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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
JONES CABLE INCOME FUND 1-C, LTD.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Limited
Partnership Interests
(2) Aggregate number of securities to which transaction applies: 85,059
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Pursuant to
Rule 0-11(c)(2), the transaction valuation is based upon the
Registrant's 60 percent interest in the $10,000,000 sales price that is
to be paid to the Jones Cable Income Fund 1-B/C Venture in connection
with the transaction that is the subject of the proxy solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$6,000,000
(5) Total fee paid: $1,200
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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[JONES INTERCABLE, INC. LOGO]
1500 Market Street
Philadelphia, Pennsylvania 19102
NOTICE OF VOTE OF THE LIMITED PARTNERS
OF JONES CABLE INCOME FUND 1-C, LTD.
To the Limited Partners of Jones Cable Income Fund 1-C, Ltd.:
A special vote of the limited partners of Jones Cable Income Fund 1-C, Ltd.
(the "Partnership") is being conducted through the mails on behalf of the
Partnership by Jones Intercable, Inc., the general partner of the Partnership,
for the purpose of obtaining limited partner approval of the sale, to an
unaffiliated third party, of the cable television system serving the
communities of Myrtle Creek, Winston, Riddle and Canyonville and certain
unincorporated areas of Douglas County, all in the State of Oregon (the
"Myrtle Creek System") owned by Jones Cable Income Fund 1-B/C Venture (the
"Venture"), a joint venture in which the Partnership has a 60 percent
ownership interest, for $10,000,000 in cash, subject to customary working
capital closing adjustments that may have the effect of increasing or
decreasing the sales price by a non-material amount. Information relating to
these matters is set forth in the accompanying Proxy Statement.
If the limited partners approve the proposed sale of the Myrtle Creek System
and if the transaction is closed, the Venture will repay all of the amounts
borrowed under its credit facility and capital lease obligations, pay certain
fees and expenses of the transaction, including a brokerage fee to a
subsidiary of the general partner and deposit funds into an interest-bearing
indemnity escrow account, and then the approximately $6,085,000 of net sale
proceeds will be distributed by the Venture to its two constituent
partnerships in proportion to their ownership interests. The Partnership
accordingly will receive 60 percent of such proceeds, estimated to total
approximately $3,665,000, and the Partnership will distribute this portion of
the net sale proceeds to its limited partners of record as of the closing date
of the sale of the Myrtle Creek System. Because the distribution to be made to
the limited partners from the sale of the Myrtle Creek System together with
all prior distributions made by the Partnership to the limited partners will
not equal the amount originally contributed to the Partnership by the limited
partners plus the limited partners' liquidation preference, Jones Intercable,
Inc. will not receive a general partner distribution from the sale proceeds.
Based upon financial information as of March 31, 1999, the limited partners as
a group will receive $3,665,000 of the net sale proceeds. This distribution
will provide the Partnership's limited partners with a return of $43 for each
$500 limited partnership interest, or $86 for each $1,000 invested in the
Partnership. Distribution checks will be issued to limited partners' account
registration or payment instruction of record.
Once the Partnership has completed the distribution of the net proceeds from
the sale of the Myrtle Creek System, limited partners of the Partnership will
have received a total return of $574 for each $500 limited partnership
interest, or $1,148 for each $1,000 invested in the Partnership, taking into
account the prior distributions to limited partners from the Partnership's
operating cash flow and from the net proceeds of prior cable television system
sales. After the closing of the sale of the Myrtle Creek System and the
distribution of the net sale proceeds, including the amounts, if any,
remaining one year after closing in an interest-bearing indemnity escrow
account, the Partnership will be liquidated and dissolved, most likely in the
third quarter of 2000.
Only limited partners of record at the close of business on June 1, 1999 are
entitled to notice of, and to participate in, this vote of limited partners.
It is very important that all limited partners participate in the voting. The
ability of the Venture to complete the transaction discussed in the Proxy
Statement and the Partnership's ability to
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make a distribution to its limited partners of the Partnership's 60 percent
share of the net proceeds of the sale of the Myrtle Creek System are dependent
upon the approval of the transaction by the holders of a majority of the
Partnership's limited partnership interests. Please note also that the closing
of the sale of the Myrtle Creek System will occur only if the proposed
transaction also is approved by the holders of a majority of the limited
partnership interests of Jones Cable Income Fund 1-B, Ltd., which has a 40
percent ownership interest in the Venture.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement") provides that the proposal will be
adopted only if approved by the holders of a majority of the limited
partnership interests, abstentions and non-votes will be treated as votes
against the proposal. A properly executed proxy card returned to the general
partner on which a limited partner does not mark a vote will be counted as a
vote for the proposed sale of the Myrtle Creek System. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Myrtle Creek System, if the holders of a majority of the
limited partnership interests approve the proposal, all limited partners will
receive a distribution of the net sale proceeds in accordance with the
procedures prescribed by the Partnership Agreement regardless of how or
whether they vote on the proposal.
Jones Intercable, Inc., as general partner of the Partnership, urges you to
sign and return the enclosed proxy card as promptly as possible. The proxy
card should be returned in the enclosed envelope.
JONES INTERCABLE, INC.
General Partner
/s/ Stanley Wang
Stanley Wang
Secretary
Dated: June 18, 1999
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1500 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19102
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS
OF JONES CABLE INCOME FUND 1-C, LTD.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Jones Cable Income Fund 1-
C, Ltd. (the "Partnership") by Jones Intercable, Inc., the general partner of
the Partnership (the "General Partner"), on behalf of the Partnership, for the
purpose of obtaining limited partner approval of the sale of the Partnership's
cable television system serving the communities of Myrtle Creek, Winston,
Riddle and Canyonville and certain unincorporated areas of Douglas County, all
in the State of Oregon (the "Myrtle Creek System") owned by Jones Cable Income
Fund 1-B/C Venture (the "Venture"), a joint venture in which the Partnership
has a 60 percent ownership interest, for $10,000,000 in cash, subject to
customary working capital closing adjustments that may have the effect of
increasing or decreasing the sales price by a non-material amount, to Falcon
Cablevision, a California limited partnership ("Falcon"), or one of its
affiliates. Falcon is not affiliated with the Partnership or with the General
Partner.
The Board of Directors of the General Partner approved the transaction and
the General Partner recommends that the holders of the Partnership's limited
partnership interests approve the transaction.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Limited partners are urged
to sign and return the enclosed proxy card as promptly as possible. Proxies
cannot be revoked except by delivery of a proxy dated as of a later date.
Officers and other employees of the General Partner may solicit proxies by
mail, by fax, by telephone or by personal interview. The deadline for the
receipt of proxy votes is July 23, 1999, unless extended, but the vote of the
Partnership's limited partners will be deemed to be concluded on the date, at
least 20 business days from the date the proxy materials are sent to limited
partners, that the General Partner, on behalf of the Partnership, is in
receipt of proxies executed by the holders of a majority of the limited
partnership interests either consenting to or disapproving of the proposed
transaction. The General Partner may extend the deadline for receipt of proxy
votes if a majority of the limited partners fail to express an opinion on the
transaction by July 23, 1999. If the General Partner extends the deadline for
receipt of proxy votes, the limited partners will be informed by mail of the
reason for the extension and the new deadline. The cost of the proxy
solicitation will be paid by the Partnership.
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest for
each $500 of capital contributed to the Partnership.
As of June 1, 1999, the Partnership had 85,059 limited partnership interests
outstanding, held by 4,766 persons. There is no established trading market for
such interests. During the past several years, Madison Partnership Liquidity
Investors 30, LLC and Capital Management Group, two firms unaffiliated with
the Partnership, the General Partner and each other, conducted tender offers
for interests in the Partnership. As of June 1, 1999, Madison Partnership
Liquidity Investors 30, LLC and its affiliates owned 4,241 limited
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partnership interests, or 4.9 percent of the Partnership's limited partnership
interests. As of such date, Capital Management Group and its affiliates owned
657 interests, or 0.8 percent of the Partnership's limited partnership
interests. Pursuant to the terms of agreements between the Partnership and the
General Partner and such firms, all of the limited partnership interests held
by these firms will be voted in the same manner as the majority of all other
limited partners who vote on the proposed transaction. Thus, for example, if
the limited partnership interests voted in favor of the proposed transaction
constitute a majority of all limited partnership interests voted but not a
majority of all limited partnership interests, these firms will be required to
vote their limited partnership interests in favor of the transaction, and in
such event the votes of these firms could be sufficient to cause the proposed
transaction to be approved by a majority of all limited partnership interests,
which is the vote necessary to cause the proposed transaction to be approved.
The General Partner owns 370 limited partnership interests and the General
Partner intends to vote all of its limited partnership interests in favor of
the proposed transaction. The officers and directors of the General Partner
also own no limited partnership interests. Only limited partners of record at
the close of business on June 1, 1999 will be entitled to notice of, and to
participate in, the vote.
Upon the consummation of the proposed sale of the Myrtle Creek System, the
Venture will repay all of the amounts borrowed under its credit facility and
its capital lease obligations, leaving the Venture with no debt outstanding,
pay certain fees and expenses of the transaction, including a brokerage fee of
2.5 percent of the sales price, or $250,000, to The Intercable Group, Ltd., a
subsidiary of the General Partner, settle working capital adjustments and
deposit $500,000 into an interest-bearing indemnity escrow account, and then
the approximately $6,085,000 of net sale proceeds will be distributed by the
Venture to its two constituent partnerships in proportion to their ownership
interests. The Partnership accordingly will receive 60 percent of such
proceeds, estimated to total approximately $3,665,000, and the Partnership
will distribute this portion of the net sale proceeds to the Partnership's
limited partners of record as of the closing date of the sale. Because the
distribution to be made to the limited partners from the sale of the Myrtle
Creek System together with all prior distributions made by the Partnership to
the limited partners from the Partnership's operating cash flow and from the
net proceeds of prior cable television system sales will not equal the amount
originally contributed to the Partnership by the limited partners plus the
limited partners' liquidation preference, the General Partner will not receive
a general partner distribution from the sale proceeds. Based upon financial
information as of March 31, 1999, the limited partners as a group will receive
$3,665,000 of the net sale proceeds. This distribution will provide the
Partnership's limited partners with a return of $43 for each $500 limited
partnership interest, or $86 for each $1,000 invested in the Partnership.
Distribution checks will be issued to limited partners' account registration
or payment instruction of record.
Once the Partnership has completed the distribution of the net proceeds from
the sale of the Myrtle Creek System, limited partners of the Partnership will
have received a total return of $574 for each $500 limited partnership
interest, or $1,148 for each $1,000 invested in the Partnership, taking into
account the prior distributions to limited partners from the Partnership's
operating cash flow and from the net proceeds of prior cable television system
sales.
Limited partners should note that there are certain federal income tax
consequences of the proposed transactions. These consequences are outlined
herein under the caption "Federal Income Tax Consequences."
As of the date of this Proxy Statement, the Partnership's only asset is its
60 percent ownership interest in the Venture and the Venture's only asset is
the Myrtle Creek System. After the sale of the Myrtle Creek System by the
Venture, and after the termination of the one year indemnity escrow period,
the Partnership will be liquidated and dissolved. The Partnership will
continue to be a public entity subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), for at least a year after the Myrtle Creek System is sold. The
Partnership will cease to be subject to the informational reporting
requirements of the Exchange Act only after the Partnership is liquidated and
dissolved, most likely in the third quarter of 2000.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement")
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provides that the proposal will be adopted only if approved by the holders of a
majority of the limited partnership interests, abstentions and non-votes will
be treated as votes against the proposal. A properly executed proxy returned to
the General Partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Myrtle Creek System. Because
limited partners do not have dissenters' or appraisal rights in connection with
the proposed sale of the Myrtle Creek System, if the holders of a majority of
the limited partnership interests approve the proposal, all limited partners
will receive distributions of the net sale proceeds in accordance with the
procedures prescribed by the Partnership Agreement regardless of how or whether
they vote on the proposal.
The General Partner also has prepared a proxy statement that is being
delivered to the limited partners of Jones Cable Income Fund 1-B, Ltd. ("Fund
1-B"), which has a 40 percent ownership interest in the Venture, in connection
with their vote to approve the sale of the Myrtle Creek System by the Venture.
The closing of the sale of the Myrtle Creek System will occur only if the
transaction is approved by the holders of a majority of the limited partnership
interests of both of the two constituent partnerships of the Venture. A copy of
the proxy statement being delivered to the limited partners of Fund 1-B has
been filed with the United States Securities and Exchange Commission (the
"Commission") and can be obtained either from the Commission or from the
General Partner upon written request to the General Partner's Investor Services
Department. See also "Certain Information About the Partnership, the General
Partner and the Purchaser of the System."
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is June 18, 1999.
PARTNERSHIP INFORMATION
THE PARTNERSHIP'S INVESTMENT OBJECTIVES
The Partnership was formed to acquire, develop, operate and, ultimately, sell
cable television systems. The primary objectives of the Partnership have been
to obtain long-term capital appreciation in the value of the Partnership's
cable television properties and to generate a positive cash flow to permit cash
returns in the form of regular quarterly distributions to limited partners. It
was contemplated from the outset of the Partnership's existence that capital
appreciation in Partnership cable television properties would be converted to
cash by a sale of such properties at such time as the General Partner
determined that the Partnership's investment objectives had substantially been
achieved and after a holding period of approximately eight to ten years.
Sales of the Partnership's limited partnership interests commenced in
February 1987 and the Partnership was formed on February 9, 1987 when
subscriptions for the minimum offering amount were received. Sales of limited
partnership interest closed in April 1987 with 85,059 limited partnership
interests sold for proceeds of $42,529,500.
The Partnership formed the Venture with Fund 1-B in November 1987. The
Partnership acquired a 60 percent ownership interest in the Venture through a
capital contribution made to the Venture of $36,681,000. The Venture was formed
to pool the financial resources of the two partnerships, both of which were
sponsored by the General Partner. The two partnerships have identical
investment objectives. The Venture enabled the two partnerships to acquire a
greater number of cable television systems than either of the partnerships
could have acquired on their own. During 1987 and 1988, the Venture acquired
cable television systems serving the communities of Brighton and Broomfield and
certain portions of unincorporated Adams, Boulder and Weld counties, all in the
State of Colorado (the "Colorado Systems"), the cable television system serving
the towns of Clearlake and Lakeport, California (the "Clearlake System"), the
cable television system serving South Sioux City, Nebraska (the "South Sioux
City System"), the cable television system serving Three Rivers, Schoolcraft,
Vicksburg, Constantine, White Pigeon, Dowagiac, Watervliet and Vandalia, all in
the State of Michigan (the "Southwestern Michigan System") and the Myrtle Creek
System. The Venture sold the Colorado Systems in January 1997, the Venture sold
the Clearlake System in January 1998, the Venture sold the Southwestern
Michigan System in July 1998, and the Venture sold the South Sioux City System
in August 1998. As a result of these prior sales, the Myrtle Creek System is
the sole remaining asset of the Venture.
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One of the primary objectives of the Partnership has been to provide
quarterly cash distributions to its partners, primarily from the distributions
made to the Partnership by the Venture. One of the primary objectives of the
Venture has been to provide quarterly cash distributions to the two 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 in 1998 and it did not declare
quarterly cash flow distributions during that time, although it did make a
distribution of $11,000,000 (of which Fund 1-B received $4,374,700 and the
Partnership received $6,625,300) to its partners from the proceeds of the sale
of the Clearlake System in February 1998, a distribution of $21,200,000 (of
which Fund 1-B received $8,431,240 and the Partnership received $12,768,760)
to its partners from the proceeds of the sale of the Southwestern Michigan
System in August 1998 and a distribution of $7,277,700 (of which Fund 1-B
received $2,894,341 and the Partnership received $4,383,359) to its partners
from the proceeds of the sale of the South Sioux City System in September
1998. The Partnership and Fund 1-B in turn distributed their shares of such
amounts to their limited partners. The Venture anticipates making a
distribution of $6,085,000 (of which Fund 1-B will receive $2,420,000 and the
Partnership will receive $3,665,000) to its partners from the proceeds of the
sale of Myrtle Creek System in the third quarter of 1999. The Partnership and
Fund 1-B will in turn distribute their shares of such amounts to their limited
partners. The Venture and the Partnership do not anticipate resuming cash flow
distributions.
Because the distributions made from the net proceeds of the sales of the
Venture's cable television systems together with prior distributions from
operating cash flow will not total the amounts originally contributed to the
Partnership by the limited partners plus the limited partners' liquidation
preference, the General Partner will not receive any general partner
distribution on the sale of the Myrtle Creek System.
Based upon disclosures made to prospective investors about the Partnership's
investment objectives in the Jones Cable Income Fund Limited Partnership
Program prospectus and accompanying sales brochure, investors in the
Partnership reasonably could have anticipated that the Partnership's
investment objectives would be achieved and its assets liquidated after a
holding period of approximately eight to ten years. Due to the uncertain and
then adverse regulatory environment that developed in the early 1990's for the
cable television industry, the resulting decline in the prices for cable
television systems and the subsequent inactivity in the cable television
system marketplace, the General Partner determined that it would be prudent to
delay the sale of the Myrtle Creek System until market conditions improved,
and as a result, the Myrtle Creek System has been held by the Venture for more
than 11 years.
The purpose of the sale of the Myrtle Creek System, from the Partnership's
perspective, is to obtain the Partnership's primary investment objective with
respect to the Myrtle Creek System, i.e., to convert the Partnership's capital
appreciation in the Myrtle Creek System to cash. The sale proceeds will be
used to repay all of the Venture's debts and pay certain fees and expenses of
the transaction, including a brokerage fee of 2.5 percent of the sales price,
or $250,000, to The Intercable Group, Ltd., a subsidiary of the General
Partner, and settle working capital adjustments, and $500,000 of the sale
proceeds will be deposited in a one-year indemnity escrow account. The
remaining $6,085,000 of net sale proceeds will be distributed by the Venture
to its two constituent partnerships in proportion to their ownership
interests. The Partnership accordingly will receive 60 percent of such
proceeds, estimated to total approximately $3,665,000, and the Partnership
will distribute this portion of the net sale proceeds to its limited partners
of record as of the closing date of the sale of the Myrtle Creek System in
accordance with the distribution procedures established by the Partnership
Agreement. The sale of the Myrtle Creek System is thus the necessary final
step in the Partnership's accomplishment of its investment objectives with
respect to the Myrtle Creek System.
All distributions of the Partnership from the proceeds of the sales of cable
television systems are to be distributed 100 percent to the limited partners
until the limited partners receive an amount equal to 100 percent of their
initial capital contributions, as reduced by all prior distributions other
than distributions from cash flow, plus a 10 percent preferential return (the
"liquidation preference"), and thereafter all such distributions are to be
shared 75 percent to the limited partners and 25 percent to the General
Partner. Counting all prior distributions made to the limited partners and the
distribution to be made to the limited partners from the Partnership's portion
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of the proceeds from the sale of the Myrtle Creek System, the limited partners
of the Partnership will not have received distributions in an amount equal to
their initial capital contributions plus the 10 percent liquidation
preference, and thus the sharing arrangement between the limited partners and
the General Partner will never be triggered. Based upon financial information
as of March 31, 1999, the limited partners as a group will receive $3,665,000
of the Myrtle Creek System's net sale proceeds. This distribution will provide
the Partnership's limited partners with an approximate return of $43 for each
$500 limited partnership interest, or $86 for each $1,000 invested in the
Partnership. Taking into account the distributions to limited partners from
the Venture's operating cash flow and from the net proceeds of the sales of
the Venture's five cable television systems, the limited partners of the
Partnership will have received a total return of $574 for each $500 limited
partnership interest, or $1,148 for each $1,000 invested in the Partnership by
the time of the Partnership's liquidation and dissolution.
Voting Provision of the Partnership Agreement
Section 2.2(k) of the Partnership Agreement provides that the sale of all or
substantially all of the Partnership's assets is subject to the approval of
the holders of a majority of the Partnership's limited partnership interests.
Because the Myrtle Creek System is the Venture's sole remaining asset and
because the Partnership's investment in the Venture is the Partnership's only
asset, the proposed sale of the Myrtle Creek System is being submitted for
limited partner approval.
PROPOSED SALE OF THE MYRTLE CREEK SYSTEM
General
Pursuant to the terms and conditions of an Asset Purchase Agreement dated as
of September 9, 1998, as amended February 26, 1999 (the "Agreement") by and
between the Venture and Falcon, the Venture has agreed to sell the Myrtle
Creek System to Falcon for a sales price of $10,000,000, subject to customary
working capital closing adjustments that may have the effect of increasing or
decreasing the sales price by a non-material amount. Falcon is a California
limited partnership headquartered at 10900 Wilshire Boulevard, 15th Floor, Los
Angeles, California 90024. Falcon is not affiliated with the Partnership or
with the General Partner. The Partnership has been informed that Falcon
intends to finance its acquisition of the Myrtle Creek System through cash on
hand and borrowings.
The Closing
The closing of the sale is scheduled to occur in July 1999. Because the
closing is conditioned upon, among other things, the approval of the limited
partners of the Partnership and the approval of the limited partners of Fund
1-B and the receipt of material third party consents necessary for the
transfer of the Myrtle Creek System to Falcon, there can be no assurance that
the proposed sale will occur. The Agreement may be terminated by either the
Venture or Falcon if the closing is not consummated on or before July 31,
1999.
The Myrtle Creek System
The Myrtle Creek System was acquired by the Venture in December 1987 for a
purchase price of $6,160,666. At acquisition, the Myrtle Creek System
consisted of cable plant passing approximately 7,200 homes and serving
approximately 4,950 basic subscribers. At December 31, 1998, the Myrtle Creek
System consisted of approximately 148 miles of cable plant passing
approximately 9,450 homes and serving approximately 6,700 basic subscribers.
During the holding period, the Venture used approximately $3,300,000 in
capital expenditures to expand and/or upgrade the cable plant of the Myrtle
Creek System. The Myrtle Creek System's basic penetration rate is
approximately 71 percent. As of December 31, 1998, the Myrtle Creek System had
annual revenue of $2,465,000 and annual cash flow of $900,000. The $10,000,000
sales price therefore represents 11.1 times 1998's cash flow. The $10,000,000
sales price represents a sales price per basic subscriber of $1,507.
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Falcon will purchase all of the tangible assets of the Myrtle Creek System
that are leased or owned by the Venture and used in the operation of the
system, including the system's real estate, vehicles, headend equipment,
underground and aboveground cable distribution systems, towers, earth
satellite receive stations and furniture and fixtures. Falcon also will
acquire certain of the intangible assets of the system, including all of the
franchises, leases, agreements, permits, licenses and other contracts and
contract rights necessary for the operation of the system. Also included in
the sale are the subscriber accounts receivable of the system and all of the
system's records, files, schematics, maps, reports, promotional graphics,
marketing materials, and reports filed with federal, state and local
regulatory agencies. The foregoing notwithstanding, certain of the system's
assets will be retained by the Venture, including cash or cash equivalents on
hand and in banks, insurance policies and any federal, state or local income
or other tax refunds to which the Venture may be entitled.
Sales Price
Subject to the closing adjustments described below, the sales price for the
Myrtle Creek System is $10,000,000. Upon execution of the Agreement, Falcon
deposited $500,000 in escrow. At closing, the deposit will be delivered to the
Venture and credited against the sales price to be paid by Falcon. If each
party to the Agreement shall have satisfied in full all of the obligations of
such party under the Agreement that were to have been satisfied by such party
prior to the closing date and neither party shall have breached any
representation, warranty, covenant or agreement of such party contained in the
Agreement but the closing shall nevertheless fail to take place without any
fault on the part of either party because one or more of the closing
conditions shall not have been satisfied or waived, then the Agreement will be
terminated without any liability or obligation on the part of either party to
the other arising out of the failure of the closing to take place and the
deposit, plus any interest accrued thereon, will be returned to Falcon. If, on
the other hand, all of the conditions to closing are satisfied, but Falcon
nevertheless fails to purchase the Myrtle Creek System in accordance with the
terms of the Agreement, the Venture will have the right to retain the deposit,
plus any interest accrued thereon. The Venture's right to claim the deposit in
the event that Falcon fails to close the transaction does not limit the
Venture's right to damages in the event of Falcon's breach of the Agreement
provided that the Venture shall have performed all of the terms and conditions
of the Agreement to be performed by it.
All expenses arising from the operation of the Myrtle Creek System,
including but not limited to power and utility charges, real and personal
property taxes, salesperson advances, payroll and other employment related
taxes or other charges, the value of accrued vacation, pole attachment fees
and other rentals and charges, applicable franchise fees and copyright royalty
payments, sales and service charges and other similar prepaid and deferred
items, and all revenues arising from the operation of the Myrtle Creek System
(other than payments from subscribers and revenues relating to items that are
excluded from the assets to be sold), shall be prorated between Falcon and the
Venture as of 11:59 p.m. on the closing date so that the Venture receives the
benefit of such revenues and bears such expenses that relate to the operation
of the Myrtle Creek System for the period through the closing date and Falcon
receives the benefit of such revenues and bears such expenses relating to the
operation of the Myrtle Creek System after the closing date. The sales price
will be adjusted in accordance with such prorations.
In addition, the sales price will be increased by an amount equal to 95
percent of the accounts receivable owed as of the close of business on the
closing date by basic subscribers to the Myrtle Creek System for services
rendered through the closing date that are 30 days or less in arrears as of
the closing date and 80 percent of the accounts receivable owed as of the
close of business on the closing date by basic subscribers to the Myrtle Creek
System for services rendered through the closing date that are more than 30
days but less than 60 days in arrears as of the closing date. Also, the sales
price will be reduced by an amount equal to subscriber deposits and unearned
subscriber payments and any interest due thereon as of the closing date. In
addition, the sales price will be reduced by any accounts payable and accrued
expenses for which the Venture would otherwise be liable under the Agreement
but for which the responsibility for payment is assumed by Falcon at closing.
If the number of basic subscribers delivered to Falcon at closing is less
than 6,650, the sales price will be reduced by an amount equal to $1,507
multiplied by the number by which the number of basic subscribers is
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less than 6,650. The Venture will not have an obligation to close the sale if
the sales price would be reduced pursuant to this adjustment by an amount
greater than $527,450.
The General Partner believes that these closing adjustments will neither
increase nor decrease the sales price by a material amount. Please see Note 4
of the Notes to Unaudited Pro Forma Financial Statements for a detailed
accounting of the General Partner's current best estimate of the anticipated
closing adjustments.
Conditions to the Closing of the Sale
The obligations of Falcon to consummate the closing are subject to the
satisfaction or waiver of certain customary conditions, including the
following conditions: (a) the representations and warranties of the Venture in
the Agreement shall be true and accurate in all material respects at and as of
the closing date with the same effect as if made at and as of the closing date
except for changes permitted or contemplated by the Agreement; (b) the Venture
shall have performed in all material respects all obligations and agreements
and shall have complied with all covenants in the Agreement to be performed or
complied with by it at or before closing; (c) the Venture and Falcon shall
have obtained all consents and approvals of third persons and parties,
including all franchise authorities and all other governmental authorities,
bodies or agencies having jurisdiction over the transaction contemplated by
the Agreement, necessary for the consummation of the transaction contemplated
by the Agreement, including consents to assignment of the leases, contracts
and licenses of the Myrtle Creek System; (d) the Venture shall have delivered
to Falcon a bill of sale and assignment relating to the assets of the Myrtle
Creek System, assignments of the Myrtle Creek System's cable television
franchises, and all other applicable assignments and other good and sufficient
instruments of conveyance, transfer and assignment, all in form and substance
reasonably satisfactory to Falcon, as shall be effective to vest in Falcon
good and marketable title in and to the Myrtle Creek System and its assets,
free and clear of all mortgages, liens, restrictions, encumbrances, claims and
obligations of any nature whatsoever; (e) Falcon shall have been furnished
with an opinion of the general counsel of the General Partner dated the
closing date and addressed to Falcon in the form agreed as an exhibit to the
Agreement; (f) Falcon shall have been furnished with an opinion of FCC counsel
for the Venture dated the closing date and addressed to Falcon in the form
agreed as an exhibit to the Agreement; (g) the Venture shall have obtained and
delivered to Falcon a report evidencing that all of the assets to be
transferred to Falcon at closing relating to the Myrtle Creek System are free
of liens; (h) between the date of the Agreement and the closing date, there
shall have been no material adverse change in the Myrtle Creek System or its
assets or their respective conditions (financial or otherwise), operations or
business other than changes arising out of general economic conditions, or
changes affecting the U.S. cable industry as a whole, including any change
arising from legislation, litigation, rulemaking or regulation, or competition
caused by or arising from direct broadcast satellite services; (i) the Venture
shall have delivered to Falcon a certificate of compliance with the Agreement
signed by an officer of the General Partner dated on and as of the closing
date; (j) there shall not be pending or threatened any lawsuit, claim or legal
action involving Falcon, the Venture or the system or its assets relating to
the transactions contemplated by the Agreement; (k) prior to or at the
closing, the Venture shall have delivered copies of all of its copyright
filings for the Myrtle Creek System that relate to the last six semiannual
reporting periods occurring prior to the closing date, along with all
information required by Falcon to complete the copyright filings for the
semiannual reporting period in which the closing occurs; (l) the Venture shall
have delivered to Falcon all blueprints, schematics, working drawings, plans,
projections, statistics, engineering records, contracts to be assumed by
Falcon, customer and subscriber lists and other files and records used by the
Venture in connection with the Myrtle Creek System's operations to be assigned
to Falcon in accordance with the Agreement; (m) the Venture shall have
delivered to Falcon, and shall have caused the General Partner, the
Partnership and Fund 1-C to have delivered to Falcon, noncompetition
agreements in the form attached as an exhibit to the Agreement; (n) the
Venture shall have delivered to Falcon certificates issued by all applicable
taxing authorities, to the extent such certificates are provided by such
authorities, certifying the absence of any sales tax liability applicable to
the Myrtle Creek System issued as of a date not more than 10 days prior to the
closing date; (o) Falcon shall have been afforded the opportunity at its
expense to engage a qualified engineer to perform a sweep of the Myrtle Creek
System to confirm that the entire distribution system of the Myrtle Creek
System conforms to the description thereof in the Agreement; (p) the Myrtle
Creek System will have not less than 6,300 basic subscribers as of the
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closing date; (q) Falcon shall have received copies of all required current
proofs of compliance with various federal communications laws; (r) the Myrtle
Creek System shall have complied in all material respects with FCC rules and
regulations regarding signal leakage as reflected in the leakage logs and
other records delivered to Falcon at closing; and (s) the Venture shall have
delivered such other documents as may reasonably be required by Falcon to
effect the transaction contemplated by the Agreement.
The obligations of the Venture to consummate the closing are subject to the
satisfaction or waiver of certain customary conditions, including the
following conditions: (a) the representations and warranties of Falcon in the
Agreement shall be true and accurate in all material respects at and as of the
closing date with the same effect as if made at and as of the closing date;
(b) Falcon shall have performed in all material respects all obligations and
agreements and shall have complied with all covenants in the Agreement to be
performed or complied with by it at or before closing; (c) Falcon shall have
delivered to the Venture a certificate of compliance with the Agreement signed
by the President or any executive Vice President of Falcon dated on and as of
the closing date; (d) Falcon shall have executed and delivered to the Venture
an assumption agreement assuming the liabilities of the Myrtle Creek System as
of the closing date; (e) the Venture shall have received an opinion of counsel
for Falcon dated the closing date and addressed to the Venture in the form
agreed as an exhibit to the Agreement; (f) Falcon and the Venture shall have
obtained all required consents and approvals of third persons or parties
necessary for the consummation of the transaction contemplated by the
Agreement; (g) there shall not be pending or threatened any lawsuit, claim or
legal action relating to the transaction contemplated by the Agreement seeking
to enjoin or render unlawful its consummation; (h) the Myrtle Creek System
will have not less than 6,300 basic subscribers as of the closing date;
provided, however, that in the event that the Myrtle Creek System has fewer
than 6,300 basic subscribers as of the closing date and Falcon agrees to limit
the amount of the actual downward subscriber shortfall closing adjustment to
the sales price to $527,450, then this condition shall be deemed waived by the
Venture; (i) the holders of a majority of the limited partnership interests of
both the Partnership and Fund 1-B shall have voted to approve the transaction
contemplated by the Agreement; and (j) Falcon shall have delivered the sales
price and such other documents as may be reasonably requested by the Venture
to effect the transaction contemplated by the Agreement.
Indemnity Escrow
For a period of one year following the closing date, $500,000 of the sale
proceeds will remain in escrow as security for the Venture's agreement to
indemnify Falcon under the Agreement. This escrow amount shall apply against
any claims made by the Venture's creditors or claims filed by other third
parties as a result of acts by the Venture that have not been assumed by
Falcon and any claims made by Falcon as a result of unsatisfied net prorations
or sales price Adjustments in Falcon's favor or as a consequence of the
failure of the Venture to deliver the assets of the Myrtle Creek System as
represented by the Venture in the Agreement, including but not limited to any
reduction in the sales price occasioned by the Venture's failure to deliver at
closing at least 6,650 basic subscribers. Any claims made by Falcon shall be
submitted to the Venture for review and approval and any claims made by the
Venture's creditors shall be submitted to both Falcon and the Venture for
review and approval prior to the release of funds to Falcon and/or such
creditors by the escrow agent. Interest earned on any amounts disbursed to
Falcon shall be paid to Falcon and interest earned on all other amounts,
whether disbursed to the Venture or to third parties, shall belong to the
Venture except to the extent that such interest is required to pay Falcon or
the Venture's creditors.
In addition, the Venture has agreed to indemnify and hold Falcon harmless
against and in respect of and is obligated to reimburse Falcon for any and all
losses, liabilities or damages resulting from any untrue representation,
breach of warranty or nonfulfillment of any covenant or agreement contained in
the Agreement or any certificate, document or instrument delivered to Falcon
at closing; any and all obligations of the Venture not specifically assumed by
Falcon pursuant to the terms of the Agreement and the assumption agreement
delivered at closing; any claims for finder's fees or brokerage or other
commissions by any person arising by reason of any services alleged to have
been rendered to or at the instance of the Venture with respect to the
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Agreement or any of the transactions contemplated thereby; any and all losses,
liabilities or damages resulting from the Venture's operation or ownership of
the Myrtle Creek System prior to the close of business on the closing date;
any and all losses, liabilities or damages resulting from claims arising after
the closing date by or on behalf of persons employed by the Venture at any
time prior to the closing and who are not employed by Falcon after the
closing; and any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or
incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing the indemnity given under the Agreement.
The Venture's primary exposure, if any, will relate to the representations
and warranties made about the Myrtle Creek System in the Agreement and to pre-
closing obligations and liabilities. The Venture will not be liable for any
claim for a breach of a representation or warranty unless and until the
aggregate amount of all claims is at least $25,000. Falcon will have the right
to make claims against the indemnity escrow account and Falcon must notify the
Venture of such claims. If the Venture objects to the payment of any claims by
the escrow agent, and if Falcon and the Venture are unable to agree on how the
escrowed funds should be distributed, the escrow agent will be authorized to
submit the dispute to arbitration.
Any amounts remaining from this indemnity escrow account at the end of the
one year period and not subject to a claim by Falcon will be distributed to
the partners of the Venture. The Partnership will continue in existence at
least until any amounts remaining from the indemnity escrow account have been
distributed. If any disputes with respect to indemnification arise, the
Partnership would not be dissolved until such disputes were resolved, which
could result in the Partnership continuing in existence beyond 2000.
REASONS FOR THE TIMING OF THE SALE
The decision to proceed with the sale of the Myrtle Creek System was based
upon the General Partner's conclusion in 1996 that it would be in the
Venture's best interests to sell the Myrtle Creek System. In accordance with
the General Partner's decision in 1996 that it was time for the Venture to
sell the Myrtle Creek System, an information package describing the Myrtle
Creek System was prepared by The Intercable Group, Ltd., the General Partner's
cable system brokerage subsidiary. During 1996, The Intercable Group, Ltd.
approached Falcon regarding the Myrtle Creek System and an information package
was sent to Falcon in November 1996. At the end of December 1996, Falcon
submitted a cash for assets offer of $9,750,000 for 6,200 basic subscribers.
The offer was subject to Falcon's due diligence review of the Myrtle Creek
System and Falcon visited the system on February 12, 1997. After this visit,
Falcon withdrew its offer to purchase the Myrtle Creek System.
Between October 1997 and February 1998, The Intercable Group, Ltd. contacted
other potential buyers: Harron Communications, Anderson Pacific Corporation,
Benchmark Communications, American Cable Entertainment, Mountain Cable
Marketing and Sun Country Cable to solicit their interest in purchasing the
Myrtle Creek System. This brokerage firm also remained in contact with Falcon
about the system. Updated information packages were sent to Falcon and the
other potential buyers in February 1998.
The Intercable Group, Ltd. remained in contact with the two companies
expressing continued interest in the Myrtle Creek System, i.e., Sun Country
Cable and Falcon. In March 1998, an information package was also sent to Tele-
Media Company. At that time, The Intercable Group, Ltd. requested bids on the
Myrtle Creek System from the three interested parties. Cash for assets offers,
subject to due diligence, were made by Falcon at $10,000,000, by Tele-Media
Company at $9,600,000 and by Sun County Cable at $9,475,000. In comparing the
offers from Falcon, Tele-Media Company and Sun Country Cable, The Intercable
Group, Ltd. evaluated each offer based on the price, the proposed basic
subscriber warrants and other proposed contract terms. The Falcon offer was
based in the Venture's delivery of 6,680 basic subscribers (which was
subsequently reduced by negotiation to 6,650 basic subscribers), while the
Tele-Media Company offer was based on the Venture's delivery of 6,780 basic
subscribers and the Sun Country Cable offer was based on the Venture's
delivery of 6,687 basic subscribers. The Tele-Media Company offer also had a
condition that the buyer obtain satisfactory financing for the transaction.
Given all of these various offer terms, The Intercable Group, Ltd., in
consultation
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with the General Partner, elected to pursue negotiations with Falcon because
Falcon offered the highest sales price and its offer was more favorable with
respect to the basic subscriber warrant requirement. In addition, Falcon is an
established cable operator with several other cable television systems in the
State of Oregon.
As a result of further discussions with Falcon, a letter of intent was
executed between the Venture and Falcon on May 13, 1998. Following the
execution of the letter of intent, representatives of The Intercable Group,
Ltd. and representatives of the General Partner negotiated the Agreement with
Falcon. The Agreement was executed on September 9, 1998. The Agreement was
subsequently approved by an unanimous vote of the Board of Directors of the
General Partner.
The Partnership has a finite legal existence of 17 years, over 12 of which
have passed. It was not intended or expected, however, that the Partnership
would hold its cable systems for 17 years. Although it was not possible at the
outset of the Partnership to determine precisely how quickly the investment
objectives with respect to any particular system would be achieved, investors
were informed that past experience with prior partnerships had shown that five
to seven years was the average length of time from the acquisition of a cable
system to its sale. Investors in the Partnership also were able to examine the
track record of prior partnerships because such track record was set forth in
the prospectus delivered in connection with the Partnership's initial public
offering. At the time of the formation of the Partnership, the track record
showed that prior partnerships had rarely held their cable systems for any
longer than six years. The Partnership had somewhat different investment
objectives from most of the General Partner's prior partnerships, however, in
that it sought to provide both current distributions and capital appreciation
in its cable systems. The expected holding period for the Partnership's
systems was therefore eight to ten years.
When investing in the Partnership, by virtue of the provisions of Section
2.2(k) of the Partnership Agreement, the limited partners vested in the
General Partner the right and responsibility to determine when the
Partnership's investment objectives had been achieved. The Myrtle Creek System
was acquired by the Venture because, in the opinion of the General Partner at
the time of the Myrtle Creek System's acquisition, the system had the
potential for capital appreciation within a reasonable period of time. It is
the General Partner's opinion that during the years that the Myrtle Creek
System has been held by the Venture, the Partnership investment objectives
with respect to the system have been achieved. The General Partner determined
that now rather than later was the appropriate time for the Venture to sell
the system. The General Partner used no specific benchmarks or measurement
tools in determining that now was the time for the Venture to sell the system.
The General Partner conducted a subjective evaluation of a variety of factors,
including the length of the holding period and the prospects for future growth
of the system as compared to the potential risks of a decline in the value of
the system.
In evaluating whether now was the time for the Venture to sell the Myrtle
Creek System, the General Partner generally considered the benefits to the
limited partners that might be derived by the Venture's holding the system for
an additional period of time. The General Partner assumed that the system
might continue to appreciate in value and, if so, the Myrtle Creek System
would be able to be sold for a greater sales price in the future. The General
Partner weighed these assumptions against the potential risk to investors from
a longer holding period, i.e., the risks that regulatory, technology and/or
competitive developments could cause the system to decline in value, which
could result in a lower sales price in the future. A longer holding period
would expose investors to the risk that competition from direct broadcast
satellite companies, telephone companies and/or neighboring cable companies
could diminish the number of subscribers to the system's basic and premium
services, thereby decreasing the value of the system. A longer holding period
would expose investors to the risk that changes in the regulations promulgated
by the governmental agencies that oversee cable operations could make cable
systems a less desirable investment, thereby decreasing the value of the
Myrtle Creek System. The General Partner's decision to sell the system at this
time was greatly influenced by the fact that the originally contemplated
holding period has been exceeded.
Recommendation of the General Partner and Fairness of the Proposed Sale
The General Partner believes that the Venture's proposed sale of the Myrtle
Creek System to Falcon on the terms and conditions of the Agreement and the
proposed distribution of the net sale proceeds therefrom to the
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limited partners of the Partnership and Fund 1-B are fair to all limited
partners of the Partnership, and it recommends that the limited partners of
the Partnership approve the Venture's sale of the Myrtle Creek System to
Falcon on the terms and conditions of the Agreement. In determining the
fairness of the proposed transaction, the General Partner's officers and
directors at the time the Agreement was negotiated and executed considered
each of the following factors, all of which had a positive effect on the
General Partner's fairness determination:
(i) the limited partnership interests are at present illiquid and the cash
to be distributed to limited partners as a result of the proposed sale of the
Myrtle Creek System will provide limited partners with liquidity;
(ii) the sales price represents the fair market value of the Myrtle Creek
System because the sales price was determined in competitive bidding and
through an arm's-length negotiation between the General Partner, representing
the Venture, and Falcon, an unaffiliated entity;
(iii) the Venture has held the Myrtle Creek System for more than 11 years;
(iv) the conditions and prospects of the cable television industry in which
the Venture is engaged, including the competition and threat of competition
from overbuilders, from DBS services and telephone companies, and the working
capital and other financial needs of the Venture if it were to continue to
operate and upgrade the Myrtle Creek Systems; and
(v) the terms and conditions of the Agreement by and between the Venture and
Falcon, including the fact that the sales price will be paid in cash and the
fact that Falcon's obligation to close is not contingent upon its ability to
obtain financing.
The General Partner's officers and directors at the time the Agreement was
negotiated and executed reviewed the terms of the Agreement and the sales
price and, based on their general knowledge of cable television system
transactions undertaken by cable television companies, concluded that the
sales price and other transaction terms were fair and were within industry
norms for comparable transactions.
Certain Effects of the Sale
Upon the consummation of the proposed sale of the Myrtle Creek System, the
proceeds of the sale will be used to repay all of the remaining amounts
borrowed under the Venture's credit facility and its capital lease
obligations, pay certain fees and expenses of the transaction, including a
brokerage fee to a subsidiary of the General Partner, and $500,000 will be
deposited into a one-year indemnity escrow account and then the approximately
$6,085,000 of net sale proceeds will be distributed by the Venture to its two
constituent partnerships in proportion to their ownership interests. The
Partnership accordingly will receive 60 percent of such proceeds, estimated to
total approximately $3,665,000, and the Partnership will distribute this
portion of the net sale proceeds to its limited partners of record as of the
closing date of the sale of the system pursuant to the terms of the
Partnership Agreement. Based upon pro forma financial information as of March
31, 1999, and assuming an unadjusted sales price of $10,000,000, as a result
of the sale of the Myrtle Creek System, the limited partners of the
Partnership, as a group, will receive $3,665,000. Limited partners will
receive $43 for each $500 limited partnership interest, or $86 for each $1,000
invested in the Partnership. The limited partners will be subject to federal
income tax on the income resulting from the sale of the Myrtle Creek System.
See the detailed information below under the caption "Federal Income Tax
Consequences."
After the sale of the Myrtle Creek System and the Venture's distribution of
the net proceeds therefrom, including the indemnity escrow amount, the
Partnership will make a final distribution to its limited partners and then it
will be liquidated and dissolved, most likely in the third quarter of 2000.
Neither Colorado law nor the Partnership Agreement afford dissenters' or
appraisal rights to limited partners in connection with the Venture's proposed
sale of the Myrtle Creek System. If the proposed transaction is approved by
the holders of a majority of the limited partnership interests of the
Partnership and Fund 1-B, all limited partners of the Partnership will receive
a distribution of the net sale proceeds in accordance with procedures
prescribed by the Partnership
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Agreement regardless of how or whether they vote on the proposal. It is
anticipated that if the proposed transaction is not consummated, the General
Partner's current management team will continue to manage the Myrtle Creek
System on behalf of the Partnership until such time as the Myrtle Creek System
can be sold. No other alternatives have been or currently are being
considered.
All distributions of the Partnership from the proceeds of the sale of the
Myrtle Creek System will be made to the Partnership's limited partners of
record as of the closing date of the sale of the Myrtle Creek System. This
includes the distribution of the Partnership's 60 percent share of the net
sale proceeds to be made shortly following the closing of the sale and the
distribution of the Partnership's 60 percent share of the amounts remaining,
if any, from the one-year indemnity escrow account. Because transferees of
limited partnership interests following the closing date of the sale of the
Myrtle Creek System would not be entitled to any distributions from the
Partnership, a transfer of limited partnership interests following the closing
date of the sale of the Myrtle Creek System would have no economic value. The
General Partner therefore has determined that, pursuant to the authority
granted to it by Section 3.5 of the Partnership Agreement, it will not approve
any transfers of limited partnership interests following the closing of the
sale of the Myrtle Creek System. Sales of limited partnership interests
pursuant to limited tender offers, in the secondary market or otherwise will
not be possible following the closing of the sale of the Myrtle Creek System.
FEDERAL INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transaction is to inform the limited partners of the 1999 federal
income tax consequences to the Partnership and to its partners arising from
the Venture's proposed sale of the Myrtle Creek System. These tax consequences
are expected to be incurred in 1999, the year in which the sale is expected to
close. The tax information included herein was prepared by the tax department
of the General Partner. The tax information is taken from tax data compiled by
the General Partner in its role as the Partnerships's tax administrator and is
not based upon the advice or formal opinion of counsel. The tax discussion
that follows is merely intended to inform the limited partners of factual
information and should not be considered tax advice.
Partnership Allocation of Gain from Sale
Section 5.4 of the Partnership Agreement specifies that partnership
distributions of cable television system net sale proceeds shall be allocated
100 percent to the limited partners until they have received a return of their
initial capital contributions plus their 10 percent liquidation preference,
and thereafter such distributions are to be made 75 percent to the limited
partners and 25 percent to the General Partner. Because the limited partners
of the Partnership will not receive a return of their initial investment plus
the liquidation preference, the General Partner will not receive a general
partner distribution.
The allocation of gain from the sale of the Myrtle Creek System will follow
the allocation of the cash distributions from the sale in accordance with
Section 5.3 of the Partnership Agreement. The allocation of gain will be 100
percent to the limited partners to the extent of initial capital contributions
plus the 10 percent liquidation preference. This allocation follows the
underlying economic gain of the partners and hence satisfies the "substantial
economic effect" test enacted in Internal Revenue Code ("IRC") Section 704(b)
regarding special partnership allocations.
Application of the allocation provisions of Section 5.3 ensures that the
limited partners' net sum of allocable partnership loss and income during the
Partnership's life will equal the net economic gain realized from their
investment in the Partnership. The estimated allocable limited partner income
from the Myrtle Creek System sale reported below incorporates the application
of the special partnership allocation rules of Section 5.3.
Projected 1999 Tax Results
By the expected date of the proposed system sale in July 1999, most of the
limited partners will have received certain tax benefits from their investment
in the Partnership. Assuming maximum federal income tax
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rates and no other sources of passive income, original limited partners of the
Partnership will have received $828,244 in tax benefits from Partnership
losses ($19 per $1,000 invested). Tax benefits derived from allocable
Partnership losses have been limited due to the passive loss limitation rules
enacted in 1986.
The sale of the Myrtle Creek System will result in a gain for federal income
tax purposes. The amount of this gain allocated to limited partners will be
approximately $4,972,714. The General Partner estimates that all of this gain
($117 per $1,000 invested) will be treated as ordinary income. This amount of
ordinary income results from the recapture of depreciation on business assets
under IRC Section 1245. It is anticipated that no passive loss carryforwards
from the Partnership will be available to offset these gain allocations.
Assuming the 31 percent rate applies to ordinary income, as a result of the
sale of the Myrtle Creek System, a limited partner will be subject to federal
income taxes of $36 per $1,000 invested in the Partnership. The taxable income
will be recognized in the year of closing of the sale, which is expected to be
1999.
Syndication Costs
Syndication costs represent sales commissions paid by limited partners on
their purchase of their limited partnership interests and allocable costs
associated in forming the Partnership. These costs were capitalized on the
Partnership books and are reflected in the limited partners' capital account
balance. Upon liquidation of the Partnership, the syndication costs cannot be
deducted by the Partnership. However, these costs can be deducted by the
limited partners as a long term capital loss under IRC Section 731. Limited
partners will have an ending capital balance on their final Form 1065,
Schedule K-1 which represents their allocable syndication costs. The
Partnership has syndication costs of $5,846,809 ($137 per $1,000 invested)
that will be deductible by limited partners in the Partnership's final tax
year. Although the sale of the Myrtle Creek System is expected to occur in
1999, it is anticipated that due to the one-year escrow arrangement, the final
Partnership tax year will be 2000. Syndication costs thus should be deductible
by limited partners on their 2000 returns.
Secondary Market Purchasers
Limited partners that have more recently acquired their partnership
interests in the limited partnership secondary market and/or through limited
tender offers will have allocable income from the Myrtle Creek System sale in
the amounts reported above. Because the Partnership does not have an IRC
Section 754 election in effect, the purchase of a limited partnership interest
in the Partnership places the new investor in the same position as the limited
partner from whom the interest was purchased.
Recent investors will not have their net tax basis in their partnership
interests reflected on their annual Schedule K-1. Such limited partners must
track their tax basis by adjusting their original cost by allocable income or
loss and partnership distributions. Their adjusted tax basis will be
deductible as a long term capital loss under IRC Section 731 in a manner
similar to the Partnership syndication costs discussed above.
Federal Reporting by Tax Exempt Entities
The July 1999 sale of the Myrtle Creek System will generate Unrelated
Business Taxable Income (UBTI) to tax exempt entities, which will require the
filing of Form 990-T. Although many trust administrators complete the required
tax returns, responsibility for completion of the Form 990-T ultimately rests
with the beneficiaries of trusts, IRAs and other tax exempt entities. Because
this is an area in which there is variance of policy among trust
administrators, each limited partner who is a beneficiary is advised to
confirm with his or her trust administrator that this filing requirement will
be fulfilled.
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CERTAIN INFORMATION ABOUT THE PARTNERSHIP, THE GENERAL
PARTNER AND THE PURCHASER OF THE SYSTEM
The principal executive offices of the Partnership and the General Partner
are located at 1500 Market Street, Philadelphia, Pennsylvania 19102-2148, and
their telephone number is (215) 665-1700. The principal executive offices of
Falcon are located at 10900 Wilshire Boulevard, 15th Floor, Los Angeles,
California 90024.
The limited partnership interests of the Partnership are registered pursuant
to Section 12(g) of the Exchange Act. As such, the Partnership currently is
subject to the informational reporting requirements of the Exchange Act and,
in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Reports and other information filed by
the Partnership can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the following regional offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The
Commission also maintains a World Wide Web site that contains reports, proxy
statements and information statements of registrants (including the
Partnership and the General Partner) that file electronically with the
Commission at http://www.sec.gov. After the Partnership's portion of the net
proceeds from the sale of the Myrtle Creek System, including amounts to be
held in a one-year indemnity escrow account, are distributed to the
Partnership's partners of record as of the closing date of the sale of the
Myrtle Creek System, the Partnership will be liquidated and dissolved. The
Partnership's registration and reporting requirements under the Exchange Act
will not be terminated until the dissolution of the Partnership, most likely
during the third quarter of 2000.
On April 7, 1999, Comcast Corporation ("Comcast") completed the acquisition
of a controlling interest in the General Partner. Comcast now owns
approximately 12.8 million shares of the General Partner's Class A Common
Stock and approximately 2.9 million shares of the General Partner's Common
Stock, representing approximately 37 percent of the economic interest and 47
percent of the voting interest in the General Partner. Also on that date,
Comcast contributed its shares in the General Partner to Comcast's wholly
owned subsidiary, Comcast Cable Communications, Inc. ("Comcast Cable"). The
approximately 2.9 million shares of Common Stock of the General Partner owned
by Comcast represents approximately 57 percent of the outstanding Common
Stock, which class of stock is entitled to elect 75 percent of the Board of
Directors of the General Partner. As a result of this transaction, the General
Partner is now a consolidated public company subsidiary of Comcast Cable.
Comcast is principally engaged in the development, management and operation
of broadband cable networks and in the provision of content through
programming investments. Comcast Cable is principally engaged in the
development, management and operation of broadband cable networks. The address
of Comcast's principal office is 1500 Market Street, Philadelphia,
Pennsylvania 19102-2148, which is also now the address of the General
Partner's principal office. The address of Comcast Cable's principal office is
1201 Market Street, Suite 2201, Wilmington, Delaware 19801.
USE OF PROCEEDS FROM THE SALE OF THE MYRTLE CREEK SYSTEM
The following is a brief summary of the Venture's estimated use of the
proceeds and of the Partnership's estimated use of its portion of the proceeds
from the sale of the Myrtle Creek System. All of the following selected
financial information is based upon amounts as of March 31, 1999 and certain
estimates of liabilities and the number of basic subscribers at closing. Final
results may differ materially from these estimates. A more detailed discussion
of the financial consequences of the sale of the Myrtle Creek System is set
forth below under the captions "Unaudited Pro Forma Financial Information."
All limited partners are encouraged to review carefully the unaudited pro
forma financial statements and notes thereto.
If the holders of a majority of limited partnership interests of the two
partnerships that comprise the Venture approve the proposed sale of the Myrtle
Creek System and the transaction is closed, the Venture will repay all of the
amounts borrowed under its credit facility and its capital lease obligations,
leaving the Venture with no debt
14
<PAGE>
outstanding, pay certain fees and expenses of the transaction, including a
brokerage fee of 2.5 percent of the sales price, or $250,000, to The
Intercable Group, Ltd., a subsidiary of the General Partner, settle working
capital adjustments and deposit $500,000 in a one-year interest bearing
indemnity escrow account, and then the approximately $6,085,000 of net sale
proceeds will be distributed by the Venture to its two constituent
partnerships in proportion to their ownership interests. The Partnership
accordingly will receive 60 percent of such proceeds, estimated to total
approximately $3,665,000, and the Partnership will distribute this portion of
the net sale proceeds to the Partnership's limited partners of record as of
the closing date of the sale of the system and pursuant to the terms of the
Partnership Agreement. Because distributions to be made on the sale of the
Myrtle Creek System together with all prior distributions made by the
Partnership to the limited partners from the Venture's operating cash flow and
from the net proceeds of prior cable television system sales will not equal
the amount originally contributed to the Partnership by the limited partners
plus the limited partners' liquidation preference, the General Partner will
not receive a general partner distribution on the sale of the Myrtle Creek
System. Based upon financial information as of March 31, 1999, the limited
partners as a group will receive $3,665,000 of the net sale proceeds. This
distribution will provide the Partnership's limited partners with a return of
$43 for each $500 limited partnership interest, or $86 for each $1,000
invested in the Partnership. The estimated uses of the sale proceeds are as
follows:
<TABLE>
<S> <C>
Contract Sales Price of the Myrtle Creek System............... $10,000,000
Add:Cash on Hand ............................................. 58,019
Less:Repayment of Debt........................................ (2,413,939)
Estimated Net Closing Adjustments.......................... (807,538)
Brokerage Fee.............................................. (250,000)
Indemnity Escrow........................................... (500,000)
Miscellaneous.............................................. (1,542)
-----------
Cash Available for Distribution to the Partnership and
to Fund 1-B............................................ $ 6,085,000
-----------
Cash Distributed to Fund 1-B............................ $ 2,420,000
-----------
Cash Available for Distribution by the Partnership...... $ 3,665,000
===========
</TABLE>
Based on financial information available at March 31, 1999, the following
table presents the estimated results of the Partnership when the sale of the
Myrtle Creek System is completed:
<TABLE>
<S> <C>
Tax and Distribution Data per $1,000 of Limited Partnership Capi-
tal:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations............................................. $ (819)
--from recapture.............................................. $1,104
Capital Gain (Loss)........................................... $ (137)
Cash Distributions to Investors
Source (on GAAP basis)
--investment income........................................... $ 148
--return of capital........................................... $1,000
Source (on cash basis)
--sales....................................................... $1,148
</TABLE>
15
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF JONES CABLE INCOME FUND 1-C, LTD.
The following unaudited pro forma balance sheet assumes that as of March 31,
1999, the Venture had sold the Myrtle Creek System for $10,000,000. The
following unaudited pro forma statements of operations assume that the Venture
had sold the Myrtle Creek System for $10,000,000, as well as the Clearlake
System, the Southwestern Michigan System and the South Sioux City System, as
of January 1, 1998. The funds available to the Venture from the sale of the
Myrtle Creek System, adjusting for the estimated net closing adjustments of
the sale, are expected to total $9,192,462. Such funds will be used to repay
all of the amounts borrowed by the Venture under its credit facility and
outstanding capital lease obligations, pay certain fees and expenses of the
transaction, including a brokerage fee to an affiliate of the General Partner,
and make a $500,000 deposit into the indemnity escrow account, and the balance
will be distributed by the Venture to its two constituent partnerships in
proportion to their ownership interests. The Partnership accordingly will
receive 60 percent of such proceeds, expected to total approximately
$3,665,000, and the Partnership will distribute this portion of the net sale
proceeds to the Partnership's limited partners in accordance with the
distribution provisions of the Partnership Agreement.
The unaudited pro forma financial statements should be read in conjunction
with the appropriate notes to the unaudited pro forma financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL INFORMATION IS BASED UPON
AMOUNTS AS OF MARCH 31, 1999 AND CERTAIN ESTIMATES OF LIABILITIES AT CLOSING.
FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
16
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents.................. $ 58,019 $ 3,606,981 $3,665,000
Trade Receivables, net..................... 18,374 (18,374) --
Investment in Cable Television Properties:
Property, plant and equipment, net....... 2,379,693 (2,379,693) --
Franchise costs and other intangibles,
net..................................... 763,243 (763,243) --
---------- ----------- ----------
Total investment in cable television
properties............................ 3,142,936 (3,142,936) --
Deposits, Prepaid Expenses and Deferred
Charges................................... 104,540 395,460 500,000
---------- ----------- ----------
Total Assets........................... $3,323,869 $ 841,131 $4,165,000
========== =========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Debt..................................... $2,413,939 $(2,413,939) $ --
Trade accounts payable and accrued lia-
bilities................................ 897,393 (897,393) --
Subscriber prepayments................... 33,059 (33,059) --
Accrued distribution to limited part-
ners.................................... -- 3,665,000 3,665,000
---------- ----------- ----------
Total Liabilities...................... 3,344,391 320,609 3,665,000
---------- ----------- ----------
Minority interest in Joint Venture......... 33,421 165,429 198,850
---------- ----------- ----------
Partners' Capital (Deficit):
General Partner.......................... (764) 3,775 3,011
Limited Partners......................... (53,179) 351,318 298,139
---------- ----------- ----------
Total Partners' Capital (Deficit)...... (53,943) 355,093 301,150
---------- ----------- ----------
Total Liabilities and Partners' Capital
(Deficit)............................... $3,323,869 $ 841,131 $4,165,000
========== =========== ==========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited pro forma balance sheet.
17
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
As Reported Adjustments Balance
----------- ----------- ---------
<S> <C> <C> <C>
REVENUES..................................... $607,350 $(607,350) $ --
COSTS AND EXPENSES: --
Operating Expenses ........................ 371,932 (371,932) --
Management fees and allocated overhead from
the General Partner....................... 73,792 (73,792) --
Depreciation and Amortization.............. 198,524 (198,524) --
-------- --------- ------
OPERATING LOSS............................... (36,898) 36,898 --
-------- --------- ------
OTHER INCOME (EXPENSE):
Interest expense .......................... (50,574) 50,574 --
Other, net................................. (39,403) 39,403 --
-------- --------- ------
Total other income (expense), net........ (89,977) 89,977 --
-------- --------- ------
CONSOLIDATED LOSS............................ (126,875) 126,875 --
MINORITY INTEREST IN CONSOLIDATED LOSS....... 50,458 (50,458) --
-------- --------- ------
NET LOSS..................................... (76,417) $ 76,417 --
======== ========= ======
NET LOSS PER LIMITED PARTNERSHIP INTEREST.... $ (.89) $ --
======== ======
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited pro forma statement.
18
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
------------ ------------ ----------
<S> <C> <C> <C>
REVENUES................................ $ 8,558,726 $ (8,558,726) $ --
COSTS AND EXPENSES:
Operating Expenses.................... 5,317,589 (5,317,589) --
Management fees and allocated overhead
from
the General Partner.................. 971,825 (971,825) --
Depreciation and Amortization......... 2,947,988 (2,947,988) --
------------ ------------ ----------
OPERATING LOSS.......................... (678,676) 678,676 --
------------ ------------ ----------
OTHER INCOME (EXPENSE):
Interest expense...................... (731,711) 731,711 --
Gain on sale of cable television sys-
tem.................................. 35,830,323 (35,830,323) --
Other, net............................ (78,098) 78,098 --
------------ ------------ ----------
Total other income (expense), net... 35,020,514 (35,020,514) --
------------ ------------ ----------
CONSOLIDATED INCOME..................... 34,341,838 (34,341,838) --
MINORITY INTEREST IN CONSOLIDATED
INCOME................................. (13,657,749) 13,657,749 --
------------ ------------ ----------
NET INCOME.............................. 20,684,089 $(20,684,089) --
============ ============ ==========
NET INCOME PER LIMITED PARTNERSHIP IN-
TEREST................................. $ 243.10 $ --
============ ==========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
19
<PAGE>
JONES CABLE INCOME FUND 1-C, LTD.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1) The Partnership has a 60 percent ownership interest in the Venture
through a capital contribution made during November 1987 of $36,681,000. The
following calculations present the sale of the Myrtle Creek System and the
resulting estimated distributions to be received by the Partnership.
2) The unaudited pro forma balance sheet of the Partnership assumes that the
Venture had sold the Myrtle Creek System for $10,000,000 as of March 31, 1999.
The unaudited pro forma statements of operations of the Partnership assume
that the Venture had sold the Myrtle Creek System for $10,000,000, as well as
the Clearlake System, the Southwestern Michigan System and the South Sioux
City System, as of January 1, 1998.
3) The Partnership will receive from the Venture $3,665,000 of net sale
proceeds from the sale of the Myrtle Creek System, which it will distribute to
the Partnership's limited partners. The limited partnership distribution will
represent $43 for each $500 limited partnership interest or $86 for each
$1,000 invested in the Partnership.
4) The estimated gain recognized from the sale of the Myrtle Creek System
and corresponding estimated distribution to the Partnership's limited partners
as of March 31, 1999 have been computed as follows:
Gain on Sale:
<TABLE>
<S> <C>
Contract sales price............................................. $10,000,000
Less: Net book value of investment at March 31, 1999............. (3,142,936)
Brokerage fee.............................................. (250,000)
-----------
Gain on sale..................................................... $ 6,607,064
===========
Distribution to Limited Partners:
Contract sales price............................................. $10,000,000
Add: Trade receivables, net..................................... 18,374
Prepaid expenses........................................... 104,540
Less: Accounts payable and accrued liabilities................... (897,393)
Subscribers prepayments.......................................... (33,059)
-----------
Adjusted cash received........................................... 9,192,462
Less: Outstanding debt to third parties.......................... (2,413,939)
Brokerage fee.............................................. (250,000)
Miscellaneous.............................................. (1,542)
Add: Cash on hand............................................... 58,019
-----------
Cash available from sale proceeds................................ $ 6,585,000
-----------
Portion of sale proceeds to be held in a one-year indemnity
escrow.......................................................... (500,000)
-----------
Cash available for distribution to the Partnership and Fund 1-B
in 1999......................................................... $ 6,085,000
===========
Cash distributed to Fund 1-B..................................... $ 2,420,000
===========
Cash available for distribution by the Partnership............... $ 3,665,000
===========
</TABLE>
20
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1999 are being mailed to the limited partners
of the Partnership together with this Proxy Statement.
INCORPORATION BY REFERENCE
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1999 are incorporated by reference in their
entirety in this Proxy Statement.
21
<PAGE>
[JONES INTERCABLE, INC. LOGO]
1500 Market Street
Philadelphia, Pennsylvania 19102
PROXY
This Proxy is Solicited on Behalf of the Partnership by the General Partner
The undersigned Limited Partner of Jones Cable Income Fund 1-C, Ltd., a
Colorado limited partnership, hereby votes on the sale of the Jones Cable
Income Fund 1-B/C Venture's Myrtle Creek, Oregon cable television system to
Falcon Cablevision or one of its affiliates, for a sales price of $10,000,000
in cash, subject to normal closing adjustments, pursuant to the terms and
conditions of that certain Asset Purchase Agreement dated as of September 9,
1998, as amended, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE PROPOSED SALE TRANSACTION.
PLEASE SIGN EXACTLY AS NAME
APPEARS ON LABEL.
DATED: ______________________, 1999
___________________________________
Beneficial Owner Signature
(Investor)
___________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
[JONES INTERCABLE, INC. LOGO]
1500 Market Street
Philadelphia, Pennsylvania 19102
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Jones Cable Income Fund 1-C, Ltd., a
Colorado limited partnership, hereby votes on the sale of the Jones Cable
Income Fund 1-B/C Venture's Myrtle Creek, Oregon cable television system to
Falcon Cablevision or one of its affiliates, for a sales price of $10,000,000
in cash, subject to normal closing adjustments, pursuant to the terms and
conditions of that certain Asset Purchase Agreement dated as of September 9,
1998, as amended, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED LIMITED PARTNER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE PROPOSED SALE TRANSACTION.
ALL OWNERS MUST SIGN EXACTLY AS
NAME(S) APPEAR ON LABEL.
When limited partnership
interests are held by more than
one person, all owners must sign.
When signing as attorney, as
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporation
name by authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: ______________________, 1999
___________________________________
Signature - Investor 1
___________________________________
Signature - Investor 2
___________________________________
Signature - Investor 3
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
Exhibit 99.1
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is made effective as of
September 9, 1998, by and between JONES CABLE INCOME FUND 1-B/C VENTURE, a
Colorado partnership (Federal Tax I.D. No. 84-1076581), with offices at 9697 E.
Mineral Avenue, Englewood, Colorado 80112 ("Seller"); JONES INTERCABLE, INC., a
Colorado corporation (for the limited purposes hereinbelow set forth); and
FALCON COMMUNITY VENTURES I LIMITED PARTNERSHIP, a California limited
partnership, with offices at 10900 Wilshire Boulevard, 15th Floor, Los Angeles,
California 90024 ("Buyer").
WHEREAS, Seller owns and operates cable television systems located in the
cities of Myrtle Creek, Winston, Riddle, and Canyonville, and in certain
unincorporated areas of Douglas County, all in the State of Oregon (all cable
television systems owned and operated by Seller in such locations collectively
referred to herein as "the System"); and
WHEREAS, Buyer desires to buy and Seller desires to sell all those assets,
tangible and intangible, of Seller, used or useful in the operation of the
System, pursuant to the terms hereof;
NOW, THEREFORE, in consideration of these premises, and the mutual
covenants, conditions, and promises hereinafter set forth, the parties hereto
represent, warrant, and agree as follows:
1.0 Sale and Purchase of Assets.
---------------------------
1.1 Assets to be Sold. Subject to the terms and conditions hereof,
-----------------
Seller, in consideration of Buyer's payment of the Purchase Price (as defined in
Section 2.0), shall sell, transfer, convey, assign, and deliver to Buyer at the
Closing (as defined in Section 3.0), free and clear of all liabilities, liens,
conditions, and encumbrances (except for those allowed in Section 5.7 below),
and Buyer shall purchase from Seller at the Closing, all of the tangible and
intangible assets of Seller used or useful in connection with the System (other
than those contracts and other intangibles expressly excluded from assumption
hereunder), including but not limited to the following:
1.1.1 Personal Property. Except for any items that are
-----------------
excluded from assignment pursuant to Section 1.2, below, all machinery,
equipment (including all equipment on each headend site, receivers, processors,
modulators, trunk amplifiers, taps, scramblers, converter/decoders and stand-by
power), tools, vehicles, furniture, fixtures, leasehold improvements, office
equipment, plant, subscriber installations, inventory (including but not limited
to traps, test equipment, converters, tools, and other materials and supplies),
and other tangible personal property relating to or used by the System,
including but not limited to all of the assets identified and described in
Schedule 1.1.1 hereto, plus such additions thereto and less any deletions
therefrom as arise in the ordinary course of business between the date of this
Agreement and the Closing Date (all of the foregoing hereinafter collectively
referred to as the "Personal Property");
<PAGE>
1.1.2 Real Property. All leasehold interests in real
-------------
property ("Leases"), except for any that are excluded from assumption pursuant
to Section 1.3.1, below, and all other interests in real property, including all
easements and rights of way, and all improvements, buildings, structures,
towers, and fixtures located thereon, which are used or useful in the operation
of the System at all locations of the System, including but not limited to all
real property interests described in Schedule 1.1.2 hereto, and specifically
including the property on which the System's headend equipment is located and
any easements related thereto (all of the foregoing hereinafter collectively
referred to as the "Real Property");
1.1.3 Governmental Licenses. Except for any that are
---------------------
excluded from assignment pursuant to Section 1.2, below, all municipal, state,
and federal licenses or franchises to provide cable television service,
applications for such licenses or franchises (if any), domestic satellite, CARS,
business radio, and other licenses granted by the Federal Communications
Commission (hereinafter "FCC"), the Federal Aviation Administration (hereinafter
"FAA"), or any other administrative agency, and all authorizations and permits
relating to the System granted to Seller by any governmental instrumentality,
including but not limited to those described in Schedule 1.1.3 hereto (all of
the foregoing hereinafter collectively referred to as the "Licenses");
1.1.4 Contracts. Except for any that are excluded from
---------
assumption pursuant to Section 1.3.1, below, all contracts, personal property
leases, pole attachment agreements, purchase orders, commitments, and other
agreements relating to the System, whether written or oral, including but not
limited to those described in Schedule 1.1.4 hereto, and all subscriber service
agreements and such additional contracts and agreements as Seller may have
relating to the operation of the System made in the ordinary course of business
(all of the foregoing hereinafter collectively referred to as the "Contracts");
1.1.5 Miscellaneous Documentation. All warranties (to the
---------------------------
extent they can be assigned to Buyer), maps, plans, diagrams, blueprints,
schematics, and books and records relating to the System, and personnel files
for employees of the System (other than those books and records described in
Section 1.2.1 hereof);
1.1.6 Subscriber and Customer Lists. All subscriber and
-----------------------------
customer lists relating to the System;
1.1.7 Intellectual Property. All patents, patent
---------------------
applications, patent licenses, and all other information and intangible assets
relating to the System, including but not limited to the items listed on
Schedule 1.1.7 hereto, but excluding those matters set forth in Section 1.2.4
below;
1.1.8 Accounts Receivable. All accounts receivable from
-------------------
subscribers (although such accounts receivable have not been taken into account
in setting the Purchase Price, and their inclusion in the Assets will result in
the adjustment to the Purchase Price set forth in Section 4.1.1 below); and
2
<PAGE>
All of such assets described in Sections 1.1.1 through 1.1.9 are
hereinafter collectively referred to as the "Assets". Between the effective
date hereof and the Closing, Seller will not dispose of any of the Assets unless
such disposition is specifically permitted by the express terms of this
Agreement or approved in advance by Buyer in a separate writing.
1.2 Excluded Assets. The Assets shall not include the following:
---------------
1.2.1 Organization Records. Seller's books and records that
--------------------
pertain to the organization, existence, or capitalization of Seller; provided,
however, that if there are any books and records of Seller as to which Buyer can
demonstrate a need for access, Seller shall provide such access in a reasonable
manner;
1.2.2 Cash. Cash or cash equivalents, such as demand
----
deposits, certificates of deposit, treasury bills, and other marketable
securities. However, certain adjustments to the Purchase Price as set forth in
Section 4.1 may require Seller to transfer to Buyer cash or cash equivalents in
an amount equal to subscriber deposits and prepayments and any interest due
thereon as of the Closing Date;
1.2.3 Correspondence. Correspondence not relating to the
--------------
prior operation of the System;
1.2.4 Trade Names. All right, title, and interest in or to
-----------
the corporate or trade names, service marks, service names, logos, symbols, and
similar proprietary rights, or any variants thereof, belonging or relating to
Seller or used in connection with the operation of the System;
1.2.5 Tax Refunds. All claims, rights, and interests in and
-----------
to any refunds for federal, state, or local income or other taxes or fees,
including franchise fees, of any nature whatsoever for periods prior to the
Closing Date, including, without limitation, fees paid to the U.S. Copyright
Office;
1.2.6 Other Accounts Receivable. Accounts receivable other
-------------------------
than those from subscribers; and
1.2.7 Bonds. Bonds, letters of credit, surety instruments
-----
and other similar items.
1.3 Assumption of Obligations and Liabilities. As of the Closing
-----------------------------------------
(as defined in Section 3.0), Buyer shall only assume and pay, discharge, and
perform:
1.3.1 Insofar as they relate to the time period after the
Closing Date, the obligations and liabilities of Seller under the Leases,
Licenses, and Contracts listed in Schedules 1.1.2, 1.1.3 and 1.1.4,
respectively, or under Contracts relating to the operation of the System made in
the ordinary course of business, but expressly excluding:
3
<PAGE>
1.3.1.1 Any employee pension benefit plan or profit
sharing plan, employee welfare benefit plan, employment agreement, or similar
arrangement for the benefit of employees, whether for selected individuals or
otherwise, of Seller or to which Seller has contributed or is under an
obligation to contribute to or fund;
1.3.1.2 Any insurance policies (notwithstanding any
assignment of insurance proceeds pursuant to Section 16 hereof);
1.3.1.3 Any programming contracts or affiliation
agreements for the provision of any programming or other services exhibited to
all or part of the System, including but not limited to satellite and
subscription services, retransmission consent or equivalent agreements which are
used or useful in the operation of the System (except those which Buyer elects
to assume, as specifically designated on Schedule 1.1.4, which shall be deemed
to be a part of the Assets and be subject to all rights and obligations related
thereto hereunder);
1.3.1.4 Except as provided in Section 1.3.2 below, any
Contract not listed in the Schedules hereto which (i) is not terminable at will
or upon not more than thirty (30) days notice, or (ii) imposes monetary
obligations of more than Twenty-Five Thousand Dollars ($25,000.00) or any
material non-monetary obligations, notwithstanding its having been made in the
ordinary course of business; and
1.3.1.5 Seller's rights under any Contract for
subscriber billing and equipment.
1.3.2 Insofar as they relate to the time period after the
Closing Date, any written or oral Leases, Licenses, Contracts, personal property
leases, pole attachment agreements, purchase orders, commitments, or other
agreements relating to the System not described on Schedule 1.1.2, 1.1.3, or
1.1.4, but which, at Buyer's sole option, are specifically assumed by Buyer by
notice in writing to Seller after Buyer has been notified of the existence of
any such agreement.
1.3.3 Any obligation or liability with respect to subscriber
deposits or prepayments (to the extent Buyer receives a credit for same under
Section 4.1 of this Agreement).
1.3.4 All obligations, liabilities, and claims arising out of
Buyer's ownership of the Assets or its operation of the System after the Closing
Date.
All other obligations, liabilities, and claims of any nature
whatsoever of Seller including any lawsuits shall remain and be the sole
obligation of Seller. Except as specifically provided in this Section 1.3 or in
the Assumption Agreement described in Section 10.6 hereof, Buyer will not assume
or be deemed to have assumed or be bound by or subject to any duties,
responsibilities, obligations, or liabilities of Seller or of any other person
or entity, or which are related to the System or any of the Assets, whether
known, unknown, contingent, or otherwise.
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2.0 Purchase Price.
--------------
The purchase price (the "Purchase Price") payable to Seller, subject
to any adjustments pursuant to Section 4.1, shall be Ten Million Dollars
($10,000,000.00), payable as follows:
2.1 Deposit. Five Hundred Thousand Dollars ($500,000.00) shall be
-------
delivered by Buyer to U.S. Bank, Denver Colorado (the "Deposit Escrow Holder")
as a deposit (the "Deposit") upon execution of this Agreement and execution by
Seller, Buyer, and the Deposit Escrow Holder of an escrow agreement containing
the terms set forth in Exhibit 2.1 attached hereto (the "Deposit Escrow
Instructions"), along with any standard and reasonable general provisions
required by the Deposit Escrow Holder. The Deposit shall, upon the Closing, be
delivered to Seller and credited against the Purchase Price to be paid by Buyer.
The Deposit shall be placed in a federally insured interest bearing account
approved by Buyer, and interest on the Deposit shall be retained by Buyer except
as set forth below. Should the Closing not occur for any reason, the following
shall apply:
2.1.1 Failure to Close Without Fault. If: (a) each party
------------------------------
hereto shall have satisfied in full all of the obligations of such party under
this Agreement which were to have been satisfied by such party prior to the
Closing and neither party shall have breached any representation, warranty,
covenant, or agreement of such party contained in this Agreement, but (b) the
Closing shall nevertheless fail to take place (without any fault on the part of
either party) because one or more conditions to the Closing shall not have been
satisfied or waived, then this Agreement shall terminate without any liability
or obligation on the part of either party to the other arising out of the
failure of the Closing to take place, and the Deposit, plus any interest accrued
thereon, shall be returned to Buyer.
2.1.2 Failure to Close When Only Seller Performs. If all of
------------------------------------------
the conditions set forth in Sections 9.1 through 9.21 below are satisfied at or
as of the Closing (or, in the case of any condition which is to be satisfied at
the Closing, Seller or the applicable third party shall have demonstrated a
willingness and ability to satisfy such condition if the Closing were to take
place), and Buyer shall nevertheless fail to purchase the System in accordance
herewith, Seller shall have the right to retain the Deposit, plus any interest
accrued thereon. Nothing contained in this section shall be construed to limit
Seller's right to damages in the event of Buyer's breach of this Agreement
provided that Seller shall have performed all of the terms and conditions of
this Agreement to be performed by it (except to the extent prevented by Buyer's
breach).
2.1.3 Failure to Close When Only Buyer Performs. If all of
-----------------------------------------
the conditions set forth in Section 10.0 below are satisfied at or as of the
Closing (or, in the case of any condition which is to be satisfied at the
Closing, Buyer or the applicable third party shall have demonstrated a
willingness and ability to satisfy such condition if the Closing were to take
place), and Seller shall nevertheless fail to sell the System to Buyer in
accordance herewith, Buyer shall be entitled to the return of the Deposit, plus
any interest accrued thereon. Nothing contained in this section shall be
construed to limit Buyer's right to damages in the event of Seller's breach of
this Agreement provided that Buyer shall have performed all of the terms and
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conditions of this Agreement to be performed by it (except to the extent
prevented by Seller's breach).
2.2 Closing Date Payment. Nine Million Dollars ($9,000,000.00) of
--------------------
the Purchase Price, as adjusted, will be paid directly to Seller on the Closing
Date by bank or certified check or federal funds wire transfer or other means
mutually satisfactory to Buyer and Seller.
2.3 Holdback. Five Hundred Thousand Dollars ($500,000.00) (the
--------
"Holdback") shall, on the Closing Date, be deposited by Buyer in a federally
insured interest bearing account with Union Bank of California (the "Holdback
Escrow Holder"). Prior to or on the Closing Date, Seller, Buyer, and the
Holdback Escrow Holder shall sign an escrow agreement containing the terms set
forth in Exhibit 2.3 attached hereto (the "Holdback Escrow Instructions"), along
with any standard and reasonable general provisions required by the Holdback
Escrow Holder. The Holdback shall apply against:
2.3.1 Third Party Claims. Any claims made by Seller's
------------------
creditors, or claims filed by other third parties as a result of acts by Seller,
which have not been assumed by Buyer; and
2.3.2 Claims By Buyer. Any claims made by Buyer as a result
---------------
of unsatisfied net prorations or Purchase Price adjustments in Buyer's favor, or
as a consequence of the failure of Seller to deliver the Assets as represented
by Seller in this Agreement, including but not limited to any reduction in the
Purchase Price occasioned by Seller's failure to deliver at least six thousand
six hundred fifty (6,650) Basic Subscribers, as provided for in Section 4.1 of
this Agreement.
Any claims made by Buyer shall be submitted to Seller for
review and approval, and any claims made by Seller's creditors shall be
submitted to both Buyer and Seller for review and approval, prior to the release
of funds to Buyer and/or such creditors by the Holdback Escrow Holder. Notice of
any such claims may be delivered by Buyer or Seller to the Holdback Escrow
Holder. Upon receipt of such notice, the Holdback Escrow Holder may segregate
the amount of the claims on its books, but shall only release funds to Buyer
and/or to a creditor in the event that both Buyer and Seller instruct the
Holdback Escrow Holder, in writing, that a claim is approved and should be paid
as designated in such instruction, or upon the receipt by the Holdback Escrow
Holder of an order by a court of competent jurisdiction setting forth the manner
in which such funds are to be disbursed. The Holdback shall be invested in the
manner provided in Exhibit 2.3. Interest earned on any amounts disbursed to
Buyer shall be paid to Buyer, and interest earned on all other amounts, whether
disbursed to Seller or third parties, shall belong to Seller, except to the
extent such interest is required to pay Buyer or Seller's creditors as provided
herein. All moneys in excess of those paid to creditors or to Buyer or retained
by the Holdback Escrow Holder pursuant to the Holdback Escrow Instructions or
any further joint instructions of Seller and Buyer shall be disbursed to Seller
on the later of (a) one (1) year after the Closing Date or (b) the date of
settlement of prorations and adjustments pursuant to Section 4.1.
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3.0 Closing and Closing Date.
------------------------
The "Closing" pursuant to this Agreement shall take place on January
29, 1999, or as soon thereafter as practicable after all of the necessary
consents have been obtained and all other conditions precedent to the parties'
obligations hereunder have been satisfied. As used herein, the term "Closing
Date" shall refer to the date of the Closing. The parties may by mutual written
agreement establish a different Closing Date. Unless the Closing can take place
by mail (i.e., by Seller delivering all of its closing deliveries in trust to
the offices of counsel for Buyer, Goldman & Kagon Law Corporation, 1801 Century
Park East, Suite 2222, Los Angeles, California, with such deliveries to be held
by said counsel pending (a) the receipt by Seller and the Holdback Escrow Holder
of the respective components of the Purchase Price to be paid to each of them on
the Closing Date, and (b) the delivery to Seller's counsel of all of the other
closing deliveries to be made by Buyer hereunder), the Closing shall take place
at the offices of said counsel for Buyer, or such other place as the parties
shall mutually agree in writing.
4.0 Prorations and Adjustments to Purchase Price.
--------------------------------------------
4.1 Items Subject to Proration and Adjustment and Payment Thereof.
-------------------------------------------------------------
All expenses arising from the operation of the System (to the extent applicable
by reason of assignment and/or assumption hereunder), including but not limited
to power and utility charges, real and personal property taxes, salesperson
advances, payroll and other employment related taxes or other charges, the value
of accrued vacation pay (but not to exceed one week for any employee of the
System), pole attachment fees and other rentals and charges, applicable
franchise fees and copyright royalty payments, sales and service charges, and
other similar prepaid and deferred items, and all revenues arising from the
operation of the System (other than payments from subscribers, which are treated
separately below, and revenues relating to items which are excluded from the
Assets as provided in Section 1.2), shall be prorated between Buyer and Seller
as of 11:59 p.m. on the Closing Date so that Seller receives the benefit of such
revenues and bears such expenses which relate to the operation of the System for
the period through the Closing Date and Buyer receives the benefit of such
revenues and bears such expenses relating to the operation of the System after
the Closing Date. The Purchase Price shall be adjusted in accordance with such
prorations. The following adjustments in the Purchase Price shall also take
place:
4.1.1 The Purchase Price shall be increased by an amount
equal to (a) ninety-five percent (95%) of the accounts receivable owed as of the
close of business on the Closing Date by Basic Subscribers (as defined in
Section 4.2, below) for services rendered through the Closing Date which (i)
arose out of bona fide sales of services in the ordinary course of business,
(ii) are not the subject of dispute, (iii) are not owed by a person who has
sought the protection of any state or federal bankruptcy or insolvency law, and
(iv) are thirty (30) days or less in arrears as of the Closing Date (arrearage
to be determined as provided in Section 4.2, below); and (b) eighty percent
(80%) of the accounts receivable owed as of the close of business on the Closing
Date by Basic Subscribers for services rendered through the Closing Date which
satisfy subclauses (i), (ii), and (iii) of clause (a) of this paragraph (1), and
which are more than thirty (30) days but less than sixty (60) days in arrears as
of the Closing Date.
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4.1.2 The Purchase Price shall be reduced by an amount equal
to subscriber deposits and unearned subscriber payments and any interest due
thereon as of the Closing;
4.1.3 The Purchase Price shall be reduced by any accounts
payable and accrued expenses for which Seller would otherwise be liable under
this Agreement, but for which the responsibility for payment is assumed by
Buyer; and
4.1.4 The Purchase Price shall be reduced by the sum of One
Thousand Five Hundred Seven Dollars ($1,507.00) for each Basic Subscriber less
than six thousand six hundred fifty (6,650) as of the Closing.
In the event Buyer is owed an amount as a result of these prorations
and adjustments, the Purchase Price shall be reduced accordingly. In the event
Seller is owed an amount as a result of these prorations and adjustments, the
Purchase Price shall be increased accordingly. The initial statement of
prorations and adjustments ("the Initial Settlement Statement") will be prepared
by Seller and delivered to Buyer not later than a date Seller reasonably
believes is at least 10 days prior to the expected Closing Date. The Initial
Settlement Statement shall be certified as to completeness and accuracy by
Seller and will show in detail the preliminary determination of the adjustments
referred to in Section 4.1, calculated as of the Closing Date (or as of any
other date agreed to by the parties) and will be accompanied by any documents
necessary to substantiate the adjustments proposed in the Initial Settlement
Statement. Following receipt of the Initial Settlement Statement and supporting
information, Buyer will have five business days to review the Initial Settlement
Statement 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 4.1 within such five business day period,
Buyer and Seller shall 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 adjusted Purchase Price to
be paid at Closing will be either (a) if no notice of disagreement is provided,
the estimate of such adjustments set forth in the Initial Settlement Statement,
or (b) if a notice of disagreement is provided, only those adjustments set forth
in the Initial Settlement Statement upon which the parties agree prior to the
Closing Date.
Within ninety (90) days after the Closing Date, Seller shall deliver
to Buyer a report (the "Final Settlement Statement"), 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
Initial Settlement Statement, together with any documents substantiating the
adjustments proposed in the Final Settlement Statement. 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 Settlement Statement.
Within thirty (30) days after receipt of the Final Settlement Statement, Buyer
shall give Seller written notice of Buyer's objection, if any, to the Final
Settlement Statement. If Buyer makes any such objections, the parties shall
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 Settlement
Statement. Any disputed amounts shall be determined within 120 days after the
Closing Date by an accounting firm reasonably acceptable to Buyer and Seller,
8
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whose determination shall be binding on Buyer and Seller. Each party shall bear
the fees and expenses of its own representatives, including its independent
accountants, if any, and the fees and expenses of any firm selected to resolve
any disagreement between the parties shall be borne equally by Buyer and Seller.
Within ten (10) business days following a final determination (whether as a
result of Buyer failing to give timely written notice of its disagreement with
the Final Settlement Statement, a resolution by Buyer and Seller of any such
disagreement, or a determination by an accounting firm selected to resolve any
disagreement between the parties), Buyer shall pay to Seller the amount of any
underpayment, or Seller shall refund to Buyer the amount of any overpayment, as
the case may be, of the Purchase Price (as adjusted to reflect such
determination). In the event Seller does not prepare the Final Settlement
Statement and submit it to Buyer for Buyer's approval within the period set
forth above, Buyer shall have the right to prepare such statement and such
statement shall be final and binding on both Buyer and Seller. If any item of
revenue or expense subject to proration or adjustment hereunder cannot be
ascertained or the proration or adjustment cannot be calculated within the time
limits set forth above, then it shall be separately prorated or adjusted as soon
as possible thereafter and, subject to the same method for resolving
disagreements discussed above, appropriate payment in satisfaction thereof shall
be made within five (5) days after its determination.
4.2 Definition of Basic Subscriber. The term "Basic Subscriber"
------------------------------
shall mean a subscriber of the System receiving at least basic cable service who
has paid any applicable deposit and installation fee, who has been a subscriber
for at least one (1) month prior to the Closing Date and paid the full non-
discounted rate for at least one (1) month of service for all services
subscribed to, who has been regularly billed pursuant to Seller's normal billing
practices since becoming a subscriber and whose account is not sixty (60) days
or more in arrears as of the Closing Date (except for past due amounts of $5.00
or less, provided such account is otherwise current), and who has not requested
disconnection on or prior to the Closing Date. For purposes of determining
arrearages, it shall be assumed that a subscriber's payment is due on the first
day of the period for which the applicable billing relates. Forgiveness of a
past due balance will not be considered a payment for purposes of calculating
any arrearage. Seller shall use commercially reasonable efforts to invoice its
subscribers, prior to the Closing Date, in a manner consistent with past billing
practices. Any subscriber who has received any inducement in connection with
his subscription, other than inducements described on Schedule 4.2 offered in
the normal course of business ("Permitted Inducements"), shall not be counted as
a Basic Subscriber unless all of his payment obligations for the three (3)
months prior to the month in which the Closing Date occurs have been at the full
non-discounted rate applicable to all services subscribed for and no part of the
inducement is to be in effect after the Closing Date. Notwithstanding the
foregoing, subscribers who are part of a bulk or commercial account or who
otherwise pay other than the full non-discounted rate in effect in the System
(pursuant to regularly discounted rates disclosed on Schedule 5.11 hereto,
including senior discounts) shall be included in the number of Basic Subscribers
(provided they meet all other requirements) according to the following formula:
the monthly billings to all such subscribers for the month in which Closing
occurs solely for the delivery of the basic and tier, if applicable, cable
service they receive (i.e., excluding any billings for installation or
reconnection, additional outlets, pay services, cable guides, or other premium
services or special items, and any separately identified taxes and other pass-
through charges) shall be divided by the monthly non-discounted rate for
9
<PAGE>
such basic and tier cable service (inclusive of any taxes and other pass-through
charges not separately identified). Notwithstanding any of the foregoing, any
subscribers added to the System between the date hereof and the Closing Date as
a result of Seller extending its cable plant after the date hereof to any homes
passed by plant owned or leased by persons or entities operating one or more
cable television systems other than the System shall not be deemed to be Basic
Subscribers for any purpose under this Agreement.
5.0 Representations and Warranties of Seller and Jones Intercable, Inc.
-------------------------------------------------------------------
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller and Jones Intercable,
Inc. (collectively, "the Warranting Parties") jointly and severally represent
and warrant to Buyer as follows:
5.1 Organization and Standing. Seller is a partnership duly
-------------------------
organized and validly existing under the laws of the State of Colorado, and is
duly qualified to do business in the State of Oregon. Seller has all requisite
power and authority to own, lease, and use its properties and assets and is
entitled to carry on its business of operating the System at and in the places
where such properties and assets are now owned, leased, or operated and such
business is now conducted. Schedule 5.1 sets forth the names and present
positions of all of Seller's general partners, the names and present positions
of all directors and officers of any corporate general partner, and any
fictitious or assumed business names or trade names (other than the name of
Seller set forth on page 1 of this Agreement) under which Seller has operated
any part of the System or owned or leased any of the Assets.
5.2 Partnership and Other Authorizations. Seller has full power
------------------------------------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. Subject to approval by the Board of Directors of Jones
Intercable, Inc., the sole general partner of the general partners of Seller,
and the limited partners of each of the general partners of Seller, this
Agreement and all transactions contemplated hereby have been duly and validly
authorized and approved by all necessary actions on the part of Seller and
constitutes a legal, valid, and binding obligation of Seller enforceable in
accordance with its terms. Upon the receipt of the consents described in
Schedule 5.3, neither the execution, delivery, and performance of this Agreement
nor the consummation of the transactions contemplated hereby by Seller will,
with or without the giving of notice or the passage of time, or both, in any
material respect, conflict with, result in a default or loss of rights under,
give rise to any rights of termination, cancellation, or acceleration under, or
result in the creation of any lien, charge, or encumbrance pursuant to, (1) any
provision of its partnership agreement, franchise, or any other document
regulating the actions of Seller; (2) any note, bond, indenture, mortgage, deed
of trust, contract, agreement, lease, license, or other instrument or obligation
to which Seller is a party or by which it may be bound or affected; or (3) any
law, order, judgment, franchise, ordinance, or decree to which Seller is a party
or by which it may be bound or affected.
5.3 Consents. Except as described in Schedule 5.3, no permit,
--------
consent, approval, or authorization of, or declaration to or filing with, any
governmental or regulatory authority, and no consent or approval from any other
party, is required prior to the Closing in
10
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connection with the execution and delivery of this Agreement by Seller or the
consummation by Seller of the transactions contemplated hereby, nor, to Seller's
knowledge after due inquiry, except as described in Schedule 5.3, is any permit,
consent, approval, or authorization of, or declaration to or filing with, any
governmental or regulatory authority, and no consent or approval from any other
party, required to (1) render this Agreement or the transactions contemplated
hereby valid and effective with respect to the parties hereto, (2) enable Buyer
to operate the System in essentially the same manner as the System is presently
operated, or (3) permit Seller to assign or transfer any Lease, Contract or
License to Buyer.
5.4 Conduct of Business in Ordinary Course. Since March 31, 1998,
--------------------------------------
Seller has conducted its business relative to the System only in the ordinary
course and has not:
5.4.1 Sold, transferred, leased to others, or otherwise
disposed of any of the Assets which are, in the aggregate, material to the
operation or maintenance of the System except for inventory and/or services sold
in the ordinary course of business or for assets sold or disposed of and
replaced by other assets in the ordinary course of business; canceled or
compromised any debts owed to, or claims relating to, the System which are, in
the aggregate, of material value; or waived, compromised, or released any rights
which are, in the aggregate, of material value;
5.4.2 Suffered any damage, destruction, or loss, whether or
not covered by insurance, which, when aggregated with all such damage,
destruction, or losses, have a material adverse impact on the System or the
Assets or their respective business prospects;
5.4.3 Transferred or granted any right under, or entered into
any settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, trade name, invention, franchise, or similar rights, or
modified, in any material sense, any existing right with respect thereto
relating to the System;
5.4.4 Instituted, been named as a party to, settled, or
agreed to settle any litigation, action, or proceeding before any court or
governmental body relating to the System or the Assets which, when aggregated
with all such litigation, actions, or proceedings, have a material adverse
impact on the System or the Assets;
5.4.5 Suffered any changes, events, or conditions (other than
changes, events or conditions affecting the U.S. cable industry as a whole,
including any change, event or condition arising from (i) legislation,
litigation, rulemaking or regulation or (ii) competition caused by or arising
from direct broadcast satellite services) which, in the aggregate, materially
and adversely affect the condition (financial or otherwise), properties, assets,
liabilities, of business of Seller or the System; or
5.4.6 Made any general uniform increase in the compensation
of employees of Seller employed at the System except for increases made in the
ordinary course of business consistent with Seller's past practices.
11
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5.5 Claims or Legal Actions. Except as disclosed in Schedule 5.5,
-----------------------
and excluding matters relating to the cable television industry in general,
there is no claim, legal action, counterclaim, suit, arbitration, governmental
investigation, or other legal, administrative, or tax proceeding, nor any order,
decree, or judgment (all collectively referred to as "Claims") in progress or
pending, nor to the best knowledge of the Warranting Parties, after due inquiry,
are any material Claims threatened, against or relating to Seller with respect
to the System, its properties, the Assets, or the business of the System or the
transactions contemplated by this Agreement, nor do either of the Warranting
Parties know or have reason to be aware of any basis for the same.
5.6. Compliance with Laws. Seller has complied in all material
--------------------
respects with the Licenses, with the National Electric Code and the National
Electrical Safety Code, and with all other laws, rules, regulations, and
ordinances, including but not limited to laws, rules, orders, regulations, and
ordinances of the State of Oregon, the FCC (including but not limited to the
Cumulative Leakage Index ("CLI") rules), and all local governmental
jurisdictions in which the System is located (hereinafter collectively "Laws"),
and to the best of the Warranting Parties' knowledge, after due inquiry, neither
the ownership nor use of the Assets nor the conduct of Seller's business
conflicts in any material respect with the rights of any other person,
corporation, or entity. Without limiting the foregoing, the Warranting Parties
represent and warrant that:
5.6.1 Seller has not offered or given any bribe or special
favor or otherwise violated any Laws in connection with processing or
maintaining any license or a rate for any customer service charge, hookup, or
installation fee, or other customer charge.
5.6.2 Seller has complied with its obligations and has not
violated any Laws or any duty or obligation with regard to protecting the
privacy rights of any past or present customers of the System.
5.6.3 Seller owns and makes available to customers of the
System all equipment and facilities required under any Laws or any of the
Licenses, which equipment and facilities are part of the Personal Property
transferred hereunder.
5.6.4 Seller has conducted or caused to be conducted, in all
material respects, all system and microwave performance tests and all CLI
related tests, and has maintained all leakage logs, required with respect to the
System by the rules and regulations of the FCC, and the leakage logs and other
records pertaining to such tests and standards for the past three (3) years, all
of which accurately and completely reflect in all material respects the results
of such tests, all FCC Forms 320 and 325, all current microwave licenses and
TVRO licenses, and all aeronautical frequency clearances, have been delivered to
Buyer, or will be so delivered at least thirty (30) days prior to the Closing.
5.6.5 Seller has obtained all required current Proofs of
Compliance with OSHA Safety Standards for all vehicles and vehicle safety
equipment.
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5.6.6 Seller has filed all required FCC Forms 395-A for all
periods during which Seller has owned the System, and has received FCC/EEO
compliance certificates for all periods during which Seller has owned the
System.
5.6.7 Seller has filed all required FCC Forms 393 (and/or
Forms 1200/1205/1210/1240) relating to the System, all such Forms 393 (and/or
Forms 1200/1205/1210/1240) completely and accurately list all information
required to be contained therein, and the System is in compliance in all
material respects with all applicable subscriber rate regulations.
5.6.8 Seller is not in violation of, or in default under, any
terms or provisions of any lien, mortgage, lease, license, deed of trust,
agreement, instrument, order, judgment, or decree related to and material to the
operation of the System.
5.7 Title to and Condition of Assets. At and as of the Closing,
--------------------------------
Seller will have good and marketable title to the Assets to be transferred
hereunder, free and clear of all mortgages, deeds of trust, pledges, liens,
charges, security interests, encumbrances, restrictions, installment purchase
obligations, leases, licenses, easements, liabilities, or claims of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent, or
payable, except for "Permitted Encumbrances", which shall mean those minor
imperfections of title and encumbrances, if any, which do not detract from the
value of the properties subject thereto and which do not interfere with the
present and continued use of the Assets or with the conduct of Seller's normal
operations. Without limiting the foregoing, the Warranting Parties represent
and warrant that:
5.7.1 All of the Real Property used for Seller's office and
headend has unfettered access to public roads or streets and has (or will have
as of the Closing) all utilities and services necessary for the proper conduct
and operation of the System.
5.7.2 To the best of the Warranting Parties' knowledge, the
leased Real Property described in Schedule 1.1.2 is being held under valid,
subsisting, and enforceable leases subject only to such exceptions to title as
do not impair the use of the properties for the purposes for which they are
leased.
5.7.3 All towers, earth receiving dishes and facilities, pole
attachments, cable, and other installations, equipment, and facilities utilized
in connection with the System are maintained, placed, and located in accordance
in all material respects with the provisions of all applicable leases, licenses,
permits, or other arrangements.
5.7.4 The Assets are in good working condition (normal wear
and tear excepted), meet all FCC technical requirements in all material
respects, and are adequate and sufficient for all of the current operations of
the System, and to the best of the Warranting Parties' knowledge, and without
either of them having been informed to the contrary by any governmental agency
or body, conform with all current applicable Laws.
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5.7.5 None of the cables, lines, or other facilities of the
System require, or, to the best of the Warranting Parties' knowledge, after due
inquiry, may require in the future, relocation or removal.
5.7.6 To the best of the Warranting Parties' knowledge, there
are no violations of any regulations relating to pole attachments in the System.
5.7.7 To the best of the Warranting Parties' knowledge, none
of the communities or other areas served by the System has taken any action to
cause the local regulation of rates charged for the provision of cable service.
5.8 Financial Statements. Schedule 5.8 contains copies of the
--------------------
Seller's audited Balance Sheets and Income Statements for its most recently
completed fiscal year, as well as its most recent interim unaudited Income
Statements relating solely to the System (the "Financial Statements"). The
Financial Statements are true, complete, and correct in all material respects,
have been prepared in accordance with generally accepted accounting principles
consistently applied from the books and records of Seller, and present fairly
the financial condition of Seller and the System as of the respective dates of
such Financial Statements.
5.9 Validity of Leases, Licenses, and Contracts. All of the
-------------------------------------------
Leases, Licenses, and Contracts, as well as any other contract material to the
operation of the System to which Seller is a party and which is otherwise
assigned to or assumed by Buyer, are valid and binding, and in full force and
effect. There is not, under any Lease, License, Contract, or any other
agreement that may be assigned to or assumed by Buyer and material to the
operation of the System, any default by any party thereto or event which, after
notice or lapse of time, or both, would constitute such a default as a result of
which any party would have the right to terminate such Lease, Contract, License,
or other agreement. Seller has complied with all material promises or
commitments on the part of Seller with respect to the System, including any
relating to capital improvements required under any License or otherwise,
insofar as such promises or commitments are to be fulfilled on or prior to the
effective date hereof, and Seller will substantially comply with all such
promises or commitments insofar as they are to be fulfilled on or prior to the
Closing Date. Except as disclosed on Schedule 5.9, no promises or commitments
other than as reflected in the Licenses which are to be fulfilled after the
Closing Date have been made with respect to capital improvements relating to the
System. Pursuant to subsections (a) through (g) of Section 626 of the Cable
Communications Policy Act of 1984 (47 U.S.C. Section 546), as amended, Seller
has caused the commencement of proceedings that will allow it to submit timely
proposals for renewal of all franchises having a remaining term of thirty-six
(36) months or less as of the effective date hereof, and has provided Buyer with
copies of all proposals for renewal, preliminary assessments, and franchisor
determinations described in subsection (c) of said Section 626. True and
complete copies of each of the Leases, Contracts, and Licenses listed in
Schedule 1.1.2, 1.1.3, or 1.1.4 (together with any and all amendments thereto)
have been delivered to Buyer. All reports of Seller to the FCC and to municipal
authorities are true and correct and have been duly filed. Other than (i)
subscriber service agreements, (ii) contracts made in the ordinary course of
business and not excluded from assumption pursuant to Section 1.3.1.4 hereof,
(iii) contracts and other intangibles which have been disclosed by Seller to
Buyer and which are expressly excluded from assumption
14
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hereunder pursuant to Subsections 1.3.1.1, 1.3.1.2, 1.3.1.3, and 1.3.1.5 above,
and (iv) the Leases, Contracts, and Licenses described in Schedules 1.1.2,
1.1.3, and 1.1.4 hereto, Seller is not a party to any contract, agreement,
license, franchise, or permit relating to the System, and no contract,
agreement, license, franchise, or permit is necessary or material to the
operation of the System, or is required to enable it to carry on its business as
presently conducted. The Warranting Parties shall disclose to Buyer any
requirement for any such other contract or license, to the extent either of them
becomes aware of any such other requirement at any time prior to the Closing.
None of the Leases, Contracts, or Licenses would be breached by virtue of the
transactions contemplated hereby or by virtue of the assignment thereof by
Seller to Buyer, provided any consents referred to in Schedule 5.3 are obtained.
5.10 Licenses and Copyrights. Without material exception, Seller
-----------------------
owns or possesses adequate licenses or other rights to use all copyrights,
trademarks, service marks, service names, trade names, and patents necessary to
operate the System as presently operated. To the best of the Warranting
Parties' knowledge, Seller is not infringing upon or otherwise acting adversely
to any copyright, trademark, trademark right, service mark, service name, trade
name, patent, patent right, trade secret, or license owned by any person or
persons, and there is no such claim or action pending, or to the knowledge of
the Warranting Parties threatened, with respect thereto.
5.11 Signal Carriage, Rates, and Technical Profile. Schedule 5.11
---------------------------------------------
accurately sets forth the channels and applicable MHz at which the System
delivers programming to its customers. The System's provision of reception on
such channels is in compliance with the requirements of all licenses and the FCC
in all material respects, and Seller has the legal right and authority,
including but not limited to all necessary authorizations from the FCC, to carry
and to continue to carry and use in the conduct of the business of the System
all of the channels now being utilized to deliver programming to subscribers.
Such channels comprise all of the stations or signals required to be carried by
the System pursuant to any license, law, rule, regulation, or ordinance.
Schedule 5.11 also accurately provides the following information:
5.11.1 A rate summary identifying each separate service
offered to subscribers, the number of subscribers to each service, the regular
rate charged for each service and the initial effective date for each such rate,
and any promotional or other discounted rates and the initial effective date for
each such rate;
5.11.2 A package summary identifying each package of services
offered to subscribers, the number of subscribers to each package, and the rate
for each package;
5.11.3 A bulk subscriber summary identifying the number of
subscribers comprising each bulk or commercial billing account, and the per
subscriber rate for each such account;
5.11.4 A listing of the names of all seasonal subscribers,
including the number of months they receive service and the manner in which they
are billed (if other than the standard monthly rates for each month they receive
service); and
15
<PAGE>
5.11.5 The type and number of miles of plant and the number of
channels.
Except as set forth in Schedule 5.11, (i) no notices or demands (oral
or written) have been received from the FCC, from any television station,
governmental agency or unit, or from any other person or entity claiming to have
a right to object to or challenge the right of Seller to carry any signal or
deliver the same; and (ii) there are no pending or threatened administrative or
judicial proceedings involving the conduct of Seller's business or the right to
carry and deliver such signals.
5.12 Copyright Filings. Seller has timely filed with the U.S.
-----------------
Copyright Office all notices, Statements of Account, Supplements, Declarations
of Gross Receipts, and Gross Receipts Adjustment Schedules (collectively,
"Copyright Filings"), and has paid all royalty fees and other fees required
pursuant to the rules and regulations of the Copyright Office and copyright acts
and amendments, relating to the System.
5.13 Franchise Fees. The current franchise fees being charged under
--------------
each of the System's franchises are disclosed in Schedule 5.13 hereto. All
franchise fees due and payable under the Licenses as of the Closing have been or
will be paid prior to the Closing.
5.14 Pole Attachment Agreements. For all pole attachment agreements
--------------------------
relating to the System, the current rates being charged as pole attachment fees
and the number of poles covered by each such agreement are disclosed in Schedule
5.14 hereto. All pole attachment fees due and payable under any pole attachment
Contracts as of the Closing have been or will be paid prior to the Closing.
5.15 Easements, Etc. Seller owns and possesses all easements,
--------------
rights of way, licenses, and other agreements material to the operation of the
System as and where it is presently operated and all of which are described in
Schedule 1.1.4. To the best knowledge of the Warranting Parties, the System
does not have cable crossing any property except under the terms of valid
easements, verbal or written licenses, leases, pole attachment agreements,
franchises or other authorizations. The current use of any Real Property does
not constitute a nonconforming use under, nor does it violate, any applicable
zoning laws or regulations.
5.16 Employment Matters. Schedule 5.16 includes a schedule showing
------------------
the name, address, date of birth, gender, and dependent status of each person
regularly employed in the operation of the System, including commission agents
and other independent contractors (other than construction contractors), along
with each such person's current annual salary rate and any amounts paid or
payable to each such person as bonus payments, indirect and/or deferred
compensation, or similar additional compensation payments for the period from
January 1, 1996, to the date of this Agreement. Except as set forth in Schedule
5.16, Seller is not a party to:
5.16.1 any union collective bargaining or similar agreement
involving employees of the System;
16
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5.16.2 any plan providing for pension benefits, medical
benefits, hospitalization, life insurance or other insurance, or related
benefits to employees of the System;
5.16.3 any employment contract or bonus or deferred
compensation plan or arrangement; or
5.16.4 any similar arrangement for the benefit of employees,
whether for selected individuals or otherwise, of Seller or to which Seller has
contributed or is under an obligation to fund.
Without material exception, Seller has complied and will comply with
all applicable laws and regulations relating to the employment of labor,
including those related to wages, hours, collective bargaining, discrimination,
employee benefit plans, and the payment of Social Security or similar taxes.
There are no unfair labor practice charges or claims pending against Seller, nor
any pending or threatened charges against Seller with respect to any wage and
hour, employment discrimination, or other statutory violation. To the best
knowledge of the Warranting Parties, there is no union campaign being conducted
to solicit cards from employees to authorize the union to request an NLRB
certification election with respect to any employees of Seller.
5.17 Miles of Plant; Homes Passed. The System has not more than One
----------------------------
Hundred Fifty-Eight (158) miles of plant. The System passes approximately Nine
Thousand Four Hundred (9,400) residential dwellings. The bandwidth of such
plant is at least Three Hundred Thirty (330) MHz.
5.18 Tax Returns; Other Reports. Seller has filed in true and
--------------------------
correct form all federal, state, local, and foreign tax returns and other
reports required to be filed with respect to the System, and has timely paid all
taxes and assessments which have become due and payable, whether or not so shown
on any such return or report, the failure to file or pay which could affect or
result in the imposition of a lien or encumbrance on the Assets. Seller has
received no notice of, nor does Seller have any knowledge of, deficiency or
assessment of proposed deficiency or assessment from any taxing governmental
authority with respect to the System which could affect or result in the
imposition of a lien or encumbrance on the Assets. There are no audits pending
with respect to the System or which could affect the Assets, and there are no
outstanding agreements or waivers by or with respect to Seller, that extend the
statutory period of limitations applicable to any federal, state, local, or
foreign tax returns or taxes for any period with respect to the System or which
could affect the Assets.
5.19 Competition and Overbuilds. Except as designated in Schedule
--------------------------
5.19 hereto, the Warranting Parties do not, after due inquiry, have knowledge of
any individual or entity who:
5.19.1 Intends to construct and/or operate another franchised
cable television system in any part of the area served by the System or any
other area within the scope of any of the cable television franchises, or has
expressed any interest in doing so; and/or
17
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5.19.2 Is constructing and/or operating another franchised
cable television system in any part of the area served by the System or any
other area within the scope of any of the cable television franchises; and/or
5.19.3 Intends to apply or has applied for a franchise
covering any part of the area served by the System or any other area within the
scope of any of the cable television franchises, or has expressed any interest
in doing so.
5.20 Brokerage Commission. Other than a commission payable to The
--------------------
Jones Group, Ltd. upon the consummation of the transactions contemplated by this
Agreement (which shall be payable solely by Seller), neither of the Warranting
Parties has entered into any agreement or other arrangement pursuant to which a
brokerage or other commission or finder's fee will be payable arising out of the
transactions contemplated by this Agreement.
5.21 Sufficiency of Assets. The Assets, the Excluded Assets, along
---------------------
with all contracts excluded from assumption hereunder pursuant to Sections
1.3.1.1, 1.3.1.2, 1.3.1.3, 1.3.1.4 and 1.3.1.5 above, constitute all of the
assets necessary to operate the System as it is presently being operated and in
compliance with all applicable laws, rules, and regulations.
5.22 No Other Commitment to Sell. No part of the System or any of
---------------------------
the Assets is directly or indirectly subject in any manner to any written or
oral commitment or any arrangement for the sale, transfer, assignment, or
disposition thereof, in whole or in part, except for actions taken in the
ordinary course of business or pursuant to this Agreement.
5.23 Environmental. To Seller's knowledge, after due inquiry, none
-------------
of the Real Property has ever been included, or considered for inclusion, on any
federal, state, or local list of properties contaminated by Hazardous Substances
(as hereinbelow defined). Seller has no knowledge of any releases, discharges,
emissions, spills, use, or storage of Hazardous Substances having occurred on
the Real Property in violation of any applicable law or regulation, and Seller
is not aware of any condition that is likely to result in any releases,
discharges, emissions, spills, use, or storage of Hazardous Substances occurring
on the Real Property in the future. The term "Hazardous Substance(s)" shall be
deemed to include (i) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq.) ("CERCLA"), and the rules and regulations
promulgated thereunder; (ii) petroleum, crude oil, diesel, natural gas,
synthetic gas usable for fuel, liquefied natural gas, and any other fraction of
crude oil; (iii) the term "pollutant or contaminant" as defined in CERCLA; (iv)
any substance regulated by the Toxic Substances Control Act (TSCA) (15 U.S.C.
Section 2601 et seq.), as amended, and rules and regulations promulgated
thereunder; (v) asbestos; (vi) polychlorinated biphenyls (PCBs); (vii) any
substance the presence, use, treatment, storage, or disposal of which on the
Real Property is prohibited by any legal requirements; and (viii) any other
substance which by any legal requirements requires special handling, reporting,
or notification by Seller of any governmental authority with respect to its
collection, storage, use, treatment, or disposal. "Disposal" as used in this
section shall have the meaning given that term under the Resource Conservation
and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.), and the
rules and regulations promulgated thereunder.
18
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5.24 Full Disclosure. No representation or warranty made by the
---------------
Warranting Parties contained in this Agreement or in any statement or
certificate furnished or to be furnished pursuant hereto contains or will
contain any untrue statement of any material fact, or omits or will fail to
state any material fact known to either of the Warranting Parties that is
required to make the statements herein or therein contained not misleading.
Any investigation made at any time by or on behalf of any party hereto
shall not diminish in any respect whatsoever Buyer's right to rely on the
foregoing representations and warranties and any others made by or on behalf of
the Warranting Parties pursuant to this Agreement.
6.0 Representations and Warranties of Buyer.
---------------------------------------
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer represents and warrants
to Seller as follows:
6.1 Organization and Standing. Buyer is a limited partnership duly
-------------------------
organized, validly existing, and in good standing under the laws of the State of
California and has full power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby.
6.2 No Conflict. The execution, delivery, and performance of this
-----------
Agreement by Buyer will not, with or without the giving of notice or the passage
of time, or both, in any material respect conflict with, result in a default or
loss of rights under, or result in the creation of any lien, charge, or
encumbrance pursuant to, any provision of its articles of incorporation, bylaws,
corporate resolutions, or any mortgage, deed of trust, lease, license,
agreement, understanding, law, order or judgment, franchise, ordinance, or
decree to which Buyer is a party or by which it is bound. Buyer has the full
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, and this Agreement and Buyer's performance
hereunder have been duly and validly authorized by all necessary actions on the
part of Buyer and the Agreement constitutes a valid and binding obligation of
Buyer enforceable in accordance with its terms.
6.3 Brokerage Commission. Buyer has not entered into any agreement
--------------------
or other arrangement pursuant to which a brokerage or other commission or
finder's fee will be payable arising out of the transactions contemplated by
this Agreement.
6.4 Consents. No permit, consent, approval, or authorization of,
--------
or declaration to or filing with, any governmental or regulatory authority, and
no consent or approval from any other party, is required prior to the Closing in
connection with the execution and delivery of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated hereby.
6.5 Legal Proceedings. There is no claim, legal action,
-----------------
counterclaim, suit, arbitration, governmental investigation, or other legal,
administrative, or tax proceeding, nor any order, decree, or judgment in
progress or pending, nor to the best knowledge of Buyer, threatened, against or
relating to Buyer which, if adversely determined, would restrain or enjoin the
19
<PAGE>
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
such transaction to be rescinded.
6.6 Full Disclosure. No representation or warranty by Buyer
---------------
contained in this Agreement or in any statement or certificate furnished or to
be furnished pursuant hereto contains or will contain any untrue statement of
material fact, or omits or will fail to state any material fact known to Buyer
that is required to make the statements herein or therein contained not
misleading.
Any investigation made at any time by or on behalf of any party hereto
shall not diminish in any respect whatsoever Seller's right to rely on the
foregoing representations and warranties and any others made by or on behalf of
Buyer pursuant to this Agreement.
7.0 Conduct of Business of Seller Pending Closing.
----------------------------------------------
Except as otherwise expressly provided herein, between the date
hereof and the Closing:
7.1 Compliance with Laws and Regulations. Seller will conduct its
------------------------------------
business and affairs in material compliance with all applicable laws and
regulations, including the timely pursuit of all regulatory matters;
7.2 Maintenance of System. Seller will maintain, keep, and
---------------------
preserve the System and Assets in the same general operating condition as on the
date hereof, ordinary wear and tear excepted. To the extent any
programming/affiliation company(ies) announce or have announced future
scrambling of signals:
7.2.1 if scrambling is to commence prior to the Closing Date,
Seller shall acquire, at its own expense, all Videocipher satellite descramblers
and such other equipment as will be necessary to continue the present operation
of the System on and after the Closing Date;
7.2.2 if scrambling is not to commence until on or after the
Closing Date, and free descrambling equipment is offered by the
programming/affiliation company(ies), if Seller has not already ordered such
equipment on its own, it shall do so upon the request of Buyer; and
7.2.3 if scrambling is not to commence until on or after the
Closing Date, and free descrambling equipment is not offered by the
programming/affiliation company(ies), then upon written request by Buyer, Seller
shall order the necessary descrambling equipment. Buyer shall assume all
obligations for such equipment ordered and will be entitled to such equipment
whether or not the transaction contemplated herein actually closes; provided,
however, that if Buyer has instructed Seller to place an order for such
equipment and this transaction fails to close, Seller shall have the option to
purchase the equipment from Buyer at Buyer's cost;
20
<PAGE>
7.3 Maintenance of Business. Seller will use commercially
-----------------------
reasonable efforts to preserve intact its business and organization relating to
the System, and will conduct its business and affairs substantially in the
ordinary course and consistent with its prior practices;
7.4 Employees and Goodwill. Seller will use commercially
----------------------
reasonable efforts to keep available to Buyer the services of the employees of
the System (provided, however, that Seller will not increase the compensation
level of any employees of the System without the prior written consent of Buyer,
except in the ordinary course of business consistent with past practices and
except for the payment of "staying" bonuses to employees in accordance with the
past practices of Jones Intercable, Inc.), and Seller will use commercially
reasonable efforts to preserve for the benefit of Buyer the goodwill of its
suppliers and customers and others having business relations with it;
7.5 Notice of Material Change. The Warranting Parties will give
-------------------------
Buyer prompt written notice of any material change in any of the information
contained in the representations and warranties made in Sections 5.1 through
5.24 hereof or the Schedules referred to herein which occurs prior to the
Closing, including but not limited to providing Buyer with copies of all
correspondence received or sent by Seller which relates to regulatory matters
and promptly notifying Buyer of any material regulatory developments;
7.6 Contracts and Agreements. Except for transactions contemplated
------------------------
hereby, Seller will not enter into any contract, agreement, commitment, or other
understanding or arrangement, other than in the ordinary course of business, and
except for agreements of the nature of those listed in Schedule 1.1.4, Seller
will not enter into any agreement or transaction obligating the System or any of
the Assets beyond the Closing Date, except to the extent such obligations will
be terminable as of the Closing Date without penalty;
7.7 Acts and Transactions. Seller will not, except for
---------------------
transactions contemplated by this Agreement or matters not within Seller's
reasonable control, perform or take any action or incur or permit to exist any
of the acts, transactions, events, or occurrences of the type described in
Section 5.4;
7.8 Breaches or Modifications. Seller will not, except for
-------------------------
transactions contemplated by this Agreement, breach, cancel, modify, or amend
any Lease, Contract, or License, and will pay all current liabilities when due;
7.9 Sale or Transfer. Seller will not sell, dispose of, or
----------------
transfer any of the Assets (except as permitted herein and except that Seller
may use inventory and dispose of damaged or defective equipment or material in
the normal course of business, subject to Section 7.10 below), or permit the
creation of any mortgage, pledge, lien or other encumbrance, security interest,
or imperfection of title thereon or with respect thereto, except for liens for
taxes not yet due and payable and liens arising under the terms of existing
security agreements in connection with Seller's secured credit facility;
7.10 Inventory; Equipment. Seller will maintain inventory levels
--------------------
consistent, in all material respects, with the inventory levels maintained by
Seller as of the date of this
21
<PAGE>
Agreement; and Seller shall replace equipment that is damaged and disposed of
with equipment of like kind and quality;
7.11 Subscriber Rates, Deposits, Etc. Seller will not, directly or
-------------------------------
indirectly, modify or amend any rate, deposit, or other material condition under
which it does business with its subscribers or potential subscribers, except to
the extent required under any applicable legal requirement or order, or
undertake any promotion, other than the Permitted Inducements, pursuant to which
any subscriber or potential subscriber will be entitled to receive any service
after the Closing Date at a lesser rate than those specified on Schedule 5.11,
or be entitled to receive any premium, prize, or other inducement after the
Closing Date; and
7.12 Representations and Warranties. Except as required under any
------------------------------
applicable legal requirement or order, Seller will not take any action which
would cause any of the representations and warranties of the Warranting Parties
contained in this Agreement to be untrue in any material respect as of the
Closing.
7.13 Extension of Myrtle Creek Franchise. Seller will use
-----------------------------------
commercially reasonable efforts to obtain an extension of the term of the
franchise granted by the City of Myrtle Creek, Oregon, such that the term of the
franchise would expire no earlier than five years from the Closing Date.
8.0 Additional Covenants and Agreements.
-----------------------------------
8.1 Access to Business and Records. During normal business hours
------------------------------
and upon reasonable advance notice, Seller will permit Buyer to have access to
the premises in which Seller conducts its business and to all of its books,
records, and personnel. Seller will furnish to Buyer such financial data,
operating data, and other information as Buyer may reasonably request, including
but not limited to (i) monthly profit and loss statements for the System from
the date of this Agreement through the Closing Date; (ii) monthly subscriber
reports from the date of this Agreement through the Closing Date, showing the
number of subscribers to the System receiving basic service, tier service, pay
services, additional outlet service, and remote control service; and (iii) the
then most current available aging of subscriber accounts receivable, broken down
by subscriber and showing the number of accounts and the corresponding dollars
owed in each category. Upon request, Seller will promptly provide to Buyer or
its representatives for review its partnership records (but only to the extent
Buyer can show a reasonable need therefor), and copies of all retirement plans,
employment agreements, leases, contracts with suppliers, and other contracts or
documents which relate to the System. Buyer and its representatives will be
afforded the opportunity, upon reasonable notice and at reasonable times, to
examine the business, assets, and operation of the System, including an on-site
inspection of the System and Assets. Buyer shall hold all information obtained
in such examinations confidential, except as may be reasonably necessary in
order for Buyer to evaluate the Assets.
8.2 Information After Closing. For a period of five (5) years
-------------------------
after the Closing Date, Buyer shall give to Seller, its representatives, and its
accountants access to any records delivered to Buyer by Seller pursuant to this
Agreement, and Seller shall give Buyer access to any records relating to the
System for the three (3) complete fiscal years ending prior to
22
<PAGE>
the Closing Date, in each case to the extent necessary to enable Buyer or
Seller, as the case may be, to prepare its audited and unaudited financial
statements, tax returns, or other reports, and to obtain any information it may
require in connection with the audit of any tax return or other report filed by
it. For a period of three (3) years after the Closing Date, Seller acknowledges
Buyer's right, at Buyer's expense, to engage Seller's accounting firm or any
other accounting firm to conduct an audit of Seller's books and records as they
pertain to the System for the three (3) complete fiscal years ending prior to
the Closing Date.
8.3 Cooperation. The parties shall cooperate to file, as quickly
-----------
as possible, any applications to any governmental authority, including the FCC,
to obtain such consents as are necessary to assign the Licenses identified and
described in Schedule 1.1.3, and shall otherwise cooperate fully with each other
and their respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations under this
Agreement, and all parties will use commercially reasonable efforts to
consummate the transactions contemplated hereby and to fulfill their obligations
hereunder.
8.4 Leased Vehicles. Seller shall pay to the lessors the
---------------
outstanding balances owed on all vehicle leases for the vehicles to be sold to
Buyer hereunder, and shall transfer title to said vehicles to Buyer free and
clear of all liens and encumbrances.
8.5 Continuance of Construction and Marketing Activities. All new
----------------------------------------------------
construction and all marketing will continue in the ordinary course of business
consistent with past practices during the period following the execution of this
Agreement through the Closing Date.
8.6 No Rate Increases or Lineup Changes Without Consent. Seller
---------------------------------------------------
will not implement any rate increases or channel additions or reconfiguration of
the existing tier service level prior to the Closing, unless agreed to by Buyer
in writing or otherwise required by law, regulation of judicial order.
8.7 Persons Employed in the System. Seller will provide to Buyer
------------------------------
as soon as practicable after the execution of this Agreement copies of all
documentation describing any employee benefit plans currently in place for any
persons employed in the operation of the System, and will promptly provide Buyer
with copies of any such documentation relating to benefit plans which come into
effect between the date hereof and the Closing Date.
8.8 Employees to be Hired by Buyer. Buyer shall provide Seller, at
------------------------------
least thirty (30) days prior to the Closing Date (but not earlier than ten (10)
days following Buyer's receipt of an executed copy of this Agreement with
Schedule 5.16 attached), a written list of the names of all of the System's
current employees, if any, to be hired as employees of Buyer after the Closing
Date (a "Transferred Employee"). It is clearly understood that Buyer has no
obligation to employ any of Seller's employees, and that Seller will be
responsible for all amounts owed to any employee terminated on or before the
Closing Date, including but not limited to wages, salaries, sick pay, accrued
vacation or other benefits, or payments on account of the termination.
Effective upon the Closing, Seller will terminate all employees of the System
who will not remain employees of Seller after the Closing (including any
Transferred Employee), and will pay to all such employees all wages, salaries,
sick pay, and other benefits accruing through the Closing Date
23
<PAGE>
(except for accrued vacation to the extent included in the adjustments to the
Purchase Price pursuant to Section 4.1), along with any payments due on account
of the termination. Each Transferred Employee shall be eligible to participate
in Buyer's employee benefit plans as of the first day of the month following the
month during which the Closing occurs (except with respect to Seller's 401(k)
plan, eligibility for participation in which will begin on the January 1 or
July 1 first following the Closing Date).
8.9 Negotiations with Others. Until the Closing, neither Seller
------------------------
nor its agents or employees will offer the assets of the System to, respond to
offers for the assets of the System from (other than to indicate that the sale
of the assets of the System is under contract), or otherwise negotiate for the
sale of the assets of the System to, or for any merger with, any third party,
nor will any of them make information about the assets of the System available
to any third party who is not currently a partner of Seller, except in the
ordinary course of business.
8.11 Allocation of Purchase Price. 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 shall be selected by the mutual agreement of Buyer and Seller within
30 days after the date of this Agreement, and the fees and expenses of such
appraiser shall 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.
8.12 Subscriber Billing and Collections After the Closing. Seller
-----------------------------------------------------
will provide reasonable assistance to Buyer to facilitate the generation of
billing statements to subscribers of the System during the sixty (60) day period
following the Closing Date, subject to Buyer's obligation to reimburse Seller
for all actual out-of-pocket costs incurred by Seller in connection therewith,
and Seller shall cooperate with Buyer and execute all documentation necessary to
enable Buyer to negotiate checks from subscribers made payable to Seller but
delivered after the Closing.
8.13 Brokerage Commission to be Paid by Seller. Seller shall pay
-----------------------------------------
the brokerage commission, if any, due to The Jones Group, Ltd.
9.0 Conditions Precedent to Buyer's Obligations.
-------------------------------------------
All obligations of Buyer at the Closing hereunder are subject to the
fulfillment of each of the following conditions at or prior to the Closing, any
or all of which may be waived in writing in whole or in part by Buyer:
9.1 Representations and Warranties. The representations and
------------------------------
warranties of the Warranting Parties contained herein shall have been true and
correct in all material respects as of the date when made and shall be true and
correct in all material respects on and as of the
24
<PAGE>
Closing Date with the same force and effect as though made on and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
9.2 Covenants. Seller shall in all material respects have
---------
performed its obligations, agreements, and covenants contained in this Agreement
to be performed or complied with by it on or before the Closing Date.
9.3 Consents and Approvals. Seller and Buyer shall have obtained
----------------------
all consents and approvals of third persons or parties, including the FCC, the
FAA, all franchise authorities, and all other governmental authorities, bodies,
or agencies having jurisdiction over the transactions contemplated by this
Agreement, or any part thereof, necessary for the consummation of the
transaction contemplated by this Agreement, including consents to assignment of
the Leases, Contracts, and Licenses; provided, however, that with respect to
each pole agreement, either (i) Seller shall have obtained any required consent
to assign such agreement to Buyer or (ii) Buyer shall have entered into a new
license agreement for pole attachments or made alternative arrangements
reasonably acceptable to Buyer for use of such pole attachments without
violation of any law, rule or regulation. With respect to all contractual
arrangements requiring the consent of third parties, Seller shall have used
commercially reasonable efforts to obtain a representation from the consenting
party that the subject agreement is in full force and effect, and that Seller is
not in material default of any of its obligations with respect to the subject
agreement. The obtaining of any such consent shall not be conditioned upon
Buyer agreeing to terms less favorable to Buyer than those set forth in the
copies of the Leases, Contracts, and Licenses delivered by Seller to Buyer, or
to any other conditions materially adverse to Buyer.
9.4 Instruments of Conveyance. Seller shall have delivered to
-------------------------
Buyer a Bill of Sale and Assignment in the form of Exhibit 9.4.1 hereto,
Assignments of Cable Television Franchises in the form of Exhibit 9.4.2 hereto,
and all other applicable assignments and other good and sufficient instruments
of conveyance, transfer, and assignment, all in form and substance reasonably
satisfactory to Buyer, as shall be effective to vest in Buyer good and
marketable title in and to the System and the Assets transferred pursuant to
this Agreement, free and clear of all mortgages, liens, restrictions,
encumbrances, claims, and obligations, of any nature whatsoever, except as
permitted in this Agreement. With respect to any fee simple interests in real
property transferred hereunder, Seller shall have obtained, at Seller's expense,
title insurance commitments in form and content reasonably satisfactory to
Buyer, and shall have delivered to Buyer copies of all recorded documents
evidencing exceptions to title specified in such title policies. With respect
to any unrecorded leasehold interests in real property transferred hereunder,
Seller shall have used commercially reasonable efforts to cause to be executed
by the lessor thereof and delivered to Buyer a memorandum of lease in proper
form for recordation.
9.5 Opinion of Counsel. Buyer shall have been furnished with an
------------------
opinion of Elizabeth M. Steele, Vice President and General Counsel of Jones
Intercable, Inc., dated the Closing Date and addressed to Buyer, in the form
attached hereto as Exhibit 9.5.
25
<PAGE>
9.6 Opinion of FCC Counsel. Buyer shall have been furnished with
----------------------
an opinion of Cole Raywid & Braverman, FCC counsel for Seller, dated the Closing
Date and addressed to Buyer, in the form attached hereto as Exhibit 9.6.
9.7 Lien Clearances. Seller shall have obtained and delivered to
---------------
Buyer a copy of the report of a lien search (including all supporting
documentation) conducted by a company reasonably acceptable to Buyer in all
states and counties in which any of the Assets are located and/or Seller is
incorporated, dated not more than ten (10) days prior to the Closing Date,
designating all presently effective financing statements, chattel or other
mortgages, tax or judgment liens, or other liens purporting to affect any of the
Assets (collectively, "Record Liens"). In the event Seller has operated any
part of the System or owned or leased any of the Assets under any fictitious or
assumed business name or trade name, the search shall include the applicable
records under each such fictitious or assumed business name or trade name as
well as the name of Seller set forth on page 1 of this Agreement. In the event
the search reveals any Record Liens (other than Permitted Encumbrances), such
liens shall have been released or terminated at or prior to the Closing, or
Buyer shall have received adequate assurances that all such Record Liens will be
released or terminated substantially concurrently with the Closing.
9.8 Adverse Change. Between the date of this Agreement and the
--------------
Closing, there shall have been no material adverse change in the System or the
Assets, or their respective conditions (financial or otherwise), operations, or
business, other than (i) a change arising out of general economic conditions in
the United States, (ii) any change affecting the U.S. cable industry as a whole,
including any change arising from legislation, litigation, rulemaking or
regulation, or (iii) competition caused by or arising from direct broadcast
satellite services. Neither Seller nor the System shall have suffered any
material loss by fire, windstorm, or other casualty which, subject to any
election made by Buyer pursuant to Section 16, has not been fully restored or
replaced to the condition in which it existed prior to such change.
9.9 Certificate of Compliance. Seller shall have delivered to
-------------------------
Buyer a Certificate of Compliance in the form of Exhibit 9.9 hereto, signed by
the general partner of its general partners and dated on and as of the Closing
Date.
9.10 Legal Proceedings. There shall not be pending or threatened
-----------------
any lawsuit, claim, or legal action involving Buyer, Seller, the Assets, or the
System relating to the transactions contemplated by this Agreement.
9.11 Copyright Documentation. Prior to or at the Closing, Seller
-----------------------
shall have delivered copies of all of its Copyright Filings (as defined in
Section 5.12, above) for the System which relate to the last six (6) semiannual
reporting periods occurring prior to the Closing, along with all information
required by Buyer to complete the Copyright Filings for the semiannual reporting
period in which the Closing occurs.
9.12 Blueprints, Etc. Seller shall have delivered to Buyer all
---------------
blueprints, schematics, working drawings, plans, projections, statistics,
engineering records, contracts to be assumed by Buyer, customer and subscriber
lists, and other files and records used by Seller in connection with its
operations and to be assigned to Buyer in accordance with this Agreement.
26
<PAGE>
9.13 Covenants not to Compete. Seller shall have delivered to
------------------------
Buyer, and shall have caused Jones Intercable, Inc., Jones Cable Income Fund 1-
B, Ltd., and Jones Cable Income Fund 1-C, Ltd. to have delivered to Buyer, Non-
Competition Agreements in the form of Exhibit 9.13.
9.14 Sales Tax Clearances. Seller shall have delivered to Buyer
--------------------
certificates issued by all applicable taxing authorities, to the extent such
certificates are provided by such authorities, certifying the absence of any
sales tax liability applicable to the System, issued as of a date not more than
ten (10) days prior to the Closing Date.
9.15 Confirmation Sweep. Buyer shall have been afforded the
------------------
opportunity, at Buyer's expense, to engage a qualified engineer to perform a
sweep of the System to confirm that the entire distribution system of the System
is as set forth in Schedule 5.11.
9.16 Number of Basic Subscribers. The System will have not less
---------------------------
than Six Thousand Three Hundred (6,300) Basic Subscribers (as defined in Section
4.2) as of the Closing.
9.17 Compliance Documentation. Buyer shall have received (i) copies
------------------------
of all required current Proofs of Compliance with OSHA Safety Standards for all
vehicles and vehicle safety equipment; (ii) copies of Seller's filed FCC Forms
395-A for the last five years; (iii) copies of Seller's FCC/EEO compliance
certificates for the last five years, or reasonably satisfactory explanations
for any periods for which such certificates were withheld; and (iv) copies of
Employee Eligibility Verification Forms (I-9) as required by the Immigration
Control and Reform Act of 1986, for each employee being hired by Buyer who was
hired by Seller after November 6, 1986 (other than employees Fields and
Goodson).
9.18 Rate Certification Documentation. Buyer shall have received
--------------------------------
true and correct copies of all FCC Forms 393 (and/or Forms 1200, 1205, 1210 and
1240) which have been filed or prepared for filing with respect to the System,
along with copies of such backup documentation as Buyer may reasonably request
to confirm the information contained in all such Forms 393 (and/or Forms 1200,
1205, 1210 and 1240).
9.19 System Revenues. Revenues generated directly from the
---------------
operation of the System during the three (3) month period concluding with the
last day of the last calendar month prior to the month during which the Closing
occurs shall have been not less than Six Hundred Twelve Thousand Five Hundred
Dollars ($612,500.00).
9.20 Signal Leakage. The System shall have complied in all material
--------------
respects with FCC rules and regulations regarding signal leakage, as reflected
in the leakage logs and other records delivered to Buyer in accordance with
Section 5.6.4.
9.21 Other Documents. Seller shall have delivered such other
---------------
documents as may be reasonably requested by Buyer to effect the transaction
contemplated by this Agreement.
27
<PAGE>
10.0 Conditions Precedent to Seller's Obligations.
--------------------------------------------
All obligations of Seller at the Closing hereunder are subject to the
fulfillment of each of the following conditions at or prior to the Closing, any
one or more of which may be waived in writing in whole or in part by Seller:
10.1 Purchase Price. Receipt by Seller of the Purchase Price as
--------------
described in Section 2.0.
10.2 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained herein shall have been true and correct in all
material respects as of the date when made and shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date.
10.3 Covenants. Buyer shall, in all material respects, have
---------
performed all of its obligations, agreements, and covenants in this Agreement to
be performed or complied with by it on or before the Closing Date.
10.4 Certificate of Compliance. Buyer shall have delivered to
-------------------------
Seller a Certificate of Compliance in the form of Exhibit 10.4 hereto, signed by
the President or any Executive Vice President of Buyer, dated on and as of the
Closing Date.
10.5 Assumption Agreement. Buyer shall have executed and delivered
--------------------
to Seller an Assumption Agreement in the form of Exhibit 10.5, dated the Closing
Date.
10.6 Opinion of Counsel. Seller shall have received an opinion of
------------------
Goldman & Kagon Law Corporation, counsel for Buyer, dated the Closing Date and
addressed to Seller, in the form of Exhibit 10.6 hereto.
10.7 Consents and Approvals. Seller and Buyer shall have obtained
----------------------
all required consents and approvals of third persons or parties, including the
FCC, the FAA, all franchise authorities, and all other governmental authorities,
bodies, or agencies having jurisdiction over the transactions contemplated by
this Agreement, or any part thereof, necessary for the consummation of the
transaction contemplated by this Agreement, including required consents to
assignment of the Leases, Contracts, and Licenses, all such consents without any
conditions materially adverse to Seller.
10.8 Legal Proceedings. There shall not be pending or threatened
-----------------
any lawsuit, claim, or legal action relating to the transactions contemplated by
this Agreement seeking to enjoin or render unlawful its consummation.
10.9 Minimum Subscribers. The System will have not less than six
-------------------
thousand three hundred (6,300) Basic Subscribers (as defined in Section 4.2) as
of the Closing; provided, however, that in the event the System has fewer than
six thousand three hundred (6,300) Basic Subscribers as of Closing and Buyer
agrees to limit the amount of the actual adjustment to the Purchase Price
pursuant to Section 4.1.4 to $527,450 (the product of One Thousand Five Hundred
28
<PAGE>
Seven Dollars ($1,507.00) and Three Hundred Fifty (350), then the condition set
forth in this Section 10.9 shall be deemed waived by Seller.
10.10 Limited Partner Approval. The limited partners of the general
------------------------
partners of Seller shall have voted to approve the transactions contemplated by
the Agreement in accordance with their respective partnership agreements.
10.11 Other Documents. Buyer shall have delivered such other
---------------
documents as may be reasonably requested by Seller to effect the transaction
contemplated by this Agreement.
11.0 Further Assurances.
------------------
At and after the Closing, Seller and Buyer will, without further
consideration, execute and deliver such further instruments and documents and do
such other acts and things as the other party or parties may reasonably request
in order to effect or confirm the transactions contemplated by this Agreement.
12.0 Indemnification.
---------------
12.1 Indemnification of Buyer by the Warranting Parties. The
--------------------------------------------------
Warranting Parties and their successors and assigns shall indemnify and hold
Buyer harmless against and in respect of, and shall reimburse Buyer for:
12.1.1 Any and all losses, liabilities, or damages resulting
from any untrue representation, breach of warranty, or nonfulfillment of any
covenant or agreement by any of the Warranting Parties contained herein or in
any certificate, document, or instrument delivered to Buyer hereunder;
12.1.2 Any and all obligations of Seller not specifically
assumed by Buyer pursuant to the terms of this Agreement and the Assumption
Agreement, including but not limited to any and all federal or state income,
franchise, sales, property, or payroll tax liabilities or any and all
liabilities arising under any Leases, Contracts, Licenses, or other agreements
assumed by Buyer pursuant to this Agreement and the Assumption Agreement and
relating to events which occurred prior to the close of business on the Closing
Date;
12.1.3 Any claims for finder's fees or brokerage or other
commissions by any person, firm, or corporation, arising by reason of any
services alleged to have been rendered to or at the instance of any of the
Warranting Parties with respect to this Agreement or any of the transactions
contemplated hereby;
12.1.4 Any and all losses, liabilities, or damages resulting
from Seller's operation or ownership of the System prior to the close of
business on the Closing Date;
12.1.5 Any and all losses, liabilities, or damages resulting
from claims arising after the Closing Date made by or on behalf of persons
employed by Seller at any time prior to the Closing and who are not employed by
Buyer after the Closing; and
29
<PAGE>
12.1.6 Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including, without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
If any claim covered by the foregoing indemnity is asserted against
Buyer by a third party, Buyer shall promptly give Seller notice thereof and give
the Warranting Parties an opportunity to defend or settle the same with counsel
of their choice and at their expense. The failure to give Seller prompt notice
of any such claim shall not affect the Warranting Parties' obligations pursuant
to this Section 12.1, except that Buyer shall be responsible for any damages
proximately incurred by Seller as a result of such failure. Buyer shall extend
its full cooperation in connection with such defense, subject to reimbursement
for actual out-of-pocket expenses incurred by Buyer as the result of a request
by either of the Warranting Parties. The settlement of any such claim by Buyer
prior to giving the Warranting Parties such opportunity or while the Warranting
Parties are providing an appropriate defense, without the Warranting Parties'
prior written consent (which consent shall not be unreasonably withheld or
delayed), shall release the Warranting Parties from their obligations hereunder
with respect to such claim or action so settled. No settlement which fails to
contain a provision expressly negating any claim of wrongdoing on the part of
Buyer shall be entered into on behalf of Buyer without its prior written
consent. Such consent shall not be unreasonably withheld or delayed, and may
only be withheld to the extent Buyer reasonably believes the lack of such a
provision may result in a material adverse impact on its business operations.
If the Warranting Parties fail to defend said claim within a reasonable time
after notice thereof, Buyer shall be entitled to assume the defense thereof and
the Warranting Parties shall be bound by the results obtained by Buyer with
respect to such claim, and the Warranting Parties shall be liable to Buyer for
all expenses incurred in such defense and/or in any action to enforce its
indemnification rights hereunder, including, without limitation, reasonable
attorneys' fees and any settlement payments.
12.1.7 Claims for indemnification arising solely by reason of
any misrepresentation or breach or nonfulfillment of any representation,
warranty or covenant shall not be payable by the Warranting Parties hereunder
unless such claims exceed, on a cumulative basis, the sum of $25,000 ("Seller's
Basket Amount"). In the event such claims exceed Seller's Basket Amount, such
claims shall be payable from the first dollar thereof. Notwithstanding anything
in this Agreement to the contrary, the liability of Warranting Parties to Buyer
under this Agreement shall not exceed $2,500,000 in the aggregate; provided,
however that this limitation shall not apply to any breaches of Warranting
Parties' warranties of title with respect to the Assets.
12.2 Indemnification of Seller by Buyer. Buyer and its successors
----------------------------------
and assigns shall indemnify and hold Seller harmless against and in respect of,
and shall reimburse Seller for:
12.2.1 Any and all losses, liabilities, or damages resulting
from any untrue representation, breach of warranty, or nonfulfillment of any
covenant or agreement by Buyer contained herein or in any certificate, document,
or instrument delivered to Seller hereunder;
30
<PAGE>
12.2.2 Any claims for finder's fees or brokerage or other
commissions by any person, firm, or corporation, arising by reason of any
services alleged to have been rendered to or at the instance of Buyer with
respect to this Agreement or any of the transactions contemplated hereby;
12.2.3 Any and all losses, liabilities, or damages resulting
from Buyer's operation or ownership of the System after the Closing Date or
relating to obligations undertaken by Buyer pursuant to the Assumption
Agreement; and
12.2.4 Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including, without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
If any claim covered by the foregoing indemnity is asserted against
Seller by a third party, Seller shall promptly give Buyer notice thereof and
give Buyer an opportunity to defend or settle the same with counsel of Buyer's
choice and at Buyer's expense. The failure to give Buyer prompt notice of any
such claim shall not affect Buyer's obligations pursuant to this Section 12.2,
except that Seller shall be responsible for any damages proximately incurred by
Buyer as a result of such failure. Seller shall extend its full cooperation in
connection with such defense, subject to reimbursement for actual out-of-pocket
expenses incurred by Seller as the result of a request by Buyer. The settlement
of any such claim by Seller prior to giving Buyer such opportunity or while
Buyer is providing an appropriate defense, without Buyer's prior written consent
(which consent shall not be unreasonably withheld or delayed), shall release
Buyer from its obligations hereunder with respect to such claim or action so
settled. No settlement which fails to contain a provision expressly negating
any claim of wrongdoing on the part of Seller shall be entered into on behalf of
Seller without its prior written consent. Such consent shall not be
unreasonably withheld or delayed, and may only be withheld to the extent Seller
reasonably believes the lack of such a provision may result in a material
adverse impact on its business operations. If Buyer fails to defend any such
claim within a reasonable time after notice thereof, Seller shall be entitled to
assume the defense thereof and Buyer shall be bound by the results obtained by
Seller with respect to such claim, and Buyer shall be liable to Seller for all
expenses incurred in such defense and/or in any action to enforce its
indemnification rights hereunder, including, without limitation, reasonable
attorneys' fees and any settlement payments.
12.2.5 Claims for indemnification arising solely by reason of
any misrepresentation or breach or nonfulfillment of any representation,
warranty or covenant shall not be payable by Buyer hereunder unless such claims
exceed, on a cumulative basis, the sum of $25,000 ("Buyer's Basket Amount"). In
the event such claims exceed Buyer's Basket Amount, such claims shall be payable
from the first dollar thereof. Notwithstanding anything in this Agreement to the
contrary, in no event shall the liability of Buyer to Seller under this
Agreement exceed $2,500,000 in the aggregate.
31
<PAGE>
13.0 Nature and Survival of Representations and Warranties.
-----------------------------------------------------
All statements made by the Warranting Parties in this Agreement or in
any certificate delivered by or on behalf of Seller pursuant to this Agreement
shall be deemed representations and warranties of the Warranting Parties, and
all statements made by Buyer in this Agreement or contained in any certificate
delivered by or on behalf of Buyer pursuant to this Agreement shall be deemed
representations and warranties of Buyer. Except as otherwise set forth below,
all representations and warranties made by Buyer or by the Warranting Parties
hereunder and all indemnities, covenants, and agreements relating thereto, other
than those expressly designating a longer term herein, shall survive the Closing
for a period of eighteen (18) months, notwithstanding any investigation by the
parties hereto. Notwithstanding the foregoing, the representations and
warranties made by the Warranting Parties in Section 5.18 and in the concluding
paragraph of Section 5.16 shall survive the Closing for the period of time
ending, in each case, as of the date of expiration of the applicable statutory
period within which Buyer could assert claims against Seller for a breach
thereof, and the following shall survive the Closing without limitation,
notwithstanding any investigation by the parties hereto:
13.1 The representations and warranties made by the Warranting
Parties in Sections 5.1, 5.2, and 5.22;
13.2 The representations and warranties made by Buyer in Sections
6.1 and 6.2;
13.3 The obligations of the Warranting Parties and Buyer for legal
fees and other defense costs under Sections 12.1 and 12.2; and
13.4 The obligations of either the Warranting Parties or Buyer under
any other representation or warranty made hereunder where the party relying on
such representation or warranty is able to prove that the party making such
representation or warranty had actual knowledge of the falsity of any such
representation or warranty at the time of execution. There are no intended
third party beneficiaries of this Agreement, and to the extent any third party
asserts any claim or cause of action arising from the alleged breach of any
representation or warranty, covenant, or agreement in this Agreement, the
statute of limitations for such alleged claim or cause of action shall not in
any way be extended or tolled by reason of this Section 13.0.
14.0 Notices.
-------
Any notices or other communications to Seller or Buyer shall be
personally delivered, sent by certified or registered mail, return receipt
requested, by Federal Express or similar service that records delivery, or by
facsimile transmission combined with any of the foregoing methods of notice, to
the addresses set forth below, or to such other address as Seller or Buyer may
designate, from time to time, by written notice to the other. Any such notice
shall be deemed effective upon receipt.
32
<PAGE>
If To Seller: With A Copy To:
------------- ---------------
Jones Cable Income 1-B/C Venture Holland & Hart
c/o Jones Intercable, Inc. 555 Seventeenth Street, Suite 3200
9697 East Mineral Avenue P.O. Box 8749
P.O Box 3309 Denver, CO 80202 (delivery)
Englewood, CO 80112 (delivery) 80201-8749 (mail)
80155 (mail) Fax No. (303) 295-8261
Fax No. (303) 799-1644 Attn: Stephen P. Villano, Esq.
Attn: Legal Department
If to Buyer: With A Copy To:
----------- --------------
Falcon Cable TV Goldman & Kagon Law Corporation
10900 Wilshire Boulevard 1801 Century Park East
Fifteenth Floor Suite 2222
Los Angeles, California 90024 Los Angeles, California 90067
Attn: General Counsel Attn: Charles D. Meyer, Esq.
15.0 Confidentiality.
---------------
In the event this Agreement is terminated and the purchase and sale
contemplated hereby abandoned, the parties hereto will keep confidential any
proprietary information obtained from the other party in connection with the
transactions contemplated by this Agreement and will return to the other party
all documents, work papers, and other written material obtained by it in
connection with the transactions contemplated hereby.
16.0 Risk of Loss.
------------
The risk of loss, damage, or destruction to the Assets to be
transferred to Buyer hereunder from fire or other casualty or cause shall be
borne by Seller at all times up to the close of business on the Closing Date.
The proceeds of any claim for any such loss payable under any insurance policy
with respect thereto shall be used to repair, replace, or restore any such
property to its former condition, subject to the conditions stated below. In
the event of any loss or damage to any of the Assets to be transferred hereunder
from fire, casualty, or other causes prior to the Closing, Seller shall notify
Buyer of same in writing immediately. Such notice shall specify with
particularity the loss or damage incurred, the cause thereof (if known or
reasonably ascertainable), and the insurance coverage. In the event that
property reasonably required for the full operation of Seller's business is
required to be replaced or restored prior to the Closing, Buyer, at its sole
option upon five (5) days prior written notice to Seller, and notwithstanding
any other limitations contained in this Agreement, may elect to do one of the
following:
33
<PAGE>
16.1 Postponement of Closing. Postpone the Closing until such time
-----------------------
as the property has been repaired, replaced, and restored, but in no event
beyond June 30, 1999;
16.2 Closing with Adjustments. Consummate the Closing and accept
------------------------
the property in its then condition, in which event Seller shall assign to Buyer
any proceeds of insurance theretofore or thereafter received covering the
property involved; or
16.3 Rescission. Rescind this Agreement and declare it of no
----------
further force and effect, in which event there shall be no Closing and this
Agreement and all the terms and provisions hereof shall thereupon be deemed null
and void, except for the provisions of Sections 8.13, 12.0 and 15.0 hereof, and
the obligation of Seller to return to Buyer any deposit made by Buyer hereunder,
which shall survive such rescission.
17.0 Termination Rights.
------------------
This Agreement may be terminated by either Buyer or Seller, if the
terminating party is not then in material default, by written notice to the
other party, upon the occurrence of either of the following, with the results
prescribed hereunder:
17.1 Material Default. Except as otherwise provided herein, if the
----------------
other party defaults in the observance or in the due and timely performance of
any of its material covenants or agreements herein contained, which default has
not been cured on or prior to the Closing Date (or any subsequent date by which
the defaulting party may cure such default), the nondefaulting party shall have
all rights and remedies provided in this Agreement and/or at law and/or in
equity.
17.2 Failure of Conditions Precedent. If any of the conditions
-------------------------------
precedent to Closing are otherwise not fulfilled or waived on or before April
30, 1999, without either party being at fault, either party may terminate this
Agreement on or after such date without any further liability to the other,
except for the liabilities created by the provisions of Sections 12.0 and 15.0
hereof, and the obligation of Seller to return to Buyer any deposit made by
Buyer hereunder, which shall survive such termination; provided, however, that
if the only conditions remaining unsatisfied as of such date are the obtaining
of consents from franchise authorities or otherwise effectuating the transfer of
any Licenses as set forth in Section 9.3, this Agreement may only be terminated
upon mutual agreement of Seller and Buyer.
If Buyer shall have the right to unilaterally terminate this Agreement
pursuant to this Section 17.0, it may nevertheless elect at its sole option to
proceed with the Closing, and such election shall not in any way be deemed a
waiver of any of Buyer's rights to indemnification.
18.0 Bulk Sales Laws.
---------------
Seller agrees to take or cause to be taken all steps necessary to
comply with the provisions of any applicable bulk sales, fraudulent conveyance,
or other laws for protection of creditors, and Seller further agrees to
indemnify and hold Buyer harmless from and reimburse Buyer for any and all
claims, liabilities, or obligations which Buyer may suffer or incur by virtue of
non-compliance with such applicable laws.
34
<PAGE>
19.0 Miscellaneous.
-------------
19.1 Sales and Transfer Taxes and other Transfer Fees. All sales or
------------------------------------------------
use taxes, transfer taxes, stamp taxes, excise taxes, and license taxes
incurred, and all other fees charged, in connection with the sale, transfer, or
delivery of any of the Assets to Buyer, shall be paid by Seller, subject to
reimbursement of one-half of such taxes and fees by Buyer.
19.2 Expenses. Except as otherwise expressly provided herein, the
--------
parties hereto shall pay their respective expenses incurred under or in
connection with this Agreement.
19.3 Attorneys' Fees. Should either Buyer or Seller institute any
---------------
action or proceeding to enforce any provision of this Agreement, or for damages
by reason of any alleged breach of any provision of this Agreement, or for a
declaration of such party's rights or obligations hereunder, or for any other
judicial or quasi-judicial remedy, the prevailing party in such action or
proceeding shall recover from the losing party all reasonable attorneys' fees,
costs, and expenses incurred by the prevailing party for the services rendered
for or on behalf of such prevailing party.
19.4 Waiver. Either Buyer or Seller may waive any provision,
------
breach, or default of this Agreement; provided, however, no waiver of any
provision, breach, or default hereunder shall be considered valid unless
contained in a writing referring to this Agreement and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any other
provision or any subsequent breach or default of the same or similar nature.
19.5 Assignment and Binding Effect. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of each party hereto, and its successors, assigns,
and transferees. Prior to the Closing, Buyer may assign its rights hereunder to
any entity affiliated with Buyer, without the consent of Seller, provided that
no such assignment shall relieve Buyer of its obligations under this Agreement.
No other assignments of any party's rights or obligations hereunder may be made
without the prior written consent of the other parties hereto.
19.6 Governing Law. The construction and performance of this
-------------
Agreement shall be governed by and construed in accordance with the laws of the
State of Oregon.
19.7 Section Headings. The section headings contained in this
----------------
Agreement are for the purpose of convenience only, are not intended as part of
this agreement, and are not intended to define or limit the contents of said
sections.
19.8 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original but which, when taken
together, shall be deemed one instrument.
19.9 Exhibits and Schedules. The Exhibits and Schedules attached
----------------------
hereto shall be deemed to be incorporated by reference in this Agreement as if
fully set forth herein.
19.10 Entire Agreement. This Agreement and the Exhibits, agreements,
----------------
and Schedules referred to herein constitute the entire agreement of the parties
with respect to the
35
<PAGE>
subject matter hereof and supersedes all prior and contemporaneous agreements,
negotiations, and oral understandings, if any. Except as otherwise provided
herein, this Agreement may not be modified, amended, or terminated other than by
a written agreement specifically referring to this Agreement and signed by all
of the parties hereto.
19.11 Resolutions. Within 45 days of the execution of this Agreement
-----------
Buyer and Seller shall have delivered to each other copies of resolutions of the
Board of Directors of each corporate general partner of Buyer and Seller
authorizing and approving the execution of this Agreement and the consummation
of the transactions contemplated hereby, certified as true and correct by the
Secretary or Assistant Secretary of each corporate general partner.
19.12 Due Inquiry. Whenever in this Agreement a representation is
-----------
qualified as being "to the best knowledge of the Warranting Parties, after due
inquiry," or the substantial equivalent thereof, it shall mean only that Seller
has made inquiry of the employees of the System and of Neil Sullivan, Vice
President/Operations of Jones Intercable, Inc., and his management team with
respect to the particular matter.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SELLER: BUYER:
- - ------ -----
JONES CABLE INCOME FUND 1-B/C FALCON COMMUNITY VENTURES I
VENTURE, a Colorado partnership LIMITED PARTNERSHIP,
a California limited partnership
By: Jones Cable Income Fund 1-B, Ltd. By: Falcon Community
Investors, L.P., and Jones Cable a California limited partnership,
Income Fund 1-C, Ltd. its general its managing general partner
partners
By: Jones Intercable, Inc., By: Falcon Holding
Group, Inc., a Colorado a California corporation,
corporation, its managing general
their general partner partner
By: /s/ James B. O'Brien By: /s/ Stanley S. Itskowitch
-------------------------- -------------------------
Name: James B. O'Brien Stanley S. Itskowitch
------------------------ Executive Vice President
Title: President
-----------------------
The undersigned agrees to be bound by the representations and warranties
set forth in Section 5 hereof, and all other provisions affecting the survival
of such representations and warranties and the indemnification arising
therefrom.
JONES INTERCABLE, INC.,
a Colorado corporation
By: /s/ Elizabeth Steele
----------------------------------
Name: Elizabeth Steele
--------------------------------
Title: Vice President
-------------------------------
37
<PAGE>
SCHEDULES
---------
1.1.1 Personal Property
1.1.2 Real Property
1.1.3 Licenses and Franchises
1.1.4 Contracts
1.1.7 Intellectual Property Transferred
5.1 Ownership, Key Personnel, and Fictitious Business Names
5.3 Consents
5.5 Claims
5.8 Financial Statements
5.9 Post-Closing Capital Improvements
5.11 Signal Carriage, Rates, and Technical Profile
5.13 Franchise Fees
5.14 Pole Attachment Fees
5.16 Employment Matters
5.19 Competition and Overbuilds
38
<PAGE>
EXHIBITS
--------
2.1 Deposit Escrow Instructions
2.3 Holdback Escrow Instructions
9.4.1 Bill of Sale and Assignment
9.4.2 Assignment of Cable Television Franchises
9.5 Opinion of Seller's Counsel
9.6 Opinion of Seller's FCC Counsel
9.9 Seller's Certificate of Compliance
9.13 Covenants not to Compete
10.4 Buyer's Certificate of Compliance
10.5 Assumption Agreement
10.6 Opinion of Buyer's Counsel
39
<PAGE>
Exhibit 99.2
First Amendment to
Asset Purchase Agreement
This First Amendment to Asset Purchase Agreement (this "Amendment") is
entered into as of February 26, 1999, by and among JONES CABLE INCOME FUND 1-B/C
VENTURE, a Colorado partnership (Federal Tax I.D. No. 84-1076581), with offices
at 9697 E. Mineral Avenue, Englewood, Colorado 80112 ("Seller"); JONES
INTERCABLE, INC., a Colorado corporation ("JIC"); and FALCON COMMUNITY VENTURES
I LIMITED PARTNERSHIP, a California limited partnership, with offices at 10900
Wilshire Boulevard, 15th Floor, Los Angeles, California 90024 ("Buyer").
Recitals
A. Seller, JIC and Buyer are parties to that certain Asset Purchase
Agreement, entered into as of September 9, 1998 (the "Purchase Agreement"),
pursuant to which Seller, among other things, agreed to sell, and Buyer agreed
to purchase, the Assets.
B. The parties desire to amend the Purchase Agreement to provide for a
change in the manner of determining the adjustment, if any, to the Purchase
Price based on the number of subscribers served by the System at Closing.
C. Capitalized terms not otherwise defined in this Amendment shall have
the meanings given in the Purchase Agreement.
Agreements
Now, therefore, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend the
Purchase Agreement and agree as follows:
1. Amendment to Section 4.1. The first two sentences of the last full
------------------------
paragraph of Section 4.1 of the Purchase Agreement are deleted in their entirety
and replaced with the following:
Within ninety (90) days after the Closing Date, Seller shall deliver
to Buyer a report (the "Final Settlement Statement"), similarly
certified by Seller, showing in detail the final determination of all
adjustments which were not calculated as of the Closing Date,
containing any corrections to the Initial Settlement Statement and
including any credits based on the post-Closing subscriber
determination described below, together with any documents
substantiating the adjustments proposed in the Final Settlement
Statement. In computing the amount of the final adjustments to the
<PAGE>
Purchase Price set forth in the Final Settlement Statement: (i) the
Final Settlement Statement shall reflect a credit to Seller in an
amount equal to $1,507.00 for each Provisional Subscriber (as defined
in Section 4.3.1 hereof) who satisfies the definition of Basic
Subscriber on the 60th day immediately following the Closing Date, and
$1,448.00 for each Senior Provisional Subscriber (as defined in
Section 4.3.1 hereof) who satisfies the definition of Basic Subscriber
on the 60th day immediately following the Closing Date (provided that
the payment requirement of such definition shall be deemed satisfied
by payment of the applicable senior discounted rate); and (ii) the
Final Settlement Statement shall reflect a credit to Buyer in an
amount equal to $1,507.00 for each Second Look Subscriber (as defined
in Section 4.3.2 hereof) who does not satisfy the definition of Basic
Subscriber on the 60th day immediately following the Closing Date, and
$1,448.00 for each Senior Second Look Subscriber (as defined in
Section 4.3.2 hereof) who does not satisfy the definition of Basic
Subscriber on the 60th day immediately following the Closing Date
(provided that the payment requirement of such definition shall be
evaluated based on payment of the applicable senior discounted rate).
For purposes of the immediately preceding sentence only, all
references to "the Closing Date" contained in the first sentence of
Section 4.2 hereof shall be deemed modified to read "the 60th day
immediately following the Closing Date". Notwithstanding the
foregoing, in the event the credit determined pursuant to clause (i)
of this paragraph exceeds the credit determined pursuant to clause
(ii) of this paragraph, such credits shall be netted together, and the
adjustment to the Purchase Price arising from the aggregate of such
credits shall be equal to the lesser of (a) such net amount or (b) the
aggregate adjustment to the Purchase Price pursuant to Section 4.1.4
hereof. Buyer will provide Seller with reasonable access to and
copies of all records which Buyer has in its possession and which are
necessary for Seller to prepare the Final Settlement Statement.
2. New Section 4.3. A new Section 4.3 is added to the Purchase Agreement
---------------
as follows:
4.3 Additional Subscriber Definitions.
---------------------------------
2
<PAGE>
4.3.1 The term "Provisional Subscriber" shall mean a subscriber of
the System at Closing who would be a Basic Subscriber except that such
subscriber has not been a subscriber of the System for at least one
(1) month prior to the Closing Date and has not paid the full non-
discounted rate for at least one (1) month of service for all
subscribed to services. The term "Senior Provisional Subscriber"
shall mean a subscriber of the System at Closing who qualifies for and
receives the System's senior discounted rate and would be included in
the formula for equivalent Basic Subscribers pursuant to Section 4.2
except that such subscriber has not been a subscriber of the System
for at least one (1) month prior to the Closing Date and has not paid
for (at the applicable senior rate) at least one (1) month of service
for all subscribed to services.
4.3.2 The term "Second Look Subscriber" shall mean a subscriber of
the System who meets the definition of a Basic Subscriber on the
Closing Date and who first received basic cable service from the
System during the period beginning three months and ending more than
one month immediately preceding the Closing Date. The term "Senior
Second Look Subscriber" shall mean a subscriber of the System who
qualified for and receives the System's senior discounted rate, was
included in the formula for equivalent Basic Subscribers pursuant to
Section 4.2 on the Closing Date, and first received basic cable
service from the System during the period beginning three months and
ending more than one month immediately preceding the Closing Date.
3. New Section 8.14. A new Section 8.14 is added to the Purchase
----------------
Agreement as follows:
8.14 Post-Closing Operation of the System. For the period ending 60
------------------------------------
days following the Closing Date, Buyer shall not (i) increase the
rates charged for any programming or other services provided by the
System; (ii) reduce, modify or discontinue any senior discount offered
by the System; (iii) except as the result of (a) the discontinuance of
any programming service, (b) the expiration or termination of Buyer's
rights under an affiliation agreement for the carriage of any
programming service, or (c) any other reason beyond Buyer's control,
delete any programming service or reconfigure any tier of service
offered by the System;
3
<PAGE>
(iv) change the collection or disconnection policies (or
implementation thereof) of the System; or (v) announce or give notice
of its intention to do any of the foregoing.
4. Section 16.1. The date "June 30, 1999" appearing in Section 16.1 is
------------
deleted and the date "September 30, 1999" is inserted in its place.
5. Section 17.2. The date "April 30, 1999" appearing in Section 17.2 is
------------
deleted and the date "July 31, 1999" is inserted in its place.
6. No Other Amendments. Except as modified in this Amendment, the
-------------------
Purchase Agreement is unmodified and remains in full force and effect.
4
<PAGE>
The parties hereto have executed this Amendment effective as of the date
first written above.
SELLER:
JONES CABLE INCOME FUND 1-B/C
VENTURE, a Colorado partnership
By: Jones Cable Income Fund 1-B, Ltd.
Jones Cable Income Fund 1-C, Ltd.
its general partners
By: Jones Intercable, Inc.
their general partner
By: /s/ Elizabeth Steele
-------------------------
Name: Elizabeth Steele
-----------------------
Title: Vice President
----------------------
JONES INTERCABLE, INC.,
a Colorado corporation
By: /s/ Elizabeth Steele
---------------------------
Name: Elizabeth Steele
-------------------------
Title: Vice President
------------------------
BUYER:
FALCON COMMUNITY VENTURES I
LIMITED PARTNERSHIP,
a California limited partnership
By: Falcon Community Investors, L.P.,
a California limited partnership,
its managing general partner
By: Falcon Holding Group, Inc.,
a California corporation,
its managing general partner
By:
------------------------------------
Stanley S. Itskowitch,
Executive Vice President
5
