Act............. 19
4.5. Financial Statements................................ 19
4.6. Liens............................................... 19
4.7. Contingent Liabilities.............................. 19
4.8. Partnership Tax Matters............................. 20
4.9. Absence of Litigation............................... 20
4.10. Absence of Default.................................. 20
4.11. Material Agreements................................. 20
4.12. Partnerships; Joint Ventures........................ 21
4.13. Full Disclosure..................................... 21
4.14. Fiscal Year......................................... 21
4.15. Franchises, Licenses, etc........................... 21
4.16. Cable Systems....................................... 21
4.17. Hazardous Wastes, Substances and Petroleum Products. 22
4.18. Compliance.......................................... 22
4.19. Perfection of Security Interests.................... 22
ARTICLE V - NEGATIVE COVENANTS................................. 23
5.1. Restriction of Indebtedness......................... 23
5.2. Amendments and Prepayments.......................... 23
5.3. Restriction on Liens................................ 23
5.4. Sale and Leaseback.................................. 23
5.5. Acquisitions, Loans and Investments................. 23
5.6. Liquidation; Merger; Disposition of Assets.......... 24
5.7. Accounts Receivable................................. 25
</TABLE>
-ii-
<PAGE>
<TABLE>
<C> <S> <C>
5.8. Contingent Liabilities.................................. 25
5.9. Affiliates.............................................. 25
5.10 Management Fees and Home Office Allocations............. 25
5.11. Restricted Payments..................................... 25
5.12. Partnerships; Joint Ventures; Partnership Documents..... 26
ARTICLE VI - AFFIRMATIVE COVENANTS................................. 26
6.1. Financial Covenants..................................... 26
6.2. Insurance............................................... 26
6.3. Partnership Existence; Obligations...................... 27
6.4. Business Activities; Management......................... 27
6.5. Properties.............................................. 27
6.6. Accounting Records; Reports............................. 27
6.7. Inspection of Records; Information...................... 29
6.8. Compliance; Notification ............................... 29
ARTICLE VII - DEFAULTS............................................. 30
7.1. Default in Payment...................................... 30
7.2. Default on Certain Covenants............................ 30
7.3. Default in Performance of Other Agreements.............. 30
7.4. Representations or Statements False..................... 30
7.5. Default on Other Obligations............................ 30
7.6. Judgments............................................... 30
7.7. Bankruptcy; Insolvency.................................. 31
7.8. Validity................................................ 31
7.9. ERISA................................................... 31
7.10. Revocation of Franchise, etc............................ 31
7.11. Termination or Dissolution of the Company, etc.......... 32
7.12. Environmental Matters................................... 32
ARTICLE VIII - THE AGENT........................................... 33
8.1. Appointment and Powers.................................. 33
8.2. Application of Payments................................. 33
8.3. Modifications and Waivers............................... 33
8.4. Obligations Several..................................... 34
8.5. Responsibility.......................................... 34
8.6. Agent's Indemnification................................. 34
8.7. Action on Instruction of Banks; Right to Indemnity...... 35
8.8. Rights as a Lender...................................... 35
8.9. Credit Investigation.................................... 35
</TABLE>
-iii-
<PAGE>
<TABLE>
<C> <S> <C>
8.10. Resignation, Removal of Agent............................. 36
8.11. Successor Agent........................................... 36
8.12. Collateral Security....................................... 36
8.13. Enforcement by Agent...................................... 36
ARTICLE IX - MISCELLANEOUS........................................... 37
9.1. Accounting Terms; Definitions............................. 37
(a) "Affiliate".......................................... 37
(b) "Annualized Cash Flow"............................... 37
(c) "Applicable Margin".................................. 37
(d) "Bank"............................................... 38
(e) "Base Rate".......................................... 38
(f) "Basic Subscribers".................................. 38
(g) "Business Day"....................................... 38
(h) "Capitalized Lease".................................. 38
(i) "Cash Flow".......................................... 38
(j) "Controlled Group"................................... 38
(k) "Debt Service"....................................... 38
(1) "Default"............................................ 38
(m) "Environmental Control Statutes"..................... 39
(n) "ERISA".............................................. 39
(o) "Eurodollar Loan".................................... 39
(p) "Federal Funds Rate"................................. 39
(q) "Gross Operating Revenues"........................... 39
(r) "Home Office Allocations"............................ 39
(s) "Intercompany Subordinated Debt"..................... 39
(t) "Interest Expense"................................... 40
(u) "Letter of Credit"................................... 40
(v) "Letter of Credit Request Form"...................... 40
(w) "Letter of Credit Sublimit".......................... 40
(x) "Leverage Ratio"..................................... 40
(y) "LIBO Rate".......................................... 40
(z) "Loan"............................................... 40
(aa) "LOC Contribution"................................... 40
(bb) "London Business Day"................................ 40
(cc) "Management Fees".................................... 41
(dd) "Maximum Permitted Indebtedness"..................... 41
(ee) "Note" and "Notes"................................... 41
(ff) "Permitted Liens".................................... 41
(gg) "Plan"............................................... 42
(hh) "Prime Rate"......................................... 42
</TABLE>
-iv-
<PAGE>
<TABLE>
<C> <S> <C>
(ii) "Prime Rate Loan"................................... 42
(jj) "Proforma Debt Service"............................. 42
(kk) "Pro rata" or "Ratably"............................. 42
(11) "Reportable Event".................................. 42
(mm) "Required Banks".................................... 43
(nn) "Restricted Payments"............................... 43
(oo) "Security Agreement"................................ 43
(pp) "Subordination Agreement"........................... 43
(qq) "Subsidiary"........................................ 43
(rr) "Termination Date".................................. 43
(ss) "Total Debt"........................................ 43
9.2. Expenses and Attorneys' Fees............................. 43
9.3. Securities Act of 1933................................... 44
9.4. Successors............................................... 44
9.5. Survival................................................. 44
9.6. Pennsylvania Law; Amendment.............................. 44
9.7. Counterparts............................................. 44
9.8. Notices.................................................. 44
9.9. Limitation on Recourse to Partners....................... 45
9.10. Indemnification and Release Provisions................... 46
9.11. Participations and Assignments........................... 46
</TABLE>
-v-
<PAGE>
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
--------------------------
THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this
"Agreement") is made this 7th day of May, 1997, by and among JONES CABLE INCOME
FUND 1-B/C VENTURE, a Colorado general partnership (the "Company"); CORESTATES
BANK, N.A., a national banking association with offices at 1339 Chestnut Street,
Philadelphia, PA 19101 ("CoreStates", and in its capacity as agent for the
Banks, "Agent"); DRESDNER BANK AG, a bank organized under the laws of Germany
acting through its branch office at 75 Wall Street, New York, NY 10005-2889
("Dresdner"); and PNC Bank, National Association, a national banking association
with offices at 1600 Market Street, Philadelphia, PA 19103 ("PNC") (CoreStates,
Dresdner and PNC each individually a "Bank" and collectively the "Banks").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is a Colorado joint venture general partnership
in which Jones Cable Income Fund 1-B, Ltd. and Jones Cable Income Fund 1-C,
Ltd., each a Colorado limited partnership (the "Partnerships"), are the sole
partners, and Jones Intercable, Inc., a Colorado corporation ("JII"), is the
sole general partner of each of the Partnerships;
WHEREAS, the Company, Agent, Banks and First National Bank of Maryland
("First Maryland") are parties to an Amended and Restated Revolving Credit
Agreement dated September 30, 1994 (as amended prior to the date hereof, the
"Existing Credit Agreement"), which was the first full amendment and restatement
of that certain Revolving Credit Agreement by and among the parties dated
September 29, 1988;
WHEREAS, First Maryland has requested the Company, Agent and the Banks
to consent to First Maryland's resignation as a Bank under the Existing Credit
Agreement, and the Company, Agent, and the Banks have agreed to such
resignation;
WHEREAS, the Company, has sold its Brighton and Broomfield, Colorado
cable television systems and has applied a portion of the net proceeds of such
sales to reduce the Company's outstanding indebtedness under the Existing Credit
Agreement;
WHEREAS, the existing Credit Agreement is due to expire June 30, 1997,
and the Company, Agent and Banks have agreed to amend and restate the Existing
Credit Agreement in its entirety to extend the term thereof to June 30, 2005,
reduce the Commitment thereunder and make certain amendments thereto as set
forth herein, all subject to the terms and conditions hereof;
WHEREAS, the amendment and restatement of the Existing Credit
Agreement hereunder, the amendment and restatement of related documents in
connection herewith, and the resignation of First Maryland, are not intended by
the parties to constitute a novation, discharge
<PAGE>
or satisfaction of the indebtedness of the Company under the Existing Credit
Agreement or any collateral security therefor, all of which indebtedness and
collateral security shall remain outstanding under this Agreement and documents
executed in connection herewith.
NOW, THEREFORE, in consideration of the premises and the agreements
herein set forth and intending to be legally bound hereby, the parties hereby
amend and restate the Existing Credit Agreement in its entirety as follows:
ARTICLE I
---------
LOANS AND NOTE
--------------
1.1. Revolving Credit Facility.
-------------------------
(a) Loans. Subject to the requirements of Article III hereof, from
-----
time to time prior to the earlier of (i) June 30, 2005 or (ii) the termination
in full of the Commitments (in either case the "Termination Date"), the Company
may obtain Loans from the Banks, on a pro rata basis, up to the amount of such
Bank's outstanding Commitment as set forth in subsection (b) below (as reduced
in connection with outstanding Letters of Credit pursuant to Section 2A.2
hereof), repay such Loans and reborrow hereunder. Each Loan shall be in a
minimum amount of One Hundred Thousand Dollars ($100,000).
(b) Banks' Several Commitments. The amount of each Bank's several
--------------------------
Commitment is set forth next to its name below:
Banks Commitment amounts
----- ------------------
CoreStates $11,500,000
Dresdner $ 8,000,000
PNC $ 8,000,000
===========
TOTAL $27,500,000
(c) On and as of the date of this Agreement (prior to any funding of
any Loans requested by the Company), each Bank shall transfer to Agent, in
immediately available funds, the difference between its respective pro rata
share (based on the Commitments set forth in (b) above) of the total outstanding
principal amount of the Loans and its pro rata shares of the aggregate
outstanding amount of Loans under the Existing Credit Agreement immediately
prior to the effectiveness of this Agreement. Agent shall transfer such amounts,
in immediately available funds, to First Maryland in an amount sufficient to
cause First Maryland to be repaid all of its remaining Loans outstanding under
the Existing Credit Agreement. Such transfers of funds by the Banks shall be
deemed for all purposes under the Existing Credit
-2-
<PAGE>
Agreement to be Loans to the Company by such Banks, outstanding hereunder on and
as of the date of this Agreement. On the date of this Agreement (prior to the
funding of any Loans requested by the Company), the Company shall transfer to
Agent, in immediately available funds, payments of all Commitment Fees and
interest accrued under the Existing Credit Agreement since the last date of
payment thereof, and Agent shall transfer such amounts to the Banks and First
Maryland in accordance with the amount of their respective Commitments under the
Existing Credit Agreement immediately prior to the transactions contemplated
pursuant to this Agreement.
(d) Notes.
-----
(i) The indebtedness of the Company to each Bank under this
Agreement will be evidenced by a Note executed by the Company in favor of such
Bank in the form of Exhibit A hereto. The original principal amount of each
---------
Bank's Note from the Company will be the amount identified in Section 1.1(b)
hereof as its respective Commitment Amount; provided, however, that
notwithstanding the face amount of each such Note, the Company's liability under
each such Note shall be limited at all times to its aggregate actual
indebtedness, including principal, interest and fees, and obligations under
Letters of Credit and unreimbursed draws under Letters of Credit then
outstanding in connection with the applicable Bank's Commitment hereunder.
(ii) The Notes issued hereunder collectively amend and restate in
their entireties, and are substituted for, the Company's Fourth Amended and
Restated Revolving Credit Promissory Notes and the Company's three Revolving
Credit Promissory Notes, each dated May 31, 1994, and issued pursuant to the
Existing Credit Agreement, without any discharge, satisfaction or novation of
the underlying indebtedness or any collateral security therefor, all of which
indebtedness and collateral security remain outstanding under this Agreement and
the Note issued pursuant hereto and continue to be secured pursuant to the
Collateral Security Documents.
(iii) Although the Notes are payable in the full amount of each Bank's
Commitment, the Company shall be obligated to pay only the amounts actually
disbursed to or for the account of the Company, together with interest on the
unpaid balance of sums so disbursed which remains outstanding from time to time,
at the rates and on the dates specified in the Notes and in Sections 1.7 and 1.8
hereof, together with the fees and expenses provided herein. The Company agrees
that, if the Banks, in their sole discretion, agree to extend the Termination
Date or increase the Commitment, the Company will execute and deliver such
amended, restated or revised notes or other instruments and documents, and take
such other action, as the Banks may deem necessary or appropriate in connection
with any such extension of the Termination Date or increase in the Commitment.
(e) Maturity. The Company hereby agrees that on the Termination Date
--------
the entire outstanding balance under this Agreement, principal, interest, fees
and expenses,
-3-
<PAGE>
shall be due and payable in full and the Company hereby agrees to make such
payment on such date.
1.2. Use of Proceeds. The Company represents, warrants and agrees that:
---------------
(a) The proceeds of the Loans made to the Company hereunder have been
or shall be used by the Company solely (i) to finance capital expenditures, (ii)
for general working capital purposes, and (iii) for payment to JII of advances
made by JII to the Company and Management Fees and Home Office Allocations
incurred in the ordinary course of business, to the extent permitted hereunder.
(b) No part of the proceeds of any Loan made hereunder will be used to
"purchase" or "carry" any "margin stock" or to extend credit to others for the
purpose of "purchasing" or "carrying" any "margin stock" (as such terms are
defined in the Regulation U of the Board of Governors of the Federal Reserve
System), and the assets of the Company do not include, and the Company has no
present intention of acquiring, any such security.
1.3. Commitment Fee. The Company shall pay to Agent, for distribution
--------------
by the Agent to the Banks in accordance with their pro rata shares, a commitment
fee computed at the rate of 3/8% per annum on the difference existing from time
to time between (a) the aggregate amount of the Banks' Commitments (as they may
be reduced pursuant to Sections 1.5 and 2A.3), and (b) the outstanding unpaid
principal balance of sums disbursed to the Company by the Banks hereunder. Such
commitment fees shall accrue for the period from the date of this Agreement to
and including the Termination Date, and shall be payable in arrears on the last
day of March, June, September and December of each year, commencing June 30,
1997.
1.4. Facility Fee. Upon the execution of this Agreement, the Company
------------
shall pay to Agent, for distribution by Agent to the Banks in accordance with
their pro rata shares, a facility fee equal to three-eighths of one percent
(3/8%) of the aggregate amount of the Commitments.
1.5. Termination or Reduction of the Commitment.
------------------------------------------
(a) Voluntary Reductions. The Company shall have the right, upon two
--------------------
Business Days' prior written notice to Agent, to ratably reduce in part the
Commitments at any time, provided, however, that each partial reduction of the
-------- -------
Commitments shall be in a minimum amount of $1,000,000 in the aggregate and in
$100,000 multiples in excess thereof and provided, however, that no reduction
-------- -------
shall reduce the Commitment of any Bank to an amount less than the aggregate
amount of the Loans of such Bank and such Bank's pro rata share of Letters of
Credit outstanding hereunder at the time. The entire Commitments of the Banks
may be terminated in whole at any time upon two Business Days' prior written
notice to Agent.
-4-
<PAGE>
(b) Scheduled Reductions. On the last day of each fiscal quarter
--------------------
during the periods set forth in the left hand column below, the Company shall
reduce each Bank's Commitment by the percentage in the right hand column below
multiplied by such Bank's Commitment as in effect at the opening of business on
September 30, 2000.
Percentage Reduction
of each Bank's
September 30, 2000 Commitment
-----------------------------
Period
------
July 1, 2001 through December 31, 2000 2.5%
January 1, 2001 through December 31, 2001 3.75%
January 1, 2002 through December 31, 2003 5.0%
January 1, 2004 through December 31, 2004 6.25%
January 1, 2005 through June 30, 2005 7.5%
(c) Mandatory Reductions. In addition, the Company shall be required
--------------------
to reduce the Commitments on a pro rata basis (and the foregoing $1,000,000
minimum reduction shall not be applicable thereto), in connection with any sale
of a cable television system owned by the Company from time to time (all such
cable systems which are owned or hereafter acquired by the Company are
hereinafter referred to as the "Cable Systems"), in the amount determined
pursuant to Section 5.6 hereof. If the Company effectuates the third (3rd) sale
of a Cable System after September 30, 2000, and the Company reduces the
Commitments pursuant to this Section 1.5 and Section 5.6 hereof, then the amount
of such a reduction shall be applied against the scheduled reductions under
Section 1.5(b) in inverse order until the entire amount is so applied.
1.6. Prepayment. Subject to the provisions of Section 1.9 of this
----------
Agreement, the Company may prepay the Loans in whole or in part at any time
without premium or penalty; and the prepayments prior to the Termination Date
shall not reduce the Commitments and may be reborrowed. All prepayments shall be
made and applied pro rata against the Notes then outstanding. Prepayments shall
be not less than $1,000,000 in the aggregate and $100,000 multiples in excess
thereof. The Company shall notify the Agent at least one (1) Business Day in
advance of any such prepayments on a Prime Rate Loan and at least two (2)
Business Days in advance of any such prepayments of a Eurodollar Loan. In
addition to the foregoing, the Company shall be required to make a payment (and
the foregoing $1,000,000 minimum reduction shall not be applicable thereto) in
connection with any sale of a Cable System, in the amount determined pursuant to
Section 5.6 hereof.
-5-
<PAGE>
1.7. Rate of Interest. The Company shall pay interest on the unpaid
----------------
principal amount of each Loan from the date of such Loan until the date the
principal balance of such Loan is paid in full at the following rates:
(a) Prime Rate Loans: During the periods that such Loan is a Prime
----------------
Rate Loan, a rate equal to the Base Rate plus the Applicable Margin per annum,
with such interest rate changing when and as the Base Rate changes and when and
as the Applicable Margin changes;
(b) Eurodollar Loans: During each Interest Period of a Eurodollar
----------------
Loan, a rate equal to LIBO Rate for the Interest Period plus the Applicable
Margin per annum, with such rate to change when and as the Applicable Margin
changes;
provided, that, in each case, the unpaid principal balance of a Loan
- --------
shall bear interest upon the occurrence and during the continuance of an Event
of Default at a rate equal to two percent (2%) per annum plus the Base Rate,
with such rate changing when and as such Base Rate changes.
1.8. Interest Periods. If and for so long as any Loan shall be maintained
----------------
as a Eurodollar Loan, the period commencing on the date of such Loan and ending
on the date of payment in full shall be divided into "Interest Periods." The
initial Interest Period shall be selected by the Company in the applicable
notice required by section 2.1. The Company may select a subsequent Interest
Period for each Loan by notifying the Agent thereof at least one (1) Business
Day (in the case of a Prime Rate Loan) and two (2) London Business Days (in the
case of a Eurodollar Loan) prior to the first day of the new Interest Period.
Within 5 Business Days after the commencement of each Interest Period, the
Company shall deliver to the Agent written confirmation of the interest rate
applicable to the Eurodollar Loan to which such Interest Period relates and the
term of such Interest Period. If the Company fails to select a subsequent
Interest Period at the termination of an applicable Interest Period for any
Eurodollar Loan in accordance with the preceding sentence, such Loan shall be a
Prime Rate Loan thereafter, until such time that an Interest Period is selected.
The selection of Interest Periods is subject to the following provisions:
(a) Each Interest Period for a Eurodollar Loan shall be a period of
one (1), two (2), three (3) or six (6) months' duration, or such other periods
requested by the Company which are reasonably available from all the Banks in
their sole discretion in the case of Eurodollar Loans of $1,000,000 or more.
(b) Interest on each Loan (other than Loans bearing interest at the
rate for Prime Rate Loans) shall accrue from and including the first day of its
Interest Period to, but excluding, the day on which such Interest Period
expires.
(c) If any Interest Period would otherwise end on a day which is not a
London Business Day, such Interest Period shall be extended to the next
succeeding London
-6-
<PAGE>
Business Day unless such London Business Day falls in another calendar month, in
which case such Interest Period shall end on the next preceding London Business
Day, as applicable (subject to Section 1.8(d) below).
(d) Any Interest Period for a Eurodollar Loan which begins on the
last London Business Day of a calendar Month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last London Business Day of a calendar month.
(e) No Interest Period for a Loan may extend beyond the Termination
Date.
(f) No more than eight separate Interest Periods may be in effect at
any one time.
1.9. Funding Costs. In connection with any prepayment or repayment of
-------------
a Eurodollar Loan made on other than the last day of the applicable Interest
Period, whether such prepayment or repayment is voluntary, mandatory, by demand,
acceleration or otherwise, and in connection with any failure by the Company to
fulfill on or before the date specified in a request for an advance of a
Eurodollar Loan the applicable conditions as set forth in this Agreement, the
Company shall pay to Banks all funding costs (other than loss of the Applicable
Margin) which may arise in connection with such prepayment or repayment or
failure to fund, as calculated by Agent in accordance with Exhibit B.
---------
1.10. Other Increased Costs. If, as a result of any (a) change in any
---------------------
law or regulation, or in the interpretation thereof by any court or
administrative or governmental authority, (b) charge generally imposed on banks
which are similarly situated to the Banks which affects any Bank in its dealings
in the London Interbank market, (c) violation by the Company of the terms of
this Agreement, or (d) the adoption of or change in any law, rule, regulation or
guideline affecting capital adequacy or compliance by a Bank (or any lending
office of such Bank) or such Bank's holding company with any request or
directive regarding capital adequacy of any court, administrative or
governmental authority, or central bank:
(i) the basis of taxation of payments to any Bank of the
principal of or interest on any Loan or any other amounts payable
under this Agreement (other than taxes imposed on the overall net
income of such Bank) is changed;
(ii) any reserve (including, without limitation, the
Certificate Reserve Percentage), special deposit or similar
requirement relating to any extension of credit or other asset of, or
any deposits with or other liabilities of any Bank which affects the
making or maintaining by such Bank of Loans hereunder is imposed,
modified or deemed applicable;
-7-
<PAGE>
(iii) any other condition or cost affecting this Agreement or
the making or maintaining by any Bank of Loans made hereunder is
imposed on such Bank by law or regulation; or
(iv) the rate of return on any Bank's capital or on the capital
of such Bank's holding company, if any, as a consequence of this
Agreement, the Commitments or the Loans is or would be reduced
and such Bank reasonably determines that, by reason thereof, the cost to it of
making or maintaining any Loan hereunder is increased, or any amount receivable
by it hereunder in respect to any such Loan is reduced, then the Bank so
affected shall notify the Company thereof within a reasonable time and the
Company shall pay to such Bank, upon written request (which request shall
describe the occurrence and include a calculation of such additional cost or
reduction), such additional amount or amounts as will, in the reasonable
determination of such Bank, compensate such Bank for such additional costs or
reduction; provided, however, that the Company's liability for additional
-------- -------
amounts computed in accordance with this section shall neither be changed nor
waived by a failure of such Bank to give such notice.
1.11. Payments. Interest on Prime Rate Loans shall be due and payable
--------
quarterly on the last day of each March, June, September, and December,
commencing on the first of such days to occur after the date thereof; interest
on Eurodollar Loans shall be due and payable on the expiration date of each
applicable Interest Period and, if the Interest Period is longer than 90 days,
on the last day of each March, June, September and December commencing on the
first of such days to occur after the commencement of such Interest Period. In
addition, interest shall be due and payable on the Termination Date. The Agent
shall give the Company telephonic advice of the amount of each scheduled
principal and interest payment which shall be due on the Notes and shall
thereafter mail a bill to the Company therefor, but failure of the Agent to give
such telephonic advice or to mail any such bill shall not relieve the Company of
its obligations to make timely payments of principal and interest on the Notes.
1.12. Special Provisions Applicable to Eurodollar Loans.
-------------------------------------------------
(a) Change of LIBO Rate. The LIBO Rate may be automatically adjusted
-------------------
by Agent on a prospective basis to take into account the additional or increased
cost of maintaining any necessary reserves for Eurodollar deposits or increased
costs due to changes in applicable law occurring subsequent to the commencement
of the then applicable Interest Period, including but not limited to changes in
tax laws (except changes of general applicability in corporate income tax laws)
and changes in the reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor) that increase the cost to Banks of
funding any Eurodollar Loan; provided, however, that each Bank shall use
reasonable efforts to minimize such costs, subject, in any event, to such Bank's
sole discretion. Agent shall give the Company notice of such a determination and
adjustment, which determination and adjustment made in good faith shall be prima
facie evidence of the correctness of the fact and the amount of
-8-
<PAGE>
such adjustment. The Company may, by notice to Agent, (A) request Agent to
furnish to the Company a statement setting forth the basis for adjusting such
LIBO Rate and the method for determining the amount of such adjustment; and/or
(B) repay the Eurodollar Loan with respect to which such adjustment is made
pursuant to the requirements of Sections 1.6 and 1.19 hereof.
(b) Unavailability of Eurodollar Funds. In the event that the Company
----------------------------------
shall have requested a Eurodollar Loan in accordance with Section 1.8 hereof and
any Bank shall have reasonably determined that Eurodollar deposits equal to the
principal amount of such Eurodollar Loan and for the Interest Period specified
are unavailable or that the LIBO Rate will not adequately and fairly reflect the
cost of making or maintaining the principal amount of such Eurodollar Loan
during the Interest Period specified or that by reason of circumstances
affecting Eurodollar markets, adequate and reasonable means do not enlist for
ascertaining the LIBO Rate applicable to the specified Interest Period, Agent on
behalf of such Bank shall promptly give notice of such determination to the
Company that the LIBO Rate is not available. A determination by Agent hereunder
made in good faith shall be prima facie evidence of the correctness of such
fact. Upon such a determination, (i) the obligation to advance or maintain
Eurodollar Loans shall be suspended until Agent shall have notified the Company
and Banks that such conditions shall have ceased to exist, and (ii) the Company
shall elect the Prime Rate to be applicable to such Loan in accordance with
Section 1.8 hereof.
1.13. Taxes. Any and all payments by the Company to the Banks hereunder
-----
shall be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding in the case of each Bank, (i) taxes
---------
assessed solely on the income of such Bank, (ii) taxes arising solely from a
connection between such Bank and the jurisdiction imposing such tax, other than
a connection arising from the activities of such Bank solely in connection with
this Agreement, and (iii) United States withholding tax payable with respect to
payments hereunder under laws (including, without limitation, any statute,
treaty, ruling, determination or regulation) in effect on the Initial Date (as
hereinafter defined) for such Bank, provided that any United States withholding
tax payable as a result of any changes in such laws occurring after the Initial
Date shall not be excluded (all such non-excluded taxes, levies, imposts,
deductions, charges, withholding and liabilities being hereinafter referred to
as "Taxes"). For purposes of this Section 1.13, the term "Initial Date" shall
mean, in the case of each Bank, the date of this Agreement and, in the case of
each assignee (for purposes of this Section 1.13, "Assignee"), the date of the
applicable assignment of the Loan. If any Taxes shall be required by law to be
deducted from or in respect of any sum payable hereunder or under any Note to
any Bank or Assignee, (i) the sum payable by the Company shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.13) such
Bank or Assignee (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, but shall be decreased to
take into account any credit, deduction or offset available in any other
jurisdiction as a result of such payment, and (ii) the Company shall make such
deductions and pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law. The Company shall not,
-9-
<PAGE>
however, be required to pay any amounts pursuant to clause (i) of the preceding
sentence to any Bank organized under the laws of a jurisdiction outside of the
United States, unless such Bank has provided to the Company either (x) a
facially complete Internal Revenue Service Form 4224 or Form 100 1 or other
applicable form, certificate or document prescribed by the United States
Internal Revenue Service certifying as to such Bank's entitlement to an
exemption from, or reduction of, United States withholding tax on payments to be
made hereunder or under the Notes or (y) a letter stating that such Bank is
unable lawfully to provide a properly completed and executed Form 4224 or Form
1001 or (z) other facially complete documents satisfactory to the Agent and the
Company indicating that all payments that will be made to such Bank are exempt
from or subject to a reduced rate of United States withholding tax.
The Company hereby agrees to pay each Bank the full amount of Taxes
(including, without limitation, any Taxes imposed by any jurisdiction on amounts
payable under this Section 1.13) paid by such Bank decreased to take into
account the effect of any credit, deduction or offset, as determined and
certified by such Bank's tax or accounting department to Company in good faith,
available in any other jurisdiction on account of the payment of Taxes, and any
liability (including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto. Each Bank subject to Taxes agrees either, at
its option, to contest the payment of Taxes or to pay or permit the Company to
pay such Taxes when due and payable and, if any such Bank receives a rebate,
refund or other return of Taxes paid by the Company, such Bank will turn over to
the Company the amount rebated, refunded or returned. Payment under this
provision shall be made within thirty (30) days from the date such Bank makes
written demand therefor.
Within (30) days after the date of any payment of Taxes, the Company will
furnish to the Agent or the applicable Bank the original or a certified copy of
a receipt or other documents reasonably acceptable to the Agent evidencing
payment thereof.
Any Bank or Assignee organized under the laws of a jurisdiction other than
the United States (or any political subdivision thereof) shall provide from time
to time if requested by the Company and the Agent or required by the Internal
Revenue Service of the United States, (i) a facially complete Internal Revenue
Service Form 4224 (or any successor form) certifying that all payments made to
such Bank are effectively connected with its conduct of trade or business in the
United States and will be includable in its gross income or (ii) a facially
complete Internal Revenue Service Form 1001 (or any successor form) certifying
as to its status for purposes of determining the applicability of a reduced rate
of United States withholding taxes with respect to all payments to be made
hereunder to such Bank pursuant to a double tax treaty obligation of the United
States, or (iii) other facially complete documents satisfactory to the Agent and
Company indicating that all payments that will be made to such Bank are exempt
from or subject to a reduced rate of United States withholding tax. Unless the
Company and Agent have received such forms of such documents validly indicating
that payments hereunder are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable double tax treaty, the
Company or the Agent shall withhold taxes from such payments to such Bank at the
applicable statutory rate.
-10-
<PAGE>
Notwithstanding any other provision contained herein to the contrary, the
Company and the Agent shall be entitled to deduct and withhold United States
withholding taxes with respect to all payments to be made hereunder to or for
any Bank or Assignee as may be required by United States law due to an
assignment and such Bank or Assignee shall indemnify and hold harmless the
Company and the Agent from and against any tax, interest, penalty or other
expense that the Company and the Agent may incur as a consequence of any failure
to withhold United States taxes applicable because of any assignment that is not
disclosed to them.
ARTICLE II
----------
ADMINISTRATION OF CREDIT
------------------------
2.1. Borrowing Procedure. Loans hereunder shall be made at the principal
-------------------
banking office of the Agent located in Philadelphia, Pennsylvania (or, in the
case of a successor Agent, the office identified by such successor Agent), upon
telephonic notice from the Company to the Agent specifying (i) the date, which
must be a Business Day, of the proposed borrowing (hereinafter referred to as a
"Funding Date") (ii) the principal amount and type of the proposed Loan and
(iii) in the case of a Eurodollar Loan, the initial Interest Period for such
Loan. Such telephonic notice shall be given to the Agent not later than 2:00
p.m., Agent's local time on the first (1st) Business Day prior to the Funding
Date, in the case of Prime Rate Loans, and not later than 2:00 p.m., Agent's
local time on the second (2nd) Business Day prior to the Funding Date in the
case of Eurodollar Loans. Upon its receipt of such telephonic notice from the
Company, the Agent shall promptly give telephonic notice to each other Bank, and
each such Bank shall have its portion of the Loans available to the Agent in
Agent's principal banking office in immediately available funds on the Funding
Date. Out of the funds received from the Banks for the making of the Loans
hereunder, the Agent will make a Loan to the Company in such amount on behalf of
such Bank. The failure of any of the Banks to lend in accordance with its
Commitment shall not relieve the other Banks of their several obligations
hereunder, but no Bank shall be liable in respect to the obligation of any other
Bank hereunder or be obligated in any event to lend in excess of its Commitment.
Documents delivered to the Agent for the account of each Bank shall be promptly
delivered to such Bank, or in accordance with instructions received from it,
together with copies of such other documents received in connection with the
borrowing as such Bank shall request. Within five (5) Business Days after each
Funding Date, the Company shall deliver to the Agent a written certification,
dated as of the Funding Date in the form of Exhibit C attached hereto confirming
---------
the matters set forth in clauses (i) through (iii) of this Section 2.1.
2.2. Computations: Non-Business Days. All interest payable on Eurodollar
-------------------------------
Loans shall be computed for the actual number of days elapsed using a daily rate
determined by dividing the annual rate by 360, and all interest payable on Prime
Rate Loans and the commitment fees under Section 1.3 hereof and the Letter of
Credit Fees under Section 2A.4(a)(iii) shall be computed on the basis of a year
of 365 or 366 days, as appropriate, for the actual number of days elapsed.
Whenever any payment to be made hereunder or under any Note
-11-
<PAGE>
shall be stated to be due on a Saturday, Sunday or a public holiday under the
laws of the Commonwealth of Pennsylvania, such payment may be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest under the Notes, or commitment fees hereunder, as the
case may be.
2.3. Application of Payments. All payments and prepayments of principal,
-----------------------
interest and fees under this Agreement and the Notes shall be made to the Agent
at 1339 Chestnut Street, Philadelphia, Pennsylvania 19101 no later than 2:00
p.m. Philadelphia, Pennsylvania time on the due date thereof in immediately
available funds, for the ratable account of the Banks. The Agent shall promptly
distribute to each such Bank, pro rata, the amount of principal, interest or
fees received by the Agent for the account of such Bank. Any payment to the
Agent for the account of a Bank or a holder of a Note under this Agreement shall
constitute a payment by the Company to such Bank or holder of the amount so paid
to the Agent, and any Notes or portions thereof so paid shall not be considered
outstanding for any purpose after the date of such payment to the Agent.
2.4. Pro Rata Treatment. All payments or prepayments of principal, interest
------------------
or fees shall be made pro rata in accordance with the amounts of the Notes then
outstanding. In the event that any Bank shall receive from the Company or any
other source (other than the sale of a participation to another commercial
lender in the ordinary course of business) any payment of, on account of, or for
any obligation of the Company hereunder or under the Notes (whether pursuant to
the exercise of any right of set off, banker's lien, realization upon any
security held for or appropriated to such obligation, counterclaim or otherwise)
other than as above provided, then such Bank shall immediately purchase, without
recourse and for cash, an interest in the obligations of the same nature held by
the other Bank so that each Bank shall thereafter have a percentage interest in
all of such obligations equal to the percentage interest which such Bank held in
the Notes outstanding immediately before such payment; provided, that if any
payment so received shall be recovered in whole or in part from such purchasing
Bank, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. The Company specifically
acknowledges and consents to the preceding sentence.
2.5. Deposits: Set Off. The Company grants each Bank, as security for the
-----------------
Note of such Bank, a lien and security interest in any and all monies, balances,
accounts and deposits of the Company at such Bank now or at any time hereafter.
If any Event of Default occurs hereunder or any attachment of any balance of the
Company occurs, such Bank may offset and apply any such security toward the
payment of the Note held by such Bank (subject to the requirements of Section
2.4 hereof), whether or not such Note or any part thereof, shall then be due.
Promptly upon its charging any account of the Company pursuant to this section,
the Bank shall give the Company notice thereof.
-12-
<PAGE>
SECTION 2A
----------
LETTERS OF CREDIT
-----------------
2A.1 Availability of Credit. Subject to the terms and conditions set
----------------------
forth herein, the Banks shall from time to time prior to the Termination Date
participate in the issuance by the Agent of Letters of Credit for the account of
the Company on the following terms and conditions:
(a) at the time of issuance of the Letter of Credit, the unborrowed
portion of the Commitments shall equal or exceed the sum of the amount available
to be drawn under such Letter of Credit and the amount available to be drawn
under, and any unreimbursed draws under, all other Letters of Credit;
(b) at the time of issuance of a Letter of Credit, the amount
available to be drawn under such Letter of Credit and all other Letters of
Credit then outstanding hereunder plus any unreimbursed draws under all other
Letters of Credit shall not exceed, in the aggregate, the Letter of Credit
Sublimit;
(c) the final expiration date of each Letter of Credit shall be
on or before the earlier of (i) one year from the date of issuance thereof and
(ii) the Termination Date;
(d) there shall not exist at the time of issuance of the Letter of
Credit, and as a result thereof, any Default or Event of Default; and
(e) each Letter of Credit issued under this Section 2A shall be
required by the Company in the ordinary course of its business.
Upon issuance of each Letter of Credit, each Bank shall have a
participation interest therein based on its pro rata share of the Commitment as
set forth in Section 1.1(b) of this Agreement.
2A.2 Commitment Availability. The amount available under the
-----------------------
Commitments as from time to time in effect shall be reduced by the amount
available to be drawn under all outstanding Letters of Credit and unreimbursed
amounts of any draws under Letters of Credit. The amount by which the Commitment
is so reduced shall not be available for Loans under Section 1.1 hereof, except
Loans thereunder which are made to reimburse Agent for draws under the Letters
of Credit as permitted pursuant to Section 2A.4(b) hereof.
2A.3 Approval and Issuance.
---------------------
(a) The Company shall provide Agent not less than three (3) Business
Days' prior written notice of each request for the issuance of a Letter of
Credit by delivery of a Letter of Credit Request Form in the form attached as
Exhibit D hereto and Agent's Letter of
- ---------
-13-
<PAGE>
Credit Application in either the form attached as Exhibit E ("Standby Letter of
---------
Credit Application") or Exhibit F ("Commercial Letter of Credit Application")
---------
hereto. Each Letter of Credit Request Form submitted by the Company to Agent
requesting the issuance of a Letter of Credit shall be certified by the Chief
Executive Officer, Chief Financial Officer, the President, a Vice President or
Treasurer of JII ("Authorized Officer(s)"), and shall, in addition to the
matters described in Section 2.1 hereof, list all Letters of Credit outstanding
for the account of the Company at that time and, for each Letter of Credit so
listed, its face amount, outstanding undrawn balance and expiration date. It
shall be a condition to the issuance of any Letter of Credit that Agent shall
have received a Letter of Credit Request Form and either a Standby Letter of
Credit Application or a Commercial Letter of Credit Application as described
above.
(b) Agent will promptly provide to Banks written or telephonic
notification of Agent's receipt of the Letter of Credit Request Form and the
Letter of Credit Application which shall state (i) the amount of the Letter of
Credit requested and (ii) the expiration date of the requested Letter of Credit.
2A.4 Obligations of the Company.
--------------------------
(a) The Company agrees to pay to Agent in connection with each Letter
of Credit issued hereunder: (i) immediately upon the demand of Agent on behalf
of all Banks, the amount paid by each Bank with respect to such Letter of
Credit; (ii) immediately upon demand of Agent, the amount of any draft presented
purporting to be drawn under such Letter of Credit provided that the draft and
accompanying documents conform to the terms of the Letter of Credit but subject
to the terms of Section 2A.7 (whether or not Agent has at such time honored such
draft) and any other amounts paid thereunder (it being understood that Agent is
not required to make demand upon or proceed against any Bank or other party or
to resort to any Collateral before obtaining payment from Company); (iii) on the
date of issuance of each Letter of Credit and on the effective date of any
extension or renewal of any Letter of Credit a non-refundable fee for the
benefit of Banks in accordance with each Bank's pro rata share of the face
amount of such Letter of Credit equal to the Applicable Margin in effect for the
LIBO Rate interest option on such date; (iv) interest on any indebtedness
outstanding with respect to such Letter of Credit, whether for funds paid on
drafts on such Letter of Credit, or otherwise (but such indebtedness shall not
include undrawn balances of such Letter of Credit issued hereunder) at the rate
applicable to Prime Rate Loans under Section 1.7(a) hereof from the date of
payment by Agent (if not reimbursed by the Company on the same day) to the date
one (1) Business Day after notice to the Company of such payment, and thereafter
at the rate of 2% per annum plus the Base Rate. Interest under the preceding
clause (iv) shall be paid at the times and in the manner set forth in Section
1.7(a) hereof, and shall accrue on amounts paid on a Letter of Credit (if not
reimbursed by the Company on the same day) from the date of payment by Agent,
whether or not demand is made, until such amounts are reimbursed by the Company
whether before, at or after demand.
(b) On or before the Termination Date, in the absence of a Default or
Event of Default, and subject to the provisions of Section 2.1 hereof, Banks
hereby agree to advance
-14-
<PAGE>
funds to the Company under the Commitment to make the payments required under
Sections 2A.4(a)(i) and (ii) hereof. If any payment by the Agent of a draft
drawn under a Letter of Credit is for any reason (including without limitation
the occurrence or continuation of a Default or Event of Default hereunder) not
reimbursed prior to or on the date of such payment, the amount of such payment
shall thereupon be deemed for purposes hereof a Loan under Section 2.1 hereof
but payable upon the demand of Agent at the direction of Required Banks. Such
demand reimbursement obligation shall be otherwise subject to all the terms and
conditions thereof as if loaned by Banks pursuant to Section 2.1 hereof (but
without duplication).
2A.5 Payment by Banks on Letters of Credit.
-------------------------------------
(a) With respect to each Letter of Credit, each Bank agrees that it is
irrevocably obligated to pay to Agent, for each such Letter of Credit, such
Bank's Pro Rata Share of each and every payment made or to be made by Agent
under such Letter of Credit (each such payment to be made, a "LOC
Contribution"). Each Bank's LOC Contribution shall be due from such Bank
immediately upon, and in any event no later than the same day as, receipt of
written notice (which may be sent by telex or telecopier) from Agent (except
that if such notice is received after 3:00 p.m. on any Business Day, payment may
be made on the following Business Day, together with interest equal to the
effective rate for overnight funds in New York as reported by the Federal
Reserve Lender of New York for such day (or, if such day is not a Business Day,
for the next preceding Business Day)) that (i) it has made a payment or (ii) a
draft has been presented purporting to be drawn on a Letter of Credit issued
hereunder. Such payment shall be made at Agent's offices in immediately
available federal funds.
(b) The obligation of each Bank to make its LOC Contribution hereunder
is absolute, continuing and unconditional, and Agent shall not be required first
to make demand upon or proceed against the Company or any guarantor or surety,
or any others liable with respect to the applicable Letter of Credit and shall
not be required first to resort to any Collateral. LOC Contributions shall be
made without regard to termination of this Agreement or the Commitment, the
existence of an Event of Default or Default hereunder, the acceleration of
indebtedness hereunder or any other event or circumstance.
2A.6 Collateral Security.
-------------------
(a) The indebtedness, liabilities and obligations of the Company under
this Section 2A, however created or incurred, whether now existing or hereafter
arising, due or to become due, absolute or contingent, direct or indirect,
secured or unsecured, are among the obligations secured by the security
interests, liens and encumbrances created by the Collateral Security Documents
delivered to Agent, and Agent and the Banks are entitled to the benefit of the
collateral security granted thereunder with respect to such indebtedness.
(b) Notwithstanding the payment in full of all the Loans made under
the Commitment, the termination of the Commitment or the occurrence of the
Termination Date, the
-15-
<PAGE>
Collateral shall continue to secure the indebtedness, liabilities and
obligations of the Company under this Section 2A until all Letters of Credit
shall have expired and all indebtedness, liabilities and obligations under this
Section 2A shall have been paid in full.
(c) On the Termination Date and the occurrence of an Event of Default,
Required Banks may require (and in the case of an Event of Default occurring
under Section 7.7 it shall be required automatically) that the Company deliver
to Agent, cash or U.S. Treasury Bills with maturities of not more than 90 days
from the date of delivery (discounted in accordance with customary banking
practice to present value to determine amount) in an amount equal at all times
to one hundred ten percent (110%) of the outstanding undrawn amount of all
Letters of Credit, such cash or U.S. Treasury Bills and all interest earned
thereon to constitute cash collateral for all such Letters of Credit. At such
time as such collateral is required to be and has not been deposited, Agent on
behalf of Banks shall be entitled to liquidate such of the other collateral for
the Loan (if any) as is necessary or appropriate in its sole judgment so as to
create such cash collateral.
(d) Any cash collateral deposited under subparagraph (c) above, and
all interest earned thereon, shall be held by Agent and invested and reinvested
at the expense and the written direction of the Company, in U.S. Treasury Bills
with maturities of no more than ninety (90) days from the date of investment.
2A.7 General Terms of Credits. The following terms and conditions
------------------------
apply with respect to each Letter of Credit (a "Credit") notwithstanding
anything to the contrary contained herein:
(a) the Company assumes all risks of the acts or omissions of the
beneficiary of each Credit with respect to the use of the Credit or with respect
to the beneficiary's obligations to the Company. None of the Banks nor any of
their officers or directors shall be liable or responsible for, and the Banks
hereby agree to ratably indemnify and hold Agent and any issuer of a Credit
harmless (except for the issuer's gross negligence or willful misconduct) with
respect to: (i) the use which may be made of the Credit or for any acts or
omissions of the beneficiary in connection therewith; (ii) the accuracy, truth,
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should in fact prove to be in any or all
respects false, misleading, inaccurate, invalid, insufficient, fraudulent, or
forged; (iii) the payment by Agent against presentation of documents which do
not comply with the terms of the Credit, including failure of any documents to
bear any reference or adequate reference to a Credit; (iv) any other
circumstances whatsoever in making or failing to make payment under a Credit; or
(v) any inaccuracy, interruption, error or delay in transmission or delivery of
correspondence or documents by post, telegraph or otherwise. In furtherance and
not in limitation of the foregoing, Agent may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
(b) Notwithstanding the foregoing, with respect to any Credit, the
Company shall have a claim against Agent, and Agent shall be liable to the
Company, to the extent,
-16-
<PAGE>
but only to the extent, of any direct, as opposed to indirect or consequential,
damages suffered by the Company caused by the Agent's willful misconduct or
gross negligence.
(c) To the extent not inconsistent with this Agreement, the Uniform
Customs and Practices for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, are hereby made a part of this
Agreement with respect to obligations in connection with each Credit.
ARTICLE III
-----------
CONDITIONS PRECEDENT OF BORROWING
---------------------------------
Without limiting any of the other terms of this Agreement, the Banks
shall not be required to make any Loan to the Company hereunder, and the Agent
shall not be required to issue any Letters of Credit for the benefit of the
Company, unless the requirements of Section 3.1 below are satisfied on the
Funding Date for such Loan or the date of issuance of the Letter of Credit. This
Second Amended and Restated Revolving Credit Agreement shall become effective
when executed by the Company, Agent and each Bank and when the conditions set
forth in Sections 3.1 to 3.6, inclusive, below are satisfied.
3.1. Representations. On the date hereof and on the date of each Loan
---------------
or Letter of Credit, the representations and warranties contained in Article IV
hereof and in Section 3 of the Security Agreement (hereinafter defined) continue
to be true and correct in all material respects; no Default or Event of Default
hereunder shall have occurred and be continuing; and the Agent shall have
received a telephonic request therefor at the times and containing the
information required under Section 2.1 above. Each such telephonic request for a
Loan shall constitute a certification by the Company that the matters set forth
in clauses (a), (b) and (c) of Exhibit C hereto are true as of the date thereof.
---------
If no Interest Period is specified by the Company, the Loan request shall be
deemed a request for a Prime Rate Loan.
3.2. Subordination. The Partnerships and JII shall have executed and
-------------
delivered to Agent a second amended and restated subordination agreement (as
amended from time to time hereafter, the "Subordination Agreement") in the form
attached hereto as Exhibit G.
---------
3.3. Security Agreement. The Company shall have executed and delivered to
------------------
Agent (i) an amended and restated security agreement in the form attached hereto
as Exhibit H (as amended and from time to time hereafter, the "Security
---------
Agreement") covering all tangible and intangible personal property of the
Company comprising, relating to or arising from the Cable Systems of the
Company, and (ii) to the extent not already filed, financing statements, in form
satisfactory to the Agent, covering the collateral described in the Security
Agreement.
-17-
<PAGE>
3.4. Insurance Certificate. Agent shall have received evidence
---------------------
satisfactory to it that the Company maintains hazard insurance coverage
reasonably satisfactory to Banks.
3.5. Counsel Opinion. Each Bank shall have received from counsel for
---------------
the Company and JII, satisfactory opinions as to such matters relating to the
Company and JII, the validity and enforceability of this Agreement, the Loans
made and to be made hereunder and the other documents required by this Article
III and Federal Communications Commission ("FCC"), U.S. Copyright Office and
franchise matters as Banks shall reasonably require. The Company shall execute
and/or deliver to each Bank or its counsel such documents concerning its
partnership status and the authorization of such transactions as may be
reasonably requested.
3.6. Proceedings Satisfactory. All proceedings taken in connection
------------------------
with the transactions contemplated by this Agreement, and all instruments,
authorizations and other documents applicable thereto, shall be satisfactory in
form and substance to each Bank and its counsel.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Banks to enter into this Agreement and to make
the Loans as provided herein, the Company represents and warrants to each of the
Banks as follows:
4.1. Organization. The Company is a joint venture partnership duly
------------
formed and validly existing under the laws of the State of Colorado and has all
requisite partnership power and authority to conduct its business and to own its
properties. The Company has no subsidiaries or investments in or loans to any
other individuals or business entities other than loans and investments
permitted by Section 5.5. The Partnerships are the sole joint venturers or
partners with an ownership interest in the Company, and JII is the sole general
partner of each of the Partnerships. The Company, the Partnerships and JII are
each duly licensed or qualified to do business in the States of Michigan,
California, Colorado, Nebraska, Oregon and Indiana and all other jurisdictions
in which the nature of their activities or the character of their properties
requires such qualification, and failure to so qualify would have a material
adverse effect on the property, financial condition or business operations of
the Company. All joint venture and partnership interests in the Company are
validly existing and the creation and sale thereof are in compliance with all
applicable federal and state securities laws and other applicable laws in all
material respects.
4.2. Authority. The execution, delivery and performance of this Agreement,
---------
the Notes and the documents required by Article III (the "Collateral Documents")
are within the partnership powers of the Company, have been duly authorized by
all necessary partnership action and do not and will not (i) require any consent
or approval of the joint venture partners of the Company which has not been
obtained (and evidence thereof delivered to the Banks), (ii) violate any
-18-
<PAGE>
provision of the joint Venture Agreement of the Company dated October 21, 1987
(as amended, the "Joint Venture Agreement") or of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to the Company; (iii) except as set forth in
Exhibit I hereto, require the consent or approval of, or filing or registration
- ---------
with, any governmental body, agency or authority; or (iv) result in a material
breach of or constitute a default under, or result in the imposition of any
lien, charge or encumbrance upon any property of the Company pursuant to, any
indenture or other material agreement or instrument under which the Company is a
party or by which it or its properties may be bound or affected, except for
Permitted Liens. This Agreement constitutes, and the Notes and each of the
documents required by Article III when executed and delivered hereunder will
constitute, legal, valid and binding obligations of the Company or other
signatory enforceable in accordance with its respective terms, except as such
enforceability may be limited by bankruptcy or similar laws affecting the
enforceability of creditors' rights generally.
4.3. Investment Company Act of 1940. The Company is not an "investment
------------------------------
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
4.4. Employee Retirement Income Security Act. The Company does not
---------------------------------------
presently maintain, nor is the Company required to contribute to, any Plan on
behalf of any of its employees.
4.5. Financial Statements. The balance sheet of the Company as of
--------------------
December 31, 1996, and the income statement of the Company for the year ended on
such date, as audited by Arthur Andersen & Co. and heretofore furnished to the
Banks, are correct and complete and fairly represent the financial condition and
the results of its operations for the fiscal year ended on such date. Other than
as described in Exhibit I attached hereto, since such date there has been no
----------
material adverse change in the property, business, financial condition or
operations of the Company or the Cable Systems.
4.6. Liens. The Company has good and marketable title to all of its
-----
assets, real and personal, free and clear of all liens, security interests,
mortgages and encumbrances of any kind, except Permitted Liens. All owned and
leased buildings and equipment of the Company are in good condition, repair and
working order in all material respects and, to the best of the Company's
knowledge and belief, conform in all material respects to all applicable laws,
regulations and ordinances.
4.7. Contingent Liabilities. The Company has no guarantees or other
----------------------
contingent liabilities outstanding (including, without limitation, liabilities
by way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss), except those permitted by Section 5.8 hereof.
-19-
<PAGE>
4.8. Partnership Tax Matters.
-----------------------
(a) Except as set forth on Exhibit I, the Company has duly and timely
---------
filed all information and tax returns and reports with any federal, state, local
or foreign governmental taxing authority, body or agency, and all taxes,
including without limitation income, gross receipt, sales, use, excise and any
other taxes, and any governmental charges, penalties, interest or fines with
respect thereto, due and payable by the Company, have been paid, withheld or
reserved for in accordance with GAAP or, to the extent they relate to periods on
or prior to the date of the financial statements referenced in Section 4.5
hereof (the "Financial Statements"), are reflected as a liability on the
Financial Statements in accordance with GAAP.
(b) As of the date of this Agreement, none of the Company's federal
income tax information returns have been audited. Except as set forth on
Exhibit I, the Company has not entered into any agreements for the extension of
- ---------
time for the assessment of any tax or tax delinquency, and the Company has
received no outstanding and unresolved notices from the Internal Revenue Service
or other state, local or foreign taxing authority, agency or body of any
proposed examination or of any proposed change in reported information which may
result in a deficiency or assessment against the Company or any partner in the
Company and there are no suits, actions, claims, investigations, inquiries or
proceedings now pending against the Company in respect of taxes, governmental
charges or assessments.
4.9. Absence of Litigation. Except as set forth in Exhibit I hereto,
--------------------- ---------
neither the Company, JII nor any Partnership is a party to any litigation or
administrative proceeding, nor so far as is known by the Company is any
litigation or administrative proceeding threatened against any of them, (i)
which relates to the execution, delivery or performance of this Agreement, the
Notes or any other document required hereunder, or (ii) which, if adversely
determined, would be reasonably likely to cause any material adverse change in
the property, financial condition or business operations of the Company.
4.10. Absence of Default. No event has occurred which either of itself or
------------------
with the lapse of time or the giving of notice or both, would give any creditor
of the Company the right to accelerate the maturity of any indebtedness of the
Company for borrowed money. The Company is not in default under any other
material lease, agreement or instrument, or any law, rule, regulation, order,
writ, injunction, decree, determination or award, non-compliance with which
could materially adversely affect its property, financial condition or business
operations.
4.11. Material Agreements. The Company is not a party to any agreement,
-------------------
instrument or undertaking, or subject to any other restriction, (i) which
materially adversely affects or may in the future so affect the property,
financial condition or business operations of the Company, or (ii) under or
pursuant to which the Company is or will be required to place (or under which
any other person may place) a lien upon any of its properties securing
indebtedness either upon demand or upon the happening of a condition, with or
without such demand (other than the Collateral Documents required by this
Agreement).
-20-
<PAGE>
4.12. Partnerships; Joint Ventures. The Company is not a member of any
----------------------------
partnership or joint venture.
4.13. Full Disclosure. No information, exhibit or report furnished by
---------------
Company or JII to any Bank in connection with the negotiation or execution of
this Agreement contained any material misstatement of fact as of the date when
made or omitted to state a material fact or any fact necessary to make the
statements contained therein not misleading as of the date when made.
4.14. Fiscal Year. The fiscal year of the Company ends on December 31 of
-----------
each year.
4.15. Franchises, Licenses, etc.
-------------------------
(a) On the date hereof the Company holds, and at all times hereafter
it will continue to hold all licenses, franchises, permits and approvals of,
governmental authorities and agencies, including FCC licenses and local
municipal licenses, permits and franchises and rights with respect thereto
(herein collectively called "Cable Licenses"), and has made all necessary
filings with and given all necessary notices to governmental authorities and
agencies, including the U.S. Copyright Office, required or necessary for the
ownership and operation of its Cable Systems. The Company is in compliance in
all material respects with such Cable Licenses, without any known conflict with
the rights of others which might result in a material adverse effect on the
Company, and in each case subject to no mortgage, pledge, lien, lease
encumbrance or option except Permitted Liens. Attached hereto as Exhibit J is a
---------
complete and accurate list of all Cable Licenses held by the Company (copies of
such Cable Licenses having been delivered to the Banks) the name of the
municipality or other entity granting the same, the expiration date thereof and
the date such Cable License was issued or transferred to the Company. No event
has occurred which permits, or after notice or lapse of time or both would
permit, the revocation or termination of any such Cable License, or which would
materially adversely affect the rights of the Company thereunder.
(b) On the date hereof and at all times hereafter, the Company has
and will have, by ownership or contract, all pole attachment and conduit use
rights necessary for the operation of its Cable Systems and is and will be party
to all agreements with public utilities and with microwave transmission
companies that are required in connection with the conduct of its business, and
will duly perform and observe in all material respects the terms and conditions
thereof, and no revocation, suspension or termination of any such agreement
shall have occurred which would have a material adverse affect on the Company,
its business or operations. The Company shall deliver to each Bank at its
request, complete and correct copies of all said agreements.
4.16. Cable Systems. The Company owns the Cable Systems described in
-------------
Exhibit K attached hereto, which sets forth a description of the franchises
- ---------
(including the expiration dates thereof), locations and Basic Subscriber counts
of such Cable Systems as March 31, 1997, and a description of the headend and
office facilities, and the record owners of such locations and descriptions of
any leases covering the Company's lease of any of such facilities from others.
-21-
<PAGE>
4.17. Hazardous Wastes, Substances and Petroleum Products.
---------------------------------------------------
(a) The Company has received all permits and filed all notifications
necessary to carry on its business(es) under, and is in compliance in all
material respects with, all Environmental Control Statutes.
(b) The Company has not given any written or oral notice to the
Environmental Protection Agency ("EPA") or any state or local agency with regard
to any actual or imminently threatened removal, spill, release or discharge of
hazardous or toxic wastes, substances or petroleum products on properties owned
or leased by the Company or in connection with the conduct of its business and
operations.
(c) The Company has not received notice that it is potentially
responsible for costs of cleanup of any actual or imminently threatened spill,
release or discharge of hazardous or toxic wastes or substances or petroleum
products pursuant to any Environmental Control Statute.
4.18. Compliance. The Company is in compliance in all material
----------
respects with all applicable laws and regulations, federal, state and local
(including without limitation those administered by the FCC and all state and
local authorities regulating the Company's Cable Systems), material to the
conduct of its business and operations; the Company has properly withheld all
amounts required by law to be withheld for income taxes and unemployment taxes
including without limitation, all amounts required with respect to social
security and unemployment compensation, relating to its employees, and has
remitted such withheld amounts in a timely manner to the appropriate taxing
authority, agency or body; the Company possesses all the franchises, permits,
licenses, certificates of compliance and approval and grants of authority
necessary or required in the conduct of its business and the same are valid,
binding, enforceable and subsisting without any material defaults thereunder and
are not subject to any proceedings or claims opposing the issuance, development
or use thereof or contesting the validity thereof.
4.19. Perfection of Security Interests. The Company has no knowledge
--------------------------------
of any further action, including any filing or recording of any documents, which
would be necessary in order to establish, perfect and maintain the first
priority security interest of Banks in the personal property assets of the
Company covered by the Security Agreement, except for the periodic filing of
continuation statements with respect to financing statements filed under the
Uniform Commercial Code of applicable jurisdictions.
-22-
<PAGE>
ARTICLE V
---------
NEGATIVE COVENANTS
------------------
For so long as the Commitments of the Banks (or any Bank) to the Company
under this Agreement remain available and while any part of the principal of or
interest on the Loans remains unpaid, the Company shall not do any of the
following without the prior written consent of Required Banks:
5.1. Restriction of Indebtedness. Create, incur, assume or have outstanding
---------------------------
any indebtedness for borrowed money or for the deferred purchase price of any
asset (including obligations under Capitalized Leases), except trade
indebtedness in the normal and ordinary course of business for value received,
and (i) the Notes; (ii) indebtedness arising under this Agreement; (iii)
indebtedness existing on the date of this Agreement and listed on Exhibit L
---------
hereto, and approved by the Banks; (iv) Intercompany Subordinated Debt; and (v)
other indebtedness, including indebtedness and obligations incurred to purchase
or lease fixed or capital assets not exceeding, at any time, five percent (5%)
of the Company's Maximum Permitted Indebtedness.
5.2. Amendments and Prepayments. Agree to any amendment, modification or
--------------------------
supplement, or obtain any waiver or consent in respect of compliance with any
of the terms of, or call or redeem, or make any purchase or prepayment of or
with respect to, any instrument or agreement evidencing or relating to any
indebtedness for borrowed money or for the deferred purchase price of any asset,
including Capitalized Leases, if such action would have a material adverse
effect on the Company or its financial condition or business operations.
5.3. Restriction on Liens. Create or permit to be created or allow to
--------------------
exist any mortgage, pledge, encumbrance or other lien upon or security interest
in any property or asset now owned or hereafter acquired by the Company
(including, without limitation, assets comprising the Cable Systems), except (i)
liens existing on the date hereof and identified on Exhibit L, securing
---------
indebtedness specified on Exhibit L hereto and approved by the Banks, (ii)
---------
Permitted Liens, and (iii) liens securing indebtedness permitted pursuant to
clause (v) of Section 5.1 above, provided the liens or security interest are
limited to the assets leased or purchased with the proceeds of such
indebtedness, or agree or covenant with or promise any person or entity other
than the Banks that it will not pledge its assets or properties or otherwise
grant any liens, security interests or encumbrances on its property on terms
similar to those set forth in this Section 5.3.
5.4. Sale and Leaseback. Enter into any agreement providing for the
------------------
leasing by the Company of property which has been or is to be sold or
transferred by the Company to the lessor thereof, or which is substantially
similar in purpose to property so sold or transferred.
5.5. Acquisitions, Loans and Investments. Acquire any other business
-----------------------------------
or any Cable System (or interest therein) not owned on the date of the Existing
Credit Agreement, or make any loan, advance or extension of credit to, or
investment in, any other person, corporation or other
-23-
<PAGE>
entity, including investments acquired in exchange for partnership interests or
other securities or obligations of any nature of the Company, or create or
participate in the creation of any Subsidiary or joint venture, except:
(a) investments in (i) commercial paper maturing in 270 days or less
from the date of acquisition which is rated A1 or better by Standard & Poor's
Rating Services or P1 or better by Moody's Investors Services, Inc.; (ii)
direct obligations of the United States of America or obligations of any agency
thereof which are guaranteed by the United States of America, provided that such
obligations mature within twelve (12) months of the date of acquisition thereof;
and (iii) certificates of deposit maturing within one (1) year from the date of
acquisition thereof issued by a Bank or bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $500,000,000 and indebtedness rated A or
better by Moody's Investors Services, Inc. or equivalent by Standard & Poor's
Rating Services;
(b) loans and advances made to employees, subcontractors and suppliers
in the ordinary course of business not to exceed $25,000 in the aggregate
principal amount outstanding at any time; and
(c) if no Default or Event of Default exists at the time thereof, or
would be caused as a result thereof, acquisitions of assets related to the
operation of Cable Systems, not to exceed One Million Dollars ($1,000,000) in
the aggregate from the date hereof to the Termination Date.
5.6. Liquidation; Merger; Disposition of Assets. Liquidate or dissolve
-------------------------------------------
or discontinue any substantial part of its operations or business; or merge with
or into or consolidate with or into any other corporation, partnership or other
entity; or sell, lease, transfer or otherwise dispose of all or any material
part of its property, assets or business (other than sales made in the ordinary
course of business for value received), or any stock or capital interest in any
Subsidiary; provided, however, that the Company may sell or dispose of any Cable
System for fair value if (a) the Company gives the Agent written notice of such
sale or disposition at least 15 days prior to the date thereof, (b) prior to and
after giving effect to the proposed sale or disposition of such Cable System
(and any required reduction of the Commitments and payment on the Notes with the
proceeds of such sale or disposition pursuant to Sections 1.5 and 1.6 hereof)
(i) no Default or Event of Default under this Agreement is continuing, (ii) the
Company's Leverage Ratio after giving effect to such sale or disposition is no
greater than such ratio immediately prior to such sale or disposition and (iii)
the Company is otherwise in compliance with the terms, provisions and covenants
of this Agreement in all material respects, (c) the Company shall use the net
proceeds of the third (3rd) such sale or disposition of a Cable System to pay
Loans on a pro rata, basis pursuant to Section 1.6 hereof to the extent
necessary to cause the Company's Leverage Ratio (based on the most recently
delivered financial statements and excluding Cash Flow attributable to the sold
Cable System(s)) to be equal to or less than 2.50 to 1, and shall permanently
reduce the Commitments pursuant to Sections 1.5 of the Credit Agreement on a pro
rata basis in the amount of such payment, and (d) the Company
-24-
<PAGE>
shall use the net proceeds of the fourth (4th) such sale or disposition of a
Cable System (together with other funds as needed) to repay the Loans in full
and shall terminate the Commitments upon such payment.
5.7. Accounts Receivable. Except in connection with the sale of the
-------------------
accounts receivable of a Cable System as part of a sale by the Company of such
Cable System which is otherwise permitted under Section 5.6 hereof, discount or
sell with recourse, or sell for less than the face amount thereof, any of its
notes or accounts receivable, whether now owned or hereafter acquired.
5.8. Contingent Liabilities. Guarantee or become a surety or otherwise
----------------------
contingency liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor or otherwise to assure the creditor
against loss) for any obligations of others, except pursuant to the deposit and
collection of checks and similar terms in the ordinary course of business.
5.9. Affiliates. Suffer or permit any transaction with any Affiliate,
----------
except on terms not less favorable to the Company than would be usual and
customary in similar transactions with non-affiliated persons; provided that
this Section 5.9 shall not prohibit the payment of (i) Intercompany Subordinated
Debt except as the same may be restricted by the terms hereof and under the
Subordination Agreement and (ii) commissions to The Jones Group, Ltd. as
described in Paragraph 2 of Article XII of the Joint Venture Agreement.
5.10. Management Fees and Home Office Allocations. Pay, or obligate or
-------------------------------------------
legally bind itself to pay, Management Fees or Home Office Allocations;
provided, however, that in the absence of a Default or an Event of Default (and
if such payment, together with any payments made pursuant to this Section 5.10
and Section 5.11 hereof will not create a Default or an Event of Default) the
Company may: (i) pay Management Fees for any fiscal quarter of the Company not
to exceed five percent (5%) of the Gross Operating Revenues of the Company for
such quarter (excluding revenues from the sale of any Cable Systems or Licenses)
and (ii) pay Home Office Allocations in amounts not to exceed reasonable levels
for such payments based on JII's and the Company's historic practices, taking
into account inflation and fluctuations in the cost of the items comprising Home
Office Allocations. Management Fees and Home Office Allocations accrued but
unpaid for any fiscal quarter shall be deferred and subordinated to indebtedness
of the Company to the Banks pursuant to the Subordination Agreement; provided,
however, that so long as there exists no Default or Event of Default under this
Agreement (and such payment, together with any payments made pursuant to this
Section 5.10 and Section 5.11 hereof, will not create a Default or Event of
Default), (i) such deferred Management Fees and Home Office Allocations may be
paid in any subsequent fiscal quarter, and (ii) the Company may pay accrued
interest on deferred Management Fees and Home Office Allocations at a rate not
to exceed JII's cost of capital.
5.11. Restricted Payments. Make any Restricted Payments; provided,
-------------------
however that the Company may, in the absence of a Default or Event of Default
under this Agreement (and if such
-25-
<PAGE>
payment, together with any payments permitted to be made pursuant to Section
5.10 hereof, will not create a Default or Event of Default), (i) make
distributions to its joint venture partners consistent with distributions
contemplated by the Partnerships to their partners as set forth in the
Prospectus dated January 10, 1986, as amended September 29, 1986 and December
19, 1986 in respect to Jones Cable Income Fund 1 previously delivered to the
Banks, (ii) make interest payments to JII at a rate not to exceed JII's cost of
capital on any indebtedness subordinated pursuant to the Subordination Agreement
and (iii) in connection with a sale of a Cable System permitted by Section 5.6
hereof, make distributions to the Partnerships to the extent the proceeds
thereof are not required thereunder to be used to make a payment of the Loans.
5.12. Partnerships; Joint Ventures; Partnership Documents. Become a member
---------------------------------------------------
of any partnership or joint venture; or amend or permit any amendments of the
Joint Venture Agreement.
ARTICLE VI
----------
AFFIRMATIVE COVENANTS
---------------------
For so long as the Commitments of the Banks (or any Bank) to the Company
under this Agreement remain available and while any part of the principal of or
interest on the Loans remains unpaid, and unless waived in writing by the Banks,
the Company shall:
6.1. Financial Covenants. (a) Maintain at all times during the periods
-------------------
set forth in the left-hand column below a Leverage Ratio as of the date of
determination as of the last day of the most recently ended quarter of not
greater than the amount set forth in the right-hand column:
Period Maximum Ratio
------ -------------
Closing through 06/30/99 3.50 to 1
07/01/99 and at all times thereafter 3.00 to 1
(b) Maintain at all times a ratio of the Company's Annualized Cash
Flow as of the last day of the most recently ended quarter to Proforma Debt
Service for the period commencing on the first day of the current quarter of not
less than 1.50 to 1.
6.2. Insurance. Maintain insurance in such amounts and against such risks
---------
as is customary by companies engaged in the same or similar businesses and
similarly situated under policies requiring the insurer to furnish reasonable
notice to the Agent and opportunity to cure any non-payment of premiums prior to
termination of coverage; and furnish each Bank with certificates of such
insurance and cause Agent to be named as the lender loss payee thereof, as its
interest may appear.
-26-
<PAGE>
6.3. Partnership Existence; Obligations. Do all things necessary to:
----------------------------------
(i) maintain its partnership existence and all rights and franchises necessary
or desirable for the conduct of its business (except for transactions permitted
by Section 5.6); (ii) comply in all material respects with all applicable laws,
rules, regulations and ordinances, and all restrictions imposed by governmental
authorities, including those relating to environmental standards and controls;
and (iii) pay, before the same become delinquent and before penalties accrue
thereon, all taxes, assessments and other governmental charges against it or its
property, and all of its other liabilities, except to the extent and so long as
the same are being contested in good faith by appropriate proceedings in such
manner as not to cause any material adverse effect upon its property, financial
condition or business operations, with adequate reserves provided for such
payments.
6.4. Business Activities; Management. Continue to carry on its business
-------------------------------
activities in substantially the manner such activities are conducted on the date
of this Agreement and not make any material change in the nature of its
business. Without limiting the generality of the foregoing, the Company shall
cause its Cable Systems to continue to be managed by JII in substantially the
same manner and on substantially the same terms as such Cable Systems are
managed by JII on the date hereof.
6.5. Properties. Keep its properties (whether owned or leased) in good
----------
condition, repair and working order, ordinary wear and tear and obsolescence
excepted, and make or cause to be made from time to time all necessary repairs
thereto (including external or structural repairs) and renewals and replacements
thereof.
6.6. Accounting Records; Reports. Maintain a standard and modern system
---------------------------
for accounting in accordance with generally accepted principles of accounting
consistently applied throughout all accounting periods; and furnish to the Agent
which shall promptly furnish to the Banks such information respecting the
business, assets and financial condition of the Company as it may reasonably
request and, without request, furnish to the Agent:
(a) Within 60 days after the end of each of the first three quarters
of each fiscal year of the Company (i) a balance sheet of the Company as of the
close of such quarter and of the preceding fiscal year-end; and (ii) statements
of income and surplus of the Company for such quarter and for that part of the
fiscal year ending with such quarter; all in reasonable detail and certified as
true and correct (subject to audit and normal year-end adjustments) by an
Authorized Officer; and
(b) As soon as available, and in any event within 120 days after the
close of each fiscal year of the Company, a copy of the audit opinion for such
year and accompanying financial statements of the Company as audited by
independent public accountants of recognized standing selected by the Company to
the effect that the same fairly present the financial condition of the Company
and the results of its operations as of the relevant dates thereof; together
with copies of any management letters (or portions thereof) issued by such
accountants in connection with such audit regarding matters which relate to or
adversely effect the Company; and
-27-
<PAGE>
(c) As soon as available, copies of all reports or materials (in
respect to matters which may have a material adverse effect on the business or
financial condition of the Company) filed with the FCC, the Securities Exchange
Commission or other governmental agency having regulatory authority over the
Company or with any national securities exchange; the Company shall also deliver
to the Agent a copy of all information (in respect to matters which may have a
material adverse effect on the business or financial condition of the Company)
sent by the Company to its joint venture partners or the limited partners of the
Partnerships within ten (10) days after the date such information shall have
been sent to such joint venture partners or limited partners, as the case may
be; and
(d) Upon request, evidence that insurance policies are in force
covering all property of the Company; and
(e) Promptly, and in any event within 10 days after the Company has
knowledge thereof, a statement of an Authorized Officer describing: (i) in
detail any event which, either of itself or with the lapse of time or the giving
of notice or both, would constitute a Default or an Event of Default hereunder
or under any other material agreement to which the Company is a party, the
period of existence thereof together with a statement of the actions which the
Company has taken or proposes to take with respect thereto; and (ii) any pending
or threatened litigation or administrative proceeding of the type described in
Section 4.9; and
(f) Together with the financial statements referred to in (a) and (b)
above, a certificate signed on behalf of the Company by an Authorized Officer,
demonstrating in reasonable detail compliance by the Company with the
requirements of Sections 5.10, 5.11 and 6.1 hereof; and
(g) Within 30 days after the end of each calendar quarter, a report,
in form and substance satisfactory to each of the Banks, showing with respect to
the Cable Systems of the Company (individually and in the aggregate) (i) the
number of Basic Subscribers at the end of such quarter and (ii) any other
information reasonably requested by the Banks.
(h) (i) Promptly, and in any event within 30 days after the Company
knows that any Reportable Event with respect to any Plan has occurred, a
statement of an Authorized Officer setting forth details as to such Reportable
Event and the action which the Company proposes to take with respect thereto,
together with a copy of any notice of such Reportable Event given to the Pension
Benefit Guaranty Corporation if a copy of such notice is available to the
Company, (ii) promptly after the filing thereof with the Internal Revenue
Service, copies of each annual report with respect to each Plan administered by
the Company and (iii) promptly after receipt thereof, a copy of any notice
(other than a notice of general application) the Company, any Subsidiary or any
member of the Controlled Group may receive from the Pension Benefit Guaranty
Corporation or the Internal Revenue Service with respect to any Plan
administered by the Company.
The financial statements referred to in (a) and (b) above shall be
accompanied by a certificate by the chief financial officer or Treasurer of JII
that, as of the close of the last period covered in such
-28-
<PAGE>
financial statements, no condition or event had occurred which constitutes an
Event of Default or a Default hereunder.
6.7. Inspection of Records; Information. Permit representatives of each of
----------------------------------
the Banks to visit and inspect any of the properties and examine any of the
books and records of the Company at any reasonable time and as often as may be
reasonably desired on reasonable notice; and provide each of the Banks with all
documents and information regarding the Company and the Cable Systems, financial
or otherwise, reasonably requested by any Bank.
6.8. Compliance; Notification.
------------------------
(a) The Company, each of the Partnerships and JII (with respect to the
Cable Systems) will comply in all material respects with all local, state and
federal laws and regulations applicable to its business and the provisions and
requirements of all franchises, permits, certificates of compliance and approval
issued by regulatory authorities and other like grants of authority held by the
Company; and the Company will notify the Agent immediately in detail of any
actual or alleged failure to comply with or perform, breach, violation or
default under any such laws or regulations or under the terms of any of such
franchises, licenses or grants of authority, the existence of which would be
reasonably likely to have a material adverse effect on the business, operations
or financial condition of the Company; or of the occurrence or existence of any
facts or circumstances which with the passage of time, the giving of notice or
otherwise could create such a breach, violation or default or could occasion the
termination of any of such franchises or grants of authority.
(b) Each of the Company, the Partnerships and JII will notify the
Agent in writing immediately of the institution of any litigation, the
commencement of any administrative proceeding, the happening of any event or the
assertion or threat of any claim, which relates to this Agreement, the Notes or
any Collateral Document or which, if adversely determined, would be reasonably
likely to have a material adverse effect on the business, operations or
financial condition of the Company.
(c) With respect to the Environmental Control Statutes, the Company
shall notify the Agent when, in connection with the conduct of the Company's
business(es) or operations, any person or entity, or any federal, state or local
agency provides oral or written notification to the Company, the Partnerships or
JII with regard to an actual or imminently threatened removal, spill, release or
discharge of hazardous or toxic wastes, substances or petroleum products; and
notify Banks in detail immediately (i) upon the receipt by the Company of an
assertion of liability under the Environmental Control Statutes, (ii) of any
actual or alleged failure to comply with or perform, breach, violation or
default under any such Environmental Control Statutes and (iii) of the
occurrence or existence of any facts, events or circumstances which with the
passage of time, the giving of notice, or both, could create such a breach,
violation or default.
-29-
<PAGE>
ARTICLE VII
-----------
DEFAULTS
--------
In the event that any one or more of the following events (each an "Event
of Default") shall occur:
7.1. Default in Payment. The Company shall fail to pay (i) any interest
------------------
on any Note, or any other amount payable to any Bank hereunder (other than a
principal payment on any Note), within three (3) days after the same becomes due
or (ii) any principal amount due on any Note when due;
7.2. Default on Certain Covenants. Default in the performance or
----------------------------
observance of any agreement, covenant, condition, provision or term contained in
Article V or Section 6.1 of this Agreement;
7.3. Default in Performance of Other Agreements. Default by the Company
------------------------------------------
or JII (in the case of the Subordination Agreement) in the performance or
observance of any of the agreements, covenants, conditions, provisions or terms
in this Agreement (other than those which constitute Events of Default under
Section 7.1 or 7.2 above) or any Collateral Document, continuing for a period of
20 days after written notice thereof is given to the Company by the Agent on
behalf of the Banks;
7.4. Representations or Statements False. Any representation or
-----------------------------------
warranty made by the Company or JII herein or in any Collateral Document or
other document, certificate or agreement delivered pursuant hereto, or any
financial statement delivered to the Banks hereunder, shall prove to have been
false in any material respect as of the time when made or given;
7.5. Default on Other Obligations. The Company shall fail to pay all
----------------------------
or any part of the principal of or interest on any indebtedness of or assumed by
it in excess of $ 100,000 as and when due and payable (whether by fixed maturity
or acceleration) and such default shall not be cured within the period or
periods of grace, if any, specified in the instruments governing such
obligations; or default shall occur under any evidence of, or any indenture or
agreement or other instrument governing, such obligation, and such default shall
continue for a period of time sufficient to permit the acceleration of the
maturity of any such indebtedness;
7.6. Judgments. Any judgment, writ, warrant, attachment or execution
---------
or similar process which, together with other outstanding judgments, writs,
warrants, attachments and executions against the Company or its property,
requires payment or presents liability in excess of $500,000 (not covered by
insurance) shall be entered or issued against or levied against the Company or
its property and such judgment or other process shall not be satisfied, waived,
discharged, settled, vacated, fully bonded or stayed within 60 days after the
date of the issuance or levy thereof;
-30-
<PAGE>
7.7. Bankruptcy; Insolvency. The Company, either of the Partnerships
----------------------
or JII shall (a) become insolvent; or (b) generally fail to pay its debts as
they mature; or (c) make a general assignment for the benefit of creditors or to
an agent authorized to liquidate any substantial amount of its property; or (d)
become the subject (either voluntarily or involuntarily) of an "order for
relief" within the meaning of the United States Bankruptcy Code; or (e) file an
answer to a creditor's petition (admitting the material allegations thereof) for
liquidation, reorganization or to effect a plan or other arrangement with
creditors; or (f) apply to a court for the appointment of a receiver, trustee or
custodian for any of its assets; or (g) have a receiver, trustee or custodian
appointed for any of its material assets (with or without its consent); or (h)
otherwise become the subject of any insolvency proceeding;
7.8. Validity. This Agreement, any Note or any document required by
--------
Article III shall, at any time after their respective execution and delivery,
and for any reason, cease to be in full force and effect or shall be declared
null and void, or be revoked or terminated, or the validity or enforceability
thereof or hereof shall be contested by the Company, either of the Partnerships
or JII, or the Company shall deny that it has any or further liability or
obligation thereunder or hereunder, as the case may be;
7.9. ERISA. Any Reportable Event, which Required Banks determine in
-----
good faith to constitute grounds for the termination of any Plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any Plan, shall have occurred,
or any Plan shall be terminated within the meaning of Title IV of ERISA, or a
trustee shall be appointed by the appropriate United States District Court to
administer any Plan, or the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan, and in case of any event described in the preceding provisions of this
section 7.9 the Required Banks determine in good faith that the aggregate amount
of the Company's liability to the Pension Benefit Guaranty Corporation under
ERISA shall exceed $500,000 and such liability is not covered, for the benefit
of the Company, by insurance;
7.10. Revocation of Franchise, etc. Custody or control of any substantial
----------------------------
part of the property of the Company, either Partnership or JII shall
be assumed by any governmental agency or any court of competent jurisdiction at
the request of any governmental agency; if any Cable franchise of the Company
shall be suspended, revoked, not renewed or otherwise terminated (including if
the Company is required by any franchising authority or by court order or
administrative order to halt construction or operations under any Cable
franchise and such action shall continue uncorrected for thirty (30) days after
the Company has received notice thereof), and such Cable franchise, together
with all other Cable franchises suspended, revoked, not renewed or otherwise
terminated at the time of such suspension, revocation or termination, has either
singly or in the aggregate in excess of the greater of ten percent (10%) of the
Basic Subscribers covered by all of the Company's Cable franchises on the last
day of the most recently ended fiscal quarter of the Company; or if any
governmental regulatory authority or judicial body shall make any other final
non-appealable determination the effect of which would be to affect materially
and adversely the operations of the Company as now conducted;
-31-
<PAGE>
7.11. Termination or Dissolution of the Company, etc. The Partnerships
----------------------------------------------
shall agree to terminate or dissolve the Company; if the Company is terminated
or dissolved and not simultaneously continued; if either Partnership shall
withdraw as a partner of the Company; if JII shall cease to be the general
partner of each of the Partnerships and the manager of the Company; or if the
sole partners of the Company shall cease to be the Partnerships;
7.12. Environmental Matters. Any event or condition shall occur or exist
---------------------
with respect to any activity or substance regulated under the Environmental
Control Statutes and as a result of such event or condition, the Company has
incurred a liability in excess of $500,000 during any consecutive twelve (12)
month period;
THEN:
(a) As to any Event of Default under section 7.1, 7.2, 7.3, 7.4, 7.5,
7.6, 7.8, 7.9, 7.10, 7.11 and 7.12 and at any time thereafter, and in each
case, the Agent at the request of Required Banks may, by written notice to the
Company, immediately terminate the obligations of the Banks to make Loans and
participate in the issuance of Letters of Credit hereunder and/or declare the
unpaid principal balance of the Notes, together with all interest accrued
thereon, to be immediately due and payable; and the unpaid principal balance of
and accrued interest on the Notes shall thereupon be due and payable all without
presentment, demand, protest, or further notice of any kind, all of which are
hereby waived, and notwithstanding anything to the contrary herein or in the
Notes contained.
(b) As to any Event of Default under section 7.7, the obligations of
the Banks to make Loans and participate in the issuance of Letters of Credit
hereunder shall immediately terminate and the unpaid principal balance of the
Notes, together with all interest accrued thereon, shall immediately and
forthwith be due and payable, all without presentment, demand, protest, or
further notice of any kind, all of which are hereby waived, and notwithstanding
anything to the contrary herein or in the Notes contained.
(c) Upon the occurrence of any of said Events of Default, the rights,
powers and privileges provided in this Article VII and all other remedies
available to the Banks under this Agreement, the Collateral Documents or at law
or in equity may be exercised by the Agent on behalf of the Banks at any time
and from time to time, whether or not the indebtedness evidenced by the Notes
and secured by the documents required by Article III hereof shall be due and
payable, and whether or not the Agent on behalf of the Banks shall have
instituted any foreclosure proceedings or other action for the enforcement of
the Banks' rights under the Notes or any of the Collateral Documents securing
the same.
(d) For the purpose of carrying out the provisions and exercising the
rights, powers and privileges granted by this Article VII and the Collateral
Documents, the Company hereby irrevocably constitutes and appoints the Agent its
true and lawful attorney-in-fact, with full power of substitution upon the
occurrence of an Event of Default, to execute, acknowledge, endorse
-32-
<PAGE>
and deliver any instruments and do and perform any acts which are referred to in
this Article VII and the Collateral Documents, in the name and behalf of the
Company. The power vested in each said attorney-in-fact is, and shall be deemed
to be, coupled with an interest and cannot be revoked.
(e) In the event that the Notes shall be paid in whole or in part
following acceleration of the maturity thereof while a Eurodollar Loan is
outstanding and such payment date is not the last day of an Interest Period for
such Loan, the Company shall pay to each Bank, on the date of such accelerated
Note payment, the amount required pursuant to Section 1.9 hereof.
ARTICLE VIII
------------
THE AGENT
---------
This Article sets forth the relative rights and duties of Agent and Banks
respecting the Loans and does not confer any enforceable rights on the Company
against Banks or create on the part of Banks any duties or obligations to the
Company.
8.1. Appointment and Powers. Each of the Banks hereby appoints CoreStates
----------------------
as Agent for the Banks hereunder, and authorizes the Agent to take such action
as Agent on its behalf and to exercise such powers as are specifically delegated
to the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. The duties of the Agent shall be entirely ministerial; the
Agent shall not have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of this Agreement,
the Notes or any related document, or to enforce such performance, or to inspect
the property (including the books and records) of the Company; and the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or the Notes or applicable law.
CoreStates agrees to act as Agent upon the express terms and conditions
contained in this Article VIII.
8.2. Application of Payments. Agent shall apply all payments of principal,
------------------------
interest, commitment fee, facility fee, letter of credit fee, or other amounts
hereunder made to Agent by or on behalf of the Company, to Banks on the basis of
their pro rata shares of the outstanding principal balance of indebtedness
hereunder, except any Agent's fee paid in connection herewith which shall be
paid solely to Agent. Such distribution of payments shall be made promptly in
federal funds immediately available at the office of each Bank set forth above.
8.3. Modifications and Waivers. No modification or amendment hereof,
-------------------------
consent hereunder or waiver of Event of Default shall be effective except by
written consent of the Required Banks, provided, however, that the written
consent of all Banks shall be required to modify, amend, waive, discharge,
terminate or suspend compliance with any of the following provisions or matters:
(i) the rate of interest, to the extent it is proposed to be decreased, (ii) the
amount of the Commitments, and of each Bank's respective Commitment, (iii) the
dates of payment hereunder, (iv)
-33-
<PAGE>
the commitment fee or the Letter of Credit Fee (v) the release of any Collateral
provided to the Agent on behalf of Banks pursuant to the Collateral Documents
(other than in connection with a sale of a Cable System which is permitted
hereunder) if the Collateral to be released is valued (based on the Company's
good faith estimate) at Fifty Thousand Dollars ($50,000) or more, and (vi) the
provisions of this Section 8.3 or the definition of Required Banks. The Banks
hereby agree to execute such further documents including without limitation
amendments to this Agreement and the Note(s), waivers and certificates and
deliver such opinions as the Agent and its counsel shall so request to implement
any modifications approved in accordance with the terms of this Section 8.3. Any
amendment or waiver made pursuant to this Section 8.3 shall apply to and bind
all of the Banks and any future holder of any Notes. No modification or waiver
of any provision of this Agreement or any Note, nor any consent to any departure
by the Company here from or therefrom, shall in any case be effective unless the
same be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No notice to
or demand on Company in any case shall entitle Company to any other or further
notice or demand in any similar or other circumstances.
8.4. Obligations Several. The obligations of the Banks hereunder are
-------------------
several, and each Bank hereunder shall not be responsible for the obligations of
the other Banks hereunder, nor, will the failure of one Bank to perform any of
its obligations hereunder relieve the other Banks from the performance of their
respective obligations hereunder.
8.5. Responsibility. The Agent (i) makes no representation or warranty
--------------
to any Bank and shall not be responsible to any Bank for any oral or written
recitals, reports, statements, warranties or representations made in or in
connection with this Agreement or any Note; (ii) shall not be responsible for
the due execution, legality, validity, enforceability, genuineness, sufficiency,
collectibility or value of this Agreement or any Note or any other instrument or
document furnished pursuant thereto; (iii) may treat the payee of any Note as
the owner thereof until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent;
(iv) may execute any of its duties under this Agreement by or through employees,
agents and attorneys in fact and shall not be answerable for the default or
misconduct of any such employee, agent or attorney in fact selected by it with
reasonable care; (v) may (but shall not be required to) consult with legal
counsel (including counsel for the Company), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with advice of such
counsel, accountants or experts; (vi) shall be entitled to rely upon any Note,
notice, consent, waiver, amendment, certificate, affidavit, letter, telegram,
telex, cable or other document or communication believed by it to be genuine and
signed or sent by the proper party or parties, and may rely on statements
contained therein without further inquiry or investigation. Neither the Agent
nor any of its directors, officers, agents, or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement on the Notes, except for its or their own gross negligence or
willful misconduct.
8.6. Agent's Indemnification. The Banks agree to indemnify and reimburse
-----------------------
the Agent (to the extent not reimbursed by the Company), ratably from and
against any and all liabilities,
-34-
<PAGE>
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent as such in any way relating to or
arising out of this Agreement or any action taken or omitted by the Agent under
this Agreement, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank agrees to
reimburse the Agent promptly upon demand for its ratable share of any out-of-
pocket expenses (including counsel fees) incurred by the Agent in connection
with the preparation, execution, administration or enforcement of, or the
preservation of any rights under, this Agreement to the extent that the Agent is
not reimbursed for such expenses by the Company.
8.7. Action on Instruction of Banks; Right to Indemnity. Agent shall in all
--------------------------------------------------
cases be fully protected in acting or refraining from acting hereunder in
accordance with written instructions to it signed by Required Banks unless the
consent of all the Banks is expressly required hereunder in which case Agent
shall be so protected when acting in accordance with such instructions from all
the Banks. Such instructions and any action taken or failure to act pursuant
thereto shall be binding on all the Banks, provided that except as otherwise
provided herein, Agent may act hereunder in its own discretion without
requesting such instructions. Agent shall be fully justified in failing or
refusing to take any action hereunder unless it shall first be specifically
indemnified to its satisfaction by the other Banks on a pro rata basis against
any and all liability and expense which it may incur by reason of taking or
continuing to take any such action.
8.8. Rights as a Lender. With respect to its Commitment and the Note
------------------
issued to it, CoreStates, in its individual capacity as a Bank, shall have, and
may exercise, the same rights and powers under this Agreement and the Note
payable to it as the other Bank has under this Agreement and Note, and the terms
"Bank" and "Banks", unless the context otherwise requires, shall include
CoreStates in its individual capacity as a Bank. CoreStates and its affiliates
may accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of banking or trust business with, the Company, any
Affiliate of the Company, or any of its subsidiaries and any person, firm or
corporation who may do business with or own securities of the Company, such
Affiliate or any subsidiary, all as if it were not the Agent, and without any
duty to account therefor to the Banks; provided, however, that Agent hereby
agrees that if it agrees to make any loan to the Company (but not any Affiliate
of the Company, or any subsidiary or any person, firm or corporation which may
do business with or own securities of the Company), and the Company provides a
security interest in its assets covered by the Collateral Documents, that any
such security interest shall be junior to the security interests granted to
Agent on behalf of Banks under the Collateral Documents.
8.9. Credit Investigation. Each of the Banks severally represents and
--------------------
warrants to the other Bank and to the Agent that it has made its own independent
investigation and evaluation of the financial condition and affairs of the
Company in connection with such Bank's execution and delivery of this Agreement
and the making of its loans and has not relied on any information or
-35-
<PAGE>
evaluation provided by any other Bank or the Agent in connection with any of the
foregoing (other than information provided by the Company to the Agent for
transmittal to the Banks in connection with the foregoing); and each Bank
represents and warrants to the other Bank and to the Agent that it shall
continue to make its own independent investigation and evaluation of the
creditworthiness of the Company while the Commitments and/or the Notes are
outstanding.
8.10. Resignation, Removal of Agent.
-----------------------------
(a) Agent may at any time resign its position as Agent, without
affecting its position as a Bank, by giving written notice to Banks and the
Company. Such resignation shall take effect upon the appointment of a successor
agent in accordance with this Article. In the event Agent shall resign, the
Company shall appoint a successor agent, subject to the consent of the Required
Banks, which shall not be unreasonably withheld. If within thirty (30) days of
the Agent's notice of resignation no successor agent shall have been appointed
by the Company and accepted such appointment, then Agent, in its discretion may
appoint any other Bank as a successor agent, subject to such Bank's acceptance
of such appointment and to approval by the Company, which approval will not be
unreasonably withheld.
(b) All Banks other than the Agent may remove the Agent, without
affecting its position as a Bank, by giving written notice signed by all such
Banks to the Agent. Such removal shall take effect thirty (30) business days
following Agent's receipt of notice of removal. The removal notice shall
identify the successor Agent (which shall be a Bank, or shall have been approved
by Company).
8.11. Successor Agent. The successor Agent appointed pursuant to Section
---------------
8.10 shall execute and deliver to its predecessor and Banks an instrument in
writing accepting such appointment, and thereupon such successor, without any
further act, deed or conveyance, shall become fully vested with all the
properties, rights, duties and obligations of its predecessor Agent. The
predecessor Agent shall deliver to its successor Agent forthwith all collateral
security, documents and moneys held by it as Agent, if any, whereupon such
predecessor Agent shall be discharged from its duties and obligations as Agent
under this Agreement.
8.12. Collateral Security. Agent will hold, administer and manage any
-------------------
collateral security pledged from time to time hereunder either in its own name
or as Agent, but each Bank shall hold a direct, undivided beneficial interest
therein, by reason of and as evidenced by this Agreement.
8.13. Enforcement by Agent. All rights of action under this Agreement
--------------------
and under the Notes and all rights to the collateral security, if any, hereunder
may be enforced by Agent and any suit or proceeding instituted by Agent in
furtherance of such enforcement shall be brought in its name as Agent without
the necessity of joining as plaintiffs or defendants any other Banks, and the
recovery of any judgment shall be for the benefit of Banks subject to the
expenses of Agent.
-36-
<PAGE>
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1. Accounting Terms: Definitions. Except as otherwise provided, all
-----------------------------
accounting terms shall be construed in accordance with generally accepted
accounting principles consistently applied, and financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
As used herein:
(a) "Affiliate" means any person, firm, corporation or partnership,
---------
which, directly or indirectly, controls, is controlled by, or is under common
control with, the Company or a Subsidiary.
(b) "Annualized Cash Flow" means the Company's Cash Flow for the
---------------------
immediately preceding and completed fiscal quarter of the Company multiplied
times four (4).
(c) "Applicable Margin" shall mean (a) in the absence of a Default or
-----------------
an Event of Default, with respect to each Prime Rate and Eurodollar Loan,
respectively, the percentage per annum set forth in the appropriate column below
that corresponds to the Company's Leverage Ratio set forth in the left-hand
column below, as calculated based on the quarterly compliance certificate of the
Company, as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Company's
Leverage Ratio Base Rate LIBO Rate
- -------------- --------- ---------
Greater than 3.00 0.375% 1.3750%
2.50 or greater but less
than or equal to 3.00 0.125% 1.1250%
Less than 2.50 0% 0.875%
</TABLE>
The Applicable Margin shall be adjusted quarterly by Agent and shall become
effective on the earlier of (i) two (2) Business Days after the receipt by Agent
of the financial statements and quarterly compliance certificates of the Company
pursuant to Sections 6.6(a) and 6.6(f) hereof, and (ii) the last date on which
such financial statements and compliance certificates were to be delivered,
provided, however, that in the event the Company fails to deliver such financial
statements and compliance certificates on a timely basis, the Company's Leverage
Ratio shall be deemed to be "Greater than 3.00" until such financial statements
and compliance certificates are delivered, and in each case the Applicable
Margin shall remain in effect until the next quarterly determination of the
Applicable Margin by Agent.
-37-
<PAGE>
(d) "Bank" shall mean individually and "Banks" shall mean individually
---- -----
and collectively, the banks or other financial institutions party to this
Agreement at any time of determination and their respective successors and
assigns, being, CoreStates, Dresdner and PNC on the date hereof.
(e) "Base Rate" means the higher of (a) the Federal Funds Rate plus
----------
one half of one percent (1/2%) per annum or (b) the Prime Rate.
(f) "Basic Subscribers" means the subscribers in the Cable Systems who
-----------------
(a) are currently receiving cable television signals supplied by the Company;
(b) have commenced payment for such signals at the standard monthly fees and
charges for "basic service" (as such term is commonly understood in the cable
television industry) charged by the Company, directly or indirectly, under
subscriptions with the Company; and (c) are not 60 or more days delinquent in
payments as determined on a contractual basis; provided, however, that for
purposes of this definition, senior citizens receiving discounts of not more
than 20% of the otherwise applicable rate shall be deemed to be paying standard
monthly fees and charges for basic service.
(g) "Business Day" means a day other than (i) a Saturday, Sunday or a
------------
day on which national banks or banks located in the Commonwealth of Pennsylvania
are permitted or required by law to close or (ii) in respect to any Eurodollar
Loan, a day on which the London interbank market is closed.
(h) "Capitalized Lease" means any lease which is capitalized on the
-----------------
books of the lessee, or should be so capitalized under generally accepted
accounting principles.
(i) "Cash Flow" means, for any fiscal quarter, total revenues of the
---------
Company for such quarter, determined and consolidated in accordance with
generally accepted accounting principles less the sum of (i) operating expenses
----
of the Company for such quarter and (ii) general and administrative expenses of
the Company for such quarter, in each case determined and consolidated in
accordance with generally accepted accounting principles.
(j) "Controlled Group" means a controlled group of corporations as
----------------
defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of
which the Company is a part.
(k) "Debt Service" means for any period, the sum of (a) all principal
------------
and Interest Expense scheduled to be paid on Total Debt during such period, plus
(b) all rentals (other than insurance premiums and property Taxes) scheduled to
be paid under Capitalized Leases during such period.
(1) "Default" means any event or circumstance which, with the giving
-------
of notice or the passage of time or both, would constitute an Event of Default.
-38-
<PAGE>
(m) "Environmental Control Statutes" means any federal, state,
------------------------------
county, regional or local laws governing the control, storage, removal, spill,
release or discharge of Hazardous Substances, including without limitation
CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984,
the Federal Water Pollution Control Act, as amended by the Clean Water Act of
1977, the Clean Air Act, the Clean Air Act Amendments, the Hazardous Materials
Transportation Act, the Emergency Planning and Community Right to Know Act of
1986, the National Environmental Policy Act of 1975, the Oil Pollution Act of
1990, the Toxic Substances Control Act, any similar or implementing state law,
and in each case including all amendments thereto and all rules and regulations
in effect at any time thereunder and all permits issued in connection therewith.
"Hazardous Substance" means petroleum products and items defined in the
Environmental Control Statutes as "hazardous substances", "hazardous wastes",
"pollutants" or "contaminants" and any other toxic, reactive, corrosive,
carcinogenic, flammable or hazardous substance or other pollutant.
(n) "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as the same may be in effect from time to time.
(o) "Eurodollar Loan" means the portion of a Loan bearing
---------------
interest at the rate specified in section 1.7(b).
(p) "Federal Funds Rate" means, for any day, the effective rate of
------------------
interest for such day, as announced from time to time by the Board of Governors
of the Federal Reserve System as shown in publication H.15 as the "Federal
Funds Rate."
(q) "Gross Operating Revenues" means, for any period for which such
------------------------
sum is being computed, the sum of all revenues and receipts earned by the
Company from the operation of its businesses during such period.
(r) "Home Office Allocations" means, for any period for which such sum
-----------------------
is being computed, the amount of reimbursement payable by the Company to JII for
general overhead and administrative expenses of JII allocated to the Company
pursuant to Paragraph 4 of Article VII of the Joint Venture Agreement (computed
by JII consistently with respect to all partnerships of which it or a Subsidiary
or Affiliate is a general partner or with which it is otherwise affiliated and
payment of which shall be subject to all the terms and provisions of this
Agreement and the Subordination Agreement).
(s) "Intercompany Subordinated Debt" means unsecured and subordinated
------------------------------
indebtedness of the Company to JII, including, without limitation, any advances
by JII to the Company, and any Home Office Allocations and Management Fees which
are deferred in accordance with the terms of this Agreement.
-39-
<PAGE>
(t) "Interest Expense" means all interest expense, letter of credit
----------------
fees and commitment fees incurred with respect to Total Debt for the relevant
period, whether accrued or paid.
(u) "Letter of Credit" means individually, and "Letters of Credit"
---------------- -----------------
means individually and collectively, the letter(s) of credit issued hereunder in
the form agreed upon among the Company, the Agent and the beneficiary thereof at
the time of issuance thereof and participated in by the Banks pursuant to the
terms and conditions of Section 2A hereof.
(v) "Letter of Credit Request Form" shall mean the certificate in the
----------------------------
form attached as Exhibit D hereto to be delivered by the Company to Agent as a
---------
condition of each issuance of a Letter of Credit pursuant to 2A.3 hereof.
(w) "Letter of Credit Sublimit" shall mean the portion of the
-------------------------
Commitment up to which Banks have agreed to participate in the issuance by Agent
of Letters of Credit pursuant to Section 2A hereof, being Two Million Dollars
($2,000,000) on the date of this Agreement.
(x) "Leverage Ratio" means the ratio of the Company's Total Debt
--------------
to the Company's Annualized Cash Flow.
(y) "LIBO Rate" means, for each Interest Period for each Eurodollar
---------
Loan, the annual rate of interest obtained by dividing (i) the average rate of
--------
interest (rounded upward, if necessary, to the nearest 1/10th of 1%) at which
deposits in U.S. dollars are offered to prime banks in the London interbank
market at 11 a.m. (London time) two Business Days prior to the commencement of
the applicable Eurodollar Loan Interest Period for a term equal to such Interest
Period and in an amount approximately equal to the principal amount of the
applicable Eurodollar Loan, as reflected on the Telerate electronic
communications terminals in Agent's money center by (ii) a percentage, expressed
as a decimal, equal to 100% minus the reserve percentage applicable to Agent
during such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for determining the reserve
requirements for Agent with respect to Eurocurrency Liabilities (as defined in
Regulation D) having a term equal to such Interest Period (including without
limitation any marginal, supplemental, special or other reserves which Agent, in
its discretion, determines must be maintained pursuant to applicable laws and
regulations).
(z) "Loan" means a loan made to the Company by any Bank pursuant to
----
Article I of this Agreement.
(aa) "LOC Contribution" shall have the meaning assigned to it in Section
----------------
2.5A hereof.
(bb) "London Business Day" means any Business Day on which the banks of
-------------------
London, England are open for business.
-40-
<PAGE>
(cc) "Management Fees" means, for each period for which such sum is
---------------
being computed, management fees payable by the Company to JII pursuant to
Article VII, Section 3 of the Joint Venture Agreement, which fees shall be
calculated and payable monthly (payment of which shall be subject to all of the
terms and provisions of this Agreement and the Subordination Agreement).
(dd) "Maximum Permitted Indebtedness" means, at the date of
------------------------------
determination, the maximum permitted Leverage Ratio of the Company on such date
multiplied by the Company's Annualized Cash Flow for the preceding fiscal
quarter.
(ee) "Note" and "Notes" shall have the meanings set forth in
---- -----
Section 1.1 of this Agreement.
(ff) "Permitted Liens" means:
---------------
(i) liens for taxes, assessments or governmental charges, and
liens incident to construction, which are either not delinquent or are being
contested in good faith by the Company by appropriate proceedings which will
prevent foreclosure of such liens, and against which adequate reserves have been
provided; and zoning restrictions, easements, restrictions, minor title
irregularities and similar matters which have no adverse effect as a practical
matter upon the ownership and use of the affected property by the Company;
(ii) liens or deposits in connection with worker's compensation
or other insurance or to secure customs' duties, public or statutory obligations
in lieu of surety, stay or appeal bonds, or to secure performance of contracts
or bids (other than contracts for the payment of money borrowed), or deposits
required by law or governmental regulations or by any court order, decree,
judgment or rule as a condition to the transaction of business or the exercise
of any right, privilege or license; or other liens or deposits of a like nature
made in the ordinary course of business;
(iii) liens or security interests in favor of the Banks securing
the indebtedness and other obligations of the Company to the Banks under or in
connection with this Agreement, the Notes and the Collateral Documents;
(iv) purchase money liens and security interests in favor of
sellers or lessors securing indebtedness or obligations incurred to acquire or
lease fixed or capital assets permitted under clause (v) of Section 5.1 of this
Agreement (and extension, renewal and replacement liens upon the same property
provided the principal amount secured by each such lien constituting such
extension, renewal or replacement shall not exceed the principal amount secured
by the liens theretofore existing), each such purchase money lien and security
interest to attach only to the specific property the purchase or lease of which
gives rise to the indebtedness or obligation secured thereby;
-41-
<PAGE>
(v) In the case of land in which the Company has a leasehold
estate and in the case of any buildings, other structures or fixtures located on
such land, the right, title and interest of the landlord under the lease
creating the leasehold, and in the case of land in which the Company has a
license to construct, own and operate buildings, fixtures and equipment on such
land, the right of the licensor with respect to such land, provided that such
landlord or licensor shall have executed fixtures disclaimers and attornment
agreements if so requested by Agent; and
(vi) liens securing judgments not in excess of $100,000 in
the aggregate arising from legal proceedings, so long as such proceedings are
being contested in good faith by appropriate proceedings diligently conducted
and so long as execution is stayed on all judgments resulting from any such
proceedings.
(gg) "Plan" means any employee pension benefit plan subject to
----
Title IV of ERISA maintained by the Company, any of its Subsidiaries, or any
member of the Controlled Group, or any such plan to which the Company, any of
its Subsidiaries, or any member of the Controlled Group is required to
contribute on behalf of any of its employees.
(hh) "Prime Rate" means the rate of interest announced by Agent
----------
from time to time as its prime rate.
(ii) "Prime Rate Loan" shall mean portion of a Loan bearing
---------------
interest at the rate specified in section 1.7(a).
(jj) "Proforma Debt Service" means, without duplication, for the
---------------------
succeeding twelve-month period from the end of any fiscal quarter or, with
respect to any calculation made as of a date other than the end of a fiscal
quarter, as of the end of the most recently ended fiscal quarter for which the
Company is required to deliver quarterly or annual Financial Statements and the
related certificate pursuant to Sections 6.6(a), 6.6(b) and 6.6(f), Debt Service
during such period; provided that, for purposes of this definition, the rates of
interest payable during any period on Total Debt (x) bearing interest at a
variable rate or at different fixed rates or (y) on which interest does not
become payable until a specified date after the end of such quarter shall, in
each case, be the interest rates per annum payable on such Total Debt as of the
date for which such calculation is made.
(kk) "pro rata" or "ratably" or "for the ratable benefit of
-------- ------- --------------------------
Banks" means each Bank's pro rata share of Loans or Letters of Credit on the
- -----
date of determination based on the ratio of the principal amount of the Loans or
Letters of Credit outstanding in favor of such Bank to the aggregate principal
amount of Loans outstanding, or, if no Loans or Letters of Credit are
outstanding, based on the amount of such Bank's Commitment to the aggregate
amount of Commitments of all Banks.
(ll) "Reportable Event" means a reportable event as that term is
----------------
defined in Title IV of ERISA.
-42-
<PAGE>
(mm) "Required Banks" means Banks whose outstanding Loans or
--------------
participation in Letters of Credit equal sixty-six and two-thirds percent
(66.2/3%) or more of the aggregate amount of the Loans or participation in
Letters of Credit, or, if no Loans or participation in Letters of Credit are
outstanding, Banks whose Commitments equal sixty-six and two-thirds percent (66
2/3%) or more of the Commitments.
(nn) "Restricted Payments" means redemptions, repurchases,
-------------------
dividends and distributions of any kind in respect of partnership or joint
venture interests in the Company, any payments of principal and interest on
Intercompany Subordinated Debt.
(oo) "Security Agreement" shall mean the Security Agreement
------------------
described in Section 3.3 of this Agreement, as it may be amended, restated,
supplemented or modified from time to time.
(pp) "Subordination Agreement" shall mean the Subordination
-----------------------
Agreement described in Section 3.2 of this Agreement, as it may be amended,
restated, supplemented or modified from time to time.
(qq) "Subsidiary" means a corporation of which the Company owns,
----------
directly or through another Subsidiary, at the date of determination, more than
50% of the outstanding stock or capital interests having ordinary voting power
for the election of directors, irrespective of whether or not at such time stock
or capital interests of any other class or classes might have voting power by
reason of the happening of any contingency.
(rr) "Termination Date" shall have the meaning set forth in
----------------
Section 1.1 of this Agreement.
(ss) "Total Debt" means the sum of all obligations for borrowed
----------
money, all payments required under non-compete agreements, capital lease
obligations, amounts required under installment sale purchases, all debt or
other financial obligations of others guaranteed or endorsed by the Company, and
any amounts for which the Company is contingently liable to provide as equity or
debt advances to other parties; provided, however, that Total Debt shall exclude
all Intercompany Subordinated Debt; provided, however, that such Intercompany
-----------------
Subordinated Debt is expressly subordinated to indebtedness of the Company to
the Banks under this Agreement pursuant to the Subordination Agreement.
9.2. Expenses and Attorneys' Fees. The Company shall be responsible
----------------------------
for the payment of all fees and out-of-pocket disbursements incurred by the
Banks in connection with the preparation, execution, delivery, administration
and enforcement of this Agreement, the Collateral Documents and the Notes,
including all costs of collection, and including without limitation the
reasonable fees and disbursements of counsel for each of the Banks, whether or
not any transaction contemplated by this Agreement is consummated.
-43-
<PAGE>
9.3. Securities Act of 1933. Each of the Banks represents that it is
----------------------
acquiring the Note payable to it without any present intention of making a sale
or other distribution of such Note, provided that each Bank reserves the right
to sell the Note payable to it or participations therein. Notwithstanding the
foregoing, each Bank agrees that it will not sell or assign the Note payable to
it, its rights under this Agreement, or participations therein, in whole or in
part, to any party other than one or more banks which are affiliated with such
Bank by reason of their being subsidiaries of the present holding company of
such Bank.
9.4. Successors. The provisions of this Agreement shall inure to the
----------
benefit of any holder of each Note, and shall inure to the benefit of and be
binding upon any successor to any of the parties hereto. No delay on the part of
either Bank or any holder of any Note in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise of any right, power or privilege hereunder preclude other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein specified are cumulative and are not exclusive of
any rights or remedies which the Banks or the holders of the Notes would
otherwise have.
9.5. Survival. All agreements, representations and warranties made
--------
herein shall survive the execution of this Agreement, the making of the loans
hereunder and the execution and delivery of the Notes.
9.6. Pennsylvania Law: Amendment. This Agreement and the Notes issued
---------------------------
hereunder shall be governed by and construed in accordance with the internal
laws of the Commonwealth of Pennsylvania. This Agreement constitutes the entire
agreement of the parties as to the subject matter hereof, and no modification,
waiver or amendment shall be effective unless made in a writing signed by the
appropriate officers of the parties hereto.
9.7. Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
9.8. Notices. All communications or notices required under this
---------
Agreement shall be deemed to have been given on the date received if sent by
telecopy, facsimile or overnight courier service, and, if mailed, on the fifth
day after deposited in the United States mail, postage prepaid, and addressed as
follows (unless and until any of such parties advises the other in writing of a
change in such address): (a) if to the Company, with the full name and address
and facsimile number of the Company as shown on this Agreement below; and (b) if
to a Bank with the full name and address and facsimile number of such Bank as
shown on this Agreement below, to the attention of the officer of such Bank
executing the form of acceptance of this Agreement.
-44-
<PAGE>
If to the Company:
c/o Jones Intercable, Inc.
9697 E. Mineral Ave.
Englewood, CO 80112
Attn: Vice President/Treasurer
Fax No.: (303) 790-7324
With a copy to:
c/o Jones Intercable, Inc.
9697 E. Mineral Ave.
Englewood, CO 80112
Attn: General Counsel
Fax No.: (303) 799-1644
If to CoreStates Bank, N.A.
CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19101
Attn: Philip D. Harrison
Fax No.: (215) 786-7721
If to Dresdner Bank AG:
Dresdner Bank AG
75 Wall Street
New York, NY 10005-2889
Attn: Jane Majeski
Fax No.: (212) 429-2041
If to PNC Bank, National Association
PNC Bank, National Association
1600 Market Street
Philadelphia, PA 19103
Attn: Cynthia L. Rogers
Fax No.: (215) 585-6680
9.9. Limitation on Recourse to Partners. Anything contained in this
----------------------------------
Agreement or the other Collateral Documents to the contrary notwithstanding, in
any action or proceeding brought on any Note, or on any of the Collateral
Documents or the indebtedness evidenced or secured
-45-
<PAGE>
thereby, no deficiency judgment shall be sought or obtained against JII, the
Partnerships or any limited partner of the Partnerships or enforced against the
separate assets of JII, the Partnerships or any limited partner of the
Partnerships, and the liability of JII, the Partnerships and such limited
partners for any amounts due under the Notes, this Agreement or under the
Collateral Documents shall be limited to the interest of JII, the Partnerships
or any limited partner of the Partnerships in the collateral described in the
Collateral Documents and their interests in any other assets of the Company. The
Banks may join any present or future partners or joint venturers of the Company,
in their capacities as general partners or joint venturers, as defendants in any
legal action it undertakes to enforce its rights and remedies under this
Agreement, the Notes and under the Collateral Documents, but any judgment in any
such action may be satisfied by recourse only to the security provided for in
the Collateral Documents and the other assets of the Company, but not by
recourse directly to or by execution on the separate assets of JII, the
Partnerships or any limited partners of the Partnerships. Notwithstanding the
foregoing, (i) nothing set forth herein shall be deemed to prohibit the Banks
from taking any legal action(s) against JII or its assets arising out of JII's
undertakings under the Subordination Agreement or arising by reason of any fraud
or intentional misconduct of JII or the Partnerships and (ii) in the event that
at any time the Company is not a validly existing legal entity, then the Banks
shall have recourse to any and all assets (A) described in any financial
statement of the Company delivered to Banks, (B) represented to Banks at any
time as being owned by the Company and (C) that would have been owned by the
Company if it had existed, and all proceeds of the foregoing.
9.10. Indemnification and Release Provisions. The Company hereby
--------------------------------------
agrees to defend Agent and each Bank and their directors, officers, agents,
employees and counsel from, and hold each of them harmless against, any and all
losses, liabilities (including without limitation settlement costs and amounts,
transfer taxes, documentary taxes, or assessments or charges made by any
governmental authority), claims, damages, interests, judgments, costs, or
expenses, including without limitation reasonable fees and disbursements of
counsel, incurred by any of them arising out of or in connection with or by
reason of this Agreement, the Commitments, the making of the Loans, or issuing
Letters of Credit, or any Collateral Document, or any amendment, waiver or
modification with respect thereto, including without limitation, any and all
losses, liabilities, claims, damages, interests, judgments, costs or expenses
relating to or arising under any Environmental Control Statute or the
application of any such Statute to any of the Company's properties or assets
except with respect to such Bank's or Agent's (as the case may be) own gross
negligence or willful misconduct. The Company hereby releases Agent and each
Bank and their respective directors, officers, agents, employees and counsel
from any and all claims for loss, damages, costs or expenses caused or alleged
to be caused by any act or omission on the part of any of them except with
respect to such Bank's or Agent's (as the case may be) own gross negligence or
willful misconduct. All obligations provided for in this Section 9.10 shall
survive any termination of this Agreement or the Commitments and the repayment
of the Loans and the Letters of Credit.
9.11. Participations and Assignments. The Company hereby acknowledges
------------------------------
and agrees that a Bank may at any time: (A) grant participations in all or any
portion of its Loans, participation in any Letters of Credit, or Note or of its
right, title and interest therein or in or to this
-46-
<PAGE>
Agreement (collectively, "Participations") to any other lending office or to any
other bank, lending institution or other entity which has the requisite
sophistication to evaluate the merits and risks of investments in Participations
("Participants"); provided, however, that: (i) all amounts payable by the
Company hereunder shall be determined as if such Bank had not granted such
Participation; and (ii) any agreement pursuant to which any Bank may grant a
Participation: (x) shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Company hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provisions of this Agreement; (y) such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement without the consent of the Participant if such modification,
amendment or waiver would reduce the principal of or rate of interest on the
Loans or postpone the date fixed for any payment of principal of or interest on
the Loan; and (z) shall not relieve such Bank from its obligations, which shall
remain absolute, to make Loans and participate in Letters of Credit hereunder;
and (b) assign, with the prior written consent of the Agent and notice to the
Company, together with the payment to the Agent of a $1,500 transfer fee, up to
forty-nine percent (49%) of its Loans, participations in Letters of Credit, and
Commitment.
-47-
<PAGE>
IN WITNESS WHEREOF, the undersigned by their duly authorized officers,
have executed this Second Amended and Restated Revolving Credit Agreement the
day and year first written above.
JONES CABLE INCOME FUND 1-B/C
VENTURE, a Colorado joint
venture general partnership
BY: Jones Cable Income Fund 1-B, Ltd., a general
partner
BY: Jones Cable Income Fund 1-C, Ltd, a general
partner
By: Jones Intercable, Inc., their general
partner
By: /s/ J. Roy Pottle
----------------------------------
Title: Vice President/Treasurer
CORESTATES BANK, N.A., for itself
and as Agent for the Banks
By:
--------------------------------------
Title:
DRESDNER BANK AG, NEW YORK BRANCH
By:
--------------------------------------
Title:
By:
--------------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
Title:
-48-
<PAGE>
IN WITNESS WHEREOF, the undersigned by their duly authorized officers,
have executed this Second Amended and Restated Revolving Credit Agreement the
day and year first written above.
JONES CABLE INCOME FUND 1-B/C
VENTURE, a Colorado joint
venture general partnership
BY: Jones Cable Income Fund 1-B, Ltd., a general
partner
BY: Jones Cable Income Fund 1-C, Ltd, a general
partner
By: Jones Intercable, Inc., their general
partner
By:
----------------------------------
Title:
CORESTATES BANK, N.A., for itself
and as Agent for the Banks
By: [SIGNATURE ILLEGIBLE]
--------------------------------------
Title: Vice President
DRESDNER BANK AG, NEW YORK BRANCH
By:
--------------------------------------
Title:
By:
--------------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
Title:
-49-
<PAGE>
IN WITNESS WHEREOF, the undersigned by their duly authorized officers,
have executed this Second Amended and Restated Revolving Credit Agreement the
day and year first written above.
JONES CABLE INCOME FUND 1-B/C
VENTURE, a Colorado joint
venture general partnership
BY: Jones Cable Income Fund 1-B, Ltd., a general
partner
BY: Jones Cable Income Fund 1-C, Ltd, a general
partner
By: Jones Intercable, Inc., their general
partner
By:
----------------------------------
Title:
CORESTATES BANK, N.A., for itself
and as Agent for the Banks
By:
--------------------------------------
Title:
DRESDNER BANK AG, NEW YORK BRANCH
By: /s/ Jane A. Majeski
--------------------------------------
Title: Vice President
By: /s/ Brian Haughney
--------------------------------------
Title: Assistant Treasurer
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
Title:
-50-
<PAGE>
IN WITNESS WHEREOF, the undersigned by their duly authorized officers,
have executed this Second Amended and Restated Revolving Credit Agreement the
day and year first written above.
JONES CABLE INCOME FUND 1-B/C
VENTURE, a Colorado joint
venture general partnership
BY: Jones Cable Income Fund 1-B, Ltd., a general
partner
BY: Jones Cable Income Fund 1-C, Ltd, a general
partner
By: Jones Intercable, Inc., their general
partner
By:
---------------------------------
Title:
CORESTATES BANK, N.A., for itself
and as Agent for the Banks
By:
--------------------------------------
Title:
DRESDNER BANK AG, NEW YORK BRANCH
By:
--------------------------------------
Title:
By:
--------------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Daniel E. Hopkins
-------------------------------------
Title: Vice President
-51-
<PAGE>
Exhibit 10.3.3
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TEMPO CABLE, INC.
AND
JONES CABLE INCOME FUND 1-B/C VENTURE
DATED AS OF
JANUARY 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1. DEFINITIONS..................................................... 3
SECTION 2. SALE OF ASSETS.................................................. 9
SECTION 3. CONSIDERATION................................................... 10
3.1 Base Purchase Price................................................... 10
3.2 Adjustments to Base Purchase Price.................................... 10
3.3 Determination of Adjustments.......................................... 11
3.4 Allocation of Consideration........................................... 12
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS......................... 12
4.1 Assignment and Assumption............................................. 12
4.2 Excluded Assets....................................................... 13
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER........................ 13
5.1 Organization and Qualification........................................ 13
5.2 Authority and Validity................................................ 13
5.3 No Conflict; Required Consents........................................ 14
5.4 Assets................................................................ 14
5.5 Governmental Permits.................................................. 15
5.6 Seller Contracts...................................................... 15
5.7 Real Property......................................................... 15
5.8 Environmental Matters................................................. 16
5.9 Compliance with Legal Requirements.................................... 17
5.10 Patents, Trademarks and Copyrights.................................... 18
5.11 Financial Statements.................................................. 19
5.12 Absence of Certain Changes............................................ 19
5.13 Legal Proceedings..................................................... 19
5.14 Tax Returns; Other Reports............................................ 20
5.15 Employment Matters.................................................... 20
5.16 System Information.................................................... 21
5.15 Bonds................................................................. 21
5.18 Finders and Brokers................................................... 21
SECTION 6. BUYER'S REPRESENTATIONS......................................... 22
6.1 Organization and Qualification........................................ 22
6.2 Authority and Validity................................................ 22
6.3 No Conflicts; Required Consents....................................... 22
6.4 Finders and Brokers................................................... 23
6.5 Legal Proceedings..................................................... 23
SECTION 7. ADDITIONAL COVENANTS............................................ 23
7.1 Access to Premises and Records........................................ 23
7.2 Continuity and Maintenance of Operations; Financial Statements........ 23
7.3 Employee Matters...................................................... 25
7.4 Leased Vehicles; Other Capital Leases................................. 26
7.5 Required Consents; Estoppel Certificates.............................. 26
7.6 Title Commitments and Surveys......................................... 27
7.7 HSR Notification...................................................... 28
7.8 No Shopping........................................................... 28
7.9 Lien and Judgment Searches............................................ 28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.10 Transfer Taxes........................................................ 29
7.11 Distant Broadcast Signals............................................. 29
7.12 Guaranty.............................................................. 29
7.13 Letter to Programmers................................................. 29
7.14 Updated Schedules..................................................... 29
7.15 Use of Names and Logos................................................ 29
7.16 Subscriber Billing Services........................................... 30
7.17 Satisfaction of Conditions............................................ 30
7.18 Confidentiality and Publicity......................................... 30
7.19 Bulk Transfers........................................................ 31
7.20 Environmental Reports................................................. 31
7.21 Board Approvals....................................................... 31
7.22 Section 1031.......................................................... 31
SECTION 8. CONDITIONS PRECEDENT............................................ 31
8.1 Conditions to the Obligations of Buyer and Seller..................... 31
8.2 Conditions to the Obligations of Buyer................................ 32
8.3 Conditions to Obligations of Seller................................... 33
8.4 Waiver of Conditions.................................................. 34
SECTION 9. CLOSING......................................................... 34
9.1 The Closing; Time and Place........................................... 34
9.2 Seller's Delivery Obligations......................................... 35
9.3 Buyer's Delivery Obligations.......................................... 36
SECTION 10. TERMINATION.................................................... 36
10.1 Termination Events.................................................... 36
10.2 Effect of Termination................................................. 37
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.... 37
11.1 Survival of Representations and Warranties............................ 37
11.2 Indemnification by Seller............................................. 38
11.3 Indemnification by Buyer.............................................. 39
11.4 Third Party Claims.................................................... 39
11.5 Limitations on Indemnification........................................ 40
11.6 Limitations on Indemnification - Buyer................................ 41
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 12. MISCELLANEOUS.................................................. 41
12.1 Parties Obligations and Benefited.................................... 41
12.2 Notices.............................................................. 41
12.3 Attorneys' Fees...................................................... 42
12.4 Waiver............................................................... 42
12.5 Captions............................................................. 42
12.6 Choice of Law........................................................ 42
12.7 Terms................................................................ 42
12.8 Rights Cumulative.................................................... 42
12.9 Further Actions...................................................... 43
12.10 Time................................................................. 43
12.11 Late Payments........................................................ 43
12.12 Counterparts......................................................... 43
12.13 Entire Agreement..................................................... 43
12.14 Severability......................................................... 43
12.15 Construction......................................................... 43
12.16 Expenses............................................................. 43
12.17 Risk of Loss; Condemnation........................................... 44
</TABLE>
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
A - Bill of Sale
B - Assignment and Assumption of Contracts
C - Assignment of Leases
D - Guaranty
E - Letter to Programmers
F - FIRPTA Affidavit
G - Opinion of Seller's Counsel
H - Opinion of Buyer's Counsel
SCHEDULES
- ---------
1.9 - Owned Equipment and Vehicles
4.2 - Excluded Assets
5.3 - Required Consents
5.4 - Encumbrances to Be Discharged Prior to Closing
5.5 - Governmental Permits
5.6 - Seller Contracts
5.7 - Real Property
5.8 - Environmental Matters
5.9 - Cost of Service Filings
5.11 - Financial Statements
5.13 - Proceedings and Judgments
5.14 - Tax Matters
5.15 - Employee Matters
5.16 - The Business/System Information (including Rate Schedule)
5.17 - Bonds
</TABLE>
2
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is made as of January 30, 1998,
by and between Tempo Cable, Inc., an Oklahoma corporation ("Buyer"), and Jones
Cable Income Fund 1-B/C Venture, a Colorado general partnership ("Seller").
RECITALS
--------
A. Seller is engaged in the business of providing cable television
service to subscribers in and around the Service Area. Buyer desires to
purchase and Seller desires to sell substantially all the assets of Seller used
or useful in connection with that business.
B. Buyer intends to complete the transfer of the Assets in a transaction
to which Section 1031 of the Internal Revenue Code of 1986, as amended (the
"Code"), applies, and Seller is willing to take such steps as are reasonably
necessary on its part to enable the transactions contemplated hereby to so
qualify, including, without limitation, permitting the assignment of this
Agreement by Buyer to a qualified intermediary in order that Buyer's acquisition
of the Assets (as defined below) may be accomplished as part of a deferred
exchange pursuant to applicable Treasury Regulations; provided that if such
exchange is not accomplished, Buyer desires to purchase the Assets directly,
subject to the terms and conditions described herein.
AGREEMENT
---------
In consideration of the above recitals and the mutual agreements stated in
this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the following
capitalized terms, when used in this Agreement, will have the meanings set forth
below:
1.1 Affiliate. With respect to any Person, any other Person controlling,
---------
controlled by or under common control with such Person, with "control" for such
purpose meaning the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or voting interests, by contract or
otherwise.
1.2 Assets. All properties, privileges, rights, interests and claims,
------
real and personal, tangible and intangible, of every type and description that
are owned, leased, held, used or useful in the Business in which Seller has any
right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing Date,
3
<PAGE>
including Governmental Permits, Intangibles, Seller Contracts, Equipment, Real
Property and deposits relating to the Business that are held by third parties
for the account of Seller or for security for Seller's performance of its
obligations, but excluding any Excluded Assets.
1.3 Basic Service. The lowest tier of service offered to subscribers of
-------------
the System.
1.4 Business. The cable television business conducted by Seller on the
--------
date of this Agreement through the System, as described on SCHEDULE 5.16.
1.5 Business Day. Any day other than Saturday, Sunday or a day on which
------------
banking institutions in Denver, Colorado are required or authorized to be
closed.
1.6 Closing. The consummation of the transactions contemplated by this
-------
Agreement, as described in SECTION 9, the date of which is referred to as the
Closing Date.
1.7 Encumbrance. Any security interest, security agreement, financing
-----------
statement filed with any Governmental Authority, conditional sale or other title
retention agreement, any lease, consignment or bailment given for purposes of
security, any mortgage, lien, indenture, pledge, option, encumbrance, adverse
interest, constructive trust or other trust, claim, attachment, exception to or
defect in title or other ownership interest (including but not limited to
reservations, rights of entry, possibilities of reverter, encroachments,
easements, rights-of-way, restrictive covenants, leases and licenses) of any
kind, which constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Governmental Permit, Seller Contract
or otherwise.
1.8 Environmental Law. Any Legal Requirement relating to pollution or
-----------------
protection of public health, safety or welfare or the environment, including
those relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
1.9 Equipment. All electronic devices, trunk and distribution coaxial and
---------
optical fiber cable, amplifiers, power supplies, conduit, vaults and pedestals,
grounding and pole hardware, subscriber's devices (including converters,
encoders, transformers behind television sets and fittings), headend hardware
(including origination, earth stations, transmission and distribution system),
test equipment, vehicles and other tangible personal property owned, leased,
used or held for use in the Business, the principal items of which are described
on SCHEDULE 1.9 (and, with respect to leased Equipment, on SCHEDULE 5.6).
4
<PAGE>
1.10 Equivalent Basic Subscribers (or EBSs). An active customer for Basic
--------------------------------------
Service either in a single household, a commercial establishment or in a multi-
unit dwelling (including a hotel unit); provided, however, that the number of
customers in a multi-unit dwelling or commercial establishment that obtain
service on a "bulk-rate" basis will be determined by dividing the gross bulk-
rate billings for Basic Service and Expanded Basic Service (but not billings
from a la carte tiers or premium services, installation or other non-recurring
charges, converter rental or from any outlet or connection other than the first
outlet or connection or from any pass-through charge for sales taxes, line-
itemized franchise fees, fees charged by the FCC and the like), attributable to
such multi-unit dwelling or commercial establishment during the most recent
billing period ended prior to the date of calculation (but excluding billings in
excess of a single month's charge) by the rate charged at the time of
determination to individual households for the highest level of Basic Service
and Expanded Basic Service offered by the System, such rate not to be less than
the rate for the System set forth on SCHEDULE 5.16 (excluding a la carte tiers
or premium services, installation or other non-recurring charges, converter
rental, pass-through charges for sales taxes, line-itemized franchise fees
charged by the FCC and the like). For purposes of this definition, an "active
customer" will mean any person, commercial establishment or multi-unit dwelling
at any given time that is paying for and receiving Basic Service from the System
who has an account that is not more than 60 days past due (except for past due
amounts of $5 or less, provided such account is otherwise current). For
purposes of this definition, an "active customer" does not include any person,
commercial establishment or multi-unit dwelling that as of the date of
calculation has not paid in full the charges for at least one month of the
services ordered or any subscriber whose service is pending disconnection for
any reason. For purposes of this definition, the number of days past due of a
customer account will be determined from the first day of the period for which
the applicable billing relates.
1.11 Expanded Basic Service. Any video programming provided over a cable
----------------------
television system, regardless of service tier other than (a) Basic Service, (b)
any new product tier and (c) video programming offered on a per channel or per
program basis.
1.12 GAAP. Generally accepted accounting principles as in effect from time
----
to time in the United States of America.
1.13 Governmental Authority. The United States of America, any state,
----------------------
commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
county, municipality, province, parish or other instrumentality of any of the
foregoing.
1.14 Governmental Permits. All franchises, approvals, authorizations,
--------------------
permits, licenses, easements, registrations, qualifications, leases, variances
and similar
5
<PAGE>
rights obtained with respect to the Business or Assets from any Governmental
Authority, including those set forth on SCHEDULE 5.5.
1.15 Hazardous Substances. Any pollutant, contaminant, chemical,
--------------------
industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a hazard or potential hazard to the
Real Property or to Persons in or about the Real Property or cause the Real
Property to be in violation of any laws, regulations or ordinances of federal,
state or applicable local governments, (b) asbestos or any asbestos-containing
material of any kind or character, (c) polychlorinated biphenyls ("PCBs"), as
regulated by the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., (d)
-- ----
any materials or substances designated as "hazardous substances" pursuant to the
Clean Water Act, 33 U.S.C. (S) 1251 et seq., (e) "economic poison," as defined
-- ----
in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 135 et
--
seq., (f) "chemical substance," "new chemical substance" or "hazardous chemical
- ---
substance or mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
(S) 2601 et seq., (g) "hazardous substances" pursuant to the Comprehensive
-- ----
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
--
seq. and (h) "hazardous waste" pursuant to the Resource Conservation and
- ----
Recovery Act, 42 U.S.C. (S) 6901 et seq.
-------
1.16 Intangibles. All intangible assets, including subscriber lists,
-----------
accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Business.
1.17 Knowledge. The actual knowledge of a particular matter of one or more
---------
of the executive officers of a Person or the general manager or one or more of
the managers of such Person's System.
1.18 Legal Requirement. Applicable common law and any statute, ordinance,
-----------------
code, or other law, rule, regulation, order, technical or other written standard
or procedure enacted, adopted or applied by any Governmental Authority,
including judicial decisions applying common law or interpreting any other Legal
Requirement.
1.19 Losses. Any claims, losses, liabilities, damages, penalties, costs
------
and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and the cost to any Person making a claim or seeking
indemnification under this Agreement with respect to funds expended by such
Person by reason of the occurrence of any event with respect to which
indemnification is sought.
1.20 Pay TV. Premium programming services selected by and sold to
------
subscribers on a per channel or per program basis.
6
<PAGE>
1.21 Permitted Encumbrances. The following Encumbrances: (a) liens
----------------------
securing Taxes, assessments and governmental charges not yet due and payable,
(b) any zoning law or ordinance or any similar Legal Requirement, (c) any right
reserved to any Governmental Authority to regulate the affected property and (d)
as to Real Property interests, any Encumbrance reflected in the public records
and that does not individually or in the aggregate interfere with the right or
ability to own, use or operate the Real Property or to convey good, marketable
and indefeasible fee simple title to such Real Property, provided that
"Permitted Encumbrances" will not include any Encumbrance which could prevent or
inhibit in any way the conduct of the business of the affected System and
provided further that classification of any Encumbrance as a "Permitted
Encumbrance" will not affect any liability Seller may have for such Encumbrance,
including pursuant to any indemnity obligation under this Agreement.
1.22 Person. Any natural person, corporation, partnership, trust,
------
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.23 Real Property. All assets held by Seller related to the Business
-------------
consisting of realty, including appurtenances, improvements and fixtures located
on such realty, and any other interests in real property, including fee
interests, leasehold interests and easements, wire crossing permits, rights of
entry (except agreements related to multiple dwelling units) described on
SCHEDULE 5.7.
1.24 Required Consents. All franchises, licenses, authorizations,
-----------------
approvals and consents required under Governmental Permits, Seller Contracts or
otherwise for (a) Seller to transfer the Assets and the Business to Buyer, (b)
Buyer to conduct the Business and to own, lease, use and operate the Assets at
the places and in the manner in which the Business is conducted as of the date
of this Agreement and on the Closing Date (assuming that the Schoolcraft
Transaction and the Southwest Michigan Transaction (both as defined below) close
on the Closing Date) and (c) Buyer to assume and perform the Governmental
Permits, Seller Contracts and the other Assumed Liabilities.
1.25 Schoolcraft Purchase Agreement. That certain Asset Purchase Agreement
------------------------------
of even date herewith between Seller and Television Cable Service, Inc., a Texas
corporation ("TCS"), by which TCS has agreed to purchase from Seller the assets
which comprise the Schoolcraft System.
1.26 Schoolcraft System. The cable television system owned by Seller
------------------
serving the County of La Grange, Indiana, the Village of Schoolcraft and the
Townships of Schoolcraft and Flowerfield, all in Michigan.
7
<PAGE>
1.27 Schoolcraft Transaction. The transaction contemplated by the
-----------------------
Schoolcraft Purchase Agreement.
1.28 Seasonal Subscribers. Customers of the System who, between the date
--------------------
hereof and Closing, have participated in, or will have participated in, Seller's
seasonal subscriber program by paying $5 per month during the months that such
subscribers were out of town, and by resuming service, or agreeing to resume
service, upon their return to town (which service will resume without a
reconnection charge).
1.29 Seller Contracts. All contracts and agreements, other than
----------------
Governmental Permits and those relating to Real Property, pertaining to the
ownership, operation and maintenance of the Assets or the Business or used or
held for use in the Business, as described on SCHEDULE 5.6 or, in the case of
contracts and agreements relating to Real Property, on SCHEDULE 5.7.
1.30 Service Area. The area in which Seller operates the Business,
------------
specifically in and around the Village of Vicksburg, Michigan.
1.31 Southwest Michigan Purchase Agreement. That certain Asset Purchase
-------------------------------------
Agreement of even date herewith between Seller and TCI Cablevision of Texas,
Inc., a Texas corporation ("TCI"), by which TCI has agreed to purchase from
Seller the assets which comprise the Southwest Michigan System.
1.32 Southwest Michigan System. The cable television system owned by
-------------------------
Seller serving the Townships of Brady, Calvin, Coloma, Constantine, Fabius,
Hagar, Hartford, La Grange, Lockport, Mendon, Mottville, Newburg, Nottawa, Park,
Pavilian, Penn, Pipestone, Pokagon, Porter, Prairie Ronde, Sherman, Silver
Creek, Watervliet, Wayne and White Pigeon, the Villages of Centreville,
Constantine, Vandalia, and White Pigeon, the Cities of Coloma, Dowagiac, Three
Rivers, and Watervliet, all in the State of Michigan, and the County of Elkhart,
Indiana.
1.33 Southwest Michigan Transaction. The transaction contemplated by the
------------------------------
Southwest Michigan Purchase Agreement.
1.34 System. The cable television reception and distribution system
------
operated in the conduct of the Business, consisting of subscriber drops and
associated electronic and other equipment, and which is, or is capable of being
operated when connected with the headend of Seller in Three Rivers, Michigan
which is part of the Southwest Michigan System.
1.35 Taxes. All levies and assessments of any kind or nature imposed by
-----
any Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together
8
<PAGE>
with any interest thereon and any penalties, additions to tax or additional
amounts applicable thereto.
1.36 Other Definitions. The following terms are defined in the Sections
-----------------
indicated:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Action 11.4
Antitrust Division 7.7
Approval Deadline 10.1.4
Assumed Liabilities 4.1
Base Purchase Price 3.1(b)
Buford Transaction 8.2.8
Buyer Damages 11.5
Closing Date 1.8
Code 5.15.2
Cost of Service Election 5.9.4
Employee Benefit Plans 5.15.2
ERISA 5.15.1
Excluded Assets 4.2
FCC 1.12
Final Adjustments Report 3.3.2
Financial Statements 5.11
FTC 7.7
HSR Act 7.7
Indemnified Party 11.4
Indemnifying Party 11.4
Intercable 5.2
1992 Cable Act 5.9.4
Preliminary Adjustments Report 3.3.1
Rate Regulation Documents 5.9.4
Seller Damages 11.6
Survival Period 11.1
Taking 12.17.2
Transaction Documents 5.2
</TABLE>
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this Agreement, at the
Closing, Seller will sell to Buyer, and Buyer will purchase from Seller, all of
Seller's rights, titles and interests in, to and under the Assets. Except as
otherwise specifically provided in this Agreement, all the Assets are intended
to be transferred to Buyer, whether or not described in the Schedules.
9
<PAGE>
SECTION 3. CONSIDERATION.
3.1 Base Purchase Price. Buyer will pay to Seller total cash
-------------------
consideration of $1,300,000 (the "Base Purchase Price"), subject to adjustment
as provided in SECTIONS 3.2 and 3.3. Such consideration will be paid at Closing
by wire transfer of immediately available funds pursuant to wire instructions
delivered by Seller to Buyer no later than two Business Days prior to the
Closing Date.
3.2 Adjustments to Base Purchase Price. The Base Purchase Price will be
----------------------------------
adjusted as follows:
3.2.1 If (a) the number of EBS's of the Business as of the Closing
Date, combined with the number of EBS's of the Schoolcraft System and the
Southwest Michigan System, is fewer than 17,400 and (b) the number of EBS's of
---
the Business as of the Closing Date is fewer than 708, then the Base Purchase
Price will be reduced by an amount equal to $1,836 multiplied by the positive
difference between (x) 708 and (y) the number of EBS's of the Business as of the
Closing Date; provided, however, that in calculating the number of EBS's, the
-------- -------
parties will consider 10 Seasonal Subscribers to be EBS's, and will not count
any additional Seasonal Subscribers as EBS's. In addition, if a reduction is
made in the Base Purchase Price as described above, and as of the Closing Date,
the Southwest Michigan System has more than 15,180 EBS's and/or the Schoolcraft
System has more than 1,512 EBS's, the Base Purchase Price, as reduced above,
shall be increased by (A) an amount equal to $1,802 multiplied by the positive
difference between (i) the number of EBS's of the Southwest Michigan System as
of the Closing Date and (ii) 15,180 and (B) an amount equal to $1,719 multiplied
by the positive difference between (X) the number of EBS's of the Schoolcraft
System as of the Closing Date and (Y) 1512; provided, however, that no such
increase in the Base Purchase Price shall cause the aggregate of (I) the Base
Purchase Price so adjusted, (II) the purchase price for the Southwest Michigan
System as adjusted pursuant to Section 3.2.1 of the Southwest Michigan Purchase
Agreement and (III) the purchase price for the Schoolcraft System, as adjusted
pursuant to Section 3.2.1 of the Schoolcraft Purchase Agreement, to exceed
$31,250,000.
3.2.2 Adjustments on a pro rata basis as of the Closing Date will be
made for all prepaid expenses (but only to the extent the full benefit thereof
will be realizable by Buyer within 12 months after the Closing Date), accrued
expenses (including real and personal property Taxes and the economic value of
all accrued vacation time permitted by Buyer's policies to be taken after the
Closing Time by Seller's System employees hired by Buyer), prepaid income,
subscriber prepayments and accounts receivable related to the Business, all as
determined in accordance with GAAP consistently applied, and to reflect the
principle that all expenses and income attributable to the Business for the
period prior to the Closing Date are for the account of Seller, and all expenses
and income attributable to the Business for the period on and after the Closing
Date are for the account of Buyer. Seller will receive no credit for
10
<PAGE>
any accounts receivable (a) resulting from cable service sales any portion of
which is 60 days or more past due as of the Closing Date, (b) from subscribers
whose accounts are inactive or whose service is pending disconnection for any
reason as of the Closing Date or (c) resulting from advertising sales any
portion of which is 120 days or more past due as of the Closing Date.
3.2.3 Buyer's account will be credited for the amount of all advance
payments to, or funds of third parties on deposit with, Seller as of the Closing
Date, relating to the Business, including advance payments and deposits by
subscribers served by the Business for converters, encoders, decoders, cable
television service and related sales, and the liability therefor will be assumed
by Buyer.
3.3 Determination of Adjustments. Preliminary and final adjustments to
----------------------------
the Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at least 10
Business Days prior to the expected Closing Date, Seller will deliver to Buyer a
report (the "Preliminary Adjustments Report"), certified as to completeness and
accuracy by Seller, showing in detail the preliminary determination of the
adjustments referred to in SECTION 3.2, which are calculated as of the Closing
Date (or as of any other date agreed by the parties) and any documents
substantiating the adjustments proposed in the Preliminary Adjustments Report.
The Preliminary Adjustments Report will include a complete list of subscribers,
a detailed calculation of the number of Equivalent Basic Subscribers and a
schedule setting forth advance payments made to or by Seller and deposits made
by Seller, as well as accounts receivable information relating to the Business
(showing sums due and their respective aging as of the Closing Date). Seller
also will furnish to Buyer its billing report for the most current period as of
the Closing Date. Following receipt of such Preliminary Adjustments Report and
supporting information, Buyer will have five Business Days to review such
Preliminary Adjustments Report and supporting information and to notify Seller
of any disagreements with Seller's estimates. If Buyer provides a notice of
disagreement with Seller's estimates of the adjustments referred to in SECTION
3.2 within such five Business Day period, Buyer and Seller will negotiate in
good faith to resolve any such dispute and to reach an agreement prior to the
Closing Date on such estimated adjustments as of the Closing Date. The basis
for determining the Base Purchase Price to be paid at Closing will be (a) the
estimate so agreed upon by Buyer and Seller or (b) if no notice of disagreement
is provided, or if such notice is provided but the parties do not reach such an
agreement prior to the Closing Date, the estimate of such adjustments set forth
in the Preliminary Adjustments Report.
3.3.2 Within 90 days after the Closing, Seller will deliver to Buyer
a report (the "Final Adjustments Report"), similarly certified by Seller,
showing in detail the final determination of all adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together
11
<PAGE>
with any documents substantiating the adjustments proposed in the Final
Adjustments Report. Buyer will provide Seller with reasonable access to all
records which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments Report,
Buyer will give Seller written notice of Buyer's objections, if any, to the
Final Adjustments Report. If Buyer makes any such objection, the parties will
agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Any disputed amounts will be determined within 120 days after the
Closing Date by the accounting firm of Price Waterhouse, whose determination
will be conclusive. Seller and Buyer will bear equally the fees and expenses
payable to such firm in connection with such determination. The payment
required after such determination will be made by the responsible party by wire
transfer of immediately available funds to the other party within three Business
Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by Buyer under
---------------------------
this Agreement will be allocated among the Assets as set forth in a schedule to
be prepared not later than 180 days after the Closing Date (or April 1 of the
year following the Closing Date if earlier) by an independent appraiser with
significant experience in the cable television industry. Such appraiser will be
selected by the mutual agreement of Buyer and Seller within 30 days after the
date of this Agreement, and the fees of such appraiser will be shared equally by
Buyer and Seller. Buyer and Seller agree to be bound by the allocation and will
not take any position inconsistent with such allocation and will file all
returns and reports with respect to the transactions contemplated by this
Agreement, including all federal, state and local Tax returns, on the basis of
such allocation.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. Seller will assign, and Buyer will assume
-------------------------
and after the Closing will pay, discharge and perform the following (the
"Assumed Liabilities"): (a) Seller's obligations to subscribers of the Business
for (i) subscriber deposits held by Seller as of the Closing Date and which are
refundable, in the amount for which Buyer received credit under SECTION 3.2,
(ii) subscriber advance payments held by Seller as of the Closing Date for
services to be rendered by a System after the Closing Date, in the amount for
which Buyer received credit under SECTION 3.2 and (iii) the delivery of cable
television service to subscribers of the Business after the Closing Date; and
(b) obligations accruing and relating to periods after the Closing Date under
Governmental Permits listed on SCHEDULE 5.5 (to the extent that such
Governmental Permits are transferable) and Seller Contracts. Buyer will not
assume or have any responsibility for any liabilities or obligations of Seller
other than the
12
<PAGE>
Assumed Liabilities. In no event will Buyer assume or have any responsibility
for any liabilities or obligations associated with the Excluded Assets.
4.2 Excluded Assets. The Excluded Assets, which will be retained by
---------------
Seller, will consist of the following: (a) programming contracts,
retransmission consent agreements and pole attachment agreements (except for
those set forth on SCHEDULE 5.6); (b) Employee Benefit Plans; (c) insurance
policies and rights and claims thereunder (except as otherwise provided in
SECTION 12.17); (d) bonds, letters of credit, surety instruments and other
similar items; (e) cash and cash equivalents and notes receivable; (f) Seller's
trademarks, trade names, service marks, service names, logos and similar
proprietary rights (subject to Buyer's rights under SECTION 7.5); (g) Seller's
rights under any agreement governing or evidencing an obligation of Seller for
borrowed money; (h) Seller Contracts for subscriber billing and equipment; (i)
Seller's rights under any contract, license, authorization, agreement or
commitment other than those creating or evidencing Assumed Liabilities; and (j)
the assets described on SCHEDULE 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer, as of the date of this Agreement
and as of the Closing, as follows:
5.1 Organization and Qualification. Seller is a general partnership duly
------------------------------
organized and validly existing under the laws of the State of Colorado and has
all requisite partnership power and authority to own, lease and use the Assets
owned, leased or used by it and to conduct the Business as it is currently
conducted. Seller is duly qualified to do business in the States of Michigan
and Indiana, and under the laws of each jurisdiction in which the ownership,
leasing or use of the Assets owned, leased or used by it or the nature of
Seller's activities makes such qualification necessary, except in any such
jurisdiction where the failure to be so qualified and in good standing would not
have a material adverse effect on the Business, the Assets or the Systems or on
the ability of Seller to perform its obligations under this Agreement. The
general partners of Seller are Jones Cable Income Fund 1-B, Ltd. and Jones Cable
Income Fund 1-C, Ltd.
5.2 Authority and Validity. Seller has all requisite partnership power
----------------------
and authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and all other
documents and instruments to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") to which Seller is a party. Subject to approval by the Board of
Directors of Jones Intercable, Inc. ("Intercable"), the sole general partner of
each of the general partners of Seller, the execution and delivery by Seller of,
the performance by Seller of its obligations under, and the consummation by
Seller of the transactions contemplated by, this
13
<PAGE>
Agreement and the Transaction Documents to which Seller is a party have been
duly and validly authorized by all necessary action by or on behalf of Seller.
This Agreement has been, and when executed and delivered by Seller the
Transaction Documents will be, duly and validly executed and delivered by Seller
and the valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the enforcement of creditors' rights generally
or by principles governing the availability of equitable remedies.
5.3 No Conflict; Required Consents. Except for the Required Consents, all
------------------------------
of which are listed on SCHEDULE 5.3, the execution and delivery by Seller, the
performance of Seller under, and the consummation of the transactions
contemplated by, this Agreement and the Transaction Documents to which Seller is
a party do not and will not: (a) violate any provision of the Partnership
Agreement of Seller; (b) violate any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with any Governmental Authority or other Person; or (d)
(i) violate or result in a breach of or default under (without regard to
requirements of notice, lapse of time, or elections of any Person, or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under any Seller Contract or any other
instrument evidencing any of the Assets or by which Seller or any of its assets
is bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications, and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on any System, the Business or Seller, the validity, binding
effect or enforceability of this Agreement or on the ability of Seller to
perform its obligations under this Agreement or the Transaction Documents to
which Seller is a party.
5.4 Assets. Seller has exclusive, good and marketable title to (or, in
------
the case of Assets that are leased, valid leasehold interests in) the Assets
(other than Real Property, as to which the representations and warranties in
SECTION 5.7 apply). The Assets are free and clear of all Encumbrances, except
(a) Permitted Encumbrances and (b) Encumbrances described on SCHEDULE 5.4, all
of which will be terminated, released or, in the case of rights of refusal
listed on SCHEDULE 5.4, waived, as appropriate, at or prior to the Closing.
Except as described on SCHEDULE 5.6, none of the Equipment is leased by Seller
from any other Person. All the Equipment is in good operating condition and
repair (ordinary wear and tear excepted). Except for items included in the
Excluded Assets and the assets which comprise the Southwest Michigan System and
the Schoolcraft System, the Assets constitute all the assets necessary to permit
Buyer to (i) conduct the Business and to operate the System substantially as it
is being conducted and operated on the date of this Agreement and in compliance
in all material respects
14
<PAGE>
with all Legal Requirements, Governmental Permits and Seller Contracts and (ii)
perform all the Assumed Liabilities. Buyer acknowledges that the System's lack
of a headend and its inability to be currently operated unless connected with
the headend of Seller in Three Rivers, Michigan, which is part of the Southwest
Michigan System, will not be deemed a breach of any representation or warranty
of Seller under this Agreement.
5.5 Governmental Permits. All Governmental Permits are listed on SCHEDULE
--------------------
5.5. Complete and correct copies of all Governmental Permits have been
delivered by Seller to Buyer. Each Governmental Permit is in full force and
effect and Seller is not and, to Seller's Knowledge, the other party thereto is
not, in breach or default of any material terms or conditions thereunder, and is
valid under all applicable Legal Requirements according to its terms. There is
no legal action, governmental proceeding or investigation, pending or, to
Seller's Knowledge threatened, to terminate, suspend or modify any Governmental
Permit and Seller is in compliance with the material terms and conditions of all
the Governmental Permits and with other material applicable requirements of all
Governmental Authorities (including the FCC and the Register of Copyrights)
relating to the Governmental Permits, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
As of the date of this Agreement, to Seller's Knowledge, no third party has been
granted or has applied for a cable television franchise or is providing or
intending to provide cable television services in any of the communities or
unincorporated areas currently served by the Business.
5.6 Seller Contracts. All Seller Contracts (other than those constituting
----------------
Excluded Assets) are described on SCHEDULE 5.6 or 5.7. Complete and correct
copies of all Seller Contracts have been delivered by Seller to Buyer. Each
Seller Contract is in full force and effect and constitutes the valid, legal,
binding and enforceable obligation of Seller, and Seller is not and to Seller's
Knowledge each other party thereto is not, in breach or default of any material
terms or conditions thereunder.
5.7 Real Property.
-------------
5.7.1 All the Assets consisting of Real Property interests are
described on SCHEDULE 5.7. Except as otherwise disclosed on SCHEDULE 5.7,
Seller holds good, marketable and indefeasible fee simple title to the Real
Property shown as being owned by Seller on SCHEDULE 5.7 and the valid and
enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Seller has valid and enforceable leasehold interests in
Real Property shown as being leased by Seller on SCHEDULE 5.7 and, with respect
to other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 5.7, subject only
to Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in
15
<PAGE>
good condition and repair and are suitable for the purposes used. The current
use and occupancy of the Real Property do not constitute nonconforming uses
under any applicable zoning Legal Requirements.
5.7.2 The documents delivered by Seller to Buyer as evidence of each
Seller Contract that is a lease of Real Property constitute the entire agreement
with the landlord in question. There are no leases or other agreements, oral or
written, granting to any Person other than Seller the right to occupy or use any
Real Property, except as described on SCHEDULE 5.7. All easements, rights-of-
way and other rights appurtenant to, or which are necessary for Seller's current
use of, any Real Property are valid and in full force and effect, and Seller has
not received any notice with respect to the termination, breach or impairment of
any of those rights. Each parcel of Real Property, any improvements constructed
thereon and their current use (a) has access to and over all public streets, or
private streets for which Seller has a valid right of ingress and egress, (b)
conforms in its current use and occupancy to all zoning requirements without
reliance upon a variance issued by a Governmental Authority or a classification
of the parcel in question as a nonconforming use, and (c) conforms in all
material respects in its use to all restrictive covenants, if any, or other
Encumbrances affecting all or part of such parcel.
5.8 Environmental Matters.
---------------------
5.8.1 The Real Property currently complies in all material respects
with and, to Seller's Knowledge, has previously been operated in compliance in
all material respects with, all Environmental Laws. Seller has not directly or
indirectly (a) generated, released, stored, used, treated, handled, discharged
or disposed of any Hazardous Substances at, on, under, in or about, or in any
other manner affecting, any Real Property, (b) transported any Hazardous
Substances to or from any Real Property or (c) undertaken or caused to be
undertaken any other activities relating to the Real Property which could
reasonably give rise to any liability under any Environmental Law, and, to
Seller's Knowledge, no other present or previous owner, tenant, occupant or user
of any Real Property or any other Person has committed or suffered any of the
foregoing. To Seller's Knowledge, (i) no release of Hazardous Substances
outside the Real Property has entered or threatens to enter any Real Property,
nor (ii) is there any pending or threatened claim based on Environmental Laws
which arises from any condition of the land surrounding any Real Property. No
litigation based on Environmental Laws which relates to any Real Property or any
operations on conditions on it (A) has been asserted or conducted in the past or
is currently pending against or with respect to Seller or, to Seller's
Knowledge, any other Person, or (B) to Seller's Knowledge is threatened or
contemplated.
5.8.2 To Seller's Knowledge, other than as described on SCHEDULE 5.8,
(a) no aboveground or underground storage tanks are currently or have been
located on any Real Property, (b) no Real Property has been used at any time as
a gasoline service
16
<PAGE>
station or any other facility for storing, pumping, dispensing or producing
gasoline or any other petroleum products or wastes and (c) no building or other
structure on any Real Property contains asbestos-containing material.
5.8.3 Seller has provided Buyer with complete and correct copies of
(a) all studies, reports, surveys or other materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(b) all notices or other materials in Seller's possession or, to Seller's
Knowledge to which it has access, that were received from any Governmental
Authority having the power to administer or enforce any Environmental Laws
relating to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (c) all materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to any litigation or
allegation by any Person concerning any Environmental Law.
5.9 Compliance with Legal Requirements.
----------------------------------
5.9.1 The ownership, leasing and use of the Assets as they are
currently owned, leased and used and the conduct of the Business and the
operation of the System as it is currently conducted and operated do not violate
or infringe, in any material respect, any Legal Requirements currently in effect
(other than the Legal Requirements described in SECTION 5.9.4, as to which the
provisions of SECTION 5.9.4 will apply). Seller has received no notice of any
violation by Seller or the Business of any Legal Requirement applicable to the
Business or the System as currently conducted, and to Seller's Knowledge, there
is no basis for the allegation of any such a violation.
5.9.2 A valid request for renewal has been duly and timely filed
under Section 626 of the Cable Communications Policy Act of 1984 with the proper
Governmental Authority with respect to applicable Governmental Permits with
franchising authorities that have expired prior to, or will expire within 36
months after, the date of this Agreement.
5.9.3 Seller has complied, and the Business is in compliance, in all
material respects, with the specifications set forth in Part 76, Subpart K of
the rules and regulations of the FCC, Section 111 of the U.S. Copyright Act of
1976 and the applicable rules and regulations thereunder and the applicable
rules and regulations of the U.S. Copyright Office, the Register of Copyrights,
the Copyright Royalty Tribunal and the Communications Act of 1934, including
provisions of any thereof pertaining to signal leakage, to utility pole make
ready and to grounding and bonding of cable television systems (in each case as
the same is currently in effect), and all other applicable Legal Requirements
relating to the construction, maintenance, ownership and operation of the
Assets, the System and the Business.
17
<PAGE>
5.9.4 Notwithstanding the foregoing, to Seller's Knowledge, the
System is in compliance in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the FCC
rules and regulations promulgated thereunder (the "1992 Cable Act") as such
Legal Requirements relate to the operation of the Business; provided, however,
that Seller does not hereby make any representation about rates charged to
subscribers, other than the representation regarding the rates charged to
subscribers set forth below. Seller has complied in all material respects with
the must carry and retransmission consent provisions of the 1992 Cable Act.
Seller has used reasonable good faith efforts to establish rates charged to
subscribers, effective since September 1, 1993, that are or were allowable under
the 1992 Cable Act and any authoritative interpretation thereof now or then in
effect, whether or not such rates are or were subject to regulation at that date
by any Governmental Authority, including any local franchising authority and/or
the FCC, unless such rates were not subject to regulation pursuant to a specific
exemption from rate regulation contained in the 1992 Cable Act other than the
failure of any franchising authority to have been certified to regulate rates.
Notwithstanding the foregoing, Seller makes no representation or warranty that
the rates charged to subscribers (a) are allowable under any rules and
regulations of the FCC or any authoritative interpretation thereof, or (b) would
be allowable under any rules and regulations of the FCC or any authoritative
interpretation thereof promulgated after the date of the Closing. Seller has
delivered to Buyer complete and correct copies of all FCC Forms 393, 1200, 1205,
1210, 1215, 1220, 1225, 1235 and 1240 filed with respect to the System and
copies of all other FCC Forms filed by Seller and of all correspondence with any
Governmental Authority relating to rate regulation generally or specific rates
charged to subscribers with respect to the System, including copies of any
complaints filed with the FCC with respect to any rates charged to subscribers
of the System, and any other documentation supporting an exemption from the rate
regulation provisions of the 1992 Cable Act claimed by Seller with respect to
the System (collectively, "Rate Regulation Documents"). As of the date of this
Agreement, Seller has received no notice from any Governmental Authority with
respect to an intention to enforce customer service standards pursuant to the
1992 Cable Act and Seller has not agreed with any Governmental Authority to
establish customer service standards that exceed the customer service standards
promulgated pursuant to the 1992 Cable Act. In addition, Seller has also
delivered to Buyer documentation for the System in which the franchising
authority has not certified to regulate rates as of the date of this Agreement
showing a determination of allowable rates using a benchmark methodology.
Except as described in SCHEDULE 5.9, Seller has not made any election with
respect to any cost of service proceeding conducted in accordance with Part
76.922 of Title 47 of the Code of Federal Regulations or any similar proceeding
(a "Cost of Service Election") with respect to the System.
5.10 Patents, Trademarks and Copyrights. Seller has timely and accurately
----------------------------------
made all requisite filings and payments with the Register of Copyrights with
respect to the Business. Seller has delivered to Buyer complete and correct
copies of all current
18
<PAGE>
reports and filings, and all reports and filings for the past three years, made
or filed pursuant to copyright rules and regulations with respect to the
Business. Seller does not possess any patent, patent right, trademark or
copyright material to the operation of the Business and Seller is not a party to
any license or royalty agreement with respect to any patent, trademark or
copyright except for licenses respecting program material and obligations under
the Copyright Act of 1976 applicable to cable television systems generally. The
Business and the System have been operated in such a manner so as not to violate
or infringe upon the rights of, or give rise to any rightful claim of any Person
for copyright, trademark, service mark, patent, license, trade secret
infringement or the like.
5.11 Financial Statements. A correct copy of the combined unaudited
--------------------
financial statements for the System and the Schoolcraft System and the Southwest
Michigan System as of September 30, 1997, including an unaudited income
statement and balance sheet which fairly present the financial condition of the
System, is attached as SCHEDULE 5.11 (collectively, the "Financial Statements").
At the date of the Financial Statements, Seller had no liability or obligation,
whether accrued, absolute, fixed or contingent (including liabilities for Taxes
or unusual forward or long-term commitments), required by GAAP to be reflected
or reserved against therein that were not fully reflected or reserved against on
the balance sheet included in the Financial Statements, other than liabilities
included in current liabilities, and none of which was or would be material to
the Business.
5.12 Absence of Certain Changes. Since September 30, 1997 (a) Seller has
--------------------------
not incurred any obligation or liability (contingent or otherwise), except
normal trade or business obligations incurred in the ordinary course of
business, the performance of which would be reasonably likely, individually or
in the aggregate, to have a material adverse effect on the financial condition
or results of operations of the Business, (b) there has been no material adverse
change (except any change affecting the United States cable industry as a whole,
including any change arising from (i) legislation, litigation, rulemaking or
regulation or (ii) competition caused by or arising from other multiple channel
distribution services) in the business, condition (financial or otherwise) or
liabilities of the Business, and (c) the Business has been conducted only in the
ordinary course of business.
5.13 Legal Proceedings. Except as set forth in SCHEDULE 5.13: (a) there
-----------------
is no claim, investigation or litigation pending or, to Seller's Knowledge,
threatened, by or before any Governmental Authority or private arbitration
tribunal against Seller which, if adversely determined, would materially
adversely affect the financial condition or operations of the Business, the
System, the Assets or the ability of Seller to perform its obligations under
this Agreement, or which, if adversely determined, would result in the
modification, revocation, termination, suspension or other limitation of any of
the Governmental Permits, Seller Contracts or leases or other documents
evidencing the Real Property; and (b) there is not in existence any judgment
requiring Seller to take
19
<PAGE>
any action of any kind with respect to the Assets or the operation of the
System, or to which Seller (with respect to the System), the System or the
Assets are subject or by which they are bound or affected.
5.14 Tax Returns; Other Reports. Seller has duly and timely filed in
--------------------------
correct form all federal, state and local Tax returns and all other Tax reports
required to be filed by Seller and has timely paid all Taxes which have become
due and payable, whether or not shown on any such report or return, the failure
of which to be filed or paid could adversely affect the Assets or result in the
imposition of an Encumbrance upon the Assets, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as specifically identified on SCHEDULE 5.14, Seller has received no
notice of, nor does Seller have any Knowledge of, any deficiency, assessment or
audit, or proposed deficiency, assessment or audit from any taxing Governmental
Authority which could affect or result in the imposition of an Encumbrance upon
the Assets.
5.15 Employment Matters.
------------------
5.15.1 SCHEDULE 5.15 contains a complete and correct list of names
and positions of all employees of Seller engaged in the Business and the
business of the Southwest Michigan System and the Schoolcraft System as of the
date set forth in such SCHEDULE. Seller has no employment agreements, either
written or oral, with any employee of the Business. Seller has complied in all
material respects with applicable Legal Requirements relating to the employment
of labor, including WARN, the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), continuation coverage requirements with respect to group
health plans, and those relating to wages, hours, collective bargaining,
unemployment insurance, worker's compensation, equal employment opportunity, age
and disability discrimination, immigration control and the payment and
withholding of Taxes.
5.15.2 Each "employee benefit plan" or "multiemployer plan" (as
those terms are defined in ERISA) with respect to which Seller or any ERISA
Affiliate (as defined in ERISA) of Seller has any liability is set forth on
SCHEDULE 5.15 (the "Employee Benefit Plans"). Neither Seller nor its ERISA
Affiliates nor any Employee Benefit Plan is in material violation of any
provision of ERISA. No "reportable event," as defined in Section 4043 of ERISA,
has occurred and is continuing with respect to any Employee Benefit Plan. No
"prohibited transaction," within the meaning of Section 406 of ERISA, has
occurred with respect to any such Employee Benefit Plan, and no "accumulated
funding deficiency" or "withdrawal liability" (both as defined in Section 302 of
ERISA) exists with respect to any such Employee Benefit Plan. After the
Closing, Buyer will not be required, under ERISA, the Internal Revenue Code of
1986, as amended (the "Code") or any collective bargaining agreement, to
establish, maintain or continue any Employee Benefit Plan currently maintained
by Seller or any of its ERISA Affiliates.
20
<PAGE>
5.15.3 Seller is not a party to any collective bargaining
agreements and Seller has not recognized or agreed to recognize and has no duty
to bargain with any labor organization or collective bargaining unit. There are
not pending any unfair labor practice charges against Seller, any demand for
recognition or any other request or demand from a labor organization for
representative status with respect to any Person employed by Seller. To
Seller's Knowledge, its employees are not engaged in organizing activity with
respect to any labor organization. Seller has no employment agreement, either
written or oral, express or implied, that would require Buyer to employ any
Person after the Closing Date.
5.16 System Information. SCHEDULE 5.16 sets forth a materially true and
------------------
accurate description of the following information relating to the Business as of
the most recent monthly report generated by Seller in the ordinary course of
business containing the information required to prepare such SCHEDULE (provided
that such date is no earlier than two months prior to the date of this
Agreement):
(a) the approximate number of miles of plant included in the Assets;
(b) the number of subscribers and EBS's served by the System;
(c) the approximate number of single family homes and residential
dwelling units passed by the System;
(d) a description of basic and optional or tier services available
from the System, the rates charged by Seller for each and the number of
subscribers and subscriber equivalents receiving each optional or tier
service;
(e) the stations and signals carried by the System and the channel
position of each such signal and station; and
(f) the cities, towns, villages, townships, boroughs and counties
served by the System.
5.17 Bonds. Except as set forth on SCHEDULE 5.17, as of the date of this
-----
Agreement, there are no franchise, construction, fidelity, performance, or other
bonds or letters of credit posted by Seller in connection with its operation or
ownership of the System or Assets.
5.18 Finders and Brokers. Seller has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer could be liable.
21
<PAGE>
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller, as of the date of this Agreement and as of the Closing, as
follows:
6.1 Organization and Qualification. Buyer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Oklahoma and has all requisite corporate power and authority to own, lease and
use the assets owned, leased or used by it and to conduct its business as it is
currently conducted. Buyer is duly qualified to do business and is in good
standing under the laws of Michigan, and of each jurisdiction in which the
ownership, leasing or use of the assets owned, leased or used by it or the
nature of Buyer's activities makes such qualification necessary, except in any
such jurisdiction where the failure to be so qualified and in good standing
would not have a material adverse effect on Buyer or on the ability of Buyer to
perform its obligations under this Agreement.
6.2 Authority and Validity. Buyer has all requisite corporate power and
----------------------
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party. The execution and delivery by Buyer of,
the performance by Buyer of its obligations under, and the consummation by Buyer
of the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party have been duly and validly authorized by all
necessary action by or on behalf of Buyer. This Agreement has been, and when
executed and delivered by Buyer the Transaction Documents will be, duly and
validly executed and delivered by Buyer and the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to the
enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
6.3 No Conflicts; Required Consents. Except for the Required Consents,
-------------------------------
the execution and delivery by Buyer, the performance of Buyer under, and the
consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party do not and will not (a) violate
any provision of the charter or bylaws of Buyer, (b) violate any Legal
Requirement, (c) require any consent, approval or authorization of, or filing of
any certificate, notice, application, report or other document with any
Governmental Authority or other Person or (d) (i) violate or result in a breach
of or constitute a default under (without regard to requirements of notice,
lapse of time or elections of any Person or any combination thereof), (ii)
permit or result in the termination, suspension, modification of, (iii) result
in the acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of any
Encumbrance under, any instrument or other agreement to which Buyer is a party
or by which Buyer or any
22
<PAGE>
of its assets is bound or affected, except for purposes of this clause (d) such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate,
have a material adverse effect on the validity, binding effect or enforceability
of this Agreement or on the ability of Buyer to perform its obligations under
this Agreement or the Transaction Documents to which it is a party.
6.4 Finders and Brokers. Buyer has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller could be liable.
6.5 Legal Proceedings. There are no claims, actions, suits, proceedings
-----------------
or investigations pending or, to Buyer's Knowledge, threatened, by or before any
Governmental Authority, or any arbitrator, by or against or affecting or
relating to Buyer which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this Agreement
------------------------------
and the Closing Date, Seller will give Buyer and its counsel, accountants and
other representatives full access during normal business hours upon reasonable
notice to all the premises and books and records of the Business and to all the
Assets and to the System personnel and will furnish to Buyer and such
representatives all such documents, financial information, and other information
regarding the Business and the Assets as Buyer from time to time reasonably may
request; provided that no such investigation will affect or limit the scope of
any of Seller's representations, warranties, covenants and indemnities in this
Agreement or any Transaction Document or limit liability for any breach of any
of the foregoing.
7.2 Continuity and Maintenance of Operations; Financial Statements.
--------------------------------------------------------------
Except as Buyer may otherwise consent in writing, between the date of this
Agreement and the Closing:
7.2.1 Seller will conduct the Business and operate the System only in
the usual, regular and ordinary course consistent with past practices (including
making budgeted capital expenditures and fulfilling installation requests) and
will use commercially reasonable efforts to (a) preserve its current business
intact, including preserving existing relationships with franchising
authorities, suppliers, customers and others having business dealings with
Seller relating to the Business unless Buyer requests otherwise, (b) keep
available the services of its employees and agents
23
<PAGE>
providing services in connection with the Business and (c) continue making
marketing, advertising and promotional expenditures with respect to the Business
consistent with past practices.
7.2.2 Seller will maintain the Assets in good repair, order and
condition (ordinary wear and tear excepted), will maintain equipment and
inventory at historical levels consistent with past practices, will maintain in
full force and effect, policies of insurance with respect to the Business in
such amounts and with respect to such risks as customarily maintained by
operators of cable television systems of the size and geographic location of the
System and will maintain its books, records and accounts in the usual, regular
and ordinary manner on a basis consistent with past practices. Seller will not
itself, and will not permit any of its officers, directors, shareholders, agents
or employees to, pay any of Seller's subscriber accounts receivable (other than
for their own residences) prior to the Closing Date. Seller will continue to
implement its procedures for disconnection and discontinuance of service to
subscribers whose accounts are delinquent in accordance with those in effect on
the date of this Agreement.
7.2.3 Without the prior approval of Buyer, Seller will not (a) change
the rate charged for Basic Service, Expanded Basic Service or Pay TV or add,
delete, retier or repackage any programming services except to the extent
required under the 1992 Cable Act or any other Legal Requirement, provided
however if Seller changes such rates in order to so comply, Seller will provide
Buyer with copies of any FCC forms (even if not filed with any Governmental
Authority) that Seller used to determine that the new rates were allowable, (b)
sell, transfer or assign any portion of the Assets other than sales in the
ordinary course of business or permit the creation of any Encumbrance on any
Asset other than a Permitted Encumbrance or any Encumbrance which will be
released at or prior to Closing, (c) modify in any material respect, terminate,
suspend or abrogate any Governmental Permits, Seller Contracts or any other
contract or agreement (other than those constituting Excluded Assets), (d) enter
into any contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to the System or the Business involving an
expenditure in excess of $25,000, other than contracts or commitments which are
cancelable on 30 days' notice or less without penalty, (e) take or omit to take
any action that would result in any of its representations or warranties in this
Agreement or in any Transaction Document not being true and correct when made or
as of the Closing, (f) engage in any marketing, subscriber installation or
collection practices that are inconsistent with past practices, or (g) enter
into any agreement with or commitment to any competitive access providers with
respect to the System.
7.2.4 Seller promptly will deliver to Buyer true and complete copies
of monthly and quarterly financial statements and operating reports and any
reports with respect to the combined operations of the Business and the
Schoolcraft System and the Southwest Michigan System, prepared by or for Seller
at any time between the date of
24
<PAGE>
this Agreement and the Closing Date. All financial statements so delivered will
be prepared in accordance with GAAP on a basis consistent with the Financial
Statements.
7.2.5 Seller will give or cause to be given to Buyer as soon as
reasonably possible but in any event no later than 5 Business Days prior to the
date of submission to the appropriate Governmental Authority, copies of all Rate
Regulation Documents prepared with respect to the System, including any Cost of
Service Elections other than those described on SCHEDULE 5.9, and Seller will
make a good faith effort to address any specific concerns raised by Buyer with
respect to such documents.
7.2.6 Seller will promptly notify Buyer of any fact, circumstance,
event or action by it or otherwise (a) which, if known at the date of this
Agreement, would have been required to be disclosed in or pursuant to this
Agreement or (b) the existence, occurrence or taking of which would result in
any of Seller's representations and warranties in this Agreement or any
Transaction Document not being true, complete and correct when made or at the
Closing, and, with respect to clause (b) use its best efforts to remedy the
same.
7.3 Employee Matters.
----------------
7.3.1 Buyer will have no obligation to employ or offer employment to
any of the employees of Seller. As of the Closing Date, Seller will terminate
the employment of all its employees who were employed incidental to the conduct
of the Business whose employment will not continue with Seller after the Closing
and will promptly pay to all such employees all compensation, including
salaries, commissions, bonuses, deferred compensation, severance, insurance,
pensions, profit sharing, vacation (except for accrued vacation included in the
adjustments pursuant to SECTION 3.2), sick pay and other compensation or
benefits to which they are entitled for periods prior to the Closing, including
all amounts, if any, payable on account of the termination of their employment.
Seller agrees to cooperate in all reasonable respects with Buyer to allow Buyer
to evaluate and interview employees of the Business to make hiring decisions.
Such cooperation will include but not be limited to allowing Buyer to contact
employees during work time and, with the consent of the employee, making
personnel records available. Buyer will give Seller written notice on or before
60 days after the date hereof of the name of all employees of the System to whom
Buyer desires to offer employment on and after the Closing Date (subject to
satisfaction of Buyer's conditions for employment). Seller will not, without
the prior written consent of Buyer, change the compensation or benefits of any
employees of the Business except in accordance with past practice.
7.3.2 All claims and obligations under, pursuant to or in connection
with any welfare, medical, insurance, disability or other employee benefit plans
of Seller or arising under any Legal Requirement affecting employees of Seller
incurred on or before the Closing Date or resulting or arising from events or
occurrences
25
<PAGE>
occurring or commencing on or before the Closing Date will remain the
responsibility of Seller, whether or not such employees are hired by Buyer after
the Closing.
7.3.3 Seller will remain solely responsible for, and will indemnify
and hold harmless Buyer from and against all Losses arising from or with respect
to, all salaries and all severance, vacation (except for accrued vacation
included in the adjustments pursuant to SECTION 3.2), medical, sick, holiday,
continuation coverage and other compensation or benefits to which Seller's
employees (whether or not hired by Buyer) may be entitled as a result of their
employment by Seller prior to the Closing, the termination of their employment
prior to the Closing, the consummation of the transactions contemplated hereby
or pursuant to any applicable Legal Requirement (including without limitation
WARN) or otherwise relating to their employment prior to the Closing.
7.3.4 Nothing in this Agreement will require Buyer to assume any
collective bargaining agreement between Seller and any labor organization.
7.4 Leased Vehicles; Other Capital Leases. Seller will pay the remaining
-------------------------------------
balances on any leases for vehicles or capital leases included in the Equipment
and will deliver title to such vehicles and other Equipment free and clear of
all Encumbrances (other than Permitted Encumbrances) to Buyer at the Closing.
7.5 Required Consents; Estoppel Certificates.
----------------------------------------
7.5.1 Seller will use commercially reasonable efforts to obtain in
writing, as promptly as possible and at its expense, all the Required Consents
and any other consent, authorization or approval required to be obtained by
Seller in connection with the transactions contemplated by this Agreement, in
form and substance reasonably satisfactory to Buyer and deliver to Buyer copies
of such Required Consents and such other consents, authorizations or approvals
promptly after they are obtained by Seller. Such Required Consents will be
proposed in a form that provides confirmation from the third party of the
continued existence of and the absence of defaults under the applicable Seller
Contract or Governmental Permit. Buyer will cooperate with Seller to obtain all
Required Consents, but Buyer will not be required to accept or agree or accede
to any modifications or amendments to, or changes in, or the imposition of any
condition to the transfer to Buyer of (in each case other than inconsequential
matters with no adverse effect on Buyer), any Seller Contract or Governmental
Permit that are not acceptable to Buyer in its sole discretion. Notwithstanding
the foregoing, the parties will deliver to the appropriate Governmental
Authority requests for the necessary consents to transfer the Governmental
Permits, and will complete, execute and deliver to the appropriate Governmental
Authority, the FCC Forms 394 prepared by Buyer with respect to each Governmental
Permit as to which the parties agree that such Form 394 should be delivered, and
failing an agreement between the parties, to any Governmental Authority
requested by Seller. In
26
<PAGE>
addition, to the extent the parties agree not to submit a Form 394 to any
Governmental Authority, if such Governmental Authority has not acted on a
request of the parties to consent to the transfer of the relevant Governmental
Permit within 75 days after such request has been made, either party may, upon
notice to the other, require that a Form 394 be submitted to such Governmental
Authority, and the parties will cooperate to submit such Form 394 within five
Business Days after such notice has been given.
7.5.2 Seller will use commercially reasonable efforts to obtain for
each lease that has not been recorded in the public records, execution of a
document suitable for recording in the public records and sufficient after
recording to constitute a memorandum of lease.
7.6 Title Commitments and Surveys.
-----------------------------
7.6.1 After the execution of this Agreement, Buyer will order at
Seller's expense (a) commitments for owner's title insurance policies on all
Real Property owned by Seller and on easements which provide access to each such
parcel of real property, (b) commitments for lessee's title insurance policies
for all Real Property leased by Seller which is used for headend or tower sites
and on easements which provide access to each such site and (c) an ALTA survey
(including such items on Table A of the Minimum Standard Detail Requirements and
Classifications thereto that Buyer in its reasonable judgment determines are
desirable or necessary) on each parcel of Real Property for which a title
insurance policy is to be obtained. The title commitments will evidence a
commitment to issue an ALTA title insurance policy insuring good, marketable and
indefeasible fee simple title or leasehold interest, in the case of Leased Real
Property, if applicable) to each parcel of such Real Property, subject only to
Permitted Encumbrances, for such amount as Buyer directs and will contain no
exceptions except for items which in Buyer's reasonable opinion do not adversely
affect (other than in an immaterial way as to any individual parcel) the good,
marketable and indefeasible title to or Buyer's access or quiet use or enjoyment
of such Real Property in the manner the Real Property is presently used or in
the normal conduct of the Business. At the Closing, Seller will cause Buyer to
receive, at Seller's expense, title commitments redated to the date and time of
Closing. In the event Seller has not eliminated or caused to be eliminated all
unacceptable exceptions from such policies or commitments prior to Closing, and
Buyer elects to proceed with the Closing, Buyer will be entitled to
indemnification with respect to such exceptions as provided in SECTION 11.2.
7.6.2 Title insurance policies on all Real Property in such amounts
as Buyer directs will be delivered to Buyer at Seller's expense within 30 days
after the Closing Date evidencing title to the Real Property vested in Buyer
consistent with the commitments delivered at the Closing pursuant to SECTION
7.6.1.
27
<PAGE>
7.7 HSR Notification. As soon as practicable after the execution of this
----------------
Agreement, but in any event no later than 30 days after such execution, Seller
and Buyer will each complete and file, or cause to be completed and filed, any
notification and report required to be filed under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); and each such
filing will request early termination of the waiting period imposed by the HSR
Act. The parties will use their reasonable best efforts to respond as promptly
as reasonably practicable to any inquiries received from the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") for additional information or documentation and to
respond as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters. The parties will use their respective reasonable best efforts to
overcome any objections which may be raised by the FTC, the Antitrust Division
or any other Governmental Authority having jurisdiction over antitrust matters.
Notwithstanding the foregoing, Buyer will not be required to make any
significant change in the operations or activities of the business (or any
material assets employed therein) of Buyer or any of its Affiliates, if Buyer
determines in good faith that such change would be materially adverse to the
operations or activities of the business (or any material assets employed
therein) of Buyer or any of its Affiliates having significant assets, net worth,
or revenue. Notwithstanding anything to the contrary in this Agreement, if
Buyer or Seller, in its sole opinion, considers a request from a governmental
agency for additional data and information in connection with the HSR Act to be
unduly burdensome, such party may terminate this Agreement by giving written
notice to the other. Within 10 days after receipt of a statement therefor,
Seller will reimburse Buyer for one-half of the filing fees payable by Buyer in
connection with Buyer's filing under the HSR Act.
7.8 No Shopping. None of Seller, its partners or any agent or
-----------
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any portion of the Assets.
7.9 Lien and Judgment Searches. Not more than 20 nor fewer than 10 days
--------------------------
prior to the expected Closing Date, Seller, at its expense, will provide Buyer
with (a) the results of a lien search conducted by a professional search company
of records in the offices of the secretaries of state in each state and county
clerks in each county where there exist tangible Assets, and in the state and
county where Seller's principal offices are located, including copies of all
financing statements or similar notices or filings (and any continuation
statements) discovered by such search company and (b) the results of a search of
the dockets of the clerk of each federal and state court sitting in the city,
county or other applicable political subdivision where the principal
28
<PAGE>
office or any material assets of Seller may be located, with respect to
judgments, orders, writs or decrees against or affecting Seller or any of the
Assets.
7.10 Transfer Taxes. Any state sales Taxes imposed by any Governmental
--------------
Authority arising from or payable by reason of the transfer of any of the Assets
pursuant to this Agreement will be paid by Seller. Any local sales, or state or
local use, transfer, Taxes or fees or any other charge (including filing fees)
imposed by any Governmental Authority arising from or payable by reason of the
transfer of any of the Assets pursuant to this Agreement will be paid by one-
half by Buyer (but in no event will Buyer's share exceed an aggregate of
$250,000), with the balance to be paid by Seller.
7.11 Distant Broadcast Signals. Unless otherwise restricted or prohibited
-------------------------
by any Governmental Authority or applicable Legal Requirement, if requested by
Buyer, Seller will delete prior to the Closing Date any distant broadcast
signals which Buyer determines will result in unacceptable liability on the part
of Buyer for copyright payments with respect to continued carriage of such
signals after the Closing.
7.12 Guaranty. At the Closing, Seller will cause Intercable to sign and
--------
deliver to Buyer, a Guaranty in the form of EXHIBIT D.
7.13 Letter to Programmers. On or before the Closing Date, Seller will
---------------------
transmit a letter in the form of EXHIBIT E to all programmers from which Seller
purchases programming for the System and provide Buyer with a copy of each such
letter.
7.14 Updated Schedules. Not later than ten Business Days prior to the
-----------------
expected Closing Date, Seller will deliver to Buyer revised copies of all
Schedules to this Agreement which will have been updated and marked to show any
changes occurring between the date of this Agreement and the date of delivery;
provided, however, that for purposes of Seller's representations and warranties
and covenants in this Agreement, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing, and
provided further that if the effect of any such updates to Schedules is to
disclose any one or more additional properties, privileges, rights, interests or
claims as Assets, Buyer, at or before Closing, will have the right (to be
exercised by written notice to Seller) to cause any one or more of such items to
be designated as and deemed to constitute Excluded Assets for all purposes under
this Agreement.
7.15 Use of Names and Logos. For a period of 90 days after the Closing
----------------------
Date, Buyer will be entitled to use all trademarks, trade names, service marks,
service names, logos and similar proprietary rights of Seller and all
derivations and abbreviations of such name and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
Notwithstanding the foregoing, Buyer will not
29
<PAGE>
be required to remove or discontinue using any such trade name or mark that is
affixed to converters or other items in or to be used in subscriber homes or
properties, or as are used in a similar fashion making such removal or
discontinuation impracticable for Buyer.
7.16 Subscriber Billing Services. Seller will provide to Buyer, upon
---------------------------
request, on terms and conditions reasonably satisfactory to each party, access
to and the right to use its billing system computers, software and related fixed
assets in connection with the System acquired by Buyer for a period of up to 90
days following the Closing to allow for conversion of existing billing
arrangements ("Transitional Billing Services"); provided however that Buyer will
not be required to pay Seller more than Seller's actual cost of providing such
service. Buyer will notify Seller at least 10 days prior to the expected
Closing Date as to whether it desires Transitional Billing Services from Seller.
7.17 Satisfaction of Conditions. Each party will use its best efforts to
--------------------------
satisfy, or to cause to be satisfied, the conditions to the obligations of the
other party to consummate the transactions contemplated by this Agreement, as
set forth in SECTION 8, provided that Buyer will not be required to agree to any
increase in the amount payable with respect to, or any modification that makes
more burdensome in any material respect, any of the Assumed Liabilities.
7.18 Confidentiality and Publicity. Neither party will issue any press
-----------------------------
release or make any other public announcement or any oral or written statements
to Seller's employees concerning this Agreement or the transactions contemplated
hereby except as required by applicable Legal Requirements, without the prior
written consent of the other party. Each party will hold, and will cause its
employees, consultants, advisors and agents to hold the terms of this Agreement
in confidence; provided that (a) such party may use and disclose such
information once it has become publicly disclosed (other than by such party in
breach of its obligations under this Section) or which rightfully has come into
the possession of such party (other than from the other party) and (b) to the
extent that such party may be compelled by Legal Requirements to disclose any of
such information, but the party proposing to disclose such information will
first notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may disclose
such information to employees, consultants, advisors, agents and actual or
potential lenders whose knowledge is necessary to facilitate the consummation of
the transactions contemplated by this Agreement. The obligation by either party
to hold information in confidence pursuant to this Section will be satisfied if
such party exercises the same care with respect to such information as it would
exercise to preserve the confidentiality of its own similar information.
30
<PAGE>
7.19 Bulk Transfers. Buyer waives compliance by Seller with Legal
--------------
Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.20 Environmental Reports. Within 60 days after the execution of this
---------------------
Agreement, Seller will, at its expense, obtain and deliver to Buyer for each
parcel of Real Property owned or leased by Seller a current Phase I
Environmental Site Assessment ("Environmental Report") prepared by a nationally
known environmental engineering firm reasonably satisfactory to Buyer in
accordance with ASTM Standard E 1527-93 and certified to Buyer. Each
Environmental Report will include, in addition to the process described in E
1527-93, such soil and groundwater sampling and other testing as will enable the
environmental engineers to determine if Hazardous Substances are detected and to
provide an estimate of the cost to remove and dispose of the Hazardous
Substances or otherwise remediate the property in accordance with all applicable
Environmental Laws.
7.21 Board Approvals. On or before the Approval Deadline, the Board of
---------------
Directors of Buyer and the Board of Directors of Intercable will have been
presented with resolutions for the approval of the transactions contemplated
hereby on behalf of Buyer and Seller, and will have approved or disapproved the
same.
7.22 Section 1031. The parties shall cooperate with each other in order
------------
that the transactions contemplated under this Agreement may be accomplished as
part of a deferred exchange pursuant to Section 1031 of the Code and applicable
Treasury Regulations and to executed such agreements and other documents as may
be necessary to complete and otherwise effectuate a tax-deferred exchange;
provided, however, that Seller shall not be obligated to incur any costs,
- -----------------
expenses or other liabilities in cooperating with Buyer hereunder. Buyer shall
be permitted to assign any or all of its rights and obligations under this
Agreement to a qualified intermediary without Seller's consent for purposes of
qualifying the transactions hereunder as a tax-deferred exchange; provided,
---------
however, that the fees of such qualified intermediary shall be paid by Buyer,
- -------
and provided further, however, that nothing in this Section shall be deemed to
-------------------------
relieve Buyer any of its obligations under this Agreement, including, without
limitation, its obligations to close the transactions contemplated by this
Agreement if the exchange described herein has not occurred prior to August 1,
1998 and the conditions to Closing described in Sections 8.1 and 8.2 have been
met or waived, subject to the rights of either party to terminate the Agreement
pursuant to Section 10.1.3.
SECTION 8. CONDITIONS PRECEDENT
8.1 Conditions to the Obligations of Buyer and Seller. The obligations of
-------------------------------------------------
each party to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or before the Closing, of the following, which
may be waived by the parties to the extent permitted by applicable Legal
Requirements:
31
<PAGE>
8.1.1 HSR Act Filings. All filings required under the HSR Act have
---------------
been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or threat of
any litigation by a Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or proceeding is
---------------------
pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of the System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of the
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement (excluding the ability to acquire
the System pursuant to a like-kind exchange under Section 1031 of the Code) or
have a material adverse effect on the right of Buyer to exercise full rights of
ownership of the System or (d) prevent or make illegal the consummation of any
transactions contemplated by this Agreement.
8.2 Conditions to the Obligations of Buyer. The obligations of Buyer to
--------------------------------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions, which may
be waived by Buyer to the extent permitted by applicable Legal Requirements:
8.2.1 Representations and Warranties. All representations and
------------------------------
warranties of Seller in this Agreement and any Transaction Document are, if
specifically qualified by materiality, true and correct in all respects and, if
not so qualified, are true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
8.2.2 Performance of Agreements. Seller has performed in all
-------------------------
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Seller at or before the Closing.
8.2.3 Deliveries. Seller has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.2.
32
<PAGE>
8.2.4 Consents. Seller has delivered to Buyer evidence, in form and
--------
substance satisfactory to Buyer, that all of the Required Consents marked with
an asterisk on SCHEDULE 5.3 have been obtained or given (or deemed to have been
given) and are in full force and effect.
8.2.5 Environmental Matters. The Environmental Reports delivered to
---------------------
Buyer pursuant to SECTION 7.20 and any other environmental audits or assessments
conducted with respect to the Assets do not indicate the existence of any
conditions that could reasonably be expected to give rise to a material risk of
liability.
8.2.6 No Material Adverse Change. There has not been any material
--------------------------
adverse change in the Business, the Assets or the System since the date of this
Agreement other than any change arising out of general economic conditions in
the United States or any change affecting the United States cable television
industry as a whole, including any change arising from (a) legislation,
litigation, rulemaking or regulation or (b) competition caused by or arising
from other multiple channel distribution services.
8.2.7 EBS. As of the Closing Date, the Business, combined with the
---
EBS's of the Schoolcraft System and the Southwest Michigan System, has no fewer
than 16,530 EBS's; provided, that if such aggregate number of EBS's is less than
16,530, Buyer may elect not to close, or if Buyer elects to close, the extent of
the adjustment pursuant to SECTION 3.2.1 shall be as if the applicable number of
EBS's (a) of the Business were 673, (b) in the Schoolcraft System were 1437 and
(c) in the Southwest Michigan System were 14,420.
8.2.8 1031 Exchange. The closing of Buyer's sale of certain systems
-------------
to Buford Group, Inc., shall have occurred (the "Buford Transaction"); provided,
however, if the Buford Transaction shall not have occurred by August 1, 1998,
the closing of the Buford Transaction shall no longer be a condition to the
obligations of Buyer to consummate the transactions hereunder.
8.2.9 Other Closings. The closings of the Southwest Michigan
--------------
Transaction and the Schoolcraft Transaction shall occur simultaneously with the
closing hereunder, unless the failure of the Southwest Michigan Transaction to
close is due to a breach of the Southwest Michigan Purchase Agreement by Seller,
or the failure of the Schoolcraft Transaction to close is due to a breach of the
Schoolcraft Purchase Agreement by Seller.
8.3 Conditions to Obligations of Seller. The obligations of Seller to
-----------------------------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction by Seller at or before the Closing, of the following, which may be
waived by Seller, to the extent permitted by applicable Legal Requirements:
33
<PAGE>
8.3.1 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement and any Transaction Document
are, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, are true and correct in all material respects, in each
case on and as of the Closing Date with the same effect as if made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
8.3.2 Performance of Agreements. Buyer has performed in all material
-------------------------
respects all obligations and agreements, and complied in all material respects
with all covenants and conditions in this Agreement and any Transaction Document
to be performed or complied with by Buyer at or before the Closing.
8.3.3 Deliveries. Buyer has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.3.
8.3.4 EBS. As of the Closing Date, either (a) the Business, combined
---
with the EBS's of the Schoolcraft System and the Southwest Michigan System, has
no fewer than 16,530 EBSs or (b) Buyer has waived its right to an adjustment
pursuant to SECTION 3.2.1 except to the extent of the adjustment applicable if
the number of EBS's (i) of the Business were 673, (ii) in the Schoolcraft System
were 1437 and (iii) in the Southwest Michigan System were 14,420.
8.3.5 Other Closings. The closings of the Southwest Michigan
--------------
Transaction and the Schoolcraft Transaction shall occur simultaneously with the
closing hereunder, unless the failure of the Southwest Michigan Transaction to
close is due to a breach of the Southwest Michigan Purchase Agreement by Buyer,
or the failure of the Schoolcraft Transaction to close is due to a breach of the
Schoolcraft Purchase Agreement by Buyer.
8.4 Waiver of Conditions. Any party may waive in writing any or all of
--------------------
the conditions to its obligations under this Agreement.
SECTION 9. CLOSING
9.1 The Closing; Time and Place. The Closing will be held simultaneously
---------------------------
with the closings of the Schoolcraft Transaction and the Southwest Michigan
Transaction on a date specified by Buyer (upon three Business Days prior notice
to Seller) that is within 15 days after all conditions to the Closing contained
in this Agreement (other than those based on acts to be performed at the
Closing) have been satisfied or waived. The Closing will be held at 10:00 a.m.
local time at Seller's office located at 9697 East Mineral Avenue, Englewood,
Colorado 80112, or at such place and time as Buyer and Seller may agree.
34
<PAGE>
9.2 Seller's Delivery Obligations. At the Closing, Seller will deliver
-----------------------------
(or cause to be delivered) to Buyer the following:
(a) a Bill of Sale in the form attached as EXHIBIT A;
(b) a special warranty deed in a form reasonably acceptable to Buyer
(and complying with applicable state laws) with respect to each parcel of
owned Real Property, duly executed and acknowledged and in recordable form,
warranting to defend title to such Real Property against all persons
claiming by, through or under Seller, subject only to Permitted
Encumbrances, and in form sufficient to permit the title company to issue
the title policy described in SECTION 7.6.1 to Buyer with respect to such
Real Property;
(c) an Assignment and Assumption of Contracts in the form attached as
EXHIBIT B;
(d) one or more Assignments of Leases in the form attached as EXHIBIT
C and, if requested by Buyer, short forms or memoranda of such Assignments
in recordable form;
(e) any memorandum of lease obtained by Seller pursuant to SECTION
7.5(B);
(f) a Guaranty signed by Intercable in the form attached as EXHIBIT
D;
(g) an affidavit of Seller, under penalty of perjury, that Seller is
not a "foreign person" (as defined in the Foreign Investment in Real
Property Tax Act and applicable regulations) and that Buyer is not required
to withhold any portion of the consideration payable under this Agreement
under the provisions of such Act in the form attached as EXHIBIT F;
(h) motor vehicle title certificates and such other transfer
instruments as Buyer may deem necessary or advisable to transfer the Assets
to Buyer and to perfect Buyer's rights in the Assets;
(i) the opinion of Elizabeth Steele, Esq., counsel for Seller, dated
the Closing Date, in the form set forth in EXHIBIT G;
(j) evidence satisfactory to Buyer that all Encumbrances affecting any
of the Assets (other than Permitted Encumbrances) have been terminated and
released;
(k) the title insurance commitments described in SECTION 7.6.1;
35
<PAGE>
(l) a certificate, dated the Closing Date, signed by the President or
any Vice President of Intercable, stating that to his or her knowledge, the
conditions set forth in SECTIONS 8.2.1, 8.2.2 and 8.2.8 are satisfied;
(m) for each multiple dwelling complex or trailer park served by the
System which is not covered by a current written agreement with the owner
of such complex or park, a cable television multiple-unit agreement in a
form reasonably satisfactory to Buyer, executed by the owner of such
complex or park; and
(n) such other documents as Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations. At the Closing, Buyer will deliver (or
----------------------------
cause to be delivered) to Seller the following:
(a) the Base Purchase Price required to be paid at the Closing, as
adjusted in accordance with this Agreement;
(b) a Bill of Sale in the form attached as EXHIBIT A;
(c) an Assignment and Assumption of Contracts in the form attached as
EXHIBIT B;
(d) a certificate, dated the Closing Date, signed by an executive
officer of Buyer, stating that to his or her knowledge, the conditions set
forth in SECTIONS 8.3.1 and 8.3.2, are satisfied;
(e) an opinion of Mary S. Willis, Esq., counsel to Buyer, dated the
Closing Date, in the form set forth in EXHIBIT H; and
(f) such other documents as Seller may reasonably request in
connection with the transactions contemplated by this Agreement.
SECTION 10. TERMINATION
10.1 Termination Events. This Agreement may be terminated and the
------------------
transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of Buyer and
Seller;
36
<PAGE>
10.1.2 By either party at any time, if the other is in material
breach or default of any of its covenants, agreements or other obligations in
this Agreement or in any Transaction Document, or if any of its representations
in this Agreement or in any Transaction Document is not true in all material
respects when made or when otherwise required by this Agreement or any
Transaction Document to be true and such breach or default or failure to be true
is not cured or waived prior to Closing;
10.1.3 By either party upon written notice to the other, if Closing
has not occurred on or before August 31, 1998, for any reason other than a
material breach or default by such party of its respective covenants, agreements
or other obligations under this Agreement, or any of its representations this
Agreement not being true and accurate in all material respects when made or when
otherwise required by this Agreement to be true and accurate in all material
respects;
10.1.4 By Buyer, within 45 days after the date hereof (the
"Approval Deadline"), if all board of director approvals are not obtained by
Buyer (for any reason) on or before the Approval Deadline;
10.1.5 By Seller, on or before the Approval Deadline, if Intercable
has not approved the transactions contemplated by this Agreement (for any
reason) on or before such date; or
10.1.6 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
SECTION 10.1, all obligations of the parties under this Agreement will
terminate, except for the obligations set forth in SECTIONS 7.18 and 12.16.
Termination of this Agreement pursuant to SECTIONS 10.1.2 OR 10.1.3 will not
limit or impair any remedies that any party may have with respect to a breach or
default by the other of its covenants, agreements or obligations under this
Agreement. Buyer will have no liability in any event upon exercise of its right
to terminate pursuant to SECTION 10.1.4. Seller will have no liability in any
event upon exercise of its right to terminate pursuant to SECTION 10.1.5.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of Seller in this Agreement and in the Transaction Documents to be
delivered by Seller pursuant to this Agreement will survive until the first
anniversary of the Closing Date, except that (a) all such representations and
warranties with respect to any federal, state or local Taxes, rates,
Environmental Law, ERISA, employment matters or copyright matters will survive
until 60 days after the expiration of the applicable statute of limitations
(including any extensions) for such federal, state or local Taxes, rates,
Environmental Law, ERISA, employment matters or copyright
37
<PAGE>
matters, respectively and (b) the representations and warranties as to ownership
of the Assets in SECTION 5.4, SECTION 5.7.1 and in the deed or deeds delivered
with respect to Real Property will survive the Closing and the delivery of such
deeds and will continue in full force and effect without limitation. The
representations and warranties of Buyer in this Agreement and in the Transaction
Documents to be delivered by Buyer pursuant to this Agreement will survive until
the first anniversary of the Closing Date. The periods of survival of the
representations and warranties prescribed by this SECTION 11.1 are referred to
as the "Survival Period." The liabilities of the parties under their respective
representations and warranties will expire as of the expiration of the
applicable Survival Period; provided, however, that such expiration will not
include, extend or apply to any representation or warranty, the breach of which
has been asserted by Buyer in a written notice to Seller before such expiration
or about which Seller has given Buyer written notice before such expiration
indicating that facts or conditions exist that, with the passage of time or
otherwise, can reasonably be expected to result in a breach (and describing such
potential breach in reasonable detail). The covenants and agreements of the
parties in this Agreement (that are by their terms intended to be performed
after Closing) and in the Transaction Documents to be delivered by Seller or
Buyer pursuant to this Agreement, will survive the Closing and will continue in
full force and effect without limitation.
11.2 Indemnification by Seller. Seller will indemnify and hold harmless
-------------------------
Buyer and its shareholders and its and their respective Affiliates, and the
shareholders, directors, officers, employees, agents, successors and assigns and
any Person claiming by or through any of them, as the case may be, from and
against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Seller in this Agreement or in the
Transactions Documents delivered by Seller, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or in the
Transaction Documents delivered by Seller, (iii) any act or omission of Seller
with respect to, or any event or circumstance related to, the ownership or
operation of the Assets or the conduct of the Business, which act, omission,
event or circumstance occurred or existed prior to or at the Closing Date,
without regard to whether a claim with respect to such matter is asserted before
or after the Closing Date, including any matter described on SCHEDULE 5.13, (iv)
any liability or obligation not included in the Assumed Liabilities, (v) any
title defect Seller fails to eliminate as an exception from a title insurance
commitment referred to in SECTION 7.7.1, (vi) any claim that the transactions
contemplated by this Agreement violates WARN, or any similar state or local law
or any bulk transfer or fraudulent conveyance laws of any jurisdiction, (vii)
the presence, generation, removal or transportation of a Hazardous Substance on
or from any of the Real Property prior to the Closing Date, including the costs
of removal or clean-up of such Hazardous Substance and other compliance with the
provisions of any Environmental Laws (whether before or after Closing), or
(viii) any rate refund ordered by any Governmental Authority for periods prior
to the Closing Date; and
38
<PAGE>
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) through (a)(viii) of this SECTION 11.2, Buyer's
rights to pursue its claim under clauses (a)(ii) through (a)(viii), as
applicable, will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (a)(i).
11.3 Indemnification by Buyer. Buyer will indemnify and hold harmless
------------------------
Seller and Seller's shareholders, directors, officers, employees, agents,
successors and assigns, and any Person claiming by or through any of them, as
the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Buyer in this Agreement or in the Transaction
Documents delivered by Buyer, (ii) any breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or in the Transaction Documents
delivered by Buyer or (iii) the failure by Buyer to perform any of its
obligations in respect of the Assumed Liabilities; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) or (a)(iii) of this SECTION 11.3, Seller's rights
to pursue its claim under clauses (a)(ii) or (a)(iii), as applicable, will exist
notwithstanding the expiration of the Survival Period applicable to such claim
under clause (a)(i).
11.4 Third Party Claims. Promptly after the receipt by any party of notice
------------------
of any claim, action, suit or proceeding by any Person who is not a party to
this Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified Party") will
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action under
the terms of this SECTION 11, (b) notifies the Indemnified Party in writing of
the
39
<PAGE>
Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be liable
as a result of such Action and (d) retains legal counsel reasonably satisfactory
to the Indemnified Party to conduct the defense of such Action. The other party
will cooperate with the party assuming the defense, compromise or settlement of
any such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Action, but the fees and expenses of such counsel will be at
the expense of the Indemnified Party unless (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) any relief other than the payment of
money damages is sought against the Indemnified Party or (iii) the Indemnified
Party will have been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnity provided in this SECTION 11 will be paid by the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this SECTION 11.4. No Indemnifying Party will settle
or compromise any such Action (A) in which any relief other than the payment of
money damages is sought against any Indemnified Party or (B) in the case of any
Action relating to the Indemnified Party's liability for any Tax, if the effect
of such settlement would be an increase in the liability of the Indemnified
Party for the payment of any Tax for any period beginning after the Closing
Date, unless the Indemnified Party consents in writing to such compromise or
settlement.
11.5 Limitations on Indemnification - Seller. Seller will not be liable
---------------------------------------
for indemnification arising solely under SECTION 11.2(A)(I) for (a) any Losses
of or to Buyer or any other person entitled to indemnification from Seller or
(b) any claims, actions, suits, proceedings, demands, judgments, assessments,
fines, interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing (the items
described in clauses (a) and (b) collectively being referred to for purposes of
this SECTION 11.5 as "Buyer Damages") unless the amount of Buyer Damages for
which Seller would, but for the provisions of this SECTION 11.5, be liable
exceeds, on an aggregate basis, $10,400 (the "Threshold Amount"), in which case
Seller will be liable for all such Buyer Damages, which will be due and payable
within 15 days after Seller's receipt of a statement therefor; provided,
however, that Seller shall be liable for all rate refunds ordered by any
Governmental Authority for periods prior to the Closing Date regardless of
whether such refunds equal or exceed the Threshold Amount.
40
<PAGE>
11.6 Limitations on Indemnification - Buyer. Buyer will not be liable for
--------------------------------------
indemnification arising solely under SECTION 11.3(A)(I) for (a) any Losses of or
to Seller or any other person entitled to indemnification from Buyer or (b) any
claims, actions, suits, proceedings, demands, judgments, assessments, fines,
interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing the items
described in clauses (a) and (b) collectively being referred to for purposes of
this SECTION 11.6 as "Seller Damages") unless the amount of Seller Damages for
which Buyer would, but for the provisions of this SECTION 11.6, be liable
exceeds, on an aggregate basis, the Threshold Amount, in which case Buyer will
be liable for all such Seller Damages, which will be due and payable within 15
days after Buyer's receipt of a statement therefor.
SECTION 12. MISCELLANEOUS
12.1 Parties Obligated and Benefited. Subject to the limitations set forth
-------------------------------
below, this Agreement will be binding upon the parties and their respective
assigns and successors in interest and will inure solely to the benefit of the
parties and their respective assigns and successors in interest, and no other
Person will be entitled to any of the benefits conferred by this Agreement.
Without the prior written consent of the other party, neither party may assign
any of its rights under this Agreement or delegate any of its duties under this
Agreement.
12.2 Notices. Any notice, request, demand, waiver or other communication
-------
required or permitted to be given under this Agreement will be in writing and
will be deemed to have been duly given only if delivered in person or by first
class, prepaid, registered or certified mail, or sent by courier or, if receipt
is confirmed, by telecopier:
To Buyer at:
c/o Tele-Communications, Inc.
5619 DTC Parkway
Englewood Colorado 80111
Attention: William R. Fitzgerald
Telecopy: (303) 488-3219
With a copy similarly addressed to the attention of Legal Department.
To Seller at:
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
41
<PAGE>
Englewood, Colorado 80112
Attention: President
Telecopy: (303) 799-1644
With a copy similarly addressed to the attention of Legal Department.
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this SECTION 12.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation, or on the third Business Day after mailing in accordance with this
Section, except that any notice of a change of address will be effective only
upon actual receipt.
12.3 Attorneys' Fees. In the event of any action or suit based upon or
---------------
arising out of any alleged breach by any party of any representation, warranty,
covenant or agreement contained in this Agreement, the prevailing party will be
entitled to recover reasonable attorneys' fees and other costs of such action or
suit from the other party.
12.4 Waiver. This Agreement or any of its provisions may not be waived
------
except in writing. The failure of any party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.5 Captions. The captions of this Agreement are for convenience only and
--------
do not constitute a part of this Agreement.
12.6 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES UNDER IT
-------------
WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF
THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF
COLORADO.
12.7 Terms. Terms used with initial capital letters will have the meanings
-----
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. The word "include" and derivatives of that word are used in
this Agreement in an illustrative sense rather than limiting sense.
12.8 Rights Cumulative. All rights and remedies of each of the parties
-----------------
under this Agreement will be cumulative, and the exercise of one or more rights
or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
42
<PAGE>
12.9 Further Actions. Seller and Buyer will execute and deliver to the
---------------
other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
12.10 Time. Time is of the essence under this Agreement. If the last day
----
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
12.11 Late Payments. If either party fails to pay the other any amounts
-------------
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the annual rate publicly announced from time to
time by The Bank of New York as its prime rate (the "Prime Rate") plus 2%,
adjusted as and when changes in the Prime Rate are made.
12.12 Counterparts. This Agreement may be executed in counterparts, each
------------
of which will be deemed an original.
12.13 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) and the Transaction Documents contain the entire
agreement of the parties and supersedes all prior oral or written agreements and
understandings with respect to the subject matter. This Agreement may not be
amended or modified except by a writing signed by the parties.
12.14 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefited by such provision or any other provisions
of this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer and
------------
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.16 Expenses. Except as otherwise expressly provided in this Agreement,
--------
each party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
43
<PAGE>
12.17 Risk of Loss; Condemnation.
--------------------------
12.17.1 Seller will bear the risk of any loss or damage to the Assets
resulting from fire, theft or other casualty (except reasonable wear and tear)
at all times prior to the Closing. If any such loss or damage is sufficiently
substantial so as to preclude or prevent resumption of normal operations of any
material portion of a System or the replacement or restoration of the lost or
damaged property within 30 days from the occurrence of the event resulting in
such loss or damage, Seller will immediately notify Buyer in writing of that
fact and Buyer, at any time within 10 days after receipt of such notice, may
elect by written notice to Seller either (a) to waive such defect and proceed
toward consummation of the transaction in accordance with terms of this
Agreement or (b) terminate this Agreement. If Buyer elects to so terminate this
Agreement, Buyer and Seller will stand fully released and discharged of any and
all obligations under this Agreement. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, there will be no adjustment in the consideration payable to Seller
on account of such loss or damage but all insurance proceeds payable as a result
of the occurrence of the event resulting in such loss or damage (to the extent
not used to replace or restore such lost or damaged property) will be delivered
by Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller.
12.17.2 If, prior to the Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller or Buyer
that it intends to condemn all or any part of or interest in the Assets (such
event being called, in either case, a "Taking"), and such Taking involves a
material part of or interest in the Assets, then Buyer may terminate this
Agreement. If Buyer does not elect or have the right to terminate this
Agreement, then (a) Buyer will have the sole right, in the name of Seller, if
Buyer so elects, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller will be relieved of its obligation to convey
to Buyer the Assets or interests that are the subject of the Taking, (c) at the
Closing Seller will assign to Buyer all of Seller's rights to all damages
payable with respect to such Taking and will pay to Buyer all damages previously
paid to Seller with respect to the Taking and (d) following the Closing, Seller
will give Buyer such further assurances of such rights and assignment with
respect to the taking as Buyer may from time to time reasonably request.
44
<PAGE>
The parties have executed this Agreement as of the day and year first above
written.
SELLER:
JONES CABLE INCOME FUND
1-B/C VENTURE
By: Jones Cable Income Fund
1-B, Ltd., and Jones Cable
Income Fund 1-C, Ltd.,
its general partners
By: /s/ Elizabeth Steele
--------------------
Name: Elizabeth Steele
----------------
Title: Vice President
--------------
BUYER:
TEMPO CABLE, INC.
By: /s/ William Fitzgerald
----------------------
Name: William Fitzgerald
------------------
Title: Vice President
--------------
45
<PAGE>
EXHIBIT 10.3.4
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TCI CABLEVISION OF TEXAS, INC.
AND
JONES CABLE INCOME FUND 1-B/C VENTURE
DATED AS OF
JANUARY 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS..................................................... 3
SECTION 2. SALE OF ASSETS.................................................. 9
SECTION 3. CONSIDERATION................................................... 10
3.1 Base Purchase Price.................................................... 10
3.2 Adjustments to Base Purchase Price..................................... 10
3.3 Determination of Adjustments........................................... 11
3.4 Allocation of Consideration............................................ 12
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS......................... 12
4.1 Assignment and Assumption.............................................. 12
4.2 Excluded Assets........................................................ 13
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER........................ 13
5.1 Organization and Qualification......................................... 13
5.2 Authority and Validity................................................. 13
5.3 No Conflict; Required Consents......................................... 14
5.4 Assets................................................................. 14
5.5 Governmental Permits................................................... 15
5.6 Seller Contracts....................................................... 15
5.7 Real Property.......................................................... 15
5.8 Environmental Matters.................................................. 16
5.9 Compliance with Legal Requirements..................................... 17
5.10 Patents, Trademarks and Copyrights..................................... 18
5.11 Financial Statements................................................... 19
5.12 Absence of Certain Changes............................................. 19
5.13 Legal Proceedings...................................................... 19
5.14 Tax Returns; Other Reports............................................. 20
5.15 Employment Matters..................................................... 20
5.16 Systems Information.................................................... 21
5.15 Bonds.................................................................. 21
5.18 Finders and Brokers.................................................... 21
SECTION 6. BUYER'S REPRESENTATIONS......................................... 21
6.1 Organization and Qualification......................................... 22
6.2 Authority and Validity................................................. 22
6.3 No Conflicts; Required Consents........................................ 22
6.4 Finders and Brokers.................................................... 23
6.5 Legal Proceedings...................................................... 23
SECTION 7. ADDITIONAL COVENANTS............................................ 23
7.1 Access to Premises and Records......................................... 23
7.2 Continuity and Maintenance of Operations; Financial Statements......... 23
7.3 Employee Matters....................................................... 25
7.4 Leased Vehicles; Other Capital Leases.................................. 26
7.5 Required Consents; Estoppel Certificates............................... 26
7.6 Title Commitments and Surveys.......................................... 27
7.7 HSR Notification....................................................... 28
7.8 No Shopping............................................................ 28
7.9 Lien and Judgment Searches............................................. 28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.10 Transfer Taxes......................................................... 29
7.11 Distant Broadcast Signals.............................................. 29
7.12 Guaranty............................................................... 29
7.13 Letter to Programmers.................................................. 29
7.14 Updated Schedules...................................................... 29
7.15 Use of Names and Logos................................................. 30
7.16 Subscriber Billing Services............................................ 30
7.17 Satisfaction of Conditions............................................. 30
7.18 Confidentiality and Publicity.......................................... 30
7.19 Bulk Transfers......................................................... 31
7.20 Environmental Reports.................................................. 31
7.21 Board Approvals........................................................ 31
7.22 Section 1031........................................................... 31
SECTION 8. CONDITIONS PRECEDENT............................................ 31
8.1 Conditions to the Obligations of Buyer and Seller...................... 32
8.2 Conditions to the Obligations of Buyer................................. 32
8.3 Conditions to Obligations of Seller.................................... 33
8.4 Waiver of Conditions................................................... 34
SECTION 9. CLOSING......................................................... 34
9.1 The Closing; Time and Place............................................ 34
9.2 Seller's Delivery Obligations.......................................... 35
9.3 Buyer's Delivery Obligations........................................... 36
SECTION 10. TERMINATION.................................................... 37
10.1 Termination Events.................................................... 37
10.2 Effect of Termination................................................. 37
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.... 37
11.1 Survival of Representations and Warranties............................ 38
11.2 Indemnification by Seller............................................. 38
11.3 Indemnification by Buyer.............................................. 39
11.4 Third Party Claims.................................................... 39
11.5 Limitations on Indemnification........................................ 40
11.6 Limitations on Indemnification - Buyer................................ 41
SECTION 12. MISCELLANEOUS.................................................. 41
12.1 Parties Obligations and Benefited..................................... 41
12.2 Notices............................................................... 41
12.3 Attorneys' Fees....................................................... 42
12.4 Waiver................................................................ 42
12.5 Captions.............................................................. 42
12.6 Choice of Law......................................................... 42
12.7 Terms................................................................. 42
12.8 Rights Cumulative..................................................... 43
12.9 Further Actions....................................................... 43
12.10 Time................................................................. 43
12.11 Late Payments........................................................ 43
12.12 Counterparts......................................................... 43
12.13 Entire Agreement..................................................... 43
12.14 Severability......................................................... 43
12.15 Construction......................................................... 43
12.16 Expenses............................................................. 44
12.17 Risk of Loss; Condemnation........................................... 44
</TABLE>
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
A - Bill of Sale
B - Assignment and Assumption of Contracts
C - Assignment of Leases
D - Guaranty
E - Letter to Programmers
F - FIRPTA Affidavit
G - Opinion of Seller's Counsel
H - Opinion of Buyer's Counsel
SCHEDULES
- -----------
1.9 - Owned Equipment and Vehicles
4.2 - Excluded Assets
5.3 - Required Consents
5.4 - Encumbrances to Be Discharged Prior to Closing
5.5 - Governmental Permits
5.6 - Seller Contracts
5.7 - Real Property
5.8 - Environmental Matters
5.9 - Cost of Service Filings
5.11 - Financial Statements
5.13 - Proceedings and Judgments
5.14 - Tax Matters
5.15 - Employee Matters
5.16 - The Business/Systems Information (including Rate Schedule)
5.17 - Bonds
2
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is made as of January 30, 1998,
by and between TCI Cablevision of Texas, Inc., a Texas corporation ("Buyer"),
and Jones Cable Income Fund 1-B/C Venture, a Colorado general partnership
("Seller").
RECITALS
--------
A. Seller is engaged in the business of providing cable television
service to subscribers in and around the Service Area. Buyer desires to
purchase and Seller desires to sell substantially all the assets of Seller used
or useful in connection with that business.
B. Buyer intends to complete the transfer of the Assets in a transaction
to which Section 1031 of the Internal Revenue Code of 1986, as amended (the
"Code"), applies, and Seller is willing to take such steps as are reasonably
necessary on its part to enable the transactions contemplated hereby to so
qualify, including, without limitation, permitting the assignment of this
Agreement by Buyer to a qualified intermediary in order that Buyer's acquisition
of the Assets (as defined below) may be accomplished as part of a deferred
exchange pursuant to applicable Treasury Regulations; provided that if such
exchange is not accomplished, Buyer desires to purchase the Assets directly,
subject to the terms and conditions described herein.
AGREEMENT
---------
In consideration of the above recitals and the mutual agreements stated in
this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the following
capitalized terms, when used in this Agreement, will have the meanings set forth
below:
1.1 Affiliate. With respect to any Person, any other Person controlling,
---------
controlled by or under common control with such Person, with "control" for such
purpose meaning the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or voting interests, by contract or
otherwise.
1.2 Assets. All properties, privileges, rights, interests and claims,
------
real and personal, tangible and intangible, of every type and description that
are owned, leased, held, used or useful in the Business in which Seller has any
right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing Date,
3
<PAGE>
including Governmental Permits, Intangibles, Seller Contracts, Equipment, Real
Property and deposits relating to the Business that are held by third parties
for the account of Seller or for security for Seller's performance of its
obligations, but excluding any Excluded Assets.
1.3 Basic Service. The lowest tier of service offered to subscribers of a
-------------
System.
1.4 Business. The cable television business conducted by Seller on the
--------
date of this Agreement through one or more Systems, as described on SCHEDULE
5.16.
1.5 Business Day. Any day other than Saturday, Sunday or a day on which
------------
banking institutions in Denver, Colorado are required or authorized to be
closed.
1.6 Closing. The consummation of the transactions contemplated by this
-------
Agreement, as described in SECTION 9, the date of which is referred to as the
Closing Date.
1.7 Encumbrance. Any security interest, security agreement, financing
-----------
statement filed with any Governmental Authority, conditional sale or other title
retention agreement, any lease, consignment or bailment given for purposes of
security, any mortgage, lien, indenture, pledge, option, encumbrance, adverse
interest, constructive trust or other trust, claim, attachment, exception to or
defect in title or other ownership interest (including but not limited to
reservations, rights of entry, possibilities of reverter, encroachments,
easements, rights-of-way, restrictive covenants, leases and licenses) of any
kind, which constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Governmental Permit, Seller Contract
or otherwise.
1.8 Environmental Law. Any Legal Requirement relating to pollution or
-----------------
protection of public health, safety or welfare or the environment, including
those relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
1.9 Equipment. All electronic devices, trunk and distribution coaxial and
---------
optical fiber cable, amplifiers, power supplies, conduit, vaults and pedestals,
grounding and pole hardware, subscriber's devices (including converters,
encoders, transformers behind television sets and fittings), headend hardware
(including origination, earth stations, transmission and distribution system),
test equipment, vehicles and other tangible personal property owned, leased,
used or held for use in the Business, the principal items of which are described
on SCHEDULE 1.9 (and, with respect to leased Equipment, on SCHEDULE 5.6).
4
<PAGE>
1.10 Equivalent Basic Subscribers (or EBSs). An active customer for Basic
--------------------------------------
Service either in a single household, a commercial establishment or in a multi-
unit dwelling (including a hotel unit); provided, however, that the number of
customers in a multi-unit dwelling or commercial establishment that obtain
service on a "bulk-rate" basis will be determined on a System by System basis by
dividing the gross bulk-rate billings for Basic Service and Expanded Basic
Service (but not billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or from any outlet
or connection other than the first outlet or connection or from any pass-through
charge for sales taxes, line-itemized franchise fees, fees charged by the FCC
and the like), attributable to such multi-unit dwelling or commercial
establishment during the most recent billing period ended prior to the date of
calculation (but excluding billings in excess of a single month's charge) by the
rate charged at the time of determination to individual households for the
highest level of Basic Service and Expanded Basic Service offered by such
System, such rate not to be less than the rate for such System set forth on
SCHEDULE 5.16 (excluding a la carte tiers or premium services, installation or
other non-recurring charges, converter rental, pass-through charges for sales
taxes, line-itemized franchise fees charged by the FCC and the like). For
purposes of this definition, an "active customer" will mean any person,
commercial establishment or multi-unit dwelling at any given time that is paying
for and receiving Basic Service from the System who has an account that is not
more than 60 days past due (except for past due amounts of $5 or less, provided
such account is otherwise current). For purposes of this definition, an "active
customer" does not include any person, commercial establishment or multi-unit
dwelling that as of the date of calculation has not paid in full the charges for
at least one month of the services ordered or any subscriber whose service is
pending disconnection for any reason. For purposes of this definition, the
number of days past due of a customer account will be determined from the first
day of the period for which the applicable billing relates.
1.11 Expanded Basic Service. Any video programming provided over a cable
----------------------
television system, regardless of service tier other than (a) Basic Service, (b)
any new product tier and (c) video programming offered on a per channel or per
program basis.
1.12 GAAP. Generally accepted accounting principles as in effect from time
----
to time in the United States of America.
1.13 Governmental Authority. The United States of America, any state,
----------------------
commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
county, municipality, province, parish or other instrumentality of any of the
foregoing.
1.14 Governmental Permits. All franchises, approvals, authorizations,
--------------------
permits, licenses, easements, registrations, qualifications, leases, variances
and similar
5
<PAGE>
rights obtained with respect to the Business or Assets from any Governmental
Authority, including those set forth on SCHEDULE 5.5.
1.15 Hazardous Substances. Any pollutant, contaminant, chemical,
--------------------
industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a hazard or potential hazard to the
Real Property or to Persons in or about the Real Property or cause the Real
Property to be in violation of any laws, regulations or ordinances of federal,
state or applicable local governments, (b) asbestos or any asbestos-containing
material of any kind or character, (c) polychlorinated biphenyls ("PCBs"), as
regulated by the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., (d)
-- ----
any materials or substances designated as "hazardous substances" pursuant to the
Clean Water Act, 33 U.S.C. (S) 1251 et seq., (e) "economic poison," as defined
-- ----
in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 135 et
--
seq., (f) "chemical substance," "new chemical substance" or "hazardous chemical
- ---
substance or mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
(S) 2601 et seq., (g) "hazardous substances" pursuant to the Comprehensive
-- ----
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
--
seq. and (h) "hazardous waste" pursuant to the Resource Conservation and
- ----
Recovery Act, 42 U.S.C. (S) 6901 et seq.
-------
1.16 Intangibles. All intangible assets, including subscriber lists,
-----------
accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Business.
1.17 Knowledge. The actual knowledge of a particular matter of one or more
---------
of the executive officers of a Person or the general manager or one or more of
the managers of such Person's Systems.
1.18 Legal Requirement. Applicable common law and any statute, ordinance,
-----------------
code, or other law, rule, regulation, order, technical or other written standard
or procedure enacted, adopted or applied by any Governmental Authority,
including judicial decisions applying common law or interpreting any other Legal
Requirement.
1.19 Losses. Any claims, losses, liabilities, damages, penalties, costs
------
and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and the cost to any Person making a claim or seeking
indemnification under this Agreement with respect to funds expended by such
Person by reason of the occurrence of any event with respect to which
indemnification is sought.
1.20 Pay TV. Premium programming services selected by and sold to
------
subscribers on a per channel or per program basis.
6
<PAGE>
1.21 Permitted Encumbrances. The following Encumbrances: (a) liens
----------------------
securing Taxes, assessments and governmental charges not yet due and payable,
(b) any zoning law or ordinance or any similar Legal Requirement, (c) any right
reserved to any Governmental Authority to regulate the affected property and (d)
as to Real Property interests, any Encumbrance reflected in the public records
and that does not individually or in the aggregate interfere with the right or
ability to own, use or operate the Real Property or to convey good, marketable
and indefeasible fee simple title to such Real Property, provided that
"Permitted Encumbrances" will not include any Encumbrance which could prevent or
inhibit in any way the conduct of the business of the affected System and
provided further that classification of any Encumbrance as a "Permitted
Encumbrance" will not affect any liability Seller may have for such Encumbrance,
including pursuant to any indemnity obligation under this Agreement.
1.22 Person. Any natural person, corporation, partnership, trust,
------
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.23 Real Property. All assets held by Seller related to the Business
-------------
consisting of realty, including appurtenances, improvements and fixtures located
on such realty, and any other interests in real property, including fee
interests, leasehold interests and easements, wire crossing permits, rights of
entry (except agreements related to multiple dwelling units) described on
SCHEDULE 5.7.
1.24 Required Consents. All franchises, licenses, authorizations,
-----------------
approvals and consents required under Governmental Permits, Seller Contracts or
otherwise for (a) Seller to transfer the Assets and the Business to Buyer, (b)
Buyer to conduct the Business and to own, lease, use and operate the Assets at
the places and in the manner in which the Business is conducted as of the date
of this Agreement and on the Closing Date (assuming that the Schoolcraft
Transaction and the Vicksburg Transaction (both as defined below) close on the
Closing Date) and (c) Buyer to assume and perform the Governmental Permits,
Seller Contracts and the other Assumed Liabilities.
1.25 Schoolcraft Purchase Agreement. That certain Asset Purchase Agreement
------------------------------
of even date herewith between Seller and Television Cable Service, Inc., a Texas
corporation ("TCS"), by which TCS has agreed to purchase from Seller the assets
which comprise the Schoolcraft System.
1.26 Schoolcraft System. The cable television system owned by Seller
------------------
serving the County of La Grange, Indiana, the Village of Schoolcraft and the
Townships of Schoolcraft and Flowerfield, all in Michigan.
1.27 Schoolcraft Transaction. The transaction contemplated by the
-----------------------
Schoolcraft Purchase Agreement.
7
<PAGE>
1.28 Seasonal Subscribers. Customers of the System who, between the date
--------------------
hereof and Closing, have participated in, or will have participated in, Seller's
seasonal subscriber program by paying $5 per month during the months that such
subscribers were out of town, and by resuming service, or agreeing to resume
service, upon their return to town (which service will resume without a
reconnection charge).
1.29 Seller Contracts. All contracts and agreements, other than
----------------
Governmental Permits and those relating to Real Property, pertaining to the
ownership, operation and maintenance of the Assets or the Business or used or
held for use in the Business, as described on SCHEDULE 5.6 or, in the case of
contracts and agreements relating to Real Property, on SCHEDULE 5.7.
1.30 Service Area. The area in which Seller operates the Business,
------------
specifically in and around the Townships of Brady, Calvin, Coloma, Constantine,
Fabius, Hagar, Hartford, La Grange, Lockport, Mendon, Mottville, Newburg,
Nottawa, Park, Pavilian, Penn, Pipestone, Pokagon, Porter, Prairie Ronde,
Sherman, Silver Creek, Watervliet, Wayne and White Pigeon, the Villages of
Centreville, Constantine, Vandalia, and White Pigeon, the Cities of Coloma,
Dowagiac, Three Rivers, and Watervliet, all in the State of Michigan, and the
County of Elkhart, Indiana.
1.31 System. A complete cable television reception and distribution system
------
operated in the conduct of the Business, consisting of one or more headends,
subscriber drops and associated electronic and other equipment, and which is, or
is capable of being without modification, operated as an independent system
without interconnections to other systems. Any systems which are interconnected
or which are served in total or in part by a common headend will be considered a
single System.
1.32 Taxes. All levies and assessments of any kind or nature imposed by
-----
any Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto.
1.33 Vicksburg Purchase Agreement. That certain Asset Purchase Agreement
----------------------------
of even date herewith between Seller and Tempo Cable, Inc., an Oklahoma
corporation ("Tempo"), by which Tempo has agreed to purchase from Seller the
assets which comprise the Vicksburg System.
1.34 Vicksburg System. The cable television system owned by Seller serving
----------------
the Village of Vicksburg, Michigan.
8
<PAGE>
1.35 Vicksburg Transaction. The transaction contemplated by the Vicksburg
---------------------
Purchase Agreement.
1.36 Other Definitions. The following terms are defined in the Sections
-----------------
indicated:
Term Section
---- -------
Action 11.4
Antitrust Division 7.7
Approval Deadline 10.1.4
Assumed Liabilities 4.1
Base Purchase Price 3.1(b)
Buford Transaction 8.2.8
Buyer Damages 11.5
Closing Date 1.8
Code 5.15.2
Cost of Service Election 5.9.4
Employee Benefit Plans 5.15.2
ERISA 5.15.1
Excluded Assets 4.2
FCC 1.12
Final Adjustments Report 3.3.2
Financial Statements 5.11
FTC 7.7
HSR Act 7.7
Indemnified Party 11.4
Indemnifying Party 11.4
Intercable 5.2
1992 Cable Act 5.9.4
Preliminary Adjustments Report 3.3.1
Rate Regulation Documents 5.9.4
Seller Damages 11.6
Survival Period 11.1
Taking 12.17.2
Transaction Documents 5.2
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this Agreement, at the
Closing, Seller will sell to Buyer, and Buyer will purchase from Seller, all of
Seller's rights, titles and interests in, to and under the Assets. Except as
otherwise specifically provided in this Agreement, all the Assets are intended
to be transferred to Buyer, whether or not described in the Schedules.
9
<PAGE>
SECTION 3. CONSIDERATION.
3.1 Base Purchase Price. Buyer will pay to Seller total cash
-------------------
consideration of $27,350,000 (the "Base Purchase Price"), subject to adjustment
as provided in SECTIONS 3.2 and 3.3. Such consideration will be paid at Closing
by wire transfer of immediately available funds pursuant to wire instructions
delivered by Seller to Buyer no later than two Business Days prior to the
Closing Date.
3.2 Adjustments to Base Purchase Price. The Base Purchase Price will be
----------------------------------
adjusted as follows:
3.2.1 If (a) the number of EBS's of the Business as of the Closing
Date, combined with the number of EBS's of the Schoolcraft System and the
Vicksburg System, is fewer than 17,400 and (b) the number of EBS's of the
---
Business as of the Closing Date is fewer than 15,180, then the Base Purchase
Price will be reduced by an amount equal to $1,802 multiplied by the positive
difference between (x) 15,180 and (y) the number of EBS's of the Business as of
the Closing Date; provided, however, that in calculating the number of EBS's,
-------- -------
the parties will consider 210 Seasonal Subscribers to be EBS's, and will not
count any additional Seasonal Subscribers as EBS's. In addition, if a reduction
is made in the Base Purchase Price as described above, and as of the Closing
Date, the Schoolcraft System has more than 1,512 EBS's and/or the Vicksburg
System has more than 708 EBS's, the Base Purchase Price, as reduced above, shall
be increased by (A) an amount equal to $1,719 multiplied by the positive
difference between (i) the number of EBS's of the Schoolcraft System as of the
Closing Date and (ii) 1512 and (B) an amount equal to $1,836 multiplied by the
positive difference between (X) the number of EBS's of the Vicksburg System as
of the Closing Date and (Y) 708; provided, however, that no such increase in the
Base Purchase Price shall cause the aggregate of (I) the Base Purchase Price so
adjusted, (II) the purchase price for the Vicksburg System as adjusted pursuant
to Section 3.2.1 of the Vicksburg Purchase Agreement and (III) the purchase
price for the Schoolcraft System, as adjusted pursuant to Section 3.2.1 of the
Schoolcraft Purchase Agreement, to exceed $31,250,000.
3.2.2 Adjustments on a pro rata basis as of the Closing Date will be
made for all prepaid expenses (but only to the extent the full benefit thereof
will be realizable by Buyer within 12 months after the Closing Date), accrued
expenses (including real and personal property Taxes and the economic value of
all accrued vacation time permitted by Buyer's policies to be taken after the
Closing Time by Seller's System employees hired by Buyer), prepaid income,
subscriber prepayments and accounts receivable related to the Business, all as
determined in accordance with GAAP consistently applied, and to reflect the
principle that all expenses and income attributable to the Business for the
period prior to the Closing Date are for the account of Seller, and all expenses
and income attributable to the Business for the period on and after the Closing
Date are for the account of Buyer. Seller will receive no credit for
10
<PAGE>
any accounts receivable (a) resulting from cable service sales any portion of
which is 60 days or more past due as of the Closing Date, (b) from subscribers
whose accounts are inactive or whose service is pending disconnection for any
reason as of the Closing Date or (c) resulting from advertising sales any
portion of which is 120 days or more past due as of the Closing Date.
3.2.3 Buyer's account will be credited for the amount of all advance
payments to, or funds of third parties on deposit with, Seller as of the Closing
Date, relating to the Business, including advance payments and deposits by
subscribers served by the Business for converters, encoders, decoders, cable
television service and related sales, and the liability therefor will be assumed
by Buyer.
3.3 Determination of Adjustments. Preliminary and final adjustments to
----------------------------
the Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at least 10
Business Days prior to the expected Closing Date, Seller will deliver to Buyer a
report (the "Preliminary Adjustments Report"), certified as to completeness and
accuracy by Seller, showing in detail the preliminary determination of the
adjustments referred to in SECTION 3.2, which are calculated as of the Closing
Date (or as of any other date agreed by the parties) and any documents
substantiating the adjustments proposed in the Preliminary Adjustments Report.
The Preliminary Adjustments Report will include a complete list of subscribers,
a detailed calculation of the number of Equivalent Basic Subscribers and a
schedule setting forth advance payments made to or by Seller and deposits made
by Seller, as well as accounts receivable information relating to the Business
(showing sums due and their respective aging as of the Closing Date). Seller
also will furnish to Buyer its billing report for the most current period as of
the Closing Date. Following receipt of such Preliminary Adjustments Report and
supporting information, Buyer will have five Business Days to review such
Preliminary Adjustments Report and supporting information and to notify Seller
of any disagreements with Seller's estimates. If Buyer provides a notice of
disagreement with Seller's estimates of the adjustments referred to in SECTION
3.2 within such five Business Day period, Buyer and Seller will negotiate in
good faith to resolve any such dispute and to reach an agreement prior to the
Closing Date on such estimated adjustments as of the Closing Date. The basis
for determining the Base Purchase Price to be paid at Closing will be (a) the
estimate so agreed upon by Buyer and Seller or (b) if no notice of disagreement
is provided, or if such notice is provided but the parties do not reach such an
agreement prior to the Closing Date, the estimate of such adjustments set forth
in the Preliminary Adjustments Report.
3.3.2 Within 90 days after the Closing, Seller will deliver to Buyer
a report (the "Final Adjustments Report"), similarly certified by Seller,
showing in detail the final determination of all adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together
11
<PAGE>
with any documents substantiating the adjustments proposed in the Final
Adjustments Report. Buyer will provide Seller with reasonable access to all
records which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments Report,
Buyer will give Seller written notice of Buyer's objections, if any, to the
Final Adjustments Report. If Buyer makes any such objection, the parties will
agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Any disputed amounts will be determined within 120 days after the
Closing Date by the accounting firm of Price Waterhouse, whose determination
will be conclusive. Seller and Buyer will bear equally the fees and expenses
payable to such firm in connection with such determination. The payment
required after such determination will be made by the responsible party by wire
transfer of immediately available funds to the other party within three Business
Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by Buyer under
---------------------------
this Agreement will be allocated among the Assets as set forth in a schedule to
be prepared not later than 180 days after the Closing Date (or April 1 of the
year following the Closing Date if earlier) by an independent appraiser with
significant experience in the cable television industry. Such appraiser will be
selected by the mutual agreement of Buyer and Seller within 30 days after the
date of this Agreement, and the fees of such appraiser will be shared equally by
Buyer and Seller. Buyer and Seller agree to be bound by the allocation and will
not take any position inconsistent with such allocation and will file all
returns and reports with respect to the transactions contemplated by this
Agreement, including all federal, state and local Tax returns, on the basis of
such allocation.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. Seller will assign, and Buyer will assume
-------------------------
and after the Closing will pay, discharge and perform the following (the
"Assumed Liabilities"): (a) Seller's obligations to subscribers of the Business
for (i) subscriber deposits held by Seller as of the Closing Date and which are
refundable, in the amount for which Buyer received credit under SECTION 3.2,
(ii) subscriber advance payments held by Seller as of the Closing Date for
services to be rendered by a System after the Closing Date, in the amount for
which Buyer received credit under SECTION 3.2 and (iii) the delivery of cable
television service to subscribers of the Business after the Closing Date; and
(b) obligations accruing and relating to periods after the Closing Date under
Governmental Permits listed on SCHEDULE 5.5 (to the extent that such
Governmental Permits are transferable) and Seller Contracts. Buyer will not
assume or have any responsibility for any liabilities or obligations of Seller
other than the
12
<PAGE>
Assumed Liabilities. In no event will Buyer assume or have any responsibility
for any liabilities or obligations associated with the Excluded Assets.
4.2 Excluded Assets. The Excluded Assets, which will be retained by
---------------
Seller, will consist of the following: (a) programming contracts,
retransmission consent agreements and pole attachment agreements (except for
those set forth on SCHEDULE 5.6); (b) Employee Benefit Plans; (c) insurance
policies and rights and claims thereunder (except as otherwise provided in
SECTION 12.17); (d) bonds, letters of credit, surety instruments and other
similar items; (e) cash and cash equivalents and notes receivable; (f) Seller's
trademarks, trade names, service marks, service names, logos and similar
proprietary rights (subject to Buyer's rights under SECTION 7.5); (g) Seller's
rights under any agreement governing or evidencing an obligation of Seller for
borrowed money; (h) Seller Contracts for subscriber billing and equipment; (i)
Seller's rights under any contract, license, authorization, agreement or
commitment other than those creating or evidencing Assumed Liabilities; and (j)
the assets described on SCHEDULE 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer, as of the date of this Agreement
and as of the Closing, as follows:
5.1 Organization and Qualification. Seller is a general partnership duly
------------------------------
organized and validly existing under the laws of the State of Colorado and has
all requisite partnership power and authority to own, lease and use the Assets
owned, leased or used by it and to conduct the Business as it is currently
conducted. Seller is duly qualified to do business in the States of Michigan
and Indiana, and under the laws of each jurisdiction in which the ownership,
leasing or use of the Assets owned, leased or used by it or the nature of
Seller's activities makes such qualification necessary, except in any such
jurisdiction where the failure to be so qualified and in good standing would not
have a material adverse effect on the Business, the Assets or the Systems or on
the ability of Seller to perform its obligations under this Agreement. The
general partners of Seller are Jones Cable Income Fund 1-B, Ltd. and Jones Cable
Income Fund 1-C, Ltd.
5.2 Authority and Validity. Seller has all requisite partnership power
----------------------
and authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and all other
documents and instruments to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") to which Seller is a party. Subject to approval by the Board of
Directors of Jones Intercable, Inc. ("Intercable"), the sole general partner of
each of the general partners of Seller, the execution and delivery by Seller of,
the performance by Seller of its obligations under, and the consummation by
Seller of the transactions contemplated by, this
13
<PAGE>
Agreement and the Transaction Documents to which Seller is a party have been
duly and validly authorized by all necessary action by or on behalf of Seller.
This Agreement has been, and when executed and delivered by Seller the
Transaction Documents will be, duly and validly executed and delivered by Seller
and the valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the enforcement of creditors' rights generally
or by principles governing the availability of equitable remedies.
5.3 No Conflict; Required Consents. Except for the Required Consents, all
------------------------------
of which are listed on SCHEDULE 5.3, the execution and delivery by Seller, the
performance of Seller under, and the consummation of the transactions
contemplated by, this Agreement and the Transaction Documents to which Seller is
a party do not and will not: (a) violate any provision of the Partnership
Agreement of Seller; (b) violate any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with any Governmental Authority or other Person; or (d)
(i) violate or result in a breach of or default under (without regard to
requirements of notice, lapse of time, or elections of any Person, or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under any Seller Contract or any other
instrument evidencing any of the Assets or by which Seller or any of its assets
is bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications, and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on any System, the Business or Seller, the validity, binding
effect or enforceability of this Agreement or on the ability of Seller to
perform its obligations under this Agreement or the Transaction Documents to
which Seller is a party.
5.4 Assets. Seller has exclusive, good and marketable title to (or, in
------
the case of Assets that are leased, valid leasehold interests in) the Assets
(other than Real Property, as to which the representations and warranties in
SECTION 5.7 apply). The Assets are free and clear of all Encumbrances, except
(a) Permitted Encumbrances and (b) Encumbrances described on SCHEDULE 5.4, all
of which will be terminated, released or, in the case of rights of refusal
listed on SCHEDULE 5.4, waived, as appropriate, at or prior to the Closing.
Except as described on SCHEDULE 5.6, none of the Equipment is leased by Seller
from any other Person. All the Equipment is in good operating condition and
repair (ordinary wear and tear excepted). Except for items included in the
Excluded Assets and the assets which comprise the Schoolcraft System and the
Vicksburg System, the Assets constitute all the assets necessary to permit Buyer
to (i) conduct the Business and to operate the Systems substantially as they are
being conducted and operated on the date of this Agreement and in compliance in
all material
14
<PAGE>
respects with all Legal Requirements, Governmental Permits and Seller Contracts
and (ii) perform all the Assumed Liabilities.
5.5 Governmental Permits. All Governmental Permits are listed on SCHEDULE
--------------------
5.5. Complete and correct copies of all Governmental Permits have been
delivered by Seller to Buyer. Each Governmental Permit is in full force and
effect and Seller is not and, to Seller's Knowledge, the other party thereto is
not, in breach or default of any material terms or conditions thereunder, and is
valid under all applicable Legal Requirements according to its terms. There is
no legal action, governmental proceeding or investigation, pending or, to
Seller's Knowledge threatened, to terminate, suspend or modify any Governmental
Permit and Seller is in compliance with the material terms and conditions of all
the Governmental Permits and with other material applicable requirements of all
Governmental Authorities (including the FCC and the Register of Copyrights)
relating to the Governmental Permits, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
As of the date of this Agreement, to Seller's Knowledge, no third party has been
granted or has applied for a cable television franchise or is providing or
intending to provide cable television services in any of the communities or
unincorporated areas currently served by the Business.
5.6 Seller Contracts. All Seller Contracts (other than those constituting
----------------
Excluded Assets) are described on SCHEDULE 5.6 or 5.7. Complete and correct
copies of all Seller Contracts have been delivered by Seller to Buyer. Each
Seller Contract is in full force and effect and constitutes the valid, legal,
binding and enforceable obligation of Seller, and Seller is not and to Seller's
Knowledge each other party thereto is not, in breach or default of any material
terms or conditions thereunder.
5.7 Real Property.
-------------
5.7.1 All the Assets consisting of Real Property interests are
described on SCHEDULE 5.7. Except as otherwise disclosed on SCHEDULE 5.7,
Seller holds good, marketable and indefeasible fee simple title to the Real
Property shown as being owned by Seller on SCHEDULE 5.7 and the valid and
enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Seller has valid and enforceable leasehold interests in
Real Property shown as being leased by Seller on SCHEDULE 5.7 and, with respect
to other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 5.7, subject only
to Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in good condition and repair and are suitable for the purposes used. The
current use and occupancy of the Real Property do not constitute nonconforming
uses under any applicable zoning Legal Requirements.
15
<PAGE>
5.7.2 The documents delivered by Seller to Buyer as evidence of each
Seller Contract that is a lease of Real Property constitute the entire agreement
with the landlord in question. There are no leases or other agreements, oral or
written, granting to any Person other than Seller the right to occupy or use any
Real Property, except as described on SCHEDULE 5.7. All easements, rights-of-
way and other rights appurtenant to, or which are necessary for Seller's current
use of, any Real Property are valid and in full force and effect, and Seller has
not received any notice with respect to the termination, breach or impairment of
any of those rights. Each parcel of Real Property, any improvements constructed
thereon and their current use (a) has access to and over all public streets, or
private streets for which Seller has a valid right of ingress and egress, (b)
conforms in its current use and occupancy to all zoning requirements without
reliance upon a variance issued by a Governmental Authority or a classification
of the parcel in question as a nonconforming use, and (c) conforms in all
material respects in its use to all restrictive covenants, if any, or other
Encumbrances affecting all or part of such parcel.
5.8 Environmental Matters.
---------------------
5.8.1 The Real Property currently complies in all material respects
with and, to Seller's Knowledge, has previously been operated in compliance in
all material respects with, all Environmental Laws. Seller has not directly or
indirectly (a) generated, released, stored, used, treated, handled, discharged
or disposed of any Hazardous Substances at, on, under, in or about, or in any
other manner affecting, any Real Property, (b) transported any Hazardous
Substances to or from any Real Property or (c) undertaken or caused to be
undertaken any other activities relating to the Real Property which could
reasonably give rise to any liability under any Environmental Law, and, to
Seller's Knowledge, no other present or previous owner, tenant, occupant or user
of any Real Property or any other Person has committed or suffered any of the
foregoing. To Seller's Knowledge, (i) no release of Hazardous Substances
outside the Real Property has entered or threatens to enter any Real Property,
nor (ii) is there any pending or threatened claim based on Environmental Laws
which arises from any condition of the land surrounding any Real Property. No
litigation based on Environmental Laws which relates to any Real Property or any
operations on conditions on it (A) has been asserted or conducted in the past or
is currently pending against or with respect to Seller or, to Seller's
Knowledge, any other Person, or (B) to Seller's Knowledge is threatened or
contemplated.
5.8.2 To Seller's Knowledge, other than as described on SCHEDULE 5.8,
(a) no aboveground or underground storage tanks are currently or have been
located on any Real Property, (b) no Real Property has been used at any time as
a gasoline service station or any other facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products or wastes and
(c) no building or other structure on any Real Property contains asbestos-
containing material.
16
<PAGE>
5.8.3 Seller has provided Buyer with complete and correct copies of
(a) all studies, reports, surveys or other materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(b) all notices or other materials in Seller's possession or, to Seller's
Knowledge to which it has access, that were received from any Governmental
Authority having the power to administer or enforce any Environmental Laws
relating to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (c) all materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to any litigation or
allegation by any Person concerning any Environmental Law.
5.9 Compliance with Legal Requirements.
----------------------------------
5.9.1 The ownership, leasing and use of the Assets as they are
currently owned, leased and used and the conduct of the Business and the
operation of the Systems as they are currently conducted and operated do not
violate or infringe, in any material respect, any Legal Requirements currently
in effect (other than the Legal Requirements described in SECTION 5.9.4, as to
which the provisions of SECTION 5.9.4 will apply). Seller has received no
notice of any violation by Seller or the Business of any Legal Requirement
applicable to the Business or the Systems as currently conducted, and to
Seller's Knowledge, there is no basis for the allegation of any such a
violation.
5.9.2 A valid request for renewal has been duly and timely filed
under Section 626 of the Cable Communications Policy Act of 1984 with the proper
Governmental Authority with respect to applicable Governmental Permits with
franchising authorities that have expired prior to, or will expire within 36
months after, the date of this Agreement.
5.9.3 Seller has complied, and the Business is in compliance, in all
material respects, with the specifications set forth in Part 76, Subpart K of
the rules and regulations of the FCC, Section 111 of the U.S. Copyright Act of
1976 and the applicable rules and regulations thereunder and the applicable
rules and regulations of the U.S. Copyright Office, the Register of Copyrights,
the Copyright Royalty Tribunal and the Communications Act of 1934, including
provisions of any thereof pertaining to signal leakage, to utility pole make
ready and to grounding and bonding of cable television systems (in each case as
the same is currently in effect), and all other applicable Legal Requirements
relating to the construction, maintenance, ownership and operation of the
Assets, the Systems and the Business.
5.9.4 Notwithstanding the foregoing, to Seller's Knowledge, each
System is in compliance in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the FCC
rules and regulations promulgated thereunder (the "1992 Cable Act") as such
Legal Requirements
17
<PAGE>
relate to the operation of the Business; provided, however, that Seller does not
hereby make any representation about rates charged to subscribers, other than
the representation regarding the rates charged to subscribers set forth below.
Seller has complied in all material respects with the must carry and
retransmission consent provisions of the 1992 Cable Act. Seller has used
reasonable good faith efforts to establish rates charged to subscribers,
effective since September 1, 1993, that are or were allowable under the 1992
Cable Act and any authoritative interpretation thereof now or then in effect,
whether or not such rates are or were subject to regulation at that date by any
Governmental Authority, including any local franchising authority and/or the
FCC, unless such rates were not subject to regulation pursuant to a specific
exemption from rate regulation contained in the 1992 Cable Act other than the
failure of any franchising authority to have been certified to regulate rates.
Notwithstanding the foregoing, Seller makes no representation or warranty that
the rates charged to subscribers (a) are allowable under any rules and
regulations of the FCC or any authoritative interpretation thereof, or (b) would
be allowable under any rules and regulations of the FCC or any authoritative
interpretation thereof promulgated after the date of the Closing. Seller has
delivered to Buyer complete and correct copies of all FCC Forms 393, 1200, 1205,
1210, 1215, 1220, 1225, 1235 and 1240 filed with respect to the Systems and
copies of all other FCC Forms filed by Seller and of all correspondence with any
Governmental Authority relating to rate regulation generally or specific rates
charged to subscribers with respect to the Systems, including copies of any
complaints filed with the FCC with respect to any rates charged to subscribers
of the Systems, and any other documentation supporting an exemption from the
rate regulation provisions of the 1992 Cable Act claimed by Seller with respect
to any of the Systems (collectively, "Rate Regulation Documents"). As of the
date of this Agreement, Seller has received no notice from any Governmental
Authority with respect to an intention to enforce customer service standards
pursuant to the 1992 Cable Act and Seller has not agreed with any Governmental
Authority to establish customer service standards that exceed the customer
service standards promulgated pursuant to the 1992 Cable Act. In addition,
Seller has also delivered to Buyer documentation for each of the Systems in
which the franchising authority has not certified to regulate rates as of the
date of this Agreement showing a determination of allowable rates using a
benchmark methodology. Except as described in SCHEDULE 5.9, Seller has not made
any election with respect to any cost of service proceeding conducted in
accordance with Part 76.922 of Title 47 of the Code of Federal Regulations or
any similar proceeding (a "Cost of Service Election") with respect to any of the
Systems.
5.10 Patents, Trademarks and Copyrights. Seller has timely and accurately
----------------------------------
made all requisite filings and payments with the Register of Copyrights with
respect to the Business. Seller has delivered to Buyer complete and correct
copies of all current reports and filings, and all reports and filings for the
past three years, made or filed pursuant to copyright rules and regulations with
respect to the Business. Seller does not possess any patent, patent right,
trademark or copyright material to the operation of
18
<PAGE>
the Business and Seller is not a party to any license or royalty agreement with
respect to any patent, trademark or copyright except for licenses respecting
program material and obligations under the Copyright Act of 1976 applicable to
cable television systems generally. The Business and the System have been
operated in such a manner so as not to violate or infringe upon the rights of,
or give rise to any rightful claim of any Person for copyright, trademark,
service mark, patent, license, trade secret infringement or the like.
5.11 Financial Statements. A correct copy of the combined unaudited
--------------------
financial statements for the Systems and the Schoolcraft System and the
Vicksburg System as of September 30, 1997, including an unaudited income
statement and balance sheet which fairly present the financial condition of the
Systems, is attached as SCHEDULE 5.11 (collectively, the "Financial
Statements"). At the date of the Financial Statements, Seller had no liability
or obligation, whether accrued, absolute, fixed or contingent (including
liabilities for Taxes or unusual forward or long-term commitments), required by
GAAP to be reflected or reserved against therein that were not fully reflected
or reserved against on the balance sheet included in the Financial Statements,
other than liabilities included in current liabilities, and none of which was or
would be material to the Business.
5.12 Absence of Certain Changes. Since September 30, 1997 (a) Seller has
--------------------------
not incurred any obligation or liability (contingent or otherwise), except
normal trade or business obligations incurred in the ordinary course of
business, the performance of which would be reasonably likely, individually or
in the aggregate, to have a material adverse effect on the financial condition
or results of operations of the Business, (b) there has been no material adverse
change (except any change affecting the United States cable industry as a whole,
including any change arising from (i) legislation, litigation, rulemaking or
regulation or (ii) competition caused by or arising from other multiple channel
distribution services) in the business, condition (financial or otherwise) or
liabilities of the Business, and (c) the Business has been conducted only in the
ordinary course of business.
5.13 Legal Proceedings. Except as set forth in SCHEDULE 5.13: (a) there
-----------------
is no claim, investigation or litigation pending or, to Seller's Knowledge,
threatened, by or before any Governmental Authority or private arbitration
tribunal against Seller which, if adversely determined, would materially
adversely affect the financial condition or operations of the Business, the
Systems, the Assets or the ability of Seller to perform its obligations under
this Agreement, or which, if adversely determined, would result in the
modification, revocation, termination, suspension or other limitation of any of
the Governmental Permits, Seller Contracts or leases or other documents
evidencing the Real Property; and (b) there is not in existence any judgment
requiring Seller to take any action of any kind with respect to the Assets or
the operation of the Systems, or to which Seller (with respect to the Systems),
the Systems or the Assets are subject or by which they are bound or affected.
19
<PAGE>
5.14 Tax Returns; Other Reports. Seller has duly and timely filed in
--------------------------
correct form all federal, state and local Tax returns and all other Tax reports
required to be filed by Seller and has timely paid all Taxes which have become
due and payable, whether or not shown on any such report or return, the failure
of which to be filed or paid could adversely affect the Assets or result in the
imposition of an Encumbrance upon the Assets, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as specifically identified on SCHEDULE 5.14, Seller has received no
notice of, nor does Seller have any Knowledge of, any deficiency, assessment or
audit, or proposed deficiency, assessment or audit from any taxing Governmental
Authority which could affect or result in the imposition of an Encumbrance upon
the Assets.
5.15 Employment Matters.
------------------
5.15.1 SCHEDULE 5.15 contains a complete and correct list of names
and positions of all employees of Seller engaged in the Business as of the date
set forth in such SCHEDULE. Seller has no employment agreements, either written
or oral, with any employee of the Business. Seller has complied in all material
respects with applicable Legal Requirements relating to the employment of labor,
including WARN, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), continuation coverage requirements with respect to group health
plans, and those relating to wages, hours, collective bargaining, unemployment
insurance, worker's compensation, equal employment opportunity, age and
disability discrimination, immigration control and the payment and withholding
of Taxes.
5.15.2 Each "employee benefit plan" or "multiemployer plan" (as
those terms are defined in ERISA) with respect to which Seller or any ERISA
Affiliate (as defined in ERISA) of Seller has any liability is set forth on
SCHEDULE 5.15 (the "Employee Benefit Plans"). Neither Seller nor its ERISA
Affiliates nor any Employee Benefit Plan is in material violation of any
provision of ERISA. No "reportable event," as defined in Section 4043 of ERISA,
has occurred and is continuing with respect to any Employee Benefit Plan. No
"prohibited transaction," within the meaning of Section 406 of ERISA, has
occurred with respect to any such Employee Benefit Plan, and no "accumulated
funding deficiency" or "withdrawal liability" (both as defined in Section 302 of
ERISA) exists with respect to any such Employee Benefit Plan. After the
Closing, Buyer will not be required, under ERISA, the Internal Revenue Code of
1986, as amended (the "Code") or any collective bargaining agreement, to
establish, maintain or continue any Employee Benefit Plan currently maintained
by Seller or any of its ERISA Affiliates.
5.15.3 Seller is not a party to any collective bargaining
agreements and Seller has not recognized or agreed to recognize and has no duty
to bargain with any labor organization or collective bargaining unit. There are
not pending any unfair
20
<PAGE>
labor practice charges against Seller, any demand for recognition or any other
request or demand from a labor organization for representative status with
respect to any Person employed by Seller. To Seller's Knowledge, its employees
are not engaged in organizing activity with respect to any labor organization.
Seller has no employment agreement, either written or oral, express or implied,
that would require Buyer to employ any Person after the Closing Date.
5.16 Systems Information. SCHEDULE 5.16 sets forth a materially true and
-------------------
accurate description of the following information relating to the Business as of
the most recent monthly report generated by Seller in the ordinary course of
business containing the information required to prepare such SCHEDULE (provided
that such date is no earlier than two months prior to the date of this
Agreement):
(a) the approximate number of miles of plant included in the Assets;
(b) the number of subscribers and EBS's served by the Systems for each
Franchise;
(c) the approximate number of single family homes and residential
dwelling units passed by the Systems;
(d) a description of basic and optional or tier services available
from the Systems, the rates charged by Seller for each and the number of
subscribers and subscriber equivalents receiving each optional or tier
service;
(e) the stations and signals carried by the Systems and the channel
position of each such signal and station; and
(f) the cities, towns, villages, townships, boroughs and counties
served by the Systems.
5.17 Bonds. Except as set forth on SCHEDULE 5.17, as of the date of this
-----
Agreement, there are no franchise, construction, fidelity, performance, or other
bonds or letters of credit posted by Seller in connection with its operation or
ownership of any of the Systems or Assets.
5.18 Finders and Brokers. Seller has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer could be liable.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.
21
<PAGE>
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller, as of the date of this Agreement and as of the Closing, as
follows:
6.1 Organization and Qualification. Buyer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to own, lease and use
the assets owned, leased or used by it and to conduct its business as it is
currently conducted. Buyer is duly qualified to do business and is in good
standing under the laws of Michigan and Indiana, and of each jurisdiction in
which the ownership, leasing or use of the assets owned, leased or used by it or
the nature of Buyer's activities makes such qualification necessary, except in
any such jurisdiction where the failure to be so qualified and in good standing
would not have a material adverse effect on Buyer or on the ability of Buyer to
perform its obligations under this Agreement.
6.2 Authority and Validity. Buyer has all requisite corporate power and
----------------------
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party. The execution and delivery by Buyer of,
the performance by Buyer of its obligations under, and the consummation by Buyer
of the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party have been duly and validly authorized by all
necessary action by or on behalf of Buyer. This Agreement has been, and when
executed and delivered by Buyer the Transaction Documents will be, duly and
validly executed and delivered by Buyer and the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to the
enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
6.3 No Conflicts; Required Consents. Except for the Required Consents,
-------------------------------
the execution and delivery by Buyer, the performance of Buyer under, and the
consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party do not and will not (a) violate
any provision of the charter or bylaws of Buyer, (b) violate any Legal
Requirement, (c) require any consent, approval or authorization of, or filing of
any certificate, notice, application, report or other document with any
Governmental Authority or other Person or (d) (i) violate or result in a breach
of or constitute a default under (without regard to requirements of notice,
lapse of time or elections of any Person or any combination thereof), (ii)
permit or result in the termination, suspension, modification of, (iii) result
in the acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of any
Encumbrance under, any instrument or other agreement to which Buyer is a party
or by which Buyer or any of its assets is bound or affected, except for purposes
of this clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have a material adverse effect on the
22
<PAGE>
validity, binding effect or enforceability of this Agreement or on the ability
of Buyer to perform its obligations under this Agreement or the Transaction
Documents to which it is a party.
6.4 Finders and Brokers. Buyer has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller could be liable.
6.5 Legal Proceedings. There are no claims, actions, suits, proceedings
-----------------
or investigations pending or, to Buyer's Knowledge, threatened, by or before any
Governmental Authority, or any arbitrator, by or against or affecting or
relating to Buyer which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this Agreement
------------------------------
and the Closing Date, Seller will give Buyer and its counsel, accountants and
other representatives full access during normal business hours upon reasonable
notice to all the premises and books and records of the Business and to all the
Assets and to the System personnel and will furnish to Buyer and such
representatives all such documents, financial information, and other information
regarding the Business and the Assets as Buyer from time to time reasonably may
request; provided that no such investigation will affect or limit the scope of
any of Seller's representations, warranties, covenants and indemnities in this
Agreement or any Transaction Document or limit liability for any breach of any
of the foregoing.
7.2 Continuity and Maintenance of Operations; Financial Statements.
--------------------------------------------------------------
Except as Buyer may otherwise consent in writing, between the date of this
Agreement and the Closing:
7.2.1 Seller will conduct the Business and operate the Systems only
in the usual, regular and ordinary course consistent with past practices
(including making budgeted capital expenditures and fulfilling installation
requests) and will use commercially reasonable efforts to (a) preserve its
current business intact, including preserving existing relationships with
franchising authorities, suppliers, customers and others having business
dealings with Seller relating to the Business unless Buyer requests otherwise,
(b) keep available the services of its employees and agents providing services
in connection with the Business and (c) continue making marketing, advertising
and promotional expenditures with respect to the Business consistent with past
practices.
23
<PAGE>
7.2.2 Seller will maintain the Assets in good repair, order and
condition (ordinary wear and tear excepted), will maintain equipment and
inventory at historical levels consistent with past practices, will maintain in
full force and effect, policies of insurance with respect to the Business in
such amounts and with respect to such risks as customarily maintained by
operators of cable television systems of the size and geographic location as the
Systems and will maintain its books, records and accounts in the usual, regular
and ordinary manner on a basis consistent with past practices. Seller will not
itself, and will not permit any of its officers, directors, shareholders, agents
or employees to, pay any of Seller's subscriber accounts receivable (other than
for their own residences) prior to the Closing Date. Seller will continue to
implement its procedures for disconnection and discontinuance of service to
subscribers whose accounts are delinquent in accordance with those in effect on
the date of this Agreement.
7.2.3 Without the prior approval of Buyer, Seller will not (a) change
the rate charged for Basic Service, Expanded Basic Service or Pay TV or add,
delete, retier or repackage any programming services except to the extent
required under the 1992 Cable Act or any other Legal Requirement, provided
however if Seller changes such rates in order to so comply, Seller will provide
Buyer with copies of any FCC forms (even if not filed with any Governmental
Authority) that Seller used to determine that the new rates were allowable, (b)
sell, transfer or assign any portion of the Assets other than sales in the
ordinary course of business or permit the creation of any Encumbrance on any
Asset other than a Permitted Encumbrance or any Encumbrance which will be
released at or prior to Closing, (c) modify in any material respect, terminate,
suspend or abrogate any Governmental Permits, Seller Contracts or any other
contract or agreement (other than those constituting Excluded Assets), (d) enter
into any contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to any System or the Business involving an
expenditure in excess of $25,000, other than contracts or commitments which are
cancelable on 30 days' notice or less without penalty, (e) take or omit to take
any action that would result in any of its representations or warranties in this
Agreement or in any Transaction Document not being true and correct when made or
as of the Closing, (f) engage in any marketing, subscriber installation or
collection practices that are inconsistent with past practices, or (g) enter
into any agreement with or commitment to any competitive access providers with
respect to the Systems
7.2.4 Seller promptly will deliver to Buyer true and complete copies
of monthly and quarterly financial statements and operating reports and any
reports with respect to the combined operations of the Business and the
Schoolcraft System and the Vicksburg System, prepared by or for Seller at any
time between the date of this Agreement and the Closing Date. All financial
statements so delivered will be prepared in accordance with GAAP on a basis
consistent with the Financial Statements.
24
<PAGE>
7.2.5 Seller will give or cause to be given to Buyer as soon as
reasonably possible but in any event no later than 5 Business Days prior to the
date of submission to the appropriate Governmental Authority, copies of all Rate
Regulation Documents prepared with respect to any of the Systems, including any
Cost of Service Elections other than those described on SCHEDULE 5.9, and Seller
will make a good faith effort to address any specific concerns raised by Buyer
with respect to such documents.
7.2.6 Seller will duly and timely file a valid notice of renewal
under Section 626 of the Cable Communications Policy Act of 1984 with the
appropriate Governmental Authority with respect to all cable television
franchises of the Business that will expire within 36 months after any date
between the date of this Agreement and the Closing Date.
7.2.7 Seller will use reasonable efforts to extend any cable
television franchises of the Business that expire on or prior to December 31,
1999 for at least 3 years from December 31, 1999.
7.2.8 Seller will promptly notify Buyer of any fact, circumstance,
event or action by it or otherwise (a) which, if known at the date of this
Agreement, would have been required to be disclosed in or pursuant to this
Agreement or (b) the existence, occurrence or taking of which would result in
any of Seller's representations and warranties in this Agreement or any
Transaction Document not being true, complete and correct when made or at the
Closing, and, with respect to clause (b) use its best efforts to remedy the
same.
7.3 Employee Matters.
----------------
7.3.1 Buyer will have no obligation to employ or offer employment to
any of the employees of Seller. As of the Closing Date, Seller will terminate
the employment of all its employees who were employed incidental to the conduct
of the Business whose employment will not continue with Seller after the Closing
and will promptly pay to all such employees all compensation, including
salaries, commissions, bonuses, deferred compensation, severance, insurance,
pensions, profit sharing, vacation (except for accrued vacation included in the
adjustments pursuant to SECTION 3.2), sick pay and other compensation or
benefits to which they are entitled for periods prior to the Closing, including
all amounts, if any, payable on account of the termination of their employment.
Seller agrees to cooperate in all reasonable respects with Buyer to allow Buyer
to evaluate and interview employees of the Business to make hiring decisions.
Such cooperation will include but not be limited to allowing Buyer to contact
employees during work time and, with the consent of the employee, making
personnel records available. Buyer will give Seller written notice on or before
60 days after the date hereof of the name of all employees of the System to whom
Buyer desires to offer employment on and after the Closing Date (subject to
satisfaction of Buyer's conditions for employment). Seller will not, without
the prior written consent of
25
<PAGE>
Buyer, change the compensation or benefits of any employees of the Business
except in accordance with past practice.
7.3.2 All claims and obligations under, pursuant to or in connection
with any welfare, medical, insurance, disability or other employee benefit plans
of Seller or arising under any Legal Requirement affecting employees of Seller
incurred on or before the Closing Date or resulting or arising from events or
occurrences occurring or commencing on or before the Closing Date will remain
the responsibility of Seller, whether or not such employees are hired by Buyer
after the Closing.
7.3.3 Seller will remain solely responsible for, and will indemnify
and hold harmless Buyer from and against all Losses arising from or with respect
to, all salaries and all severance, vacation (except for accrued vacation
included in the adjustments pursuant to SECTION 3.2), medical, sick, holiday,
continuation coverage and other compensation or benefits to which Seller's
employees (whether or not hired by Buyer) may be entitled as a result of their
employment by Seller prior to the Closing, the termination of their employment
prior to the Closing, the consummation of the transactions contemplated hereby
or pursuant to any applicable Legal Requirement (including without limitation
WARN) or otherwise relating to their employment prior to the Closing.
7.3.4 Nothing in this Agreement will require Buyer to assume any
collective bargaining agreement between Seller and any labor organization.
7.4 Leased Vehicles; Other Capital Leases. Seller will pay the remaining
-------------------------------------
balances on any leases for vehicles or capital leases included in the Equipment
and will deliver title to such vehicles and other Equipment free and clear of
all Encumbrances (other than Permitted Encumbrances) to Buyer at the Closing.
7.5 Required Consents; Estoppel Certificates.
----------------------------------------
7.5.1 Seller will use commercially reasonable efforts to obtain in
writing, as promptly as possible and at its expense, all the Required Consents
and any other consent, authorization or approval required to be obtained by
Seller in connection with the transactions contemplated by this Agreement, in
form and substance reasonably satisfactory to Buyer and deliver to Buyer copies
of such Required Consents and such other consents, authorizations or approvals
promptly after they are obtained by Seller. Such Required Consents will be
proposed in a form that provides confirmation from the third party of the
continued existence of and the absence of defaults under the applicable Seller
Contract or Governmental Permit. Buyer will cooperate with Seller to obtain all
Required Consents, but Buyer will not be required to accept or agree or accede
to any modifications or amendments to, or changes in, or the imposition of any
condition to the transfer to Buyer of (in each case other than inconsequential
matters with no adverse effect on Buyer), any Seller Contract or
26
<PAGE>
Governmental Permit that are not acceptable to Buyer in its sole discretion.
Notwithstanding the foregoing, the parties will deliver to the appropriate
Governmental Authority requests for the necessary consents to transfer the
Governmental Permits, and will complete, execute and deliver to the appropriate
Governmental Authority, the FCC Forms 394 prepared by Buyer with respect to each
Governmental Permit as to which the parties agree that such Form 394 should be
delivered, and failing an agreement between the parties, to any Governmental
Authority requested by Seller. In addition, to the extent the parties agree not
to submit a Form 394 to any Governmental Authority, if such Governmental
Authority has not acted on a request of the parties to consent to the transfer
of the relevant Governmental Permit within 75 days after such request has been
made, either party may, upon notice to the other, require that a Form 394 be
submitted to such Governmental Authority, and the parties will cooperate to
submit such Form 394 within five Business Days after such notice has been given.
7.5.2 Seller will use commercially reasonable efforts to obtain for
each lease that has not been recorded in the public records, execution of a
document suitable for recording in the public records and sufficient after
recording to constitute a memorandum of lease.
7.6 Title Commitments and Surveys.
-----------------------------
7.6.1 After the execution of this Agreement, Buyer will order at
Seller's expense (a) commitments for owner's title insurance policies on all
Real Property owned by Seller and on easements which provide access to each such
parcel of real property, (b) commitments for lessee's title insurance policies
for all Real Property leased by Seller which is used for headend or tower sites
and on easements which provide access to each such site and (c) an ALTA survey
(including such items on Table A of the Minimum Standard Detail Requirements and
Classifications thereto that Buyer in its reasonable judgment determines are
desirable or necessary) on each parcel of Real Property for which a title
insurance policy is to be obtained. The title commitments will evidence a
commitment to issue an ALTA title insurance policy insuring good, marketable and
indefeasible fee simple title or leasehold interest, in the case of Leased Real
Property, if applicable) to each parcel of such Real Property, subject only to
Permitted Encumbrances, for such amount as Buyer directs and will contain no
exceptions except for items which in Buyer's reasonable opinion do not adversely
affect (other than in an immaterial way as to any individual parcel) the good,
marketable and indefeasible title to or Buyer's access or quiet use or enjoyment
of such Real Property in the manner the Real Property is presently used or in
the normal conduct of the Business. At the Closing, Seller will cause Buyer to
receive, at Seller's expense, title commitments redated to the date and time of
Closing. In the event Seller has not eliminated or caused to be eliminated all
unacceptable exceptions from such policies or commitments prior to Closing, and
Buyer elects to proceed with the Closing, Buyer will be entitled to
indemnification with respect to such exceptions as provided in SECTION 11.2.
27
<PAGE>
7.6.2 Title insurance policies on all Real Property in such amounts
as Buyer directs will be delivered to Buyer at Seller's expense within 30 days
after the Closing Date evidencing title to the Real Property vested in Buyer
consistent with the commitments delivered at the Closing pursuant to SECTION
7.6.1.
7.7 HSR Notification. As soon as practicable after the execution of this
----------------
Agreement, but in any event no later than 30 days after such execution, Seller
and Buyer will each complete and file, or cause to be completed and filed, any
notification and report required to be filed under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); and each such
filing will request early termination of the waiting period imposed by the HSR
Act. The parties will use their reasonable best efforts to respond as promptly
as reasonably practicable to any inquiries received from the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") for additional information or documentation and to
respond as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters. The parties will use their respective reasonable best efforts to
overcome any objections which may be raised by the FTC, the Antitrust Division
or any other Governmental Authority having jurisdiction over antitrust matters.
Notwithstanding the foregoing, Buyer will not be required to make any
significant change in the operations or activities of the business (or any
material assets employed therein) of Buyer or any of its Affiliates, if Buyer
determines in good faith that such change would be materially adverse to the
operations or activities of the business (or any material assets employed
therein) of Buyer or any of its Affiliates having significant assets, net worth,
or revenue. Notwithstanding anything to the contrary in this Agreement, if
Buyer or Seller, in its sole opinion, considers a request from a governmental
agency for additional data and information in connection with the HSR Act to be
unduly burdensome, such party may terminate this Agreement by giving written
notice to the other. Within 10 days after receipt of a statement therefor,
Seller will reimburse Buyer for one-half of the filing fees payable by Buyer in
connection with Buyer's filing under the HSR Act.
7.8 No Shopping. None of Seller, its partners or any agent or
-----------
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any portion of the Assets.
7.9 Lien and Judgment Searches. Not more than 20 nor fewer than 10 days
--------------------------
prior to the expected Closing Date, Seller, at its expense, will provide Buyer
with (a) the results of a lien search conducted by a professional search company
of records
28
<PAGE>
in the offices of the secretaries of state in each state and county clerks in
each county where there exist tangible Assets, and in the state and county where
Seller's principal offices are located, including copies of all financing
statements or similar notices or filings (and any continuation statements)
discovered by such search company and (b) the results of a search of the dockets
of the clerk of each federal and state court sitting in the city, county or
other applicable political subdivision where the principal office or any
material assets of Seller may be located, with respect to judgments, orders,
writs or decrees against or affecting Seller or any of the Assets.
7.10 Transfer Taxes. Any state sales Taxes imposed by any Governmental
--------------
Authority arising from or payable by reason of the transfer of any of the Assets
pursuant to this Agreement will be paid by Seller. Any local sales, or state or
local use, transfer, Taxes or fees or any other charge (including filing fees)
imposed by any Governmental Authority arising from or payable by reason of the
transfer of any of the Assets pursuant to this Agreement will be paid by one-
half by Buyer (but in no event will Buyer's share exceed an aggregate of
$250,000), with the balance to be paid by Seller.
7.11 Distant Broadcast Signals. Unless otherwise restricted or prohibited
-------------------------
by any Governmental Authority or applicable Legal Requirement, if requested by
Buyer, Seller will delete prior to the Closing Date any distant broadcast
signals which Buyer determines will result in unacceptable liability on the part
of Buyer for copyright payments with respect to continued carriage of such
signals after the Closing.
7.12 Guaranty. At the Closing, Seller will cause Intercable to sign and
--------
deliver to Buyer, a Guaranty in the form of EXHIBIT D.
7.13 Letter to Programmers. On or before the Closing Date, Seller will
---------------------
transmit a letter in the form of EXHIBIT E to all programmers from which Seller
purchases programming for the Systems and provide Buyer with a copy of each such
letter.
7.14 Updated Schedules. Not later than ten Business Days prior to the
-----------------
expected Closing Date, Seller will deliver to Buyer revised copies of all
Schedules to this Agreement which will have been updated and marked to show any
changes occurring between the date of this Agreement and the date of delivery;
provided, however, that for purposes of Seller's representations and warranties
and covenants in this Agreement, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing, and
provided further that if the effect of any such updates to Schedules is to
disclose any one or more additional properties, privileges, rights, interests or
claims as Assets, Buyer, at or before Closing, will have the right (to be
exercised by written notice to Seller) to cause any one or more of such items to
be designated as and deemed to constitute Excluded Assets for all purposes under
this Agreement.
29
<PAGE>
7.15 Use of Names and Logos. For a period of 90 days after the Closing
----------------------
Date, Buyer will be entitled to use all trademarks, trade names, service marks,
service names, logos and similar proprietary rights of Seller and all
derivations and abbreviations of such name and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
Notwithstanding the foregoing, Buyer will not be required to remove or
discontinue using any such trade name or mark that is affixed to converters or
other items in or to be used in subscriber homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable for
Buyer.
7.16 Subscriber Billing Services. Seller will provide to Buyer, upon
---------------------------
request, on terms and conditions reasonably satisfactory to each party, access
to and the right to use its billing system computers, software and related fixed
assets in connection with the Systems acquired by Buyer for a period of up to 90
days following the Closing to allow for conversion of existing billing
arrangements ("Transitional Billing Services"); provided however that Buyer will
not be required to pay Seller more than Seller's actual cost of providing such
service. Buyer will notify Seller at least 10 days prior to the expected
Closing Date as to whether it desires Transitional Billing Services from Seller.
7.17 Satisfaction of Conditions. Each party will use its best efforts to
--------------------------
satisfy, or to cause to be satisfied, the conditions to the obligations of the
other party to consummate the transactions contemplated by this Agreement, as
set forth in SECTION 8, provided that Buyer will not be required to agree to any
increase in the amount payable with respect to, or any modification that makes
more burdensome in any material respect, any of the Assumed Liabilities.
7.18 Confidentiality and Publicity. Neither party will issue any press
-----------------------------
release or make any other public announcement or any oral or written statements
to Seller's employees concerning this Agreement or the transactions contemplated
hereby except as required by applicable Legal Requirements, without the prior
written consent of the other party. Each party will hold, and will cause its
employees, consultants, advisors and agents to hold the terms of this Agreement
in confidence; provided that (a) such party may use and disclose such
information once it has become publicly disclosed (other than by such party in
breach of its obligations under this Section) or which rightfully has come into
the possession of such party (other than from the other party) and (b) to the
extent that such party may be compelled by Legal Requirements to disclose any of
such information, but the party proposing to disclose such information will
first notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may disclose
such information to employees, consultants, advisors, agents and actual or
potential lenders whose knowledge is necessary to facilitate the consummation of
the transactions contemplated by this Agreement. The obligation by either party
to hold information in confidence
30
<PAGE>
pursuant to this Section will be satisfied if such party exercises the same care
with respect to such information as it would exercise to preserve the
confidentiality of its own similar information.
7.19 Bulk Transfers. Buyer waives compliance by Seller with Legal
--------------
Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.20 Environmental Reports. Within 60 days after the execution of this
---------------------
Agreement, Seller will, at its expense, obtain and deliver to Buyer for each
parcel of Real Property owned or leased by Seller a current Phase I
Environmental Site Assessment ("Environmental Report") prepared by a nationally
known environmental engineering firm reasonably satisfactory to Buyer in
accordance with ASTM Standard E 1527-93 and certified to Buyer. Each
Environmental Report will include, in addition to the process described in E
1527-93, such soil and groundwater sampling and other testing as will enable the
environmental engineers to determine if Hazardous Substances are detected and to
provide an estimate of the cost to remove and dispose of the Hazardous
Substances or otherwise remediate the property in accordance with all applicable
Environmental Laws.
7.21 Board Approvals. On or before the Approval Deadline, the Board of
---------------
Directors of Buyer and the Board of Directors of Intercable will have been
presented with resolutions for the approval of the transactions contemplated
hereby on behalf of Buyer and Seller, and will have approved or disapproved the
same.
7.22 Section 1031. The parties shall cooperate with each other in order
------------
that the transactions contemplated under this Agreement may be accomplished as
part of a deferred exchange pursuant to Section 1031 of the Code and applicable
Treasury Regulations and to executed such agreements and other documents as may
be necessary to complete and otherwise effectuate a tax-deferred exchange;
provided, however, that Seller shall not be obligated to incur any costs,
- -----------------
expenses or other liabilities in cooperating with Buyer hereunder. Buyer shall
be permitted to assign any or all of its rights and obligations under this
Agreement to a qualified intermediary without Seller's consent for purposes of
qualifying the transactions hereunder as a tax-deferred exchange; provided,
---------
however, that the fees of such qualified intermediary shall be paid by Buyer,
- -------
and provided further, however, that nothing in this Section shall be deemed to
-------------------------
relieve Buyer any of its obligations under this Agreement, including, without
limitation, its obligations to close the transactions contemplated by this
Agreement if the exchange described herein has not occurred prior to August 1,
1998 and the conditions to Closing described in Sections 8.1 and 8.2 have been
met or waived, subject to the rights of either party to terminate the Agreement
pursuant to Section 10.1.3.
SECTION 8. CONDITIONS PRECEDENT
31
<PAGE>
8.1 Conditions to the Obligations of Buyer and Seller. The obligations of
-------------------------------------------------
each party to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or before the Closing, of the following, which
may be waived by the parties to the extent permitted by applicable Legal
Requirements:
8.1.1 HSR Act Filings. All filings required under the HSR Act have
---------------
been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or threat of
any litigation by a Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or proceeding is
---------------------
pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of any
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement (excluding the ability to acquire
the Systems pursuant to a like-kind exchange under Section 1031 of the Code) or
have a material adverse effect on the right of Buyer to exercise full rights of
ownership of the Systems or (d) prevent or make illegal the consummation of any
transactions contemplated by this Agreement.
8.2 Conditions to the Obligations of Buyer. The obligations of Buyer to
--------------------------------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions, which may
be waived by Buyer to the extent permitted by applicable Legal Requirements:
8.2.1 Representations and Warranties. All representations and
------------------------------
warranties of Seller in this Agreement and any Transaction Document are, if
specifically qualified by materiality, true and correct in all respects and, if
not so qualified, are true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
8.2.2 Performance of Agreements. Seller has performed in all
-------------------------
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Seller at or before the Closing.
32
<PAGE>
8.2.3 Deliveries. Seller has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.2.
8.2.4 Consents. Seller has delivered to Buyer evidence, in form and
--------
substance satisfactory to Buyer, that all of the Required Consents marked with
an asterisk on SCHEDULE 5.3 have been obtained or given (or deemed to have been
given) and are in full force and effect.
8.2.5 Environmental Matters. The Environmental Reports delivered to
---------------------
Buyer pursuant to SECTION 7.20 and any other environmental audits or assessments
conducted with respect to the Assets do not indicate the existence of any
conditions that could reasonably be expected to give rise to a material risk of
liability.
8.2.6 No Material Adverse Change. There has not been any material
--------------------------
adverse change in the Business, the Assets or the Systems since the date of this
Agreement other than any change arising out of general economic conditions in
the United States or any change affecting the United States cable television
industry as a whole, including any change arising from (a) legislation,
litigation, rulemaking or regulation or (b) competition caused by or arising
from other multiple channel distribution services.
8.2.7 EBS. As of the Closing Date, the Business, combined with the
---
EBS's of the Schoolcraft System and the Vicksburg System, has no fewer than
16,530 EBS's; provided, that if such aggregate number of EBS's is less than
16,530, Buyer may elect not to close, or if Buyer elects to close, the extent of
the adjustment pursuant to SECTION 3.2.1 shall be as if the applicable number of
EBS's (a) of the Business were 14,420, (b) in the Schoolcraft System were 1437
and (c) in the Vicksburg System were 673.
8.2.8 1031 Exchange. The closing of Buyer's sale of certain systems
-------------
to Buford Group, Inc., shall have occurred (the "Buford Transaction"); provided,
however, if the Buford Transaction shall not have occurred by August 1, 1998,
the closing of the Buford Transaction shall no longer be a condition to the
obligations of Buyer to consummate the transactions hereunder.
8.2.9 Other Closings. The closings of the Vicksburg Transaction and
--------------
the Schoolcraft Transaction shall occur simultaneously with the closing
hereunder, unless the failure of the Vicksburg Transaction to close is due to a
breach of the Vicksburg Purchase Agreement by Seller, or the failure of the
Schoolcraft Transaction to close is due to a breach of the Schoolcraft Purchase
Agreement by Seller.
8.3 Conditions to Obligations of Seller. The obligations of Seller to
-----------------------------------
consummate the transactions contemplated by this Agreement are subject to the
33
<PAGE>
satisfaction by Seller at or before the Closing, of the following, which may be
waived by Seller, to the extent permitted by applicable Legal Requirements:
8.3.1 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement and any Transaction Document
are, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, are true and correct in all material respects, in each
case on and as of the Closing Date with the same effect as if made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
8.3.2 Performance of Agreements. Buyer has performed in all material
-------------------------
respects all obligations and agreements, and complied in all material respects
with all covenants and conditions in this Agreement and any Transaction Document
to be performed or complied with by Buyer at or before the Closing.
8.3.3 Deliveries. Buyer has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.3.
8.3.4 EBS. As of the Closing Date, either (a) the Business, combined
---
with the EBS's of the Schoolcraft System and the Vicksburg System, has no fewer
than 16,530 EBSs or (b) Buyer has waived its right to an adjustment pursuant to
SECTION 3.2.1 except to the extent of the adjustment applicable if the number of
EBS's (i) of the Business were 14,420, (ii) in the Schoolcraft System were 1437
and (iii) in the Vicksburg System were 673.
8.3.5 Other Closings. The closings of the Vicksburg Transaction and
--------------
the Schoolcraft Transaction shall occur simultaneously with the closing
hereunder, unless the failure of the Vicksburg Transaction to close is due to a
breach of the Vicksburg Purchase Agreement by Buyer, or the failure of the
Schoolcraft Transaction to close is due to a breach of the Schoolcraft Purchase
Agreement by Buyer.
8.4 Waiver of Conditions. Any party may waive in writing any or all of
--------------------
the conditions to its obligations under this Agreement.
SECTION 9. CLOSING
9.1 The Closing; Time and Place. The Closing will be held simultaneously
---------------------------
with the closings of the Schoolcraft Transaction and the Vicksburg Transaction
on a date specified by Buyer (upon three Business Days prior notice to Seller)
that is within 15 days after all conditions to the Closing contained in this
Agreement (other than those based on acts to be performed at the Closing) have
been satisfied or waived. The Closing will be held at 10:00 a.m. local time at
Seller's office located at 9697 East
34
<PAGE>
Mineral Avenue, Englewood, Colorado 80112, or at such place and time as Buyer
and Seller may agree.
9.2 Seller's Delivery Obligations. At the Closing, Seller will deliver
-----------------------------
(or cause to be delivered) to Buyer the following:
(a) a Bill of Sale in the form attached as EXHIBIT A;
(b) a special warranty deed in a form reasonably acceptable to Buyer
(and complying with applicable state laws) with respect to each parcel of
owned Real Property, duly executed and acknowledged and in recordable form,
warranting to defend title to such Real Property against all persons
claiming by, through or under Seller, subject only to Permitted
Encumbrances, and in form sufficient to permit the title company to issue
the title policy described in SECTION 7.6.1 to Buyer with respect to such
Real Property;
(c) an Assignment and Assumption of Contracts in the form attached as
EXHIBIT B;
(d) one or more Assignments of Leases in the form attached as EXHIBIT
C and, if requested by Buyer, short forms or memoranda of such Assignments
in recordable form;
(e) any memorandum of lease obtained by Seller pursuant to SECTION
7.5(B);
(f) a Guaranty signed by Intercable in the form attached as EXHIBIT
D;
(g) an affidavit of Seller, under penalty of perjury, that Seller is
not a "foreign person" (as defined in the Foreign Investment in Real
Property Tax Act and applicable regulations) and that Buyer is not required
to withhold any portion of the consideration payable under this Agreement
under the provisions of such Act in the form attached as EXHIBIT F;
(h) motor vehicle title certificates and such other transfer
instruments as Buyer may deem necessary or advisable to transfer the Assets
to Buyer and to perfect Buyer's rights in the Assets;
(i) the opinion of Elizabeth Steele, Esq., counsel for Seller, dated
the Closing Date, in the form set forth in EXHIBIT G;
35
<PAGE>
(j) evidence satisfactory to Buyer that all Encumbrances affecting any
of the Assets (other than Permitted Encumbrances) have been terminated and
released;
(k) the title insurance commitments described in SECTION 7.6.1;
(l) a certificate, dated the Closing Date, signed by the President or
any Vice President of Intercable, stating that to his or her knowledge, the
conditions set forth in SECTIONS 8.2.1, 8.2.2 and 8.2.8 are satisfied;
(m) for each multiple dwelling complex or trailer park served by the
System which is not covered by a current written agreement with the owner
of such complex or park, a cable television multiple-unit agreement in a
form reasonably satisfactory to Buyer, executed by the owner of such
complex or park; and
(n) such other documents as Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations. At the Closing, Buyer will deliver (or
----------------------------
cause to be delivered) to Seller the following:
(a) the Base Purchase Price required to be paid at the Closing, as
adjusted in accordance with this Agreement;
(b) a Bill of Sale in the form attached as EXHIBIT A;
(c) an Assignment and Assumption of Contracts in the form attached as
EXHIBIT B;
(d) a certificate, dated the Closing Date, signed by an executive
officer of Buyer, stating that to his or her knowledge, the conditions set
forth in SECTIONS 8.3.1 and 8.3.2, are satisfied;
(e) an opinion of Mary S. Willis, Esq., counsel to Buyer, dated the
Closing Date, in the form set forth in EXHIBIT H; and
(f) such other documents as Seller may reasonably request in
connection with the transactions contemplated by this Agreement.
36
<PAGE>
SECTION 10. TERMINATION
10.1 Termination Events. This Agreement may be terminated and the
------------------
transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of Buyer and
Seller;
10.1.2 By either party at any time, if the other is in material
breach or default of any of its covenants, agreements or other obligations in
this Agreement or in any Transaction Document, or if any of its representations
in this Agreement or in any Transaction Document is not true in all material
respects when made or when otherwise required by this Agreement or any
Transaction Document to be true and such breach or default or failure to be true
is not cured or waived prior to Closing;
10.1.3 By either party upon written notice to the other, if Closing
has not occurred on or before August 31, 1998, for any reason other than a
material breach or default by such party of its respective covenants, agreements
or other obligations under this Agreement, or any of its representations this
Agreement not being true and accurate in all material respects when made or when
otherwise required by this Agreement to be true and accurate in all material
respects;
10.1.4 By Buyer, within 45 days after the date hereof (the
"Approval Deadline"), if all board of director approvals are not obtained by
Buyer (for any reason) on or before the Approval Deadline;
10.1.5 By Seller, on or before the Approval Deadline, if Intercable
has not approved the transactions contemplated by this Agreement (for any
reason) on or before such date; or
10.1.6 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
SECTION 10.1, all obligations of the parties under this Agreement will
terminate, except for the obligations set forth in SECTIONS 7.18 and 12.16.
Termination of this Agreement pursuant to SECTIONS 10.1.2 OR 10.1.3 will not
limit or impair any remedies that any party may have with respect to a breach or
default by the other of its covenants, agreements or obligations under this
Agreement. Buyer will have no liability in any event upon exercise of its right
to terminate pursuant to SECTION 10.1.4. Seller will have no liability in any
event upon exercise of its right to terminate pursuant to SECTION 10.1.5.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
37
<PAGE>
11.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of Seller in this Agreement and in the Transaction Documents to be
delivered by Seller pursuant to this Agreement will survive until the first
anniversary of the Closing Date, except that (a) all such representations and
warranties with respect to any federal, state or local Taxes, rates,
Environmental Law, ERISA, employment matters or copyright matters will survive
until 60 days after the expiration of the applicable statute of limitations
(including any extensions) for such federal, state or local Taxes, rates,
Environmental Law, ERISA, employment matters or copyright matters, respectively
and (b) the representations and warranties as to ownership of the Assets in
SECTION 5.4, SECTION 5.7.1 and in the deed or deeds delivered with respect to
Real Property will survive the Closing and the delivery of such deeds and will
continue in full force and effect without limitation. The representations and
warranties of Buyer in this Agreement and in the Transaction Documents to be
delivered by Buyer pursuant to this Agreement will survive until the first
anniversary of the Closing Date. The periods of survival of the representations
and warranties prescribed by this SECTION 11.1 are referred to as the "Survival
Period." The liabilities of the parties under their respective representations
and warranties will expire as of the expiration of the applicable Survival
Period; provided, however, that such expiration will not include, extend or
apply to any representation or warranty, the breach of which has been asserted
by Buyer in a written notice to Seller before such expiration or about which
Seller has given Buyer written notice before such expiration indicating that
facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail). The covenants and agreements of the parties in
this Agreement (that are by their terms intended to be performed after Closing)
and in the Transaction Documents to be delivered by Seller or Buyer pursuant to
this Agreement, will survive the Closing and will continue in full force and
effect without limitation.
11.2 Indemnification by Seller. Seller will indemnify and hold harmless
-------------------------
Buyer and its shareholders and its and their respective Affiliates, and the
shareholders, directors, officers, employees, agents, successors and assigns and
any Person claiming by or through any of them, as the case may be, from and
against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Seller in this Agreement or in the
Transactions Documents delivered by Seller, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or in the
Transaction Documents delivered by Seller, (iii) any act or omission of Seller
with respect to, or any event or circumstance related to, the ownership or
operation of the Assets or the conduct of the Business, which act, omission,
event or circumstance occurred or existed prior to or at the Closing Date,
without regard to whether a claim with respect to such matter is asserted before
or after the Closing Date, including any matter described on SCHEDULE 5.13, (iv)
any liability or obligation not included in the Assumed Liabilities, (v) any
title defect Seller fails to eliminate as an exception from a title insurance
commitment
38
<PAGE>
referred to in SECTION 7.7.1, (vi) any claim that the transactions contemplated
by this Agreement violates WARN, or any similar state or local law or any bulk
transfer or fraudulent conveyance laws of any jurisdiction, (vii) the presence,
generation, removal or transportation of a Hazardous Substance on or from any of
the Real Property prior to the Closing Date, including the costs of removal or
clean-up of such Hazardous Substance and other compliance with the provisions of
any Environmental Laws (whether before or after Closing), or (viii) any rate
refund ordered by any Governmental Authority for periods prior to the Closing
Date; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) through (a)(viii) of this SECTION 11.2, Buyer's
rights to pursue its claim under clauses (a)(ii) through (a)(viii), as
applicable, will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (a)(i).
11.3 Indemnification by Buyer. Buyer will indemnify and hold harmless
------------------------
Seller and Seller's shareholders, directors, officers, employees, agents,
successors and assigns, and any Person claiming by or through any of them, as
the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Buyer in this Agreement or in the Transaction
Documents delivered by Buyer, (ii) any breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or in the Transaction Documents
delivered by Buyer or (iii) the failure by Buyer to perform any of its
obligations in respect of the Assumed Liabilities; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) or (a)(iii) of this SECTION 11.3, Seller's rights
to pursue its claim under clauses (a)(ii) or (a)(iii), as applicable, will exist
notwithstanding the expiration of the Survival Period applicable to such claim
under clause (a)(i).
11.4 Third Party Claims. Promptly after the receipt by any party of notice
------------------
of any claim, action, suit or proceeding by any Person who is not a party to
this Agreement (collectively, an "Action"), which Action is subject to
indemnification
39
<PAGE>
under this Agreement, such party (the "Indemnified Party") will give reasonable
written notice to the party from whom indemnification is claimed (the
"Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action under
the terms of this SECTION 11, (b) notifies the Indemnified Party in writing of
the Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be liable
as a result of such Action and (d) retains legal counsel reasonably satisfactory
to the Indemnified Party to conduct the defense of such Action. The other party
will cooperate with the party assuming the defense, compromise or settlement of
any such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Action, but the fees and expenses of such counsel will be at
the expense of the Indemnified Party unless (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) any relief other than the payment of
money damages is sought against the Indemnified Party or (iii) the Indemnified
Party will have been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnity provided in this SECTION 11 will be paid by the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this SECTION 11.4. No Indemnifying Party will settle
or compromise any such Action (A) in which any relief other than the payment of
money damages is sought against any Indemnified Party or (B) in the case of any
Action relating to the Indemnified Party's liability for any Tax, if the effect
of such settlement would be an increase in the liability of the Indemnified
Party for the payment of any Tax for any period beginning after the Closing
Date, unless the Indemnified Party consents in writing to such compromise or
settlement.
11.5 Limitations on Indemnification - Seller. Seller will not be liable
---------------------------------------
for indemnification arising solely under SECTION 11.2(A)(I) for (a) any Losses
of or to Buyer or any other person entitled to indemnification from Seller or
(b) any claims, actions, suits, proceedings, demands, judgments, assessments,
fines, interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing (the items
described in clauses (a) and (b) collectively being
40
<PAGE>
referred to for purposes of this SECTION 11.5 as "Buyer Damages") unless the
amount of Buyer Damages for which Seller would, but for the provisions of this
SECTION 11.5, be liable exceeds, on an aggregate basis, $218,800 (the "Threshold
Amount"), in which case Seller will be liable for all such Buyer Damages, which
will be due and payable within 15 days after Seller's receipt of a statement
therefor; provided, however, that Seller shall be liable for all rate refunds
ordered by any Governmental Authority for periods prior to the Closing Date
regardless of whether such refunds equal or exceed the Threshold Amount.
11.6 Limitations on Indemnification - Buyer. Buyer will not be liable for
--------------------------------------
indemnification arising solely under SECTION 11.3(A)(I) for (a) any Losses of or
to Seller or any other person entitled to indemnification from Buyer or (b) any
claims, actions, suits, proceedings, demands, judgments, assessments, fines,
interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing the items
described in clauses (a) and (b) collectively being referred to for purposes of
this SECTION 11.6 as "Seller Damages") unless the amount of Seller Damages for
which Buyer would, but for the provisions of this SECTION 11.6, be liable
exceeds, on an aggregate basis, the Threshold Amount, in which case Buyer will
be liable for all such Seller Damages, which will be due and payable within 15
days after Buyer's receipt of a statement therefor.
SECTION 12. MISCELLANEOUS
12.1 Parties Obligated and Benefited. Subject to the limitations set forth
-------------------------------
below, this Agreement will be binding upon the parties and their respective
assigns and successors in interest and will inure solely to the benefit of the
parties and their respective assigns and successors in interest, and no other
Person will be entitled to any of the benefits conferred by this Agreement.
Without the prior written consent of the other party, neither party may assign
any of its rights under this Agreement or delegate any of its duties under this
Agreement.
12.2 Notices. Any notice, request, demand, waiver or other communication
-------
required or permitted to be given under this Agreement will be in writing and
will be deemed to have been duly given only if delivered in person or by first
class, prepaid, registered or certified mail, or sent by courier or, if receipt
is confirmed, by telecopier:
To Buyer at:
c/o Tele-Communications, Inc.
5619 DTC Parkway
Englewood Colorado 80111
Attention: William R. Fitzgerald
41
<PAGE>
Telecopy: (303) 488-3219
With a copy similarly addressed to the attention of Legal Department.
To Seller at:
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
Englewood, Colorado 80112
Attention: President
Telecopy: (303) 799-1644
With a copy similarly addressed to the attention of Legal Department.
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this SECTION 12.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation, or on the third Business Day after mailing in accordance with this
Section, except that any notice of a change of address will be effective only
upon actual receipt.
12.3 Attorneys' Fees. In the event of any action or suit based upon or
---------------
arising out of any alleged breach by any party of any representation, warranty,
covenant or agreement contained in this Agreement, the prevailing party will be
entitled to recover reasonable attorneys' fees and other costs of such action or
suit from the other party.
12.4 Waiver. This Agreement or any of its provisions may not be waived
------
except in writing. The failure of any party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.5 Captions. The captions of this Agreement are for convenience only and
--------
do not constitute a part of this Agreement.
12.6 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES UNDER IT
-------------
WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF
THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF
COLORADO.
12.7 Terms. Terms used with initial capital letters will have the meanings
-----
specified, applicable to both singular and plural forms, for all purposes of
this
42
<PAGE>
Agreement. The word "include" and derivatives of that word are used in this
Agreement in an illustrative sense rather than limiting sense.
12.8 Rights Cumulative. All rights and remedies of each of the parties
-----------------
under this Agreement will be cumulative, and the exercise of one or more rights
or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.9 Further Actions. Seller and Buyer will execute and deliver to the
---------------
other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
12.10 Time. Time is of the essence under this Agreement. If the last day
----
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
12.11 Late Payments. If either party fails to pay the other any amounts
-------------
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the annual rate publicly announced from time to
time by The Bank of New York as its prime rate (the "Prime Rate") plus 2%,
adjusted as and when changes in the Prime Rate are made.
12.12 Counterparts. This Agreement may be executed in counterparts, each
------------
of which will be deemed an original.
12.13 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) and the Transaction Documents contain the entire
agreement of the parties and supersedes all prior oral or written agreements and
understandings with respect to the subject matter. This Agreement may not be
amended or modified except by a writing signed by the parties.
12.14 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefited by such provision or any other provisions
of this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer and
------------
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party
43
<PAGE>
drafting this Agreement will not apply in any construction or interpretation of
this Agreement.
12.16 Expenses. Except as otherwise expressly provided in this Agreement,
--------
each party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
12.17 Risk of Loss; Condemnation.
--------------------------
12.17.1 Seller will bear the risk of any loss or damage to the Assets
resulting from fire, theft or other casualty (except reasonable wear and tear)
at all times prior to the Closing. If any such loss or damage is sufficiently
substantial so as to preclude or prevent resumption of normal operations of any
material portion of a System or the replacement or restoration of the lost or
damaged property within 30 days from the occurrence of the event resulting in
such loss or damage, Seller will immediately notify Buyer in writing of that
fact and Buyer, at any time within 10 days after receipt of such notice, may
elect by written notice to Seller either (a) to waive such defect and proceed
toward consummation of the transaction in accordance with terms of this
Agreement or (b) terminate this Agreement. If Buyer elects to so terminate this
Agreement, Buyer and Seller will stand fully released and discharged of any and
all obligations under this Agreement. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, there will be no adjustment in the consideration payable to Seller
on account of such loss or damage but all insurance proceeds payable as a result
of the occurrence of the event resulting in such loss or damage (to the extent
not used to replace or restore such lost or damaged property) will be delivered
by Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller.
12.17.2 If, prior to the Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller or Buyer
that it intends to condemn all or any part of or interest in the Assets (such
event being called, in either case, a "Taking"), and such Taking involves a
material part of or interest in the Assets, then Buyer may terminate this
Agreement. If Buyer does not elect or have the right to terminate this
Agreement, then (a) Buyer will have the sole right, in the name of Seller, if
Buyer so elects, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller will be relieved of its obligation to convey
to Buyer the Assets or interests that are the subject of the Taking, (c) at the
Closing Seller will assign to Buyer all of Seller's rights to all damages
payable with respect to such Taking and will pay to Buyer all damages previously
paid to Seller with respect to the Taking and (d) following the Closing, Seller
will give Buyer such further assurances of such rights and assignment with
respect to the taking as Buyer may from time to time reasonably request.
44
<PAGE>
The parties have executed this Agreement as of the day and year first above
written.
SELLER:
JONES CABLE INCOME FUND
1-B/C VENTURE
By: Jones Cable Income Fund
1-B, Ltd., and Jones Cable
Income Fund 1-C, Ltd.,
its general partners
By: /s/ Elizabeth M. Steele
-----------------------
Name: Elizabeth Steele
---------------------
Title: Vice President
--------------------
BUYER:
TCI CABLEVISION OF TEXAS, INC.
By: /s/ William Fitzgerald
-----------------------------
Name: William Fitzgerald
--------------------------
Title: Vice President
-------------------------
45
<PAGE>
Exhibit 10.3.5
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TELEVISION CABLE SERVICE, INC.
AND
JONES CABLE INCOME FUND 1-B/C VENTURE
DATED AS OF
JANUARY 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS..................................................... 3
SECTION 2. SALE OF ASSETS.................................................. 9
SECTION 3. CONSIDERATION................................................... 10
3.1 Base Purchase Price.................................................... 10
3.2 Adjustments to Base Purchase Price..................................... 10
3.3 Determination of Adjustments........................................... 11
3.4 Allocation of Consideration............................................ 12
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS......................... 12
4.1 Assignment and Assumption.............................................. 12
4.2 Excluded Assets........................................................ 13
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER........................ 13
5.1 Organization and Qualification......................................... 13
5.2 Authority and Validity................................................. 13
5.3 No Conflict; Required Consents......................................... 14
5.4 Assets................................................................. 14
5.5 Governmental Permits................................................... 15
5.6 Seller Contracts....................................................... 15
5.7 Real Property.......................................................... 15
5.8 Environmental Matters.................................................. 16
5.9 Compliance with Legal Requirements..................................... 17
5.10 Patents, Trademarks and Copyrights.................................... 19
5.11 Financial Statements.................................................. 19
5.12 Absence of Certain Changes............................................ 19
5.13 Legal Proceedings..................................................... 20
5.14 Tax Returns; Other Reports............................................ 20
5.15 Employment Matters.................................................... 20
5.16 Systems Information................................................... 21
5.15 Bonds................................................................. 22
5.18 Finders and Brokers................................................... 22
SECTION 6. BUYER'S REPRESENTATIONS......................................... 22
6.1 Organization and Qualification......................................... 22
6.2 Authority and Validity................................................. 22
6.3 No Conflicts; Required Consents........................................ 23
6.4 Finders and Brokers.................................................... 23
6.5 Legal Proceedings...................................................... 23
SECTION 7. ADDITIONAL COVENANTS............................................ 23
7.1 Access to Premises and Records......................................... 23
7.2 Continuity and Maintenance of Operations; Financial Statements......... 24
7.3 Employee Matters....................................................... 25
7.4 Leased Vehicles; Other Capital Leases.................................. 26
7.5 Required Consents; Estoppel Certificates............................... 26
7.6 Title Commitments and Surveys.......................................... 27
7.7 HSR Notification....................................................... 28
7.8 No Shopping............................................................ 29
7.9 Lien and Judgment Searches............................................. 29
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.10 Transfer Taxes........................................................ 29
7.11 Distant Broadcast Signals............................................. 29
7.12 Guaranty.............................................................. 29
7.13 Letter to Programmers................................................. 30
7.14 Updated Schedules..................................................... 30
7.15 Use of Names and Logos................................................ 30
7.16 Subscriber Billing Services........................................... 30
7.17 Satisfaction of Conditions............................................ 30
7.18 Confidentiality and Publicity......................................... 31
7.19 Bulk Transfers........................................................ 31
7.20 Environmental Reports................................................. 31
7.21 Board Approvals....................................................... 31
7.22 Section 1031.......................................................... 32
SECTION 8. CONDITIONS PRECEDENT............................................ 32
8.1 Conditions to the Obligations of Buyer and Seller...................... 32
8.2 Conditions to the Obligations of Buyer................................. 33
8.3 Conditions to Obligations of Seller.................................... 34
8.4 Waiver of Conditions................................................... 35
SECTION 9. CLOSING......................................................... 35
9.1 The Closing; Time and Place............................................ 35
9.2 Seller's Delivery Obligations.......................................... 35
9.3 Buyer's Delivery Obligations........................................... 37
SECTION 10. TERMINATION.................................................... 37
10.1 Termination Events.................................................... 37
10.2 Effect of Termination................................................. 38
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION38
11.1 Survival of Representations and Warranties............................ 38
11.2 Indemnification by Seller............................................. 39
11.3 Indemnification by Buyer.............................................. 40
11.4 Third Party Claims.................................................... 40
11.5 Limitations on Indemnification........................................ 41
11.6 Limitations on Indemnification - Buyer................................ 41
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 12. MISCELLANEOUS.................................................. 42
12.1 Parties Obligations and Benefited..................................... 42
12.2 Notices............................................................... 42
12.3 Attorneys' Fees....................................................... 43
12.4 Waiver................................................................ 43
12.5 Captions.............................................................. 43
12.6 Choice of Law......................................................... 43
12.7 Terms................................................................. 43
12.8 Rights Cumulative..................................................... 43
12.9 Further Actions....................................................... 43
12.10 Time................................................................. 44
12.11 Late Payments........................................................ 44
12.12 Counterparts......................................................... 44
12.13 Entire Agreement..................................................... 44
12.14 Severability......................................................... 44
12.15 Construction......................................................... 44
12.16 Expenses............................................................. 44
12.17 Risk of Loss; Condemnation........................................... 45
</TABLE>
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
A - Bill of Sale
B - Assignment and Assumption of Contracts
C - Assignment of Leases
D - Guaranty
E - Letter to Programmers
F - FIRPTA Affidavit
G - Opinion of Seller's Counsel
H - Opinion of Buyer's Counsel
SCHEDULES
- ---------
1.9 - Owned Equipment and Vehicles
4.2 - Excluded Assets
5.3 - Required Consents
5.4 - Encumbrances to Be Discharged Prior to Closing
5.5 - Governmental Permits
5.6 - Seller Contracts
5.7 - Real Property
5.8 - Environmental Matters
5.9 - Cost of Service Filings
5.11 - Financial Statements
5.13 - Proceedings and Judgments
5.14 - Tax Matters
5.15 - Employee Matters
5.16 - The Business/Systems Information (including Rate Schedule)
5.17 - Bonds
2
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is made as of January 30, 1998,
by and between Television Cable Service, Inc., a Texas corporation ("Buyer"),
and Jones Cable Income Fund 1-B/C Venture, a Colorado general partnership
("Seller").
RECITALS
--------
A. Seller is engaged in the business of providing cable television
service to subscribers in and around the Service Area. Buyer desires to
purchase and Seller desires to sell substantially all the assets of Seller used
or useful in connection with that business.
B. Buyer intends to complete the transfer of the Assets in a transaction
to which Section 1031 of the Internal Revenue Code of 1986, as amended (the
"Code"), applies, and Seller is willing to take such steps as are reasonably
necessary on its part to enable the transactions contemplated hereby to so
qualify, including, without limitation, permitting the assignment of this
Agreement by Buyer to a qualified intermediary in order that Buyer's acquisition
of the Assets (as defined below) may be accomplished as part of a deferred
exchange pursuant to applicable Treasury Regulations; provided that if such
exchange is not accomplished, Buyer desires to purchase the Assets directly,
subject to the terms and conditions described herein.
AGREEMENT
---------
In consideration of the above recitals and the mutual agreements stated in
this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the following
capitalized terms, when used in this Agreement, will have the meanings set forth
below:
1.1 Affiliate. With respect to any Person, any other Person controlling,
---------
controlled by or under common control with such Person, with "control" for such
purpose meaning the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or voting interests, by contract or
otherwise.
1.2 Assets. All properties, privileges, rights, interests and claims,
------
real and personal, tangible and intangible, of every type and description that
are owned, leased, held, used or useful in the Business in which Seller has any
right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing Date,
3
<PAGE>
including Governmental Permits, Intangibles, Seller Contracts, Equipment, Real
Property and deposits relating to the Business that are held by third parties
for the account of Seller or for security for Seller's performance of its
obligations, but excluding any Excluded Assets.
1.3 Basic Service. The lowest tier of service offered to subscribers of a
-------------
System.
1.4 Business. The cable television business conducted by Seller on the
--------
date of this Agreement through one or more Systems, as described on SCHEDULE
5.16.
1.5 Business Day. Any day other than Saturday, Sunday or a day on which
------------
banking institutions in Denver, Colorado are required or authorized to be
closed.
1.6 Closing. The consummation of the transactions contemplated by this
-------
Agreement, as described in SECTION 9, the date of which is referred to as the
Closing Date.
1.7 Encumbrance. Any security interest, security agreement, financing
-----------
statement filed with any Governmental Authority, conditional sale or other title
retention agreement, any lease, consignment or bailment given for purposes of
security, any mortgage, lien, indenture, pledge, option, encumbrance, adverse
interest, constructive trust or other trust, claim, attachment, exception to or
defect in title or other ownership interest (including but not limited to
reservations, rights of entry, possibilities of reverter, encroachments,
easements, rights-of-way, restrictive covenants, leases and licenses) of any
kind, which constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Governmental Permit, Seller Contract
or otherwise.
1.8 Environmental Law. Any Legal Requirement relating to pollution or
-----------------
protection of public health, safety or welfare or the environment, including
those relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
1.9 Equipment. All electronic devices, trunk and distribution coaxial and
---------
optical fiber cable, amplifiers, power supplies, conduit, vaults and pedestals,
grounding and pole hardware, subscriber's devices (including converters,
encoders, transformers behind television sets and fittings), headend hardware
(including origination, earth stations, transmission and distribution system),
test equipment, vehicles and other tangible personal property owned, leased,
used or held for use in the Business, the principal items of which are described
on SCHEDULE 1.9 (and, with respect to leased Equipment, on SCHEDULE 5.6).
4
<PAGE>
1.10 Equivalent Basic Subscribers (or EBSs). An active customer for Basic
--------------------------------------
Service either in a single household, a commercial establishment or in a multi-
unit dwelling (including a hotel unit); provided, however, that the number of
customers in a multi-unit dwelling or commercial establishment that obtain
service on a "bulk-rate" basis will be determined on a System by System basis by
dividing the gross bulk-rate billings for Basic Service and Expanded Basic
Service (but not billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or from any outlet
or connection other than the first outlet or connection or from any pass-through
charge for sales taxes, line-itemized franchise fees, fees charged by the FCC
and the like), attributable to such multi-unit dwelling or commercial
establishment during the most recent billing period ended prior to the date of
calculation (but excluding billings in excess of a single month's charge) by the
rate charged at the time of determination to individual households for the
highest level of Basic Service and Expanded Basic Service offered by such
System, such rate not to be less than the rate for such System set forth on
SCHEDULE 5.16 (excluding a la carte tiers or premium services, installation or
other non-recurring charges, converter rental, pass-through charges for sales
taxes, line-itemized franchise fees charged by the FCC and the like). For
purposes of this definition, an "active customer" will mean any person,
commercial establishment or multi-unit dwelling at any given time that is paying
for and receiving Basic Service from the System who has an account that is not
more than 60 days past due (except for past due amounts of $5 or less, provided
such account is otherwise current). For purposes of this definition, an "active
customer" does not include any person, commercial establishment or multi-unit
dwelling that as of the date of calculation has not paid in full the charges for
at least one month of the services ordered or any subscriber whose service is
pending disconnection for any reason. For purposes of this definition, the
number of days past due of a customer account will be determined from the first
day of the period for which the applicable billing relates.
1.11 Expanded Basic Service. Any video programming provided over a cable
----------------------
television system, regardless of service tier other than (a) Basic Service, (b)
any new product tier and (c) video programming offered on a per channel or per
program basis.
1.12 GAAP. Generally accepted accounting principles as in effect from time
----
to time in the United States of America.
1.13 Governmental Authority. The United States of America, any state,
----------------------
commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
county, municipality, province, parish or other instrumentality of any of the
foregoing.
1.14 Governmental Permits. All franchises, approvals, authorizations,
--------------------
permits, licenses, easements, registrations, qualifications, leases, variances
and similar
5
<PAGE>
rights obtained with respect to the Business or Assets from any Governmental
Authority, including those set forth on SCHEDULE 5.5.
1.15 Hazardous Substances. Any pollutant, contaminant, chemical,
--------------------
industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a hazard or potential hazard to the
Real Property or to Persons in or about the Real Property or cause the Real
Property to be in violation of any laws, regulations or ordinances of federal,
state or applicable local governments, (b) asbestos or any asbestos-containing
material of any kind or character, (c) polychlorinated biphenyls ("PCBs"), as
regulated by the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., (d)
-- ----
any materials or substances designated as "hazardous substances" pursuant to the
Clean Water Act, 33 U.S.C. (S) 1251 et seq., (e) "economic poison," as defined
-- ----
in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 135 et
--
seq., (f) "chemical substance," "new chemical substance" or "hazardous chemical
- ---
substance or mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
(S) 2601 et seq., (g) "hazardous substances" pursuant to the Comprehensive
-- ----
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
--
seq. and (h) "hazardous waste" pursuant to the Resource Conservation and
- ----
Recovery Act, 42 U.S.C. (S) 6901 et seq.
-------
1.16 Intangibles. All intangible assets, including subscriber lists,
-----------
accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Business.
1.17 Knowledge. The actual knowledge of a particular matter of one or more
---------
of the executive officers of a Person or the general manager or one or more of
the managers of such Person's Systems.
1.18 Legal Requirement. Applicable common law and any statute, ordinance,
-----------------
code, or other law, rule, regulation, order, technical or other written standard
or procedure enacted, adopted or applied by any Governmental Authority,
including judicial decisions applying common law or interpreting any other Legal
Requirement.
1.19 Losses. Any claims, losses, liabilities, damages, penalties, costs
------
and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and the cost to any Person making a claim or seeking
indemnification under this Agreement with respect to funds expended by such
Person by reason of the occurrence of any event with respect to which
indemnification is sought.
1.20 Pay TV. Premium programming services selected by and sold to
------
subscribers on a per channel or per program basis.
6
<PAGE>
1.21 Permitted Encumbrances. The following Encumbrances: (a) liens
----------------------
securing Taxes, assessments and governmental charges not yet due and payable,
(b) any zoning law or ordinance or any similar Legal Requirement, (c) any right
reserved to any Governmental Authority to regulate the affected property and (d)
as to Real Property interests, any Encumbrance reflected in the public records
and that does not individually or in the aggregate interfere with the right or
ability to own, use or operate the Real Property or to convey good, marketable
and indefeasible fee simple title to such Real Property, provided that
"Permitted Encumbrances" will not include any Encumbrance which could prevent or
inhibit in any way the conduct of the business of the affected System and
provided further that classification of any Encumbrance as a "Permitted
Encumbrance" will not affect any liability Seller may have for such Encumbrance,
including pursuant to any indemnity obligation under this Agreement.
1.22 Person. Any natural person, corporation, partnership, trust,
------
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.23 Real Property. All assets held by Seller related to the Business
-------------
consisting of realty, including appurtenances, improvements and fixtures located
on such realty, and any other interests in real property, including fee
interests, leasehold interests and easements, wire crossing permits, rights of
entry (except agreements related to multiple dwelling units) described on
SCHEDULE 5.7.
1.24 Required Consents. All franchises, licenses, authorizations,
-----------------
approvals and consents required under Governmental Permits, Seller Contracts or
otherwise for (a) Seller to transfer the Assets and the Business to Buyer, (b)
Buyer to conduct the Business and to own, lease, use and operate the Assets at
the places and in the manner in which the Business is conducted as of the date
of this Agreement and on the Closing Date (assuming that the Schoolcraft
Transaction and the Vicksburg Transaction (both as defined below) close on the
Closing Date) and (c) Buyer to assume and perform the Governmental Permits,
Seller Contracts and the other Assumed Liabilities.
1.25 Southwest Michigan Purchase Agreement. That certain Asset Purchase
-------------------------------------
Agreement of even date herewith between Seller and TCI Cablevision of Texas,
Inc., a Texas corporation ("TCI"), by which TCI has agreed to purchase from
Seller the assets which comprise the Southwest Michigan System.
1.26 Southwest Michigan System. The cable television system owned by
-------------------------
Seller serving the Townships of Brady, Calvin, Coloma, Constantine, Fabius,
Hagar, Hartford, La Grange, Lockport, Mendon, Mottville, Newburg, Nottawa, Park,
Pavilian, Penn, Pipestone, Pokagon, Porter, Prairie Ronde, Sherman, Silver
Creek, Watervliet, Wayne and White Pigeon, the Villages of Centreville,
Constantine,
7
<PAGE>
Vandalia, and White Pigeon, the Cities of Coloma, Dowagiac, Three Rivers, and
Watervliet, all in the State of Michigan, and the County of Elkhart, Indiana.
1.27 Southwest Michigan Transaction. The transaction contemplated by the
------------------------------
Southwest Michigan Purchase Agreement.
1.28 Seasonal Subscribers. Customers of the System who, between the date
--------------------
hereof and Closing, have participated in, or will have participated in, Seller's
seasonal subscriber program by paying $5 per month during the months that such
subscribers were out of town, and by resuming service, or agreeing to resume
service, upon their return to town (which service will resume without a
reconnection charge).
1.29 Seller Contracts. All contracts and agreements, other than
----------------
Governmental Permits and those relating to Real Property, pertaining to the
ownership, operation and maintenance of the Assets or the Business or used or
held for use in the Business, as described on SCHEDULE 5.6 or, in the case of
contracts and agreements relating to Real Property, on SCHEDULE 5.7.
1.30 Service Area. The area in which Seller operates the Business,
------------
specifically in and around the County of La Grange, Indiana, the Village of
Schoolcraft and the Townships of Schoolcraft and Flowerfield, all in Michigan.
1.31 System. A cable television reception and distribution system operated
------
in the conduct of the Business, consisting of subscriber drops and associated
electronic and other equipment, and which is, or is capable of being operated
when connected with the headend of Seller in Three Rivers, Michigan, which is
part of the Southwest Michigan System.
1.32 Taxes. All levies and assessments of any kind or nature imposed by
-----
any Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto.
1.33 Vicksburg Purchase Agreement. That certain Asset Purchase Agreement
----------------------------
of even date herewith between Seller and Tempo Cable, Inc., an Oklahoma
corporation ("Tempo"), by which Tempo has agreed to purchase from Seller the
assets which comprise the Vicksburg System.
1.34 Vicksburg System. The cable television system owned by Seller serving
----------------
the Village of Vicksburg, Michigan.
8
<PAGE>
1.35 Vicksburg Transaction. The transaction contemplated by the Vicksburg
---------------------
Purchase Agreement.
1.36 Other Definitions. The following terms are defined in the Sections
-----------------
indicated:
Term Section
---- -------
Action 11.4
Antitrust Division 7.7
Approval Deadline 10.1.4
Assumed Liabilities 4.1
Base Purchase Price 3.1(b)
Buford Transaction 8.2.8
Buyer Damages 11.5
Closing Date 1.8
Code 5.15.2
Cost of Service Election 5.9.4
Employee Benefit Plans 5.15.2
ERISA 5.15.1
Excluded Assets 4.2
FCC 1.12
Final Adjustments Report 3.3.2
Financial Statements 5.11
FTC 7.7
HSR Act 7.7
Indemnified Party 11.4
Indemnifying Party 11.4
Intercable 5.2
1992 Cable Act 5.9.4
Preliminary Adjustments Report 3.3.1
Rate Regulation Documents 5.9.4
Seller Damages 11.6
Survival Period 11.1
Taking 12.17.2
Transaction Documents 5.2
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this Agreement, at the
Closing, Seller will sell to Buyer, and Buyer will purchase from Seller, all of
Seller's rights, titles and interests in, to and under the Assets. Except as
otherwise specifically provided in this Agreement, all the Assets are intended
to be transferred to Buyer, whether or not described in the Schedules.
9
<PAGE>
SECTION 3. CONSIDERATION.
3.1 Base Purchase Price. Buyer will pay to Seller total cash
-------------------
consideration of $2,600,000 (the "Base Purchase Price"), subject to adjustment
as provided in SECTIONS 3.2 and 3.3. Such consideration will be paid at Closing
by wire transfer of immediately available funds pursuant to wire instructions
delivered by Seller to Buyer no later than two Business Days prior to the
Closing Date.
3.2 Adjustments to Base Purchase Price. The Base Purchase Price will be
----------------------------------
adjusted as follows:
3.2.1 If (a) the number of EBS's of the Business as of the Closing
Date, combined with the number of EBS's of the Southwest Michigan System and the
Vicksburg System, is fewer than 17,400 and (b) the number of EBS's of the
---
Business as of the Closing Date is fewer than 1,512, then the Base Purchase
Price will be reduced by an amount equal to $1,719 multiplied by the positive
difference between (x) 1,512 and (y) the number of EBS's of the Business as of
the Closing Date; provided, however, that in calculating the number of EBS's,
-------- -------
the parties will consider 20 Seasonal Subscribers to be EBS's, and will not
count any additional Seasonal Subscribers as EBS's. In addition, if a reduction
is made in the Base Purchase Price as described above, and as of the Closing
Date, the Southwest Michigan System has more than 15,180 EBS's and/or the
Vicksburg System has more than 708 EBS's, the Base Purchase Price, as reduced
above, shall be increased by (A) an amount equal to $1,802 multiplied by the
positive difference between (i) the number of EBS's of the Southwest Michigan
System as of the Closing Date and (ii) 15,180 and (B) an amount equal to $1,836
multiplied by the positive difference between (X) the number of EBS's of the
Vicksburg System as of the Closing Date and (Y) 708; provided, however, that no
such increase in the Base Purchase Price shall cause the aggregate of (I) the
Base Purchase Price so adjusted, (II) the purchase price for the Southwest
Michigan System as adjusted pursuant to Section 3.2.1 of the Southwest Michigan
Purchase Agreement and (III) the purchase price for the Vicksburg System, as
adjusted pursuant to Section 3.2.1 of the Vicksburg Purchase Agreement, to
exceed $31,250,000.
3.2.2 Adjustments on a pro rata basis as of the Closing Date will be
made for all prepaid expenses (but only to the extent the full benefit thereof
will be realizable by Buyer within 12 months after the Closing Date), accrued
expenses (including real and personal property Taxes and the economic value of
all accrued vacation time permitted by Buyer's policies to be taken after the
Closing Time by Seller's System employees hired by Buyer), prepaid income,
subscriber prepayments and accounts receivable related to the Business, all as
determined in accordance with GAAP consistently applied, and to reflect the
principle that all expenses and income attributable to the Business for the
period prior to the Closing Date are for the account of Seller, and all expenses
and income attributable to the Business for the period on and after the Closing
Date are for the account of Buyer. Seller will receive no credit for
10
<PAGE>
any accounts receivable (a) resulting from cable service sales any portion of
which is 60 days or more past due as of the Closing Date, (b) from subscribers
whose accounts are inactive or whose service is pending disconnection for any
reason as of the Closing Date or (c) resulting from advertising sales any
portion of which is 120 days or more past due as of the Closing Date.
3.2.3 Buyer's account will be credited for the amount of all advance
payments to, or funds of third parties on deposit with, Seller as of the Closing
Date, relating to the Business, including advance payments and deposits by
subscribers served by the Business for converters, encoders, decoders, cable
television service and related sales, and the liability therefor will be assumed
by Buyer.
3.3 Determination of Adjustments. Preliminary and final adjustments to
----------------------------
the Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at least 10
Business Days prior to the expected Closing Date, Seller will deliver to Buyer a
report (the "Preliminary Adjustments Report"), certified as to completeness and
accuracy by Seller, showing in detail the preliminary determination of the
adjustments referred to in SECTION 3.2, which are calculated as of the Closing
Date (or as of any other date agreed by the parties) and any documents
substantiating the adjustments proposed in the Preliminary Adjustments Report.
The Preliminary Adjustments Report will include a complete list of subscribers,
a detailed calculation of the number of Equivalent Basic Subscribers and a
schedule setting forth advance payments made to or by Seller and deposits made
by Seller, as well as accounts receivable information relating to the Business
(showing sums due and their respective aging as of the Closing Date). Seller
also will furnish to Buyer its billing report for the most current period as of
the Closing Date. Following receipt of such Preliminary Adjustments Report and
supporting information, Buyer will have five Business Days to review such
Preliminary Adjustments Report and supporting information and to notify Seller
of any disagreements with Seller's estimates. If Buyer provides a notice of
disagreement with Seller's estimates of the adjustments referred to in SECTION
3.2 within such five Business Day period, Buyer and Seller will negotiate in
good faith to resolve any such dispute and to reach an agreement prior to the
Closing Date on such estimated adjustments as of the Closing Date. The basis
for determining the Base Purchase Price to be paid at Closing will be (a) the
estimate so agreed upon by Buyer and Seller or (b) if no notice of disagreement
is provided, or if such notice is provided but the parties do not reach such an
agreement prior to the Closing Date, the estimate of such adjustments set forth
in the Preliminary Adjustments Report.
3.3.2 Within 90 days after the Closing, Seller will deliver to Buyer
a report (the "Final Adjustments Report"), similarly certified by Seller,
showing in detail the final determination of all adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together
11
<PAGE>
with any documents substantiating the adjustments proposed in the Final
Adjustments Report. Buyer will provide Seller with reasonable access to all
records which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments Report,
Buyer will give Seller written notice of Buyer's objections, if any, to the
Final Adjustments Report. If Buyer makes any such objection, the parties will
agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Any disputed amounts will be determined within 120 days after the
Closing Date by the accounting firm of Price Waterhouse, whose determination
will be conclusive. Seller and Buyer will bear equally the fees and expenses
payable to such firm in connection with such determination. The payment
required after such determination will be made by the responsible party by wire
transfer of immediately available funds to the other party within three Business
Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by Buyer under
---------------------------
this Agreement will be allocated among the Assets as set forth in a schedule to
be prepared not later than 180 days after the Closing Date (or April 1 of the
year following the Closing Date if earlier) by an independent appraiser with
significant experience in the cable television industry. Such appraiser will be
selected by the mutual agreement of Buyer and Seller within 30 days after the
date of this Agreement, and the fees of such appraiser will be shared equally by
Buyer and Seller. Buyer and Seller agree to be bound by the allocation and will
not take any position inconsistent with such allocation and will file all
returns and reports with respect to the transactions contemplated by this
Agreement, including all federal, state and local Tax returns, on the basis of
such allocation.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. Seller will assign, and Buyer will assume
-------------------------
and after the Closing will pay, discharge and perform the following (the
"Assumed Liabilities"): (a) Seller's obligations to subscribers of the Business
for (i) subscriber deposits held by Seller as of the Closing Date and which are
refundable, in the amount for which Buyer received credit under SECTION 3.2,
(ii) subscriber advance payments held by Seller as of the Closing Date for
services to be rendered by a System after the Closing Date, in the amount for
which Buyer received credit under SECTION 3.2 and (iii) the delivery of cable
television service to subscribers of the Business after the Closing Date; and
(b) obligations accruing and relating to periods after the Closing Date under
Governmental Permits listed on SCHEDULE 5.5 (to the extent that such
Governmental Permits are transferable) and Seller Contracts. Buyer will not
assume or have any responsibility for any liabilities or obligations of Seller
other than the
12
<PAGE>
Assumed Liabilities. In no event will Buyer assume or have any responsibility
for any liabilities or obligations associated with the Excluded Assets.
4.2 Excluded Assets. The Excluded Assets, which will be retained by
---------------
Seller, will consist of the following: (a) programming contracts,
retransmission consent agreements and pole attachment agreements (except for
those set forth on SCHEDULE 5.6); (b) Employee Benefit Plans; (c) insurance
policies and rights and claims thereunder (except as otherwise provided in
SECTION 12.17); (d) bonds, letters of credit, surety instruments and other
similar items; (e) cash and cash equivalents and notes receivable; (f) Seller's
trademarks, trade names, service marks, service names, logos and similar
proprietary rights (subject to Buyer's rights under SECTION 7.5); (g) Seller's
rights under any agreement governing or evidencing an obligation of Seller for
borrowed money; (h) Seller Contracts for subscriber billing and equipment; (i)
Seller's rights under any contract, license, authorization, agreement or
commitment other than those creating or evidencing Assumed Liabilities; and (j)
the assets described on SCHEDULE 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer, as of the date of this Agreement
and as of the Closing, as follows:
5.1 Organization and Qualification. Seller is a general partnership duly
------------------------------
organized and validly existing under the laws of the State of Colorado and has
all requisite partnership power and authority to own, lease and use the Assets
owned, leased or used by it and to conduct the Business as it is currently
conducted. Seller is duly qualified to do business in the States of Michigan
and Indiana, and under the laws of each jurisdiction in which the ownership,
leasing or use of the Assets owned, leased or used by it or the nature of
Seller's activities makes such qualification necessary, except in any such
jurisdiction where the failure to be so qualified and in good standing would not
have a material adverse effect on the Business, the Assets or the Systems or on
the ability of Seller to perform its obligations under this Agreement. The
general partners of Seller are Jones Cable Income Fund 1-B, Ltd. and Jones Cable
Income Fund 1-C, Ltd.
5.2 Authority and Validity. Seller has all requisite partnership power
----------------------
and authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and all other
documents and instruments to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") to which Seller is a party. Subject to approval by the Board of
Directors of Jones Intercable, Inc. ("Intercable"), the sole general partner of
each of the general partners of Seller, the execution and delivery by Seller of,
the performance by Seller of its obligations under, and the consummation by
Seller of the transactions contemplated by, this
13
<PAGE>
Agreement and the Transaction Documents to which Seller is a party have been
duly and validly authorized by all necessary action by or on behalf of Seller.
This Agreement has been, and when executed and delivered by Seller the
Transaction Documents will be, duly and validly executed and delivered by Seller
and the valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the enforcement of creditors' rights generally
or by principles governing the availability of equitable remedies.
5.3 No Conflict; Required Consents. Except for the Required Consents, all
------------------------------
of which are listed on SCHEDULE 5.3, the execution and delivery by Seller, the
performance of Seller under, and the consummation of the transactions
contemplated by, this Agreement and the Transaction Documents to which Seller is
a party do not and will not: (a) violate any provision of the Partnership
Agreement of Seller; (b) violate any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with any Governmental Authority or other Person; or (d)
(i) violate or result in a breach of or default under (without regard to
requirements of notice, lapse of time, or elections of any Person, or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under any Seller Contract or any other
instrument evidencing any of the Assets or by which Seller or any of its assets
is bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications, and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on any System, the Business or Seller, the validity, binding
effect or enforceability of this Agreement or on the ability of Seller to
perform its obligations under this Agreement or the Transaction Documents to
which Seller is a party.
5.4 Assets. Seller has exclusive, good and marketable title to (or, in
------
the case of Assets that are leased, valid leasehold interests in) the Assets
(other than Real Property, as to which the representations and warranties in
SECTION 5.7 apply). The Assets are free and clear of all Encumbrances, except
(a) Permitted Encumbrances and (b) Encumbrances described on SCHEDULE 5.4, all
of which will be terminated, released or, in the case of rights of refusal
listed on SCHEDULE 5.4, waived, as appropriate, at or prior to the Closing.
Except as described on SCHEDULE 5.6, none of the Equipment is leased by Seller
from any other Person. All the Equipment is in good operating condition and
repair (ordinary wear and tear excepted). Except for items included in the
Excluded Assets and the assets which comprise the Southwest Michigan System and
the Vicksburg System, the Assets constitute all the assets necessary to permit
Buyer to (i) conduct the Business and to operate the Systems substantially as
they are being conducted and operated on the date of this Agreement and in
compliance in all material
14
<PAGE>
respects with all Legal Requirements, Governmental Permits and Seller Contracts
and (ii) perform all the Assumed Liabilities. Buyer acknowledges that the
System's lack of a headend and its inability to be currently operated unless
connected with the headend of Seller in Three Rivers, Michigan which is part of
the Southwest Michigan System, will not be deemed a breach of any representation
or warranty of Seller under this Agreement.
5.5 Governmental Permits. All Governmental Permits are listed on SCHEDULE
--------------------
5.5. Complete and correct copies of all Governmental Permits have been
delivered by Seller to Buyer. Each Governmental Permit is in full force and
effect and Seller is not and, to Seller's Knowledge, the other party thereto is
not, in breach or default of any material terms or conditions thereunder, and is
valid under all applicable Legal Requirements according to its terms. There is
no legal action, governmental proceeding or investigation, pending or, to
Seller's Knowledge threatened, to terminate, suspend or modify any Governmental
Permit and Seller is in compliance with the material terms and conditions of all
the Governmental Permits and with other material applicable requirements of all
Governmental Authorities (including the FCC and the Register of Copyrights)
relating to the Governmental Permits, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
As of the date of this Agreement, to Seller's Knowledge, no third party has been
granted or has applied for a cable television franchise or is providing or
intending to provide cable television services in any of the communities or
unincorporated areas currently served by the Business.
5.6 Seller Contracts. All Seller Contracts (other than those constituting
----------------
Excluded Assets) are described on SCHEDULE 5.6 or 5.7. Complete and correct
copies of all Seller Contracts have been delivered by Seller to Buyer. Each
Seller Contract is in full force and effect and constitutes the valid, legal,
binding and enforceable obligation of Seller, and Seller is not and to Seller's
Knowledge each other party thereto is not, in breach or default of any material
terms or conditions thereunder.
5.7 Real Property.
-------------
5.7.1 All the Assets consisting of Real Property interests are
described on SCHEDULE 5.7. Except as otherwise disclosed on SCHEDULE 5.7, Seller
holds good, marketable and indefeasible fee simple title to the Real Property
shown as being owned by Seller on SCHEDULE 5.7 and the valid and enforceable
right to use and possess such Real Property, subject only to the Permitted
Encumbrances. Seller has valid and enforceable leasehold interests in Real
Property shown as being leased by Seller on SCHEDULE 5.7 and, with respect to
other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 5.7, subject only
to Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in
15
<PAGE>
good condition and repair and are suitable for the purposes used. The current
use and occupancy of the Real Property do not constitute nonconforming uses
under any applicable zoning Legal Requirements.
5.7.2 The documents delivered by Seller to Buyer as evidence of each
Seller Contract that is a lease of Real Property constitute the entire agreement
with the landlord in question. There are no leases or other agreements, oral or
written, granting to any Person other than Seller the right to occupy or use any
Real Property, except as described on SCHEDULE 5.7. All easements, rights-of-way
and other rights appurtenant to, or which are necessary for Seller's current use
of, any Real Property are valid and in full force and effect, and Seller has not
received any notice with respect to the termination, breach or impairment of any
of those rights. Each parcel of Real Property, any improvements constructed
thereon and their current use (a) has access to and over all public streets, or
private streets for which Seller has a valid right of ingress and egress, (b)
conforms in its current use and occupancy to all zoning requirements without
reliance upon a variance issued by a Governmental Authority or a classification
of the parcel in question as a nonconforming use, and (c) conforms in all
material respects in its use to all restrictive covenants, if any, or other
Encumbrances affecting all or part of such parcel.
5.8 Environmental Matters.
---------------------
5.8.1 The Real Property currently complies in all material respects
with and, to Seller's Knowledge, has previously been operated in compliance in
all material respects with, all Environmental Laws. Seller has not directly or
indirectly (a) generated, released, stored, used, treated, handled, discharged
or disposed of any Hazardous Substances at, on, under, in or about, or in any
other manner affecting, any Real Property, (b) transported any Hazardous
Substances to or from any Real Property or (c) undertaken or caused to be
undertaken any other activities relating to the Real Property which could
reasonably give rise to any liability under any Environmental Law, and, to
Seller's Knowledge, no other present or previous owner, tenant, occupant or user
of any Real Property or any other Person has committed or suffered any of the
foregoing. To Seller's Knowledge, (i) no release of Hazardous Substances outside
the Real Property has entered or threatens to enter any Real Property, nor (ii)
is there any pending or threatened claim based on Environmental Laws which
arises from any condition of the land surrounding any Real Property. No
litigation based on Environmental Laws which relates to any Real Property or any
operations on conditions on it (A) has been asserted or conducted in the past or
is currently pending against or with respect to Seller or, to Seller's
Knowledge, any other Person, or (B) to Seller's Knowledge is threatened or
contemplated.
5.8.2 To Seller's Knowledge, other than as described on SCHEDULE 5.8,
(a) no aboveground or underground storage tanks are currently or have been
located on any Real Property, (b) no Real Property has been used at any time as
a gasoline service
16
<PAGE>
station or any other facility for storing, pumping, dispensing or producing
gasoline or any other petroleum products or wastes and (c) no building or other
structure on any Real Property contains asbestos-containing material.
5.8.3 Seller has provided Buyer with complete and correct copies of
(a) all studies, reports, surveys or other materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(b) all notices or other materials in Seller's possession or, to Seller's
Knowledge to which it has access, that were received from any Governmental
Authority having the power to administer or enforce any Environmental Laws
relating to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (c) all materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to any litigation or
allegation by any Person concerning any Environmental Law.
5.9 Compliance with Legal Requirements.
----------------------------------
5.9.1 The ownership, leasing and use of the Assets as they are
currently owned, leased and used and the conduct of the Business and the
operation of the Systems as they are currently conducted and operated do not
violate or infringe, in any material respect, any Legal Requirements currently
in effect (other than the Legal Requirements described in SECTION 5.9.4, as to
which the provisions of SECTION 5.9.4 will apply). Seller has received no
notice of any violation by Seller or the Business of any Legal Requirement
applicable to the Business or the Systems as currently conducted, and to
Seller's Knowledge, there is no basis for the allegation of any such a
violation.
5.9.2 A valid request for renewal has been duly and timely filed
under Section 626 of the Cable Communications Policy Act of 1984 with the proper
Governmental Authority with respect to applicable Governmental Permits with
franchising authorities that have expired prior to, or will expire within 36
months after, the date of this Agreement.
5.9.3 Seller has complied, and the Business is in compliance, in all
material respects, with the specifications set forth in Part 76, Subpart K of
the rules and regulations of the FCC, Section 111 of the U.S. Copyright Act of
1976 and the applicable rules and regulations thereunder and the applicable
rules and regulations of the U.S. Copyright Office, the Register of Copyrights,
the Copyright Royalty Tribunal and the Communications Act of 1934, including
provisions of any thereof pertaining to signal leakage, to utility pole make
ready and to grounding and bonding of cable television systems (in each case as
the same is currently in effect), and all other applicable Legal Requirements
relating to the construction, maintenance, ownership and operation of the
Assets, the Systems and the Business.
17
<PAGE>
5.9.4 Notwithstanding the foregoing, to Seller's Knowledge, each
System is in compliance in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the FCC
rules and regulations promulgated thereunder (the "1992 Cable Act") as such
Legal Requirements relate to the operation of the Business; provided, however,
that Seller does not hereby make any representation about rates charged to
subscribers, other than the representation regarding the rates charged to
subscribers set forth below. Seller has complied in all material respects with
the must carry and retransmission consent provisions of the 1992 Cable Act.
Seller has used reasonable good faith efforts to establish rates charged to
subscribers, effective since September 1, 1993, that are or were allowable under
the 1992 Cable Act and any authoritative interpretation thereof now or then in
effect, whether or not such rates are or were subject to regulation at that date
by any Governmental Authority, including any local franchising authority and/or
the FCC, unless such rates were not subject to regulation pursuant to a specific
exemption from rate regulation contained in the 1992 Cable Act other than the
failure of any franchising authority to have been certified to regulate rates.
Notwithstanding the foregoing, Seller makes no representation or warranty that
the rates charged to subscribers (a) are allowable under any rules and
regulations of the FCC or any authoritative interpretation thereof, or (b) would
be allowable under any rules and regulations of the FCC or any authoritative
interpretation thereof promulgated after the date of the Closing. Seller has
delivered to Buyer complete and correct copies of all FCC Forms 393, 1200, 1205,
1210, 1215, 1220, 1225, 1235 and 1240 filed with respect to the Systems and
copies of all other FCC Forms filed by Seller and of all correspondence with any
Governmental Authority relating to rate regulation generally or specific rates
charged to subscribers with respect to the Systems, including copies of any
complaints filed with the FCC with respect to any rates charged to subscribers
of the Systems, and any other documentation supporting an exemption from the
rate regulation provisions of the 1992 Cable Act claimed by Seller with respect
to any of the Systems (collectively, "Rate Regulation Documents"). As of the
date of this Agreement, Seller has received no notice from any Governmental
Authority with respect to an intention to enforce customer service standards
pursuant to the 1992 Cable Act and Seller has not agreed with any Governmental
Authority to establish customer service standards that exceed the customer
service standards promulgated pursuant to the 1992 Cable Act. In addition,
Seller has also delivered to Buyer documentation for each of the Systems in
which the franchising authority has not certified to regulate rates as of the
date of this Agreement showing a determination of allowable rates using a
benchmark methodology. Except as described in SCHEDULE 5.9, Seller has not made
any election with respect to any cost of service proceeding conducted in
accordance with Part 76.922 of Title 47 of the Code of Federal Regulations or
any similar proceeding (a "Cost of Service Election") with respect to any of the
Systems.
5.10 Patents, Trademarks and Copyrights. Seller has timely and accurately
----------------------------------
made all requisite filings and payments with the Register of Copyrights with
respect to
18
<PAGE>
the Business. Seller has delivered to Buyer complete and correct copies of all
current reports and filings, and all reports and filings for the past three
years, made or filed pursuant to copyright rules and regulations with respect to
the Business. Seller does not possess any patent, patent right, trademark or
copyright material to the operation of the Business and Seller is not a party to
any license or royalty agreement with respect to any patent, trademark or
copyright except for licenses respecting program material and obligations under
the Copyright Act of 1976 applicable to cable television systems generally. The
Business and the System have been operated in such a manner so as not to violate
or infringe upon the rights of, or give rise to any rightful claim of any Person
for copyright, trademark, service mark, patent, license, trade secret
infringement or the like.
5.11 Financial Statements. A correct copy of the combined unaudited
--------------------
financial statements for the Systems and the Southwest Michigan System and the
Vicksburg System as of September 30, 1997, including an unaudited income
statement and balance sheet which fairly present the financial condition of the
Systems, is attached as SCHEDULE 5.11 (collectively, the "Financial
Statements"). At the date of the Financial Statements, Seller had no liability
or obligation, whether accrued, absolute, fixed or contingent (including
liabilities for Taxes or unusual forward or long-term commitments), required by
GAAP to be reflected or reserved against therein that were not fully reflected
or reserved against on the balance sheet included in the Financial Statements,
other than liabilities included in current liabilities, and none of which was or
would be material to the Business.
5.12 Absence of Certain Changes. Since September 30, 1997 (a) Seller has
--------------------------
not incurred any obligation or liability (contingent or otherwise), except
normal trade or business obligations incurred in the ordinary course of
business, the performance of which would be reasonably likely, individually or
in the aggregate, to have a material adverse effect on the financial condition
or results of operations of the Business, (b) there has been no material adverse
change (except any change affecting the United States cable industry as a whole,
including any change arising from (i) legislation, litigation, rulemaking or
regulation or (ii) competition caused by or arising from other multiple channel
distribution services) in the business, condition (financial or otherwise) or
liabilities of the Business, and (c) the Business has been conducted only in the
ordinary course of business.
5.13 Legal Proceedings. Except as set forth in SCHEDULE 5.13: (a) there
-----------------
is no claim, investigation or litigation pending or, to Seller's Knowledge,
threatened, by or before any Governmental Authority or private arbitration
tribunal against Seller which, if adversely determined, would materially
adversely affect the financial condition or operations of the Business, the
Systems, the Assets or the ability of Seller to perform its obligations under
this Agreement, or which, if adversely determined, would result in the
modification, revocation, termination, suspension or other limitation of any of
the Governmental Permits, Seller Contracts or leases or other documents
evidencing
19
<PAGE>
the Real Property; and (b) there is not in existence any judgment requiring
Seller to take any action of any kind with respect to the Assets or the
operation of the Systems, or to which Seller (with respect to the Systems), the
Systems or the Assets are subject or by which they are bound or affected.
5.14 Tax Returns; Other Reports. Seller has duly and timely filed in
--------------------------
correct form all federal, state and local Tax returns and all other Tax reports
required to be filed by Seller and has timely paid all Taxes which have become
due and payable, whether or not shown on any such report or return, the failure
of which to be filed or paid could adversely affect the Assets or result in the
imposition of an Encumbrance upon the Assets, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as specifically identified on SCHEDULE 5.14, Seller has received no
notice of, nor does Seller have any Knowledge of, any deficiency, assessment or
audit, or proposed deficiency, assessment or audit from any taxing Governmental
Authority which could affect or result in the imposition of an Encumbrance upon
the Assets.
5.15 Employment Matters.
------------------
5.15.1 SCHEDULE 5.15 contains a complete and correct list of names and
positions of all employees of Seller engaged in the Business and the business of
the Southwest Michigan System and the Vicksburg System as of the date set forth
in such SCHEDULE. Seller has no employment agreements, either written or oral,
with any employee of the Business. Seller has complied in all material respects
with applicable Legal Requirements relating to the employment of labor,
including WARN, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), continuation coverage requirements with respect to group health
plans, and those relating to wages, hours, collective bargaining, unemployment
insurance, worker's compensation, equal employment opportunity, age and
disability discrimination, immigration control and the payment and withholding
of Taxes.
5.15.2 Each "employee benefit plan" or "multiemployer plan" (as those
terms are defined in ERISA) with respect to which Seller or any ERISA Affiliate
(as defined in ERISA) of Seller has any liability is set forth on SCHEDULE 5.15
(the "Employee Benefit Plans"). Neither Seller nor its ERISA Affiliates nor any
Employee Benefit Plan is in material violation of any provision of ERISA. No
"reportable event," as defined in Section 4043 of ERISA, has occurred and is
continuing with respect to any Employee Benefit Plan. No "prohibited
transaction," within the meaning of Section 406 of ERISA, has occurred with
respect to any such Employee Benefit Plan, and no "accumulated funding
deficiency" or "withdrawal liability" (both as defined in Section 302 of ERISA)
exists with respect to any such Employee Benefit Plan. After the Closing, Buyer
will not be required, under ERISA, the Internal Revenue Code of 1986, as amended
(the "Code") or any collective bargaining
20
<PAGE>
agreement, to establish, maintain or continue any Employee Benefit Plan
currently maintained by Seller or any of its ERISA Affiliates.
5.15.3 Seller is not a party to any collective bargaining agreements
and Seller has not recognized or agreed to recognize and has no duty to bargain
with any labor organization or collective bargaining unit. There are not pending
any unfair labor practice charges against Seller, any demand for recognition or
any other request or demand from a labor organization for representative status
with respect to any Person employed by Seller. To Seller's Knowledge, its
employees are not engaged in organizing activity with respect to any labor
organization. Seller has no employment agreement, either written or oral,
express or implied, that would require Buyer to employ any Person after the
Closing Date.
5.16 Systems Information. SCHEDULE 5.16 sets forth a materially true and
-------------------
accurate description of the following information relating to the Business as of
the most recent monthly report generated by Seller in the ordinary course of
business containing the information required to prepare such SCHEDULE (provided
that such date is no earlier than two months prior to the date of this
Agreement):
(a) the approximate number of miles of plant included in the Assets;
(b) the number of subscribers and EBS's served by the Systems for
each Franchise;
(c) the approximate number of single family homes and residential
dwelling units passed by the Systems;
(d) a description of basic and optional or tier services available
from the Systems, the rates charged by Seller for each and the number of
subscribers and subscriber equivalents receiving each optional or tier
service;
(e) the stations and signals carried by the Systems and the channel
position of each such signal and station; and
(f) the cities, towns, villages, townships, boroughs and counties
served by the Systems.
5.17 Bonds. Except as set forth on SCHEDULE 5.17, as of the date of this
-----
Agreement, there are no franchise, construction, fidelity, performance, or other
bonds or letters of credit posted by Seller in connection with its operation or
ownership of any of the Systems or Assets.
5.18 Finders and Brokers. Seller has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's
21
<PAGE>
or similar fee or commission in connection with the transactions contemplated by
this Agreement for which Buyer could be liable.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller, as of the date of this Agreement and as of the Closing, as
follows:
6.1 Organization and Qualification. Buyer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to own, lease and use
the assets owned, leased or used by it and to conduct its business as it is
currently conducted. Buyer is duly qualified to do business and is in good
standing under the laws of Michigan and Indiana, and of each jurisdiction in
which the ownership, leasing or use of the assets owned, leased or used by it or
the nature of Buyer's activities makes such qualification necessary, except in
any such jurisdiction where the failure to be so qualified and in good standing
would not have a material adverse effect on Buyer or on the ability of Buyer to
perform its obligations under this Agreement.
6.2 Authority and Validity. Buyer has all requisite corporate power and
----------------------
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party. The execution and delivery by Buyer of, the
performance by Buyer of its obligations under, and the consummation by Buyer of
the transactions contemplated by, this Agreement and the Transaction Documents
to which Buyer is a party have been duly and validly authorized by all necessary
action by or on behalf of Buyer. This Agreement has been, and when executed and
delivered by Buyer the Transaction Documents will be, duly and validly executed
and delivered by Buyer and the valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies.
6.3 No Conflicts; Required Consents. Except for the Required Consents,
-------------------------------
the execution and delivery by Buyer, the performance of Buyer under, and the
consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party do not and will not (a) violate
any provision of the charter or bylaws of Buyer, (b) violate any Legal
Requirement, (c) require any consent, approval or authorization of, or filing of
any certificate, notice, application, report or other document with any
Governmental Authority or other Person or (d) (i) violate or result in a breach
of or constitute a default under (without regard to requirements of notice,
lapse of time or elections of any Person or any combination thereof), (ii)
permit or result in the termination, suspension, modification of, (iii) result
22
<PAGE>
in the acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of any
Encumbrance under, any instrument or other agreement to which Buyer is a party
or by which Buyer or any of its assets is bound or affected, except for purposes
of this clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have a material adverse effect on the validity, binding effect or
enforceability of this Agreement or on the ability of Buyer to perform its
obligations under this Agreement or the Transaction Documents to which it is a
party.
6.4 Finders and Brokers. Buyer has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller could be liable.
6.5 Legal Proceedings. There are no claims, actions, suits, proceedings
-----------------
or investigations pending or, to Buyer's Knowledge, threatened, by or before any
Governmental Authority, or any arbitrator, by or against or affecting or
relating to Buyer which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this Agreement
------------------------------
and the Closing Date, Seller will give Buyer and its counsel, accountants and
other representatives full access during normal business hours upon reasonable
notice to all the premises and books and records of the Business and to all the
Assets and to the System personnel and will furnish to Buyer and such
representatives all such documents, financial information, and other information
regarding the Business and the Assets as Buyer from time to time reasonably may
request; provided that no such investigation will affect or limit the scope of
any of Seller's representations, warranties, covenants and indemnities in this
Agreement or any Transaction Document or limit liability for any breach of any
of the foregoing.
7.2 Continuity and Maintenance of Operations; Financial Statements.
--------------------------------------------------------------
Except as Buyer may otherwise consent in writing, between the date of this
Agreement and the Closing:
7.2.1 Seller will conduct the Business and operate the Systems only
in the usual, regular and ordinary course consistent with past practices
(including making budgeted capital expenditures and fulfilling installation
requests) and will use commercially reasonable efforts to (a) preserve its
current business intact, including
23
<PAGE>
preserving existing relationships with franchising authorities, suppliers,
customers and others having business dealings with Seller relating to the
Business unless Buyer requests otherwise, (b) keep available the services of its
employees and agents providing services in connection with the Business and (c)
continue making marketing, advertising and promotional expenditures with respect
to the Business consistent with past practices.
7.2.2 Seller will maintain the Assets in good repair, order and
condition (ordinary wear and tear excepted), will maintain equipment and
inventory at historical levels consistent with past practices, will maintain in
full force and effect, policies of insurance with respect to the Business in
such amounts and with respect to such risks as customarily maintained by
operators of cable television systems of the size and geographic location as the
Systems and will maintain its books, records and accounts in the usual, regular
and ordinary manner on a basis consistent with past practices. Seller will not
itself, and will not permit any of its officers, directors, shareholders, agents
or employees to, pay any of Seller's subscriber accounts receivable (other than
for their own residences) prior to the Closing Date. Seller will continue to
implement its procedures for disconnection and discontinuance of service to
subscribers whose accounts are delinquent in accordance with those in effect on
the date of this Agreement.
7.2.3 Without the prior approval of Buyer, Seller will not (a) change
the rate charged for Basic Service, Expanded Basic Service or Pay TV or add,
delete, retier or repackage any programming services except to the extent
required under the 1992 Cable Act or any other Legal Requirement, provided
however if Seller changes such rates in order to so comply, Seller will provide
Buyer with copies of any FCC forms (even if not filed with any Governmental
Authority) that Seller used to determine that the new rates were allowable, (b)
sell, transfer or assign any portion of the Assets other than sales in the
ordinary course of business or permit the creation of any Encumbrance on any
Asset other than a Permitted Encumbrance or any Encumbrance which will be
released at or prior to Closing, (c) modify in any material respect, terminate,
suspend or abrogate any Governmental Permits, Seller Contracts or any other
contract or agreement (other than those constituting Excluded Assets), (d) enter
into any contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to any System or the Business involving an
expenditure in excess of $25,000, other than contracts or commitments which are
cancelable on 30 days' notice or less without penalty, (e) take or omit to take
any action that would result in any of its representations or warranties in this
Agreement or in any Transaction Document not being true and correct when made or
as of the Closing, (f) engage in any marketing, subscriber installation or
collection practices that are inconsistent with past practices, or (g) enter
into any agreement with or commitment to any competitive access providers with
respect to the Systems
7.2.4 Seller promptly will deliver to Buyer true and complete copies
of monthly and quarterly financial statements and operating reports and any
reports with
24
<PAGE>
respect to the combined operations of the Business and the Southwest Michigan
System and the Vicksburg System, prepared by or for Seller at any time between
the date of this Agreement and the Closing Date. All financial statements so
delivered will be prepared in accordance with GAAP on a basis consistent with
the Financial Statements.
7.2.5 Seller will give or cause to be given to Buyer as soon as
reasonably possible but in any event no later than 5 Business Days prior to the
date of submission to the appropriate Governmental Authority, copies of all Rate
Regulation Documents prepared with respect to any of the Systems, including any
Cost of Service Elections other than those described on SCHEDULE 5.9, and Seller
will make a good faith effort to address any specific concerns raised by Buyer
with respect to such documents.
7.2.6 Seller will promptly notify Buyer of any fact, circumstance,
event or action by it or otherwise (a) which, if known at the date of this
Agreement, would have been required to be disclosed in or pursuant to this
Agreement or (b) the existence, occurrence or taking of which would result in
any of Seller's representations and warranties in this Agreement or any
Transaction Document not being true, complete and correct when made or at the
Closing, and, with respect to clause (b) use its best efforts to remedy the
same.
7.3 Employee Matters.
----------------
7.3.1 Buyer will have no obligation to employ or offer employment to
any of the employees of Seller. As of the Closing Date, Seller will terminate
the employment of all its employees who were employed incidental to the conduct
of the Business whose employment will not continue with Seller after the Closing
and will promptly pay to all such employees all compensation, including
salaries, commissions, bonuses, deferred compensation, severance, insurance,
pensions, profit sharing, vacation (except for accrued vacation included in the
adjustments pursuant to SECTION 3.2), sick pay and other compensation or
benefits to which they are entitled for periods prior to the Closing, including
all amounts, if any, payable on account of the termination of their employment.
Seller agrees to cooperate in all reasonable respects with Buyer to allow Buyer
to evaluate and interview employees of the Business to make hiring decisions.
Such cooperation will include but not be limited to allowing Buyer to contact
employees during work time and, with the consent of the employee, making
personnel records available. Buyer will give Seller written notice on or before
60 days after the date hereof of the name of all employees of the System to whom
Buyer desires to offer employment on and after the Closing Date (subject to
satisfaction of Buyer's conditions for employment). Seller will not, without
the prior written consent of Buyer, change the compensation or benefits of any
employees of the Business except in accordance with past practice.
7.3.2 All claims and obligations under, pursuant to or in connection
with any welfare, medical, insurance, disability or other employee benefit plans
of
25
<PAGE>
Seller or arising under any Legal Requirement affecting employees of Seller
incurred on or before the Closing Date or resulting or arising from events or
occurrences occurring or commencing on or before the Closing Date will remain
the responsibility of Seller, whether or not such employees are hired by Buyer
after the Closing.
7.3.3 Seller will remain solely responsible for, and will indemnify
and hold harmless Buyer from and against all Losses arising from or with respect
to, all salaries and all severance, vacation (except for accrued vacation
included in the adjustments pursuant to SECTION 3.2), medical, sick, holiday,
continuation coverage and other compensation or benefits to which Seller's
employees (whether or not hired by Buyer) may be entitled as a result of their
employment by Seller prior to the Closing, the termination of their employment
prior to the Closing, the consummation of the transactions contemplated hereby
or pursuant to any applicable Legal Requirement (including without limitation
WARN) or otherwise relating to their employment prior to the Closing.
7.3.4 Nothing in this Agreement will require Buyer to assume any
collective bargaining agreement between Seller and any labor organization.
7.4 Leased Vehicles; Other Capital Leases. Seller will pay the remaining
-------------------------------------
balances on any leases for vehicles or capital leases included in the Equipment
and will deliver title to such vehicles and other Equipment free and clear of
all Encumbrances (other than Permitted Encumbrances) to Buyer at the Closing.
7.5 Required Consents; Estoppel Certificates.
----------------------------------------
7.5.1 Seller will use commercially reasonable efforts to obtain in
writing, as promptly as possible and at its expense, all the Required Consents
and any other consent, authorization or approval required to be obtained by
Seller in connection with the transactions contemplated by this Agreement, in
form and substance reasonably satisfactory to Buyer and deliver to Buyer copies
of such Required Consents and such other consents, authorizations or approvals
promptly after they are obtained by Seller. Such Required Consents will be
proposed in a form that provides confirmation from the third party of the
continued existence of and the absence of defaults under the applicable Seller
Contract or Governmental Permit. Buyer will cooperate with Seller to obtain all
Required Consents, but Buyer will not be required to accept or agree or accede
to any modifications or amendments to, or changes in, or the imposition of any
condition to the transfer to Buyer of (in each case other than inconsequential
matters with no adverse effect on Buyer), any Seller Contract or Governmental
Permit that are not acceptable to Buyer in its sole discretion. Notwithstanding
the foregoing, the parties will deliver to the appropriate Governmental
Authority requests for the necessary consents to transfer the Governmental
Permits, and will complete, execute and deliver to the appropriate Governmental
Authority, the FCC Forms 394 prepared by Buyer with respect to each Governmental
Permit as to
26
<PAGE>
which the parties agree that such Form 394 should be delivered, and failing an
agreement between the parties, to any Governmental Authority requested by
Seller. In addition, to the extent the parties agree not to submit a Form 394 to
any Governmental Authority, if such Governmental Authority has not acted on a
request of the parties to consent to the transfer of the relevant Governmental
Permit within 75 days after such request has been made, either party may, upon
notice to the other, require that a Form 394 be submitted to such Governmental
Authority, and the parties will cooperate to submit such Form 394 within five
Business Days after such notice has been given.
7.5.2 Seller will use commercially reasonable efforts to obtain for
each lease that has not been recorded in the public records, execution of a
document suitable for recording in the public records and sufficient after
recording to constitute a memorandum of lease.
7.6 Title Commitments and Surveys.
-----------------------------
7.6.1 After the execution of this Agreement, Buyer will order at
Seller's expense (a) commitments for owner's title insurance policies on all
Real Property owned by Seller and on easements which provide access to each such
parcel of real property, (b) commitments for lessee's title insurance policies
for all Real Property leased by Seller which is used for headend or tower sites
and on easements which provide access to each such site and (c) an ALTA survey
(including such items on Table A of the Minimum Standard Detail Requirements and
Classifications thereto that Buyer in its reasonable judgment determines are
desirable or necessary) on each parcel of Real Property for which a title
insurance policy is to be obtained. The title commitments will evidence a
commitment to issue an ALTA title insurance policy insuring good, marketable and
indefeasible fee simple title or leasehold interest, in the case of Leased Real
Property, if applicable) to each parcel of such Real Property, subject only to
Permitted Encumbrances, for such amount as Buyer directs and will contain no
exceptions except for items which in Buyer's reasonable opinion do not adversely
affect (other than in an immaterial way as to any individual parcel) the good,
marketable and indefeasible title to or Buyer's access or quiet use or enjoyment
of such Real Property in the manner the Real Property is presently used or in
the normal conduct of the Business. At the Closing, Seller will cause Buyer to
receive, at Seller's expense, title commitments redated to the date and time of
Closing. In the event Seller has not eliminated or caused to be eliminated all
unacceptable exceptions from such policies or commitments prior to Closing, and
Buyer elects to proceed with the Closing, Buyer will be entitled to
indemnification with respect to such exceptions as provided in SECTION 11.2.
7.6.2 Title insurance policies on all Real Property in such amounts
as Buyer directs will be delivered to Buyer at Seller's expense within 30 days
after the Closing Date evidencing title to the Real Property vested in Buyer
consistent with the commitments delivered at the Closing pursuant to SECTION
7.6.1.
27
<PAGE>
7.7 HSR Notification. As soon as practicable after the execution of this
----------------
Agreement, but in any event no later than 30 days after such execution, Seller
and Buyer will each complete and file, or cause to be completed and filed, any
notification and report required to be filed under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); and each such
filing will request early termination of the waiting period imposed by the HSR
Act. The parties will use their reasonable best efforts to respond as promptly
as reasonably practicable to any inquiries received from the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") for additional information or documentation and to
respond as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters. The parties will use their respective reasonable best efforts to
overcome any objections which may be raised by the FTC, the Antitrust Division
or any other Governmental Authority having jurisdiction over antitrust matters.
Notwithstanding the foregoing, Buyer will not be required to make any
significant change in the operations or activities of the business (or any
material assets employed therein) of Buyer or any of its Affiliates, if Buyer
determines in good faith that such change would be materially adverse to the
operations or activities of the business (or any material assets employed
therein) of Buyer or any of its Affiliates having significant assets, net worth,
or revenue. Notwithstanding anything to the contrary in this Agreement, if Buyer
or Seller, in its sole opinion, considers a request from a governmental agency
for additional data and information in connection with the HSR Act to be unduly
burdensome, such party may terminate this Agreement by giving written notice to
the other. Within 10 days after receipt of a statement therefor, Seller will
reimburse Buyer for one-half of the filing fees payable by Buyer in connection
with Buyer's filing under the HSR Act.
7.8 No Shopping. None of Seller, its partners or any agent or
-----------
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any portion of the Assets.
7.9 Lien and Judgment Searches. Not more than 20 nor fewer than 10 days
--------------------------
prior to the expected Closing Date, Seller, at its expense, will provide Buyer
with (a) the results of a lien search conducted by a professional search company
of records in the offices of the secretaries of state in each state and county
clerks in each county where there exist tangible Assets, and in the state and
county where Seller's principal offices are located, including copies of all
financing statements or similar notices or filings (and any continuation
statements) discovered by such search company and (b) the results of a search of
the dockets of the clerk of each federal and state court sitting in the city,
county or other applicable political subdivision where the principal
28
<PAGE>
office or any material assets of Seller may be located, with respect to
judgments, orders, writs or decrees against or affecting Seller or any of the
Assets.
7.10 Transfer Taxes. Any state sales Taxes imposed by any Governmental
--------------
Authority arising from or payable by reason of the transfer of any of the Assets
pursuant to this Agreement will be paid by Seller. Any local sales, or state or
local use, transfer, Taxes or fees or any other charge (including filing fees)
imposed by any Governmental Authority arising from or payable by reason of the
transfer of any of the Assets pursuant to this Agreement will be paid by one-
half by Buyer (but in no event will Buyer's share exceed an aggregate of
$250,000), with the balance to be paid by Seller.
7.11 Distant Broadcast Signals. Unless otherwise restricted or prohibited
-------------------------
by any Governmental Authority or applicable Legal Requirement, if requested by
Buyer, Seller will delete prior to the Closing Date any distant broadcast
signals which Buyer determines will result in unacceptable liability on the part
of Buyer for copyright payments with respect to continued carriage of such
signals after the Closing.
7.12 Guaranty. At the Closing, Seller will cause Intercable to sign and
--------
deliver to Buyer, a Guaranty in the form of EXHIBIT D.
7.13 Letter to Programmers. On or before the Closing Date, Seller will
---------------------
transmit a letter in the form of EXHIBIT E to all programmers from which Seller
purchases programming for the Systems and provide Buyer with a copy of each such
letter.
7.14 Updated Schedules. Not later than ten Business Days prior to the
-----------------
expected Closing Date, Seller will deliver to Buyer revised copies of all
Schedules to this Agreement which will have been updated and marked to show any
changes occurring between the date of this Agreement and the date of delivery;
provided, however, that for purposes of Seller's representations and warranties
and covenants in this Agreement, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing, and
provided further that if the effect of any such updates to Schedules is to
disclose any one or more additional properties, privileges, rights, interests or
claims as Assets, Buyer, at or before Closing, will have the right (to be
exercised by written notice to Seller) to cause any one or more of such items to
be designated as and deemed to constitute Excluded Assets for all purposes under
this Agreement.
7.15 Use of Names and Logos. For a period of 90 days after the Closing
----------------------
Date, Buyer will be entitled to use all trademarks, trade names, service marks,
service names, logos and similar proprietary rights of Seller and all
derivations and abbreviations of such name and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
Notwithstanding the foregoing, Buyer will not
29
<PAGE>
be required to remove or discontinue using any such trade name or mark that is
affixed to converters or other items in or to be used in subscriber homes or
properties, or as are used in a similar fashion making such removal or
discontinuation impracticable for Buyer.
7.16 Subscriber Billing Services. Seller will provide to Buyer, upon
---------------------------
request, on terms and conditions reasonably satisfactory to each party, access
to and the right to use its billing system computers, software and related fixed
assets in connection with the Systems acquired by Buyer for a period of up to 90
days following the Closing to allow for conversion of existing billing
arrangements ("Transitional Billing Services"); provided however that Buyer will
not be required to pay Seller more than Seller's actual cost of providing such
service. Buyer will notify Seller at least 10 days prior to the expected Closing
Date as to whether it desires Transitional Billing Services from Seller.
7.17 Satisfaction of Conditions. Each party will use its best efforts to
--------------------------
satisfy, or to cause to be satisfied, the conditions to the obligations of the
other party to consummate the transactions contemplated by this Agreement, as
set forth in SECTION 8, provided that Buyer will not be required to agree to any
increase in the amount payable with respect to, or any modification that makes
more burdensome in any material respect, any of the Assumed Liabilities.
7.18 Confidentiality and Publicity. Neither party will issue any press
-----------------------------
release or make any other public announcement or any oral or written statements
to Seller's employees concerning this Agreement or the transactions contemplated
hereby except as required by applicable Legal Requirements, without the prior
written consent of the other party. Each party will hold, and will cause its
employees, consultants, advisors and agents to hold the terms of this Agreement
in confidence; provided that (a) such party may use and disclose such
information once it has become publicly disclosed (other than by such party in
breach of its obligations under this Section) or which rightfully has come into
the possession of such party (other than from the other party) and (b) to the
extent that such party may be compelled by Legal Requirements to disclose any of
such information, but the party proposing to disclose such information will
first notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may disclose such
information to employees, consultants, advisors, agents and actual or potential
lenders whose knowledge is necessary to facilitate the consummation of the
transactions contemplated by this Agreement. The obligation by either party to
hold information in confidence pursuant to this Section will be satisfied if
such party exercises the same care with respect to such information as it would
exercise to preserve the confidentiality of its own similar information.
30
<PAGE>
7.19 Bulk Transfers. Buyer waives compliance by Seller with Legal
--------------
Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.20 Environmental Reports. Within 60 days after the execution of this
---------------------
Agreement, Seller will, at its expense, obtain and deliver to Buyer for each
parcel of Real Property owned or leased by Seller a current Phase I
Environmental Site Assessment ("Environmental Report") prepared by a nationally
known environmental engineering firm reasonably satisfactory to Buyer in
accordance with ASTM Standard E 1527-93 and certified to Buyer. Each
Environmental Report will include, in addition to the process described in E
1527-93, such soil and groundwater sampling and other testing as will enable the
environmental engineers to determine if Hazardous Substances are detected and to
provide an estimate of the cost to remove and dispose of the Hazardous
Substances or otherwise remediate the property in accordance with all applicable
Environmental Laws.
7.21 Board Approvals. On or before the Approval Deadline, the Board of
---------------
Directors of Buyer and the Board of Directors of Intercable will have been
presented with resolutions for the approval of the transactions contemplated
hereby on behalf of Buyer and Seller, and will have approved or disapproved the
same.
7.22 Section 1031. The parties shall cooperate with each other in order
------------
that the transactions contemplated under this Agreement may be accomplished as
part of a deferred exchange pursuant to Section 1031 of the Code and applicable
Treasury Regulations and to executed such agreements and other documents as may
be necessary to complete and otherwise effectuate a tax-deferred exchange;
provided, however, that Seller shall not be obligated to incur any costs,
- -----------------
expenses or other liabilities in cooperating with Buyer hereunder. Buyer shall
be permitted to assign any or all of its rights and obligations under this
Agreement to a qualified intermediary without Seller's consent for purposes of
qualifying the transactions hereunder as a tax-deferred exchange; provided,
---------
however, that the fees of such qualified intermediary shall be paid by Buyer,
- -------
and provided further, however, that nothing in this Section shall be deemed to
-------------------------
relieve Buyer any of its obligations under this Agreement, including, without
limitation, its obligations to close the transactions contemplated by this
Agreement if the exchange described herein has not occurred prior to August 1,
1998 and the conditions to Closing described in Sections 8.1 and 8.2 have been
met or waived; subject to the rights of either party to terminate the Agreement
pursuant to Section 10.1.3.
SECTION 8. CONDITIONS PRECEDENT
8.1 Conditions to the Obligations of Buyer and Seller. The obligations
-------------------------------------------------
of each party to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or before the Closing, of the following, which
may be waived by the parties to the extent permitted by applicable Legal
Requirements:
31
<PAGE>
8.1.1 HSR Act Filings. All filings required under the HSR Act have
---------------
been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or threat of
any litigation by a Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or proceeding is
---------------------
pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of any
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement (excluding the ability to acquire
the Systems pursuant to a like-kind exchange under Section 1031 of the Code) or
have a material adverse effect on the right of Buyer to exercise full rights of
ownership of the Systems or (d) prevent or make illegal the consummation of any
transactions contemplated by this Agreement.
8.2 Conditions to the Obligations of Buyer. The obligations of Buyer to
--------------------------------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions, which may
be waived by Buyer to the extent permitted by applicable Legal Requirements:
8.2.1 Representations and Warranties. All representations and
------------------------------
warranties of Seller in this Agreement and any Transaction Document are, if
specifically qualified by materiality, true and correct in all respects and, if
not so qualified, are true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
8.2.2 Performance of Agreements. Seller has performed in all
-------------------------
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Seller at or before the Closing.
8.2.3 Deliveries. Seller has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.2.
32
<PAGE>
8.2.4 Consents. Seller has delivered to Buyer evidence, in form and
--------
substance satisfactory to Buyer, that all of the Required Consents marked with
an asterisk on SCHEDULE 5.3 have been obtained or given (or deemed to have been
given) and are in full force and effect.
8.2.5 Environmental Matters. The Environmental Reports delivered to
---------------------
Buyer pursuant to SECTION 7.20 and any other environmental audits or assessments
conducted with respect to the Assets do not indicate the existence of any
conditions that could reasonably be expected to give rise to a material risk of
liability.
8.2.6 No Material Adverse Change. There has not been any material
--------------------------
adverse change in the Business, the Assets or the Systems since the date of this
Agreement other than any change arising out of general economic conditions in
the United States or any change affecting the United States cable television
industry as a whole, including any change arising from (a) legislation,
litigation, rulemaking or regulation or (b) competition caused by or arising
from other multiple channel distribution services.
8.2.7 EBS. As of the Closing Date, the Business, combined with the
---
EBS's of the Southwest Michigan System and the Vicksburg System, has no fewer
than 16,530 EBS's; provided, that if such aggregate number of EBS's is less than
16,530, Buyer may elect not to close, or if Buyer elects to close, the extent of
the adjustment pursuant to SECTION 3.2.1 shall be as if the applicable number of
EBS's (a) of the Business were 1,437, (b) in the Southwest Michigan System were
14,420 and (c) in the Vicksburg System were 673.
8.2.8 1031 Exchange. The closing of Buyer's sale of certain systems
-------------
to Buford Group, Inc., shall have occurred (the "Buford Transaction"); provided,
however, if the Buford Transaction shall not have occurred by August 1, 1998,
the closing of the Buford Transaction shall no longer be a condition to the
obligations of Buyer to consummate the transactions hereunder.
8.2.9 Other Closings. The closings of the Vicksburg Transaction and
--------------
the Southwest Michigan Transaction shall occur simultaneously with the closing
hereunder, unless the failure of the Vicksburg Transaction to close is due to a
breach of the Vicksburg Purchase Agreement by Seller, or the failure of the
Southwest Michigan Transaction to close is due to a breach of the Southwest
Michigan Purchase Agreement by Seller.
8.3 Conditions to Obligations of Seller. The obligations of Seller to
-----------------------------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction by Seller at or before the Closing, of the following, which may be
waived by Seller, to the extent permitted by applicable Legal Requirements:
33
<PAGE>
8.3.1 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement and any Transaction Document
are, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, are true and correct in all material respects, in each
case on and as of the Closing Date with the same effect as if made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
8.3.2 Performance of Agreements. Buyer has performed in all
-------------------------
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Buyer at or before the Closing.
8.3.3 Deliveries. Buyer has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.3.
8.3.4 EBS. As of the Closing Date, either (a) the Business,
---
combined with the EBS's of the Southwest Michigan System and the Vicksburg
System, has no fewer than 16,530 EBSs or (b) Buyer has waived its right to an
adjustment pursuant to SECTION 3.2.1 except to the extent of the adjustment
applicable if the number of EBS's (i) of the Business were 1,437, (ii) in the
Southwest Michigan System were 14,420 and (iii) in the Vicksburg System were
673.
8.3.5 Other Closings. The closings of the Vicksburg Transaction and
--------------
the Southwest Michigan Transaction shall occur simultaneously with the closing
hereunder, unless the failure of the Vicksburg Transaction to close is due to a
breach of the Vicksburg Purchase Agreement by Buyer, or the failure of the
Southwest Michigan Transaction to close is due to a breach of the Southwest
Michigan Purchase Agreement by Buyer.
8.4 Waiver of Conditions. Any party may waive in writing any or all of
--------------------
the conditions to its obligations under this Agreement.
SECTION 9. CLOSING
9.1 The Closing; Time and Place. The Closing will be held simultaneously
---------------------------
with the closings of the Southwest Michigan Transaction and the Vicksburg
Transaction on a date specified by Buyer (upon three Business Days prior notice
to Seller) that is within 15 days after all conditions to the Closing contained
in this Agreement (other than those based on acts to be performed at the
Closing) have been satisfied or waived. The Closing will be held at 10:00 a.m.
local time at Seller's office located at 9697 East Mineral Avenue, Englewood,
Colorado 80112, or at such place and time as Buyer and Seller may agree.
34
<PAGE>
9.2 Seller's Delivery Obligations. At the Closing, Seller will deliver
-----------------------------
(or cause to be delivered) to Buyer the following:
(a) a Bill of Sale in the form attached as EXHIBIT A;
(b) a special warranty deed in a form reasonably acceptable to Buyer
(and complying with applicable state laws) with respect to each parcel of
owned Real Property, duly executed and acknowledged and in recordable form,
warranting to defend title to such Real Property against all persons
claiming by, through or under Seller, subject only to Permitted
Encumbrances, and in form sufficient to permit the title company to issue
the title policy described in SECTION 7.6.1 to Buyer with respect to such
Real Property;
(c) an Assignment and Assumption of Contracts in the form attached as
EXHIBIT B;
(d) one or more Assignments of Leases in the form attached as EXHIBIT
C and, if requested by Buyer, short forms or memoranda of such Assignments
in recordable form;
(e) any memorandum of lease obtained by Seller pursuant to SECTION
7.5(B);
(f) a Guaranty signed by Intercable in the form attached as EXHIBIT
D;
(g) an affidavit of Seller, under penalty of perjury, that Seller is
not a "foreign person" (as defined in the Foreign Investment in Real
Property Tax Act and applicable regulations) and that Buyer is not required
to withhold any portion of the consideration payable under this Agreement
under the provisions of such Act in the form attached as EXHIBIT F;
(h) motor vehicle title certificates and such other transfer
instruments as Buyer may deem necessary or advisable to transfer the Assets
to Buyer and to perfect Buyer's rights in the Assets;
(i) the opinion of Elizabeth Steele, Esq., counsel for Seller, dated
the Closing Date, in the form set forth in EXHIBIT G;
(j) evidence satisfactory to Buyer that all Encumbrances affecting
any of the Assets (other than Permitted Encumbrances) have been terminated
and released;
(k) the title insurance commitments described in SECTION 7.6.1;
35
<PAGE>
(l) a certificate, dated the Closing Date, signed by the President or
any Vice President of Intercable, stating that to his or her knowledge, the
conditions set forth in SECTIONS 8.2.1, 8.2.2 and 8.2.8 are satisfied;
(m) for each multiple dwelling complex or trailer park served by the
System which is not covered by a current written agreement with the owner
of such complex or park, a cable television multiple-unit agreement in a
form reasonably satisfactory to Buyer, executed by the owner of such
complex or park; and
(n) such other documents as Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations. At the Closing, Buyer will deliver (or
----------------------------
cause to be delivered) to Seller the following:
(a) the Base Purchase Price required to be paid at the Closing, as
adjusted in accordance with this Agreement;
(b) a Bill of Sale in the form attached as EXHIBIT A;
(c) an Assignment and Assumption of Contracts in the form attached as
EXHIBIT B;
(d) a certificate, dated the Closing Date, signed by an executive
officer of Buyer, stating that to his or her knowledge, the conditions set
forth in SECTIONS 8.3.1 and 8.3.2, are satisfied;
(e) an opinion of Mary S. Willis, Esq., counsel to Buyer, dated the
Closing Date, in the form set forth in EXHIBIT H; and
(f) such other documents as Seller may reasonably request in
connection with the transactions contemplated by this Agreement.
SECTION 10. TERMINATION
10.1 Termination Events. This Agreement may be terminated and the
------------------
transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of Buyer and
Seller;
36
<PAGE>
10.1.2 By either party at any time, if the other is in material
breach or default of any of its covenants, agreements or other obligations in
this Agreement or in any Transaction Document, or if any of its representations
in this Agreement or in any Transaction Document is not true in all material
respects when made or when otherwise required by this Agreement or any
Transaction Document to be true and such breach or default or failure to be true
is not cured or waived prior to Closing;
10.1.3 By either party upon written notice to the other, if Closing
has not occurred on or before August 31, 1998, for any reason other than a
material breach or default by such party of its respective covenants, agreements
or other obligations under this Agreement, or any of its representations this
Agreement not being true and accurate in all material respects when made or when
otherwise required by this Agreement to be true and accurate in all material
respects;
10.1.4 By Buyer, within 45 days after the date hereof (the
"Approval Deadline"), if all board of director approvals are not obtained by
Buyer (for any reason) on or before the Approval Deadline;
10.1.5 By Seller, on or before the Approval Deadline, if Intercable
has not approved the transactions contemplated by this Agreement (for any
reason) on or before such date; or
10.1.6 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
SECTION 10.1, all obligations of the parties under this Agreement will
terminate, except for the obligations set forth in SECTIONS 7.18 and 12.16.
Termination of this Agreement pursuant to SECTIONS 10.1.2 OR 10.1.3 will not
limit or impair any remedies that any party may have with respect to a breach or
default by the other of its covenants, agreements or obligations under this
Agreement. Buyer will have no liability in any event upon exercise of its right
to terminate pursuant to SECTION 10.1.4. Seller will have no liability in any
event upon exercise of its right to terminate pursuant to SECTION 10.1.5.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of Seller in this Agreement and in the Transaction Documents to be
delivered by Seller pursuant to this Agreement will survive until the first
anniversary of the Closing Date, except that (a) all such representations and
warranties with respect to any federal, state or local Taxes, rates,
Environmental Law, ERISA, employment matters or copyright
37
<PAGE>
matters will survive until 60 days after the expiration of the applicable
statute of limitations (including any extensions) for such federal, state or
local Taxes, rates, Environmental Law, ERISA, employment matters or copyright
matters, respectively and (b) the representations and warranties as to ownership
of the Assets in SECTION 5.4, SECTION 5.7.1 and in the deed or deeds delivered
with respect to Real Property will survive the Closing and the delivery of such
deeds and will continue in full force and effect without limitation. The
representations and warranties of Buyer in this Agreement and in the Transaction
Documents to be delivered by Buyer pursuant to this Agreement will survive until
the first anniversary of the Closing Date. The periods of survival of the
representations and warranties prescribed by this SECTION 11.1 are referred to
as the "Survival Period." The liabilities of the parties under their respective
representations and warranties will expire as of the expiration of the
applicable Survival Period; provided, however, that such expiration will not
include, extend or apply to any representation or warranty, the breach of which
has been asserted by Buyer in a written notice to Seller before such expiration
or about which Seller has given Buyer written notice before such expiration
indicating that facts or conditions exist that, with the passage of time or
otherwise, can reasonably be expected to result in a breach (and describing such
potential breach in reasonable detail). The covenants and agreements of the
parties in this Agreement (that are by their terms intended to be performed
after Closing) and in the Transaction Documents to be delivered by Seller or
Buyer pursuant to this Agreement, will survive the Closing and will continue in
full force and effect without limitation.
11.2 Indemnification by Seller. Seller will indemnify and hold harmless
-------------------------
Buyer and its shareholders and its and their respective Affiliates, and the
shareholders, directors, officers, employees, agents, successors and assigns and
any Person claiming by or through any of them, as the case may be, from and
against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Seller in this Agreement or in the
Transactions Documents delivered by Seller, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or in the
Transaction Documents delivered by Seller, (iii) any act or omission of Seller
with respect to, or any event or circumstance related to, the ownership or
operation of the Assets or the conduct of the Business, which act, omission,
event or circumstance occurred or existed prior to or at the Closing Date,
without regard to whether a claim with respect to such matter is asserted before
or after the Closing Date, including any matter described on SCHEDULE 5.13, (iv)
any liability or obligation not included in the Assumed Liabilities, (v) any
title defect Seller fails to eliminate as an exception from a title insurance
commitment referred to in SECTION 7.7.1, (vi) any claim that the transactions
contemplated by this Agreement violates WARN, or any similar state or local law
or any bulk transfer or fraudulent conveyance laws of any jurisdiction, (vii)
the presence, generation, removal or transportation of a Hazardous Substance on
or from any of the Real Property prior to the Closing Date, including the costs
of removal or clean-up of such Hazardous Substance and other compliance with the
provisions of any Environmental Laws (whether before or after Closing), or
(viii) any rate refund ordered by any Governmental Authority for periods prior
to the Closing Date; and
38
<PAGE>
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) through (a)(viii) of this SECTION 11.2, Buyer's
rights to pursue its claim under clauses (a)(ii) through (a)(viii), as
applicable, will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (a)(i).
11.3 Indemnification by Buyer. Buyer will indemnify and hold harmless
------------------------
Seller and Seller's shareholders, directors, officers, employees, agents,
successors and assigns, and any Person claiming by or through any of them, as
the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Buyer in this Agreement or in the Transaction
Documents delivered by Buyer, (ii) any breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or in the Transaction Documents
delivered by Buyer or (iii) the failure by Buyer to perform any of its
obligations in respect of the Assumed Liabilities; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) or (a)(iii) of this SECTION 11.3, Seller's rights
to pursue its claim under clauses (a)(ii) or (a)(iii), as applicable, will exist
notwithstanding the expiration of the Survival Period applicable to such claim
under clause (a)(i).
11.4 Third Party Claims. Promptly after the receipt by any party of notice
------------------
of any claim, action, suit or proceeding by any Person who is not a party to
this Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified Party") will
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action under
the terms of this SECTION 11, (b) notifies the Indemnified Party in writing of
the
39
<PAGE>
Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be liable
as a result of such Action and (d) retains legal counsel reasonably satisfactory
to the Indemnified Party to conduct the defense of such Action. The other party
will cooperate with the party assuming the defense, compromise or settlement of
any such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Action, but the fees and expenses of such counsel will be at
the expense of the Indemnified Party unless (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) any relief other than the payment of
money damages is sought against the Indemnified Party or (iii) the Indemnified
Party will have been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnity provided in this SECTION 11 will be paid by the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this SECTION 11.4. No Indemnifying Party will settle
or compromise any such Action (A) in which any relief other than the payment of
money damages is sought against any Indemnified Party or (B) in the case of any
Action relating to the Indemnified Party's liability for any Tax, if the effect
of such settlement would be an increase in the liability of the Indemnified
Party for the payment of any Tax for any period beginning after the Closing
Date, unless the Indemnified Party consents in writing to such compromise or
settlement.
11.5 Limitations on Indemnification - Seller. Seller will not be liable
---------------------------------------
for indemnification arising solely under SECTION 11.2(A)(I) for (a) any Losses
of or to Buyer or any other person entitled to indemnification from Seller or
(b) any claims, actions, suits, proceedings, demands, judgments, assessments,
fines, interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing (the items
described in clauses (a) and (b) collectively being referred to for purposes of
this SECTION 11.5 as "Buyer Damages") unless the amount of Buyer Damages for
which Seller would, but for the provisions of this SECTION 11.5, be liable
exceeds, on an aggregate basis, $20,800 (the "Threshold Amount"), in which case
Seller will be liable for all such Buyer Damages, which will be due and payable
within 15 days after Seller's receipt of a statement therefor; provided,
however, that Seller shall be liable for all rate refunds ordered by any
Governmental Authority for periods prior to the Closing Date regardless of
whether such refunds equal or exceed the Threshold Amount.
40
<PAGE>
11.6 Limitations on Indemnification - Buyer. Buyer will not be liable for
--------------------------------------
indemnification arising solely under SECTION 11.3(A)(I) for (a) any Losses of or
to Seller or any other person entitled to indemnification from Buyer or (b) any
claims, actions, suits, proceedings, demands, judgments, assessments, fines,
interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing the items
described in clauses (a) and (b) collectively being referred to for purposes of
this SECTION 11.6 as "Seller Damages") unless the amount of Seller Damages for
which Buyer would, but for the provisions of this SECTION 11.6, be liable
exceeds, on an aggregate basis, the Threshold Amount, in which case Buyer will
be liable for all such Seller Damages, which will be due and payable within 15
days after Buyer's receipt of a statement therefor.
SECTION 12. MISCELLANEOUS
12.1 Parties Obligated and Benefited. Subject to the limitations set forth
-------------------------------
below, this Agreement will be binding upon the parties and their respective
assigns and successors in interest and will inure solely to the benefit of the
parties and their respective assigns and successors in interest, and no other
Person will be entitled to any of the benefits conferred by this Agreement.
Without the prior written consent of the other party, neither party may assign
any of its rights under this Agreement or delegate any of its duties under this
Agreement.
12.2 Notices. Any notice, request, demand, waiver or other communication
-------
required or permitted to be given under this Agreement will be in writing and
will be deemed to have been duly given only if delivered in person or by first
class, prepaid, registered or certified mail, or sent by courier or, if receipt
is confirmed, by telecopier:
To Buyer at:
c/o Tele-Communications, Inc.
5619 DTC Parkway
Englewood Colorado 80111
Attention: William R. Fitzgerald
Telecopy: (303) 488-3219
With a copy similarly addressed to the attention of Legal Department.
To Seller at:
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
41
<PAGE>
Englewood, Colorado 80112
Attention: President
Telecopy: (303) 799-1644
With a copy similarly addressed to the attention of Legal Department.
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this SECTION 12.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation, or on the third Business Day after mailing in accordance with this
Section, except that any notice of a change of address will be effective only
upon actual receipt.
12.3 Attorneys' Fees. In the event of any action or suit based upon or
---------------
arising out of any alleged breach by any party of any representation, warranty,
covenant or agreement contained in this Agreement, the prevailing party will be
entitled to recover reasonable attorneys' fees and other costs of such action or
suit from the other party.
12.4 Waiver. This Agreement or any of its provisions may not be waived
------
except in writing. The failure of any party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.5 Captions. The captions of this Agreement are for convenience only and
--------
do not constitute a part of this Agreement.
12.6 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES UNDER IT
-------------
WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF
THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF
COLORADO.
12.7 Terms. Terms used with initial capital letters will have the meanings
-----
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. The word "include" and derivatives of that word are used in
this Agreement in an illustrative sense rather than limiting sense.
12.8 Rights Cumulative. All rights and remedies of each of the parties
-----------------
under this Agreement will be cumulative, and the exercise of one or more rights
or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
42
<PAGE>
12.9 Further Actions. Seller and Buyer will execute and deliver to the
---------------
other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
12.10 Time. Time is of the essence under this Agreement. If the last day
----
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
12.11 Late Payments. If either party fails to pay the other any amounts
-------------
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the annual rate publicly announced from time to
time by The Bank of New York as its prime rate (the "Prime Rate") plus 2%,
adjusted as and when changes in the Prime Rate are made.
12.12 Counterparts. This Agreement may be executed in counterparts, each
------------
of which will be deemed an original.
12.13 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) and the Transaction Documents contain the entire
agreement of the parties and supersedes all prior oral or written agreements and
understandings with respect to the subject matter. This Agreement may not be
amended or modified except by a writing signed by the parties.
12.14 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefited by such provision or any other provisions
of this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer and
------------
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.16 Expenses. Except as otherwise expressly provided in this Agreement,
--------
each party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
43
<PAGE>
12.17 Risk of Loss; Condemnation.
--------------------------
12.17.1 Seller will bear the risk of any loss or damage to the Assets
resulting from fire, theft or other casualty (except reasonable wear and tear)
at all times prior to the Closing. If any such loss or damage is sufficiently
substantial so as to preclude or prevent resumption of normal operations of any
material portion of a System or the replacement or restoration of the lost or
damaged property within 30 days from the occurrence of the event resulting in
such loss or damage, Seller will immediately notify Buyer in writing of that
fact and Buyer, at any time within 10 days after receipt of such notice, may
elect by written notice to Seller either (a) to waive such defect and proceed
toward consummation of the transaction in accordance with terms of this
Agreement or (b) terminate this Agreement. If Buyer elects to so terminate this
Agreement, Buyer and Seller will stand fully released and discharged of any and
all obligations under this Agreement. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, there will be no adjustment in the consideration payable to Seller
on account of such loss or damage but all insurance proceeds payable as a result
of the occurrence of the event resulting in such loss or damage (to the extent
not used to replace or restore such lost or damaged property) will be delivered
by Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller.
12.17.2 If, prior to the Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller or Buyer
that it intends to condemn all or any part of or interest in the Assets (such
event being called, in either case, a "Taking"), and such Taking involves a
material part of or interest in the Assets, then Buyer may terminate this
Agreement. If Buyer does not elect or have the right to terminate this
Agreement, then (a) Buyer will have the sole right, in the name of Seller, if
Buyer so elects, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller will be relieved of its obligation to convey
to Buyer the Assets or interests that are the subject of the Taking, (c) at the
Closing Seller will assign to Buyer all of Seller's rights to all damages
payable with respect to such Taking and will pay to Buyer all damages previously
paid to Seller with respect to the Taking and (d) following the Closing, Seller
will give Buyer such further assurances of such rights and assignment with
respect to the taking as Buyer may from time to time reasonably request.
44
<PAGE>
The parties have executed this Agreement as of the day and year first above
written.
SELLER:
JONES CABLE INCOME FUND
1-B/C VENTURE
By: Jones Cable Income Fund
1-B, Ltd., and Jones Cable
Income Fund 1-C, Ltd.,
its general partners
By: /s/ Elizabeth Steele
--------------------
Name: Elizabeth Steele
----------------
Title: Vice President
--------------
BUYER:
TELEVISION CABLE SERVICE, INC.
By: /s/ William Fitzgerald
----------------------
Name: William Fitzgerald
------------------
Title: Vice President
--------------
45
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 454,501
<SECURITIES> 0
<RECEIVABLES> 414,688
<ALLOWANCES> 42,753
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 45,101,407
<DEPRECIATION> 24,222,527
<TOTAL-ASSETS> 30,514,718
<CURRENT-LIABILITIES> 1,647,915
<BONDS> 23,624,588
0
0
<COMMON> 0
<OTHER-SE> 5,242,215
<TOTAL-LIABILITY-AND-EQUITY> 30,514,718
<SALES> 0
<TOTAL-REVENUES> 18,338,834
<CGS> 0
<TOTAL-COSTS> 17,802,658
<OTHER-EXPENSES> 85,528
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,521,275
<INCOME-PRETAX> 10,493,520
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,493,520
<EPS-PRIMARY> 119.47
<EPS-DILUTED> 119.47
</TABLE>
