<PAGE>
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
CABLE TV FUND 14-B, 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: 261,353
(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 73 percent interest in the $140,000,000 sales price that is
to be paid to the Cable TV Fund 14 A/B Venture in connection with the
sale of the Broward System, one of the transactions that is a subject of
the proxy solicitation plus the $51,500,000 sales price that is to be
paid to the Registrant in connection with the sale of the Surfside
System, the other transaction that is a subject of the proxy
solicitation.
(4) Proposed maximum aggregate value of the transactions to the Registrant:
$153,700,000
(5) Total fee paid: $30,740
[X] Fee paid previously with preliminary materials. Of the $30,740 total fee
paid, $20,440 was paid previously with the filing of the preliminary proxy
statement and $10,300 was paid with the filing of the revised preliminary
proxy statement.
[_] 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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[LOGO OF JONES INTERCABLE, INC. APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTES OF THE LIMITED PARTNERS OF CABLE TV FUND 14-B, LTD.
To the Limited Partners of Cable TV Fund 14-B, Ltd.:
Special votes of the limited partners of Cable TV Fund 14-B, Ltd. (the
"Partnership") are being conducted through the mails on behalf of the
Partnership by Jones Intercable, Inc., the general partner of the Partnership,
for the purposes of obtaining limited partner approval of Proposal A and
Proposal B. Proposal A relates to the sale, to an unaffiliated third party, of
the cable television system serving portions of Broward County, Florida,
including the cities of Davie, Cooper City, Dania and Lauderdale Lakes (the
"Broward System"), owned by the Cable TV Fund 14 A/B Venture (the "Venture"),
a joint venture in which the Partnership has a 73 percent ownership interest,
for $140,000,000 in cash, subject to closing adjustments that may have the
effect of reducing the sales price by up to approximately $7,000,000. Proposal
B relates to the sale, to an unaffiliated third party, of the cable television
system serving the towns of Pawleys Island and Surfside Beach, the counties of
Horry and Georgetown, and the Myrtle Beach Air Force Base Redevelopment
Authority, all in South Carolina (the "Surfside System"), owned by the
Partnership, for $51,500,000 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 Broward System and
if the transaction is closed, the Venture will repay all of its debts and pay
a brokerage fee and then the $96,831,351 of net sale proceeds will be
distributed to the two constituent partnerships of the Venture in proportion
to their ownership interests. The Partnership accordingly will receive 73
percent of such proceeds, estimated to total $70,583,138, 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 Broward System. It is
estimated that the Partnership will distribute to the limited partners $270
for each $500 limited partnership interest, or $540 for each $1,000 invested
in the Partnership. Distribution checks will be issued to limited partners'
account registration or payment instruction of record.
If the limited partners approve the proposed sale of the Surfside System and
if the transaction is closed, the Partnership will repay all of the amounts
borrowed under its credit facility and certain capital leases, pay a brokerage
fee and a deferred acquisition fee and then the $34,444,900 of net sale
proceeds will be distributed by the Partnership to its limited partners of
record as of the closing date of the sale of the Surfside System. It is
estimated that the Partnership will distribute to the limited partners $132
for each $500 limited partnership interest, or $264 for each $1,000 invested
in the Partnership. Distributions will be net of South Carolina non-resident
withholding tax, if applicable, and distribution checks will be issued to
limited partners' account registration or payment instruction of record.
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Once the Partnership has completed the distributions of its portion of the
net proceeds from the sale of the Broward System and the net proceeds from the
sale of the Surfside System, limited partners of the Partnership will have
received a total of $402 for each $500 limited partnership interest, or $804
for each $1,000 invested in the Partnership. The Partnership has made no prior
distributions to limited partners. After the sale of the Broward System and
the sale of the Surfside System, the Partnership will still own and operate
the cable television system serving Littlerock, California. It is anticipated
that the Partnership will make another distribution to limited partners when
the Littlerock, California system is sold.
Only limited partners of record at the close of business on December 31,
1997 are entitled to notice of, and to participate in, these votes of limited
partners. It is very important that all limited partners participate in the
voting. The ability of the Venture and the Partnership to complete the
transactions discussed in the Proxy Statement and the Partnership's ability to
make distributions to its limited partners of its portion of the net proceeds
of the sale of the Broward System and of the net proceeds of the sale of the
Surfside System are dependent upon the approval of the transactions by the
holders of a majority of the Partnership's limited partnership interests. The
closing of the sale of the Broward System is not contingent upon the closing
of the sale of the Surfside System and the closing of the sale of the Surfside
System is not contingent upon the closing of the sale of the Broward System.
If, for example, the limited partners approve one of the proposed sales but
not the other, the transaction that receives limited partner approval will be
able to close but the transaction that does not receive limited partner
approval will not be able to close.
The proposals that are 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 each proposal. Because the Partnership's limited
partnership agreement (the "Partnership Agreement") provides that the
proposals 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 proposals. A properly executed proxy returned to the general
partner on which a limited partner does not mark a vote will be counted as
votes for the proposed sales of the Broward System and the Surfside System.
Because limited partners do not have dissenters' or appraisal rights in
connection with the proposed sales of the Broward System and the Surfside
System, if the holders of a majority of the limited partnership interests
approve the proposals, 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 proposals.
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/ Elizabeth M. Steele
-----------------------
Elizabeth M. Steele
Secretary
Dated: January 15, 1998
<PAGE>
[LOGO OF JONES INTERCABLE, INC. APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTES OF THE LIMITED PARTNERS
OF CABLE TV FUND 14-B, LTD.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Cable TV Fund 14-B, Ltd.
(the "Partnership") by Jones Intercable, Inc., the general partner of the
Partnership (the "General Partner"), on behalf of the Partnership, for the
purposes of obtaining limited partner approval of Proposal A and Proposal B.
Proposal A relates to the sale of the cable television system serving portions
of Broward County, Florida, including the cities of Davie, Cooper City, Dania
and Lauderdale Lakes (the "Broward System"), owned by the Cable TV Fund 14 A/B
Venture (the "Venture"), a joint venture in which the Partnership has a 73
percent ownership interest, for $140,000,000 in cash, subject to closing
adjustments that may have the effect of reducing the sales price by up to
approximately $7,000,000, to Comcast Corporation or one of its affiliates
("Comcast"). Proposal B relates to the sale of the cable television system
serving the towns of Pawleys Island and Surfside Beach, the counties of Horry
and Georgetown, and the Myrtle Beach Air Force Base Redevelopment Authority,
all in South Carolina (the "Surfside System"), owned by the Partnership for
$51,500,000 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 Cable One, Inc. ("Cable One"). Neither Comcast nor Cable
One are affiliated with the Partnership or with the General Partner.
Proposal A and Proposal B are not contingent upon the other. For example, if
the limited partners approve Proposal A but not Proposal B, the sale of the
Broward System will be able to close but the sale of the Surfside System will
not be able to close. Conversely, if the limited partners approve Proposal B
but not Proposal A, the sale of the Surfside System will be able to close but
the sale of the Broward System will not be able to close. The Board of
Directors has approved both transactions and the General Partner recommends
that the holders of the Partnership's limited partnership interests approve
both transactions.
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 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 February 20, 1998, 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
transactions. 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
transactions by February 20, 1998. 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.
<PAGE>
As of November 30, 1997, the Partnership had 261,353 limited partnership
interests outstanding, held by 15,628 persons. There is no established trading
market for such interests. To the best of the General Partner's knowledge, no
person or group of persons beneficially own more than five percent of the
limited partnership interests. During late 1996 and early 1997, Madison
Partnership Liquidity Investors XIII, LLC, First Trust Co. LP and Smithtown
Bay, LLC, three firms unaffiliated with the Partnership, the General Partner
and each other, conducted tender offers for interests in the Partnership. As
of November 30, 1997, Madison Partnership Liquidity Investors XIII, LLC and
its affiliates owned 6,384 limited partnership interests, or 2.4 percent of
the Partnership's limited partnership interests. As of such date, First Trust
Co. LP and its affiliates owned 3,100 limited partnership interests, or 1.2
percent of the Partnership's limited partnership interests. And as of such
date, Smithtown Bay, LLC and its affiliates owned 1,595 interests, or 0.6
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 transactions. Thus, for example, if the limited
partnership interests voted in favor of the proposed transactions 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 transactions, and in such event
the votes of these firms could be sufficient to cause the proposed
transactions to be approved by a majority of all limited partnership
interests, which is the vote necessary to cause the proposed transactions to
be approved. The General Partner owns 28 limited partnership interests. The
officers and directors of the General Partner own no limited partnership
interests. The 28 limited partnership interests owned by the General Partner
will be voted in favor of the proposed transactions. Only limited partners of
record at the close of business on December 31, 1997 will be entitled to
notice of, and to participate in, the vote.
As of the date of this Proxy Statement, the Partnership owns a 73 percent
ownership interest in the Venture. Cable TV Fund 14-A, Ltd. ("Fund 14-A") has
a 27 percent ownership interest in the Venture. The Venture's only asset is
the Broward System. Because of the Partnership's majority ownership interest
in the Venture, the Partnership's financial statements are consolidated with
the financial statements of the Venture, with the ownership interest of Fund
14-A in the Venture shown as a minority interest. The Partnership also
directly owns the Surfside System and the cable television system serving
Littlerock, California (the "Littlerock System"). Although the General Partner
expects that the Littlerock System will be sold in the near future, the
General Partner cannot predict when this remaining asset of the Partnership
will be sold and thus the General Partner cannot predict when the Partnership
will be liquidated and dissolved. After the sale of the Broward System by the
Venture, the Venture will be liquidated and dissolved but 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"). A vote of the limited partners of the Partnership will be required in
the future to approve the sale of the Littlerock System.
Upon the consummation of the proposed sale of the Broward System, the
Venture will pay all of its indebtedness, which totaled $39,571,339 at
September 30, 1997, and a brokerage fee totaling $3,500,000 to The Jones
Group, Ltd., a wholly owned subsidiary of the General Partner, and then the
$96,831,351 of net sale proceeds will be distributed to the two constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture. The Partnership accordingly will receive 73 percent of such proceeds,
estimated to total $70,583,138 and then 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 Broward System. Distribution checks will be
issued to limited partners' account registration or payment instruction of
record. Based upon pro forma financial information as of September 30, 1997
and assuming an unadjusted sales price of $140,000,000, as a result of the
Broward System's sale, the limited partners of the Partnership, as a group,
will receive $70,583,138. Limited partners will receive $270 for each $500
limited partnership interest, or $540 for each $1,000 invested in the
Partnership, from the Partnership's portion of the net proceeds of the Broward
System's sale.
If the closing adjustments result in a lower sales price, however, the
amount of the net sale proceeds available for distribution to limited partners
will be reduced. If the sales price is reduced because the Broward System has
less than 56,637 basic subscribers at closing, the sales price will be reduced
by an amount equal to
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$2,472 multiplied by the number by which the system's basic subscribers are
less than 56,637. It is possible that the sales price could be reduced by as
much as $7,000,000, from $140,000,000 to $133,000,000, if the number of basic
subscribers to the Broward System are equal to or less than 53,805 at closing.
In such event, the limited partners of the Partnership, as a group, would
receive only $65,480,638, or $251 for each $500 limited partnership interest,
or $502 for each $1,000 invested in the Partnership. The Venture would have no
obligation to close the sale of the Broward System if the sales price were
reduced below $133,000,000 due to this basic subscriber closing adjustment.
Because the General Partner expects that the Broward System will have
approximately 56,700 basic subscribers as of the closing date of the system's
sale to Comcast, the General Partner anticipates that any closing adjustments
relating to the number of the system's basic subscribers will not reduce the
sales price by a material amount. See "Proposed Sale of the Broward System,
Sales Price."
Upon the consummation of the proposed sale of the Surfside System, the
Partnership will retain approximately $350,000 of the sale proceeds as a
capital reserve, repay all of the approximately $14,400,000 borrowed under its
credit facility, leaving the Partnership with no debt outstanding, pay a
brokerage fee totalling $1,287,500 to The Jones Group, Ltd., a wholly owned
subsidiary of the General Partner, pay a deferred acquisition fee of $920,000
to The Jones Group, Ltd., make capital lease repayments of $101,629, and then
the $34,444,891 of net sale proceeds will be distributed to the Partnership's
limited partners of record as of the closing date of the sale of the Surfside
System. Distributions will be net of South Carolina non-resident withholding
tax, if applicable, and distribution checks will be issued to limited
partners' account registration or payment instruction of record. Based upon
pro forma financial information as of September 30, 1997, as a result of the
Surfside System's sale, the limited partners of the Partnership, as a group,
will receive $34,444,891. Limited partners will receive $132 for each $500
limited partnership interest, or $264 for each $1,000 invested in the
Partnership.
Once the Partnership has completed the distributions of its portion of the
net proceeds from the sale of the Broward System and the net proceeds from the
sale of the Surfside System, limited partners of the Partnership will have
received a total of $402 for each $500 limited partnership interest, or $804
for each $1,000 invested in the Partnership. The Partnership has made no prior
distributions to limited partners. After the sale of the Broward System and
the sale of the Surfside System, the Partnership will still own and operate
the Littlerock System. It is anticipated that the Partnership will make
another distribution to limited partners when the Littlerock System is sold.
Limited partners should note that there are certain income tax consequences
of the proposed transactions. These consequences are outlined herein under the
caption "Federal and State Income Tax Consequences."
The proposals that are 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 each proposal. Because the Partnership's limited
partnership agreement (the "Partnership Agreement") provides that the
proposals 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 proposals. A properly executed proxy returned to the General
Partner on which a limited partner does not mark a vote with respect to
Proposal A will be counted as a vote for the proposed sale of the Broward
System and a properly executed proxy returned to the General Partner on which
a limited partner does not mark a vote with respect to Proposal B will be
counted as a vote for the proposed sale of the Surfside System. Because
limited partners do not have dissenters' or appraisal rights in connection
with the proposed sales of the Broward System and the Surfside System, if the
holders of a majority of the limited partnership interests approve the
proposals, 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 proposals.
The limited partners of Fund 14-A will not vote on the sale of the Broward
System because the Venture's proposed sale of the Broward System does not
constitute the sale of all or substantially all of Fund 14-A's assets. Thus,
the closing of the sale of the Broward System is not conditioned upon the
approval of Fund 14-A's limited partners.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is January 15, 1998.
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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 capital appreciation in the value of the Partnership's cable
television properties; to obtain equity build-up through debt reduction; and
to generate tax losses that could be utilized to offset passive income. 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 five to seven years.
Sales of the Partnership's limited partnership interests commenced on August
17, 1987 and the Partnership was formed on September 9, 1987 when
subscriptions for the minimum offering amount were received. On January 8,
1988, Fund 14-A and the Partnership formed the Venture. Fund 14-A contributed
$18,975,000 to the capital of the Venture for a 27 percent ownership interest
and the Partnership contributed $51,025,000 to the capital of the Venture for
a 73 percent ownership interest. The Venture was formed to pool the financial
resources of Fund 14-A and Partnership, two public partnerships sponsored by
the General Partner with identical investment objectives, and to enable them
to acquire a greater number of and/or larger cable television systems than
each of the partnerships could acquire on its own. The Venture acquired the
Broward System on March 31, 1988. The Partnership acquired the Surfside System
on September 23, 1988.
Based upon the track record of prior public partnerships sponsored by the
General Partner that had liquidated or were in the process of liquidating
their assets during the period that limited partnership interests in the
Partnership were being sold and based upon disclosures made to prospective
investors about the Partnership's investment objectives in the Cable TV Fund
14 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 five to seven years. Due to
the uncertain and then adverse regulatory environment that developed in the
early 1990's for the cable television industry, the resultant 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 Broward System and the Surfside System until
market conditions improved, and as a result the Broward System has been held
by the Venture for almost 10 years and the Surfside System has been held by
the Partnership for more than nine years.
The purpose of the sale of the Broward System, from the Partnership's
perspective, is to attain the Partnership's primary investment objective with
respect to the Broward System, i.e., to convert the Partnership's illiquid
investment in the Broward System to cash. The sale proceeds will be used to
repay all outstanding indebtedness of the Venture and certain fees and
expenses of the transaction, and the remaining sale proceeds will be
distributed to the two constituent partnerships of the Venture. The
Partnership in turn will distribute its 73 percent portion of the net sale
proceeds to the limited partners of the Partnership in accordance with the
distribution procedures established by the Partnership Agreement. The sale of
the Broward System is thus the necessary final step in the Partnership's
accomplishment of its investment objectives with respect to the Venture and
the Broward System.
The purpose of the sale of the Surfside System, from the Partnership's
perspective, is to obtain the Partnership's primary investment objective with
respect to the Surfside System, i.e., to convert the Partnership's illiquid
investment in the Surfside System to cash. The sale proceeds will be used to
repay all of the Partnership's debt and certain fees and expenses of the
transaction, and the remaining sale proceeds will be distributed to the
limited partners of the Partnership in accordance with the distribution
procedures established by the Partnership Agreement. The sale of the Surfside
System is thus the necessary final step in the Partnership's accomplishment of
its investment objectives with respect to the Surfside System.
All distributions of the Partnership from the proceeds of the sale of cable
television systems are to be distributed 100 percent to the limited partners
until the limited partners receive an amount equal to 125 percent of their
initial capital contributions, and thereafter all such distributions are to be
shared 75 percent to the limited
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partners and 25 percent to the General Partner. Based upon the proposed sale
prices for the Broward System and the Surfside System and the most recent
appraisal of the current fair market value of the Littlerock System, the
General Partner now estimates that the limited partners of the Partnership
will not ultimately receive distributions in an amount equal to their initial
capital contributions and thus the sharing arrangement with the General
Partner will not ever be triggered.
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 Broward System is the Venture's sole asset, and because the
Partnership's ownership interest in the Venture represents a substantial
portion of the Partnership's assets, the proposed sale of the Broward System
to Comcast is being submitted for limited partner approval. Because the
Surfside System represents a substantial portion of the Partnership's assets,
the proposed sale of the Surfside System to Cable One is also being submitted
for limited partner approval.
PROPOSAL A--SALE OF THE BROWARD SYSTEM
GENERAL
Pursuant to the terms and conditions of an asset purchase agreement dated as
of October 3, 1997 (the "Broward Agreement") by and between the Venture and
Comcast, the Venture has agreed to sell the Broward System to Comcast for a
sales price of $140,000,000, subject to closing adjustments that may have the
effect of reducing the sales price by up to $7,000,000. Comcast is a
Pennsylvania corporation headquartered at 1500 Market Street, Philadelphia,
Pennsylvania 19102. Comcast is not affiliated with the Partnership or with the
General Partner. The Partnership has been informed that Comcast intends to
finance its acquisition of the Broward System through cash on hand and
borrowings.
THE CLOSING OF THE BROWARD SYSTEM'S SALE
The closing of the sale will occur on the last day of the month immediately
following the tenth day after the date on which all of the closing conditions
set forth in the Broward Agreement have been satisfied. It is anticipated that
the closing will occur during the first quarter of 1998. Because the closing
is conditioned upon, among other things, the approval of the limited partners
of the Partnership and the receipt of material third party consents necessary
for the transfer of the Broward System to Comcast, there can be no assurance
that the proposed sale will occur. The Broward Agreement may be terminated by
either the Venture or Comcast if the closing is not consummated on or before
March 31, 1998. See "Proposed Sale of the Broward System, Conditions to
Closing of the Broward System's Sale" for a description of the material third
party consents necessary for the transfer of the Broward System to Comcast.
THE BROWARD SYSTEM
The Broward System was acquired by the Venture in March 1988 for an
aggregate purchase price of $98,972,000, including a brokerage fee of
$3,800,000 paid to The Jones Group, Ltd., which represented 4 percent of the
Broward System's $95,000,000 purchase price. At acquisition, the Broward
System consisted of approximately 660 miles of cable plant passing
approximately 70,800 homes and serving approximately 35,000 basic subscribers.
The basic penetration rate of the Broward System at acquisition was
approximately 49 percent. The Broward System's $95,000,000 purchase price
represented a purchase price per basic subscriber of $2,714.
At the closing of its sale to Comcast, the Broward System is expected to
consist of approximately 1,030 miles of cable plant passing approximately
91,800 homes and serving approximately 56,700 basic subscribers. The basic
penetration rate of the Broward System is now approximately 62 percent. During
the holding period, the Venture used approximately $33,372,600 in capital
expenditures to expand and/or rebuild the cable plant of the Broward System.
In 1996, the Broward System had annual revenues of $25,500,000 and annual cash
flow of $11,660,000. The Broward System is projected to have annual revenues
in 1997 of $28,200,000 and annual cash flow in 1997 of $12,700,000. Thus, the
$140,000,000 sales price represents 12 times 1996 cash flow and 11 times
projected 1997 cash flow, and the $140,000,000 sales price represents a sales
price per basic subscriber of $2,472.
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Comcast will purchase all of the tangible assets of the Broward 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. Comcast 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 Broward 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 FOR THE BROWARD SYSTEM
Subject to the closing adjustments described below, the sales price for the
Broward System is $140,000,000. The Broward Agreement provides for closing
adjustments that may reduce the sales price by as much as five percent.
In the event that the Broward System's current assets as of the closing date
are in excess of the Broward System's total liabilities as of closing date,
the sales price will be increased by an amount equal to the Broward System's
net assets. In the event that the Broward System's current assets as of the
closing date are less than the Broward System's total liabilities as of the
closing date, the purchase price will be decreased by an amount equal to the
Broward System's net liabilities. These closing adjustments, which are not
expected to be material, reflect the principle that all liabilities, expenses
and income of the Broward System prior to the closing date belong to the
Venture and all liabilities, expenses and income attributable to the Broward
System after the closing date are for the account of Comcast.
The sales price will be reduced by an amount equal to the product of $2,472
multiplied by the number, if any, by which the average number of basic
subscribers to the Broward System as of the closing date is less than 56,637.
This provision could result in the sales price being reduced by as much as
$7,000,000. For example, the purchase price would be reduced from $140,000,000
to $133,000,000 if the number of basic subscribers to the Broward System are
equal to or less than 53,805 at closing. The Venture would have no obligation
to close the sale of the Broward System if the sales price were reduced below
$133,000,000 due to this basic subscriber closing adjustment. Because the
General Partner expects that the Broward System will have approximately 56,700
basic subscribers as of the closing date of the system's sale to Comcast, the
General Partner anticipates that any closing adjustments relating to the
number of the system's basic subscribers will not reduce the sales price by a
material amount.
The sales price will also be decreased by an amount equal to the amount of
refunds to be made to subscribers of the Broward System's paging business
after the closing date under the agreements for paging services executed on or
prior to the closing date. In addition, the sales price will be reduced by
$300,000, the value that Comcast has placed on the Broward System's paging
business, if the Venture is unable to obtain from a third party certain
waivers and contract modifications relating to the Broward System's paging
business that are necessary to transfer the Broward System's paging business
to Comcast.
Please see the Notes to Unaudited Pro Forma Consolidated 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 BROWARD SYSTEM'S SALE
The obligations of both the Venture and Comcast to consummate the closing
are subject to the satisfaction or waiver of the following conditions: (a) any
applicable waiting period under the Hart Scott Rodino Anti-Trust Improvements
Act of 1976 (the "HSR Act") relating to the transactions contemplated by the
Broward Agreement shall have expired or been terminated; (b) no provision of
any applicable law or regulation and no judgment, injunction, order or decree
shall prohibit the consummation of the closing; (c) the Venture and Comcast
shall have received all required consents in connection with the Broward
System's material contracts (excluding pole attachment agreements) and all
approvals of governmental franchising authorities to the transfer
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of the Broward System's cable television franchises from the Venture to
Comcast, and no such required consent or franchise approval shall have been
revoked; and (d) the holders of the limited partnership interests of the
Partnership shall have voted to approve the Venture's sale of the Broward
System to Comcast. All waiting periods under the HSR Act have expired, thereby
removing this as a condition to closing.
The obligation of Comcast to consummate the closing is subject to the
satisfaction or waiver of the following further conditions: (a) the Venture
shall have performed in all material respects all of its obligations required
under the Broward Agreement to be performed by it on or prior to the closing
date, the representations and warranties of the Venture contained in the
Broward Agreement and in any certificate or other writing delivered by the
Venture pursuant thereto shall have been true as of the date of the Broward
Agreement and shall be true at and as of the closing date in all material
respects except for changes permitted or contemplated by the Broward
Agreement, and Comcast shall have received a certificate signed by an
appropriate executive officer of the General Partner to the foregoing effect;
(b) Comcast shall have received an opinion of the General Partner's Vice
President and General Counsel, dated the closing date, in form and substance
reasonably satisfactory to Comcast; (c) Comcast shall have received an opinion
of the Venture's FCC counsel, dated the closing date, in form and substance
reasonably satisfactory to Comcast; (d) the Broward System shall have as of
the closing date at least (i) an average number of basic subscribers equal to
53,805, (ii) 91,800 homes passed and (iii) average monthly revenue per basic
subscriber of at least $33.29; (e) there shall have been no material adverse
change in the business, assets, condition (financial or otherwise) or results
of operations of the Broward System; (f) Comcast shall have entered into, or
received a valid assignment of, a retransmission consent agreement with each
broadcaster whose signal is carried on the Broward System at the closing on
terms and conditions reasonably acceptable to Comcast (excluding broadcasters
that made the "must carry" election); (g) Comcast shall have entered into
license agreements for pole attachments with each of the parties to the
Broward System's license agreements for pole attachments or provided for or
made alternative arrangements reasonably acceptable to Comcast for use of such
pole attachments without violation of any legal requirement; (h) Comcast shall
have conducted an environmental assessment of the Broward System's real
estate, which assessment shall be satisfactory to Comcast in its reasonable
discretion; (i) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall restrain, prohibit or otherwise
interfere with the effective operation or enjoyment by Comcast of all or any
material portion of the Broward System; (j) no proceeding challenging the
Broward Agreement or the transactions contemplated thereby or seeking to
prohibit or materially delay the closing shall have been instituted by any
person; (k) Comcast shall have received evidence satisfactory to it that the
Venture's credit facility has been repaid and that the security interest of
the Venture's banks in the Broward System have been terminated; and (l) all
title defects shall have been insured or cured.
The obligation of the Venture to consummate the closing is subject to the
satisfaction or waiver of the following further conditions: (a) Comcast shall
have performed in all material respects all of its obligations under the
Broward Agreement required to be performed by it at or prior to the closing
date, the representations and warranties of Comcast contained in the Broward
Agreement and in any certificate or other writing delivered by Comcast
pursuant thereto shall have been true as of the date of the Broward Agreement
and shall be true at and as of the closing date in all material respects, and
the Venture shall have received a certificate signed by an appropriate
executive officer of Comcast to the foregoing effect; (b) the downward
adjustment to the sales price shall not exceed the amount of $7,000,704;
provided, however, that in the event that the downward adjustment to the sales
price would exceed such amount but Comcast agrees to limit the amount of the
downward adjustment to the sales price to an amount equal to $7,000,704, then
this condition shall be deemed waived by the Venture; (c) the Venture shall
have received an opinion of the Deputy General Counsel of Comcast, dated the
closing date in form and substance reasonably satisfactory to the Venture; and
(d) no proceeding challenging the Broward Agreement or the transactions
contemplated thereby or seeking to prohibit or materially delay the closing
shall have been instituted by any person.
BREAK-UP FEE AND EXPENSE REIMBURSEMENT PAYABLE TO COMCAST
In order to induce Comcast to enter into the Broward Agreement, the Venture
has agreed that if (i) the General Partner fails to vote in favor of or fails
to recommend to the limited partners of the Partnership that they
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vote in favor of the sale of the Broward System to Comcast and the limited
partners of the Partnership fail to approve the sale of the Broward System to
Comcast, or (ii) the limited partners of the Partnership fail to approve the
sale of the Broward System to Comcast because of a superior proposal for the
Broward System received by the Venture after the date of the Broward Agreement
and prior to the vote of the limited partners of the Partnership or any
transaction having a similar effect, the Venture will pay to Comcast a break-
up fee in an amount equal to the greater of five percent of the $140,000,000
sales price or five percent of the sales price to be received by the Venture
from the party making the superior proposal. For this purpose, the term
"superior proposal" means any bona fide, written, unsolicited offer or
proposal relating to a merger or other business combination involving the
Venture or the acquisition in any manner of any significant equity interest
in, or a substantial portion of the assets of, the Venture. Limited partners
are informed that as of the date of this Proxy Statement, the Venture has
received no superior proposal for the Broward System and the General Partner
currently does not expect that the Venture will receive a superior proposal
for the Broward System.
In order to induce Comcast to enter into the Broward Agreement, the Venture
also has agreed that if the limited partners of the Partnership fail to
approve the sale of the Broward System to Comcast for any reason, the Venture
will pay Comcast an amount equal to the actual reasonable fees and expenses
paid or payable by or on behalf of Comcast to its attorneys, accountants,
environmental consultants, management consultants, as well as costs and
expenses incurred by Comcast in connection with time spent by its employees,
in connection with the negotiation, execution and delivery of the Broward
Agreement.
GENERAL PARTNER GUARANTEE AND COVENANTS TO COMCAST
In order to induce Comcast to enter into the Broward Agreement, the General
Partner has executed and delivered to Comcast a guarantee by which the General
Partner has guaranteed all of the liabilities and obligations of the Venture,
Fund 14-A and the Partnership to Comcast under the Broward Agreement. Comcast
informed the General Partner that it would be unwilling to enter into the
Broward Agreement without having received the General Partner's guarantee. The
General Partner received no payment from the Venture or Fund 14-A or the
Partnership in return for giving this guarantee.
The General Partner also agreed with Comcast that the General Partner would
prepare and, as soon as practicable, and in any event within 30 days after the
date of the Broward Agreement, file with the Securities and Exchange
Commission (the "SEC") a preliminary proxy statement comprising preliminary
proxy materials of the Partnership under the Exchange Act with respect to the
transactions contemplated by the Broward Agreement, and would thereafter use
its best efforts to respond to any comments of the SEC with respect thereto
and to cause a definitive proxy statement and proxy to be mailed to the
limited partners of the Partnership as promptly as practicable. The General
Partner is obligated to notify Comcast promptly of the receipt of any comments
from the SEC or its staff or any other governmental official and of any
request by the SEC or its staff or any other governmental official for
amendments or supplements to the preliminary proxy statement or for additional
information.
The General Partner also agreed with Comcast that this Proxy Statement would
include the affirmative recommendation of the General Partner that the limited
partners of the Partnership approve the transactions contemplated by the
Broward Agreement, and it does so. The General Partner also agreed with
Comcast that it would take all action necessary, in accordance with applicable
law and the Partnership Agreement, to conduct a vote of the limited partners
of the Partnership as promptly as practicable to consider the approval of the
Broward Agreement and the transactions contemplated thereby, and it has done
so. The General Partner also agreed with Comcast that, subject to compliance
with applicable law, it would use commercially reasonable efforts to solicit
from the limited partners of the Partnership proxies in favor of approval of
the transactions contemplated by the Broward Agreement and to take all other
commercially reasonable action necessary to secure the vote of the limited
partners required to effect the transactions contemplated by the Broward
Agreement, and it has done so. The General Partner also agreed with Comcast
that it would vote its limited partnership interests in favor of the sale of
the Broward System to Comcast pursuant to the terms and conditions of the
Broward Agreement, and it intends to do so.
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BROKERAGE FEE
As permitted by Section 2.2(n)(i) of the Partnership Agreement, which
provides for the payment by the Partnership of brokerage fees to The Jones
Group, Ltd. in an amount not to exceed a total of 2.5 percent of the sales
price of a cable television system sold by the Partnership to an unaffiliated
party, the Venture will pay The Jones Group, Ltd. a fee of $3,500,000 upon the
completion of the sale of the Broward System to Comcast as compensation to
such firm for acting as the Venture's broker and financial advisor in
connection with the sale of the Broward System to Comcast. The $3,500,000
brokerage fee represents 2.5 percent of the $140,000,000 sales price.
REASONS FOR THE TIMING OF THE SALE OF THE BROWARD SYSTEM
The decision to proceed with the sale of the Broward System at this time was
based upon the General Partner's determination early in 1997 that Fund 14-A
and the Partnership had achieved their investment objectives with respect to
the Broward System and that the Broward System should be offered for sale. In
accordance with this decision, an information package describing the Broward
System was prepared by The Jones Group, Ltd., and The Jones Group, Ltd. began
marketing the Broward System for sale. Upon request, the information package
about the Broward System was sent to four unaffiliated cable television system
operators, each of which is one of the nation's largest multiple cable
television system operators. Offers to purchase the Broward System were
received in mid-July 1997 from three of these four cable television system
operators. All of the various terms of these offers were analyzed by officers
of The Jones Group, Ltd. and were discussed with the Group Vice
President/Finance of the General Partner. Upon the conclusion of this
analysis, Comcast's bid, which offered the highest purchase price for the
Broward System and terms customary for transactions of this kind, was
accepted. A definitive agreement was negotiated at arm's-length between the
General Partner, representing the Venture and its two constituent
partnerships, and Comcast over a period of two months and the definitive
agreement was executed on October 3, 1997.
The Partnership has a finite legal existence of 17 years, over 10 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.
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 the responsibility to determine when the
Partnership's investment objectives had been achieved. The Broward System was
acquired by the Venture because, in the opinion of the General Partner at the
time of the Broward System's acquisition, it had the potential for capital
appreciation within a reasonable period of time. It is the General Partner's
opinion that during the almost 10 years that the Broward System has been held
by the Venture, the Partnership's investment objectives with respect to the
Broward System have been achieved. The General Partner used no specific
benchmarks or measurement tools in determining that the Partnership's
investment objectives have been achieved. The General Partner conducted a
subjective evaluation of a variety of factors including the length of the
holding period, the prospects for future growth as compared to the potential
risks, the cash on cash return to investors, the after-tax internal rate of
return to limited partners and the amount of gain to be recognized on the sale
of assets.
In evaluating whether now was the time for the Venture to sell the Broward
System, the General Partner generally considered the benefits to the limited
partners that might be derived by the Partnership's holding the Broward System
for an additional period of time. The General Partner assumed that the Broward
System probably would continue to appreciate in value and that as a result the
Broward System might be able to be sold for a greater sales price in the
future. The General Partner weighed these assumptions against the potential
risks
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to investors from a longer holding period, i.e., the risks that regulatory,
technology and/or competitive developments could cause the Broward System to
decline in value, which would result in a lesser 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 Broward
System's basic and premium services, thereby decreasing the value of the
Broward System. A longer holding period also 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 Broward System. The General
Partner's decision to sell the Broward 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 OF THE
BROWARD SYSTEM
The General Partner believes that the Venture's proposed sale of the Broward
System to Comcast on the terms and conditions of the Broward Agreement and the
proposed distributions of the net proceeds therefrom 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 Broward System to Comcast on
the terms and conditions of the Broward Agreement. In determining the fairness
of the proposed transaction, the General Partner's officers and directors
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 Broward System will provide limited partners with liquidity;
(ii) The sales price represents the fair market value of the Broward
System because the sales price was determined in an arm's-length
negotiation between the General Partner, representing the Venture, and
Comcast, an unaffiliated corporation;
(iii) The Venture has held the Broward System for almost 10 years, a
holding period beyond that originally anticipated;
(iv) The conditions and prospects of the cable television industry in
which the Venture is engaged, including the developing threat of
competition 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 Broward System; and
(v) The terms and conditions of the Broward Agreement by and between the
Venture and Comcast, including the fact that the sales price will be paid
in cash and the fact that Comcast's obligation to close is not contingent
upon its ability to obtain financing.
The General Partner's officers and directors reviewed the terms of the
Broward 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 OF THE BROWARD SYSTEM
Upon consummation of the sale of the Broward System, the proceeds of the
sale will be used to repay all of the Venture's indebtedness and a brokerage
fee totaling $3,500,000, and then the $96,831,351 of net sale proceeds will be
distributed to the two constituent partnerships of the Venture in proportion
to their ownership interests in the Venture. The Partnership accordingly will
receive 73 percent of such proceeds, estimated to total $70,583,138, and then
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 Broward
System pursuant to the terms of the Partnership Agreement. Based upon pro
forma financial information as of September 30, 1997, and assuming an
unadjusted sales price of $140,000,000, as a result of the sale of the Broward
System, the limited partners of the Partnership, as a group, will receive
$70,583,138. Limited partners will receive $270 for each $500 limited
partnership interest, or $540 for each $1,000 invested in the Partnership.
If the closing adjustments result in a lower sales price, however, the
amount of the net sale proceeds available for distribution to limited partners
will be reduced. If the sales price is reduced because the Broward
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System has less than 56,637 basic subscribers at closing, the sales price will
be reduced by an amount equal to $2,472 multiplied by the number by which the
system's basic subscribers are less than 56,637. It is possible that the sales
price could be reduced by as much as $7,000,000, from $140,000,000 to
$133,000,000, if the number of basic subscribers to the Broward System are
equal to or less than 53,805 at closing. In such event, the limited partners
of the Partnership, as a group, would receive only $65,480,638, or $251 for
each $500 limited partnership interest, or $502 for each $1,000 invested in
the Partnership. The Venture would have no obligation to close the sale of the
Broward System if the sales price were reduced below $133,000,000 due to this
basic subscriber closing adjustment. Because the General Partner expects that
the Broward System will have approximately 56,700 basic subscribers as of the
closing date of the system's sale to Comcast, the General Partner anticipates
that any closing adjustments relating to the number of the system's basic
subscribers will not reduce the sales price by a material amount.
The limited partners will be subject to federal income tax on the income
resulting from the sale of the Broward System. See the detailed information
below under the caption "Federal and State Income Tax Consequences."
After the sale of the Broward System and the distribution of the net
proceeds therefrom, the Venture will be liquidated and dissolved, most likely
in 1998. The Partnership will continue to own and operate the Surfside System
and the Littlerock System until such time as these systems are sold. The
Surfside System also is proposed to be sold. See "Proposal B--Sale of the
Surfside System." No definitive agreement has been executed for the sale of
the Littlerock System. Based upon the proposed sale prices for the Broward
System and the Surfside System and the most recent appraisal of the current
fair market value of the Littlerock System, the General Partner now estimates
that limited partners of the Partnership will not ultimately receive
distributions in an amount equal to the capital initially contributed to the
Partnership by the limited partners. Another vote of the limited partners will
be required in the future to approve the sale of the Littlerock System. After
the Littlerock System is sold, the Partnership will be liquidated and
dissolved.
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 Broward System. If the proposed transaction is approved by the
holders of a majority of limited partnership interests, all limited partners
of the Partnership will receive a distribution of the Partnership's portion 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.
It is anticipated that if the proposed transaction is not consummated, the
General Partner's current management team will continue to manage the Broward
System on behalf of the Venture until such time as the Broward System can be
sold. No other alternatives have been or currently are being considered.
PROPOSAL B--SALE OF THE SURFSIDE SYSTEM
GENERAL
Pursuant to the terms and conditions of an asset purchase agreement dated as
of November 4, 1997 (the "Surfside Agreement") by and between the Partnership
and Cable One, the Partnership has agreed to sell the Surfside System to Cable
One for a sales price of $51,500,000, subject to customary working capital
closing adjustments that may have the effect of increasing or decreasing the
sales price by a non-material amount. Cable One is a Delaware corporation
headquartered at 4742 North 24th Street, Phoenix, Arizona 85016. Cable One is
not affiliated with the Partnership or with the General Partner. The
Partnership has been informed that Cable One intends to finance its
acquisition of the Surfside System through cash on hand and borrowings.
Cable One and Time Warner Entertainment-Advance/Newhouse Partnership, a New
York general partnership ("Time Warner"), have entered into an asset exchange
agreement whereby, following the purchase by Cable One from the Partnership of
the assets of the Surfside System, Time Warner will acquire from Cable One the
assets of the Surfside System and Cable One will acquire from Time Warner the
assets of a certain cable television system owned by Time Warner. The
Partnership requested that Time Warner agree, and Time Warner has agreed, to
perform Cable One's obligations under the Surfside Agreement in the event that
Cable One fails to consummate the transactions contemplated by the Surfside
Agreement on or before June 30, 1998. This agreement among the Partnership,
Cable One and Time Warner is set forth in a performance agreement dated
November 4, 1997. Time Warner is not affiliated with the Partnership or with
the General Partner.
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THE CLOSING OF THE SURFSIDE SYSTEM'S SALE
The closing of the sale will occur on the last calendar day of the month in
which all of the closing conditions set forth in the Surfside Agreement have
been satisfied. It is anticipated that the closing will occur during the
second quarter of 1998. Because the closing is conditioned upon, among other
things, the approval of the limited partners of the Partnership and the
receipt of material third party consents necessary for the transfer of the
Surfside System to Cable One and/or Time Warner, there can be no assurance
that the proposed sale will occur. The Surfside Agreement may be terminated by
either the Partnership or Cable One if the closing is not consummated on or
before June 30, 1998. See "Proposed Sale of the Surfside System, Conditions to
Closing of the Surfside System's Sale" for a description of the material third
party consents necessary for the transfer of the Surfside System.
THE SURFSIDE SYSTEM
The Surfside System was acquired by the Partnership in September 1988 for a
purchase price of $48,000,000. In addition, at acquisition, the Partnership
reimbursed the seller approximately $3,000,000 for certain capital
expenditures made by the seller prior to the Partnership's acquisition of the
Surfside System. The Jones Group, Ltd. also received a brokerage fee of
approximately, $1,920,000, which represented 4 percent of the Surfside
System's purchase price, for acting as the Partnership's broker in connection
with the Surfside System's acquisition. Approximately $920,000 of this
brokerage fee was deferred and is payable by the Partnership upon its sale of
the Surfside System. At acquisition, the Surfside System consisted of
approximately 460 miles of cable plant passing approximately 26,000 homes and
serving approximately 19,600 basic equivalent subscribers. The basic
equivalent penetration rate of the Surfside System at acquisition was 75
percent. The $48,000,000 purchase price represented a purchase price per basic
equivalent subscriber of $2,449.
At the closing of the Partnership's sale of the Surfside System in the
second quarter of 1998, the Surfside System is expected to consist of
approximately 523 miles of cable plant passing approximately 26,400 homes and
serving approximately 25,800 basic equivalent subscribers. During the holding
period, the Partnership used approximately $8,458,900 in capital expenditures
to expand and/or upgrade the cable plant of the Surfside System, including
$1,248,071 of casualty insurance proceeds paid to the Partnership by its
insurance carrier following the partial destruction of the system's cable
plant by Hurricane Hugo. The basic equivalent penetration rate of the Surfside
System is now approximately 79 percent. In 1996, the Surfside System had
annual revenues of $9,900,000 and annual cash flow of $4,415,000. The Surfside
System is projected to have annual revenues in 1997 of $11,072,000 and annual
cash flow in 1997 of $4,682,000. Thus, the $51,500,000 sales price represents
11.6 times 1996 cash flow and 11 times projected 1997 cash flow, and the
$51,500,000 sales price represents a sales price per basic equivalent
subscriber of $1,996.
Cable One will purchase all of the tangible assets of the Surfside System
that are leased or owned by the Partnership 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. Cable One 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 Surfside
System's assets will be retained by the Partnership, 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 Partnership may be entitled.
SALES PRICE FOR THE SURFSIDE SYSTEM
Subject to the closing adjustment described below, the sales price for the
Surfside System is $51,500,000. The Surfside Agreement provides for closing
adjustments that may either increase or decrease the sales price by a non-
material amount.
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Cable One will be entitled to an amount equal to the aggregate of all
deposits of subscribers of the Surfside System for converters, decoders and
similar items and all payments to the Partnership for services to be rendered
by Cable One to subscribers of the Surfside System after the closing date and
for other services to be rendered by Cable One to other third parties after
the closing date for cable television commercials, channel leasing or other
services or rentals, to the extent such obligations of the Partnership
relating thereto are assumed by Cable One at the closing. The Partnership will
be entitled to an amount equal to the sum of 95 percent of the face amount of
all subscriber accounts receivable that are current or 60 days or less past
due as of the closing date plus 95 percent of the face amount of all
advertising accounts receivable that are current or 60 days or less past due
as of the closing date plus 80 percent of the face amount of all advertising
accounts receivable that are between 61 and 120 days past due as of the
closing date.
In addition, as of the closing date, the following expenses will be prorated
in accordance with generally accepted accounting principals, so that all
expenses for periods prior to the closing date shall be for the account of the
Partnership and all expenses for periods after the closing date shall be for
the account of Cable One: all payments and charges under the Surfside System's
franchises, licenses and contracts transferred to Cable One at closing; taxes
levied or assessed against any of the assets or payable with respect to cable
television service and related sales to system subscribers; charges for
utilities and other goods or services furnished to the system; copyright fees
based on signal carriage by the system; and all other items of expense
relating to the system. The Partnership and Cable One will not prorate any
items of expense payable under any of the assets excluded from the sale, all
of which shall remain and be solely for the account of the Partnership. In
addition, Cable One will be entitled at closing to an amount equal to the
economic value of all accrued vacation time permitted by Cable One to be
carried over by the employees of the system hired by Cable One.
If the aggregate number of subscribers as of the closing date is less than
25,500, Cable One will be entitled to an amount equal to the product of the
difference between 25,500 and the aggregate number of subscribers as of the
closing date multiplied by $2,020. The Partnership will have no obligation to
close the sale of the Surfside System if the sales price would be reduced more
than $1,414,000 due to this basic subscriber closing adjustment. Because the
General Partner expects that the Surfside System will have approximately
25,500 basic subscribers as of the closing date of the system's sale to Cable
One, the General Partner anticipates that any closing adjustments relating to
the number of the system's basic subscribers will not reduce the sales price
by a material amount.
Please see the Notes to Unaudited Pro Forma Consolidated 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 SURFSIDE SYSTEM'S SALE
The obligations of Cable One to consummate the closing are subject to the
satisfaction or waiver of the following conditions: (a) the representations
and warranties of the Partnership in the Surfside 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) the Partnership shall
have performed in all material respects all obligations and agreements and
shall have complied with all covenants in the Surfside Agreement or in any
related document to be performed or complied with by it at or before closing;
(c) Cable One shall have received a certificate executed by an executive
officer of the General Partner, dated as of the closing date, reasonably
satisfactory in form and substance to Cable One, certifying that the material
conditions to closing have been satisfied; (d) there shall be no legal
requirement and no judgment shall have been entered and not vacated by any
governmental authority of competent jurisdiction in any litigation or other
matter that seeks to enjoin, restrain, make illegal or prohibit consummation
of the sale of the Surfside System or require separation or divestiture by
Cable One or Time Warner of all or any significant portion of the assets of
the Surfside System after closing and there shall be no litigation pending or
threatened seeking any of the foregoing; (e) Cable One shall have received an
opinion of the general counsel of the General Partner addressed to Cable One
and Time Warner and dated as of the closing date in form and substance
reasonably satisfactory to Cable One and Time Warner; (f) Cable One shall have
received an opinion of the Partnership's FCC counsel, addressed to Cable One
and Time Warner and dated as of the closing date, in form and substance
reasonably satisfactory to Cable One; (g) all waiting periods under the HSR
Act applicable to the Surfside Agreement or the transactions contemplated
thereby shall have expired or been terminated; (h) Cable One shall have
received evidence in form and substance reasonably satisfactory to it
13
<PAGE>
that all material consents, approvals and authorizations have been obtained
consenting to, approving or authorizing the transfer and assignment of the
assets of the Surfside System first from the Partnership to Cable One and then
from Cable One to Time Warner; provided, however, that to the extent any
material consents, approvals and authorizations relate to consents by the FCC
to assignments of system licenses, this condition shall be deemed met if such
consents to assignment have been requested prior to the closing date and Time
Warner is entitled to operate such system licenses pursuant to conditional use
authorizations until the FCC's consent is received; (i) Cable One shall
received evidence satisfactory to it that all liens (other than permitted
liens) affecting or encumbering the assets of the Surfside System have been
terminated, released or waived, as appropriate, or shall have received
original, executed instruments in a form satisfactory to it effecting such
terminations, releases or waivers; (j) Cable One shall be reasonably satisfied
that any environmental audits or assessments conducted by it or Time Warner
with respect to the real property of the Surfside System have not indicated
the presence thereon or the likelihood of presence thereon, of hazardous
substances in amount or under conditions reasonably likely to lead to
imposition of material fines, penalties or compliance actions by applicable
governmental authorities; (k) the aggregate number of subscribers to the
Surfside System as of the closing date shall be not less than 24,800; (l)
Cable One shall have received a non-competition covenant, dated as of the
closing date, executed by both the Partnership and the General Partner; (m)
there shall exist no title defects with respect to the assets to be
transferred to Cable One at closing; (n) neither the FCC nor any franchising
governmental authority shall have announced any rate rollback relating to any
of the rates established by or for the Surfside System pursuant to the
Partnership's cost-of-service showings that is reasonably likely to have a
material adverse effect on the business or operations (financial or otherwise)
of the Surfside System; (o) the number of subscribers to the Surfside System
that subscribe to the basic plus service shall be at least 93 percent of the
total number of subscribers to the Surfside System; and (p) all of the
conditions to the obligation of Cable One to close the transactions
contemplated by its asset exchange agreement with Time Warner shall have been
satisfied or waived and Cable One shall be reasonably satisfied that the
exchange transactions contemplated by its exchange agreement with Time Warner
shall be consummated in all material respects immediately after and on the
same day as the closing in accordance with the terms of the asset exchange
agreement between Cable One and Time Warner.
The obligations of the Partnership to consummate the closing are subject to
the satisfaction or waiver of the following conditions: (a) the
representations and warranties of Cable One in the Surfside 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) Cable One shall
have performed in all material respects all obligations and agreements and
shall have complied with all covenants in the Surfside Agreement or in any
related document to be performed or complied with by it at or before closing;
(c) the Partnership shall have received a certificate executed by an executive
officer of Cable One, dated as of the closing date, reasonably satisfactory in
form and substance to the Partnership certifying that the material closing
conditions have been satisfied; (d) there shall be no legal requirement and no
judgment shall have been entered and not vacated by any governmental authority
of competent jurisdiction in any litigation or other matter that seeks to
enjoin, restrain, make illegal or prohibit consummation of the transactions
contemplated by the Surfside Agreement and there shall be no litigation
pending or threatened seeking any of the foregoing; (e) the Partnership shall
have received an opinion of the general counsel of Cable One dated as of the
closing date in form and substance reasonably satisfactory to it; (f) all
waiting periods under the HSR Act applicable to the Surfside Agreement or the
transactions contemplated thereby shall have expired or been terminated; (g)
the Partnership shall have received evidence in form and substance reasonably
satisfactory to it that all material consents, approvals and authorizations
have been obtained; (h) the Surfside Agreement and the transactions
contemplated thereby shall have been approved by the Partnership's limited
partners; provided, however, that this condition (h) shall be deemed satisfied
unless the Partnership provides notice to both Cable One and Time Warner
within 180 days after the execution of the Surfside Agreement that the
Partnership's limited partners have not approved the Surfside Agreement, in
which case either Cable One or the Partnership shall have the right to
terminate the Surfside Agreement without further obligation to the other; and
(i) as of the closing date, either the aggregate number of subscribers shall
not be less than 24,800 or Cable One shall have waived its right to an
adjustment to the sales price to the extent that the aggregate number of
subscribers is less than 24,800.
14
<PAGE>
BROKERAGE FEE
As permitted by Section 2.2(n)(i) of the Partnership Agreement, which
provides for the payment by the Partnership of brokerage fees to The Jones
Group, Ltd. in an amount not to exceed 2.5 percent of the sales price of a
cable television system sold by the Partnership to an unaffiliated party, the
Partnership will pay The Jones Group, Ltd. a fee of $1,287,500 upon the
completion of the sale of the Surfside System to Cable One as compensation to
such firm for acting as the Partnership's broker and financial advisor in
connection with the sale of the Surfside System to Cable One. The $1,287,500
brokerage fee represents 2.5 percent of the $51,500,000 sales price. In
addition, the Partnership will pay The Jones Group, Ltd. a deferred
acquisition fee of $920,000. The Jones Group, Ltd. earned an acquisition fee
of $1,920,000 upon the Partnership's acquisition of the Surfside System in
September 1988, $920,000 of which was deferred until the Surfside System's
sale.
REASONS FOR THE TIMING OF THE SALE OF THE SURFSIDE SYSTEM
The decision to proceed with the sale of the Surfside System at this time
was based upon the General Partner's conclusion late in 1996 that it would be
in the Partnership's best interests to sell the Surfside System now rather
than at a later date. Since acquisition, the Surfside System has experienced
intense competition from private cable television systems in its market and
the Surfside System is now experiencing competition in portions of its service
area from the local telephone company that has begun overbuilding portions of
the Surfside System. In addition, during the holding period, the Surfside
System was damaged by Hurricane Hugo and many homes lost in the storm were
never rebuilt. Nevertheless, during the holding period, the Surfside System
has grown from a system serving approximately 19,600 basic equivalent
subscribers to a system serving approximately 25,800 basic equivalent
subscribers. The Surfside System's cable plant mileage has increased from
approximately 460 miles of cable plant at acquisition to approximately 523
miles of cable plant expected at the time of the sale. At acquisition, the
Surfside System passed approximately 26,000 homes. The Surfside System is
expected to pass approximately 26,400 homes at closing.
In accordance with the General Partner's decision that it was time for the
Partnership to sell the Surfside System, an information package describing the
Surfside System was prepared by The Jones Group, Ltd., and The Jones Group,
Ltd. began marketing the Surfside System for sale. In April 1997, upon their
request, the information package describing the system was sent to three
unaffiliated cable television system operators, each of which are multiple
cable television system operators. Of the three original prospects, only Time
Warner pursued the acquisition and submitted an offer for the Surfside System.
Time Warner initially offered $50,000,000 for the Surfside System and, through
negotiations with representatives of the General Partner and The Jones Group,
Ltd., Time Warner ultimately agreed to pay $51,500,000 for the Surfside
System. Because Time Warner did not want to purchase the Surfside System
directly for cash, Cable One agreed to become the actual purchaser of the
Surfside System and to immediately thereafter trade it to Time Warner to
effect a like-kind exchange of assets under Section 1031 of the Internal
Revenue Code, whereby Cable One will transfer to Time Warner the Surfside
System acquired by Cable One from the Partnership and Time Warner will
transfer to Cable One the assets of another cable television system owned by
Time Warner. A definitive agreement was negotiated at arm's-length between the
General Partner, representing the Partnership, and both Cable One and Time
Warner as buyers over a period of several months. The definitive agreement was
executed on November 4, 1997.
The Partnership has a finite legal existence of 17 years, over 10 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.
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<PAGE>
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 Surfside System was
acquired by the Partnership because, in the opinion of the General Partner at
the time of the Surfside System's acquisition, it had the potential for
capital appreciation within a reasonable period of time. Due to the
competition that the system has faced during the holding period, the permanent
loss of homes due to Hurricane Hugo, the rate re-regulation of the cable
industry during the early 1990s and the general decline in the values of cable
television systems since the Surfside System was acquired in September 1988,
the Surfside System has not measurably appreciated in value during the holding
period. The General Partner determined nevertheless that now rather than later
was the appropriate time for the Partnership to sell the Surfside System. The
General Partner used no specific benchmarks or measurement tools in
determining that now was the time for the Partnership to sell the Surfside
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 size and/or value of the system.
In evaluating whether now was the time for the Partnership to sell the
Surfside System, the General Partner generally considered the benefits to the
limited partners that might be derived by the Partnership's holding the
Surfside System for an additional period of time. The General Partner assumed
that the Surfside System may continue to appreciate in value and as a result
the Surfside System might 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
Surfside System to decline in value, which would result in a lesser 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 Surfside System's basic and premium services, thereby
decreasing the value of the Surfside System. As discussed above, the Surfside
System has faced and is currently facing competition from actual and potential
overbuilders 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 Surfside System. The
General Partner's decision to sell the Surfside 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 OF THE
SURFSIDE SYSTEM
The General Partner believes that the Partnership's proposed sale of the
Surfside System to Cable One on the terms and conditions of the Surfside
Agreement and the proposed distribution of the net sale proceeds therefrom are
fair to all limited partners of the Partnership, and it recommends that the
limited partners of the Partnership approve the Partnership sale of the
Surfside System to Cable One on the terms and conditions of the Surfside
Agreement. In determining the fairness of the proposed transaction, the
General Partner's officers and directors 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
Surfside System will provide limited partners with liquidity;
(ii) the sales price represents the fair market value of the Surfside System
because the sales price was determined in an arm's-length negotiation between
the General Partner, representing the Partnership, and Cable One and Time
Warner, unaffiliated corporations;
(iii) the Partnership has held the Surfside System for over nine years, a
holding period beyond that originally anticipated;
16
<PAGE>
(iv) the conditions and prospects of the cable television industry in which
the Partnership 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 Partnership if it were to
continue to operate and upgrade the Surfside System; and
(v) the terms and conditions of the Surfside Agreement by and between the
Partnership and Cable One, including the fact that the sales price will be
paid in cash and the fact that Cable One's obligation to close is not
contingent upon its ability to obtain financing.
The General Partner's officers and directors reviewed the terms of the
Surfside 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 OF THE SURFSIDE SYSTEM
Upon consummation of the sale of the Surfside System, the proceeds of the
sale will be used to repay all of the amounts borrowed under the Partnership's
credit facility and certain capital leases, pay a brokerage fee and a deferred
acquisition fee and then the $34,444,891 of net sale proceeds will be
distributed by the Partnership to its limited partners of record as of the
closing date of the sale of the Surfside System pursuant to the terms of the
Partnership Agreement. Based upon pro forma financial information as of
September 30, 1997, and assuming an unadjusted sales price of $51,500,000, as
a result of the sale of the Surfside System, the limited partners of the
Partnership, as a group, will receive $34,444,891. Limited partners will
receive $132 for each $500 limited partnership interest, or $264 for each
$1,000 invested in the Partnership.
The limited partners will be subject to federal and state income tax on the
income resulting from the sale of the Surfside System. See the detailed
information below under the caption "Federal and State Income Tax
Consequences."
After the sale of the Surfside System and the distribution of the net
proceeds therefrom, the Partnership will continue to own and operate the
Littlerock System until such time as this system is sold. No definitive
agreement has been executed for the sale of the Littlerock System. Based upon
the proposed sale prices for the Venture's Broward System and the
Partnership's Surfside System and the most recent appraisal of the current
fair market value of the Littlerock System, the General Partner now estimates
that limited partners of the Partnership will not ultimately receive
distributions in an amount equal to the capital initially contributed to the
Partnership by the limited partners. Another vote of the limited partners will
be required in the future to approve the sale of the Littlerock System. After
the Littlerock System is sold, the Partnership will be liquidated and
dissolved.
Neither Colorado law nor the Partnership Agreement afford dissenters' or
appraisal rights to limited partners in connection with the Partnership's
proposed sale of the Surfside System. If the proposed transaction is approved
by the holders of a majority of limited partnership interests, all limited
partners of the Partnership will receive a distribution of the net sale
proceeds in accordance with procedures prescribed by the Partnership 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 Surfside
System on behalf of the Partnership until such time as the Surfside System can
be sold. No other alternatives have been or currently are being considered.
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<PAGE>
FEDERAL AND STATE INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transactions is to inform the limited partners of the federal and
state income tax consequences to the Partnership and to its limited partners
arising from the proposed sales of the Broward System and the Surfside System.
These tax consequences are expected to be incurred in 1998, the year in which
the sales are 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.
By the expected date of the proposed system sales in 1998, most of the
limited partners will have received certain tax benefits from their investment
in the Partnership. Assuming maximum federal income tax rates and no other
sources of passive income, original limited partners of the Partnership will
have received $1,698,795 in tax benefits from Partnership losses ($13 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 BROWARD SYSTEM SALE
The 1998 sale of the Broward System will generate Partnership gain, which
will allocable to the limited partners in an amount approximating $69,826,640
($534 per $1,000 invested). The General Partner estimates that all of the gain
will be characterized as ordinary income from Internal Revenue Code (IRC)
Section 1245 recapture of depreciation and amortization on Partnership
operating assets. It is not anticipated that any of the allocable gain will be
treated as long term capital gain under IRC Section 1231. Some or all of this
allocable gain may be offset by passive loss carryforwards of the limited
partners, which is discussed in more detail below.
THE SURFSIDE SYSTEM SALE
The 1998 sale of the Surfside System will generate Partnership gain, which
will be allocable to the limited partners in an amount approximating
$19,775,454 ($152 per $1,000 invested). The General Partner estimates that all
of the gain will be characterized as ordinary income from IRC Section 1245
recapture of depreciation and amortization on Partnership operating assets. It
is not anticipated that any of the allocable gain will be treated as long term
capital gain under IRC Section 1231. Some or all of this allocable gain may be
offset by passive loss carryforwards of the limited partners, which is
discussed in more detail below.
APPLICATION OF PASSIVE LOSS CARRYFORWARDS
The Tax Reform Act of 1986 enacted a limitation on a limited partners'
ability to currently deduct allocable partnership losses, which were deemed to
be passive losses. The law phased in the disallowance of passive loss
deductions until 1990, when no passive losses were allowable except to the
extent of passive income or a disposition of the passive activity. The proper
application of these loss limitation rules should have resulted in the
existence of passive loss carryforwards for the Partnership's limited
partners. These potential passive loss carryforwards can be deducted in the
current year to offset the allocable Partnership gains detailed above.
The General Partner estimates that the Partnership has generated potential
passive loss carryforwards of $88,798,296 ($680 per $1,000 invested) which may
be available for deduction in 1998. The carryforward amount is calculated by
applying the passive loss limitations to historical partnership losses and
assuming that the limited partners of the Partnership would not have utilized
prior year limited passive losses on account of other sources of passive
income. The availability of these loss carryforwards depends on the particular
tax history of each limited partner. Partners that have utilized some or all
of prior Partnership losses limited by the passive loss rules will have
deductible losses that vary accordingly.
Assuming the 31 percent rate applies to ordinary income, a limited partner
with the maximum available passive loss carryforwards will be subject to 1998
federal income taxes of approximately $1 per $1,000 invested in the
Partnership.
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<PAGE>
SECONDARY MARKET PURCHASERS
Limited partners that have recently acquired their partnership interests in
the limited partnership secondary market will have allocable income from the
cable system sales 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. However,
the new investor will not have the old investor's passive loss carryforwards
or tax basis in the Partnership.
Newer investors in the Partnership will not have the passive loss
carryforwards reported above and will likely have a greater reportable net
taxable income from the system sales than investors who have held their
limited partnership interests for a longer period of time. Also, 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 pertinent in the
year when they sell their limited partnership interests or when the
Partnership is liquidated.
TAX WITHHOLDING ON SALE PROCEEDS
Limited partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a federal withholding tax on their share of
the Partnership's income from the system sales. The withholding rates are 39.6
percent for individual partners and 35 percent for corporate partners. The tax
withheld will be remitted to the Internal Revenue Service and the foreign
persons will receive a credit on their 1998 U.S. tax return for the amount of
the tax withheld by the Partnership. The withheld tax will be treated as a
distribution to the limited partner.
The sale of the Surfside System will require limited partner reporting to
the state of South Carolina. The General Partner is required by state law to
withhold 5 percent of each partner's allocable income occurring from sale
activity within South Carolina without consideration of loss carryforwards.
This withholding requirement applies to individual and tax exempt entities
such as trusts and IRAs. Limited partners will need to file non-resident state
tax returns to compute the appropriate state tax liability. Withheld taxes,
which will be reported on specified forms to limited partners in January 1999,
will apply against the computed liability. The General Partner anticipates
that most partners will likely receive a refund from this reporting process.
Detailed South Carolina reporting instructions and blank forms will be
provided to limited partners in their 1999 annual tax reporting package, which
is mailed to limited partners in March of each year.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP, THE GENERAL
PARTNER AND THE PURCHASERS OF THE SYSTEMS
The principal executive offices of the Partnership and the General Partner
are located at 9697 East Mineral Avenue, Englewood, Colorado 80112, and their
telephone number is (303) 792-3111. The principal executive offices of Comcast
are located at 1500 Market Street, Philadelphia, Pennsylvania 19102. The
principal executive offices of Cable One are located at 4742 North 24th
Street, Phoenix, Arizona 85016.
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 SEC 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 SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the following regional offices of the SEC: 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 SEC also maintains a
World Wide Web site that contains reports,
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proxy statements and information statements of registrants (including the
Partnership) that file electronically with the SEC at http://www.sec.gov. The
Partnership will continue in existence and will continue to be subject to the
informational reporting requirements of the Exchange Act after the sales of
the Broward System and the Surfside System. The Partnership's registration and
reporting requirements under the Exchange Act will not be terminated until the
dissolution of the Partnership after the sale of the Partnership's Littlerock
System.
USE OF PROCEEDS FROM THE BROWARD SYSTEM'S SALE
The following is a brief summary of the Venture's estimated use of proceeds
and of the Partnership's estimated use of its portion of the proceeds from the
sale of the Broward System. All of the following selected financial
information is based upon amounts as of September 30, 1997 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 system is set forth below
under the captions "Unaudited Pro Forma Consolidated Financial Information."
All limited partners are encouraged to review carefully the unaudited pro
forma consolidated financial statements and notes thereto.
If the holders of a majority of limited partnership interests of the
Partnership approve the proposed sale of the Broward System and the
transaction is closed, the Venture will pay all of its indebtedness and a
brokerage fee, and $96,831,351 of net sale proceeds will be distributed to the
two constituent partnerships of the Venture in proportion to their ownership
interests in the Venture. The Partnership accordingly will receive 73 percent
of such proceeds, estimated to total $70,583,138, and then 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 Broward System and
pursuant to the terms of the Partnership Agreement. The estimated uses of the
sale proceeds are as follows:
<TABLE>
<S> <C>
Contract Sales Price of the Broward System........................ $140,000,000
Add: Cash on Hand................................................ 446,090
Less: Estimated Net Closing Adjustments........................... (543,400)
Repayment of Debt........................................... (39,571,339)
Brokerage Fee............................................... (3,500,000)
------------
Cash Available for Distribution by the Venture.............. 96,831,351
Cash Distributed to Fund 14-A............................... 26,248,213
------------
Cash Available for Distribution by the Partnership to its
Limited Partners........................................ $ 70,583,138
============
</TABLE>
Based on financial information available at September 30, 1997, the
following table presents the estimated results of the Partnership when the
sale of the Broward System is completed:
<TABLE>
<S> <C>
Dollar Amount Raised............................................ $130,676,500
Number of Cable Television Systems Purchased Directly........... Two
Number of Cable Television Systems Purchased Indirectly......... One
Date of Closing of Offering..................................... August 1987
</TABLE>
<TABLE>
<S> <C>
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations.............................................. $(727)
--from recapture............................................... $ 549
Capital Gain (Loss)............................................ $ 3
Cash Distributions to Investors
Source (on GAAP basis)
--investment income............................................ $ -0-
--return of capital............................................ $ 540
Source (on cash basis)
--sales........................................................ $ 540
</TABLE>
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USE OF PROCEEDS FROM THE SURFSIDE SYSTEM'S SALE
The following is a brief summary of the Partnership's estimated use of its
portion of the proceeds from the sale of the Surfside System. All of the
following selected financial information is based upon amounts as of September
30, 1997 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 system is set forth below under the captions "Unaudited Pro Forma
Consolidated Financial Information." All limited partners are encouraged to
review carefully the unaudited pro forma consolidated financial statements and
notes thereto.
If the holders of a majority of limited partnership interests of the
Partnership approve the proposed sale of the Surfside System and the
transaction is closed, the Partnership will repay all of the amounts borrowed
under its credit facility and certain capital leases, pay a brokerage fee and
a deferred acquisition fee and then the $34,444,891 of net sale proceeds will
be distributed to the Partnership's limited partners of record as of the
closing date of the sale of the Surfside System and pursuant to the terms of
the Partnership Agreement. The estimated uses of the sale proceeds are as
follows:
<TABLE>
<S> <C>
Contract Sales Price of the Surfside System........................ $51,500,000
Less: Estimated Net Closing Adjustments............................ (345,980)
Repayment of Debt............................................ (14,400,000)
Repayment of Capital Leases.................................. (101,629)
Deferred Acquisition Fee..................................... (920,000)
Brokerage Fee................................................ (1,287,500)
-----------
Cash Available for Distribution by the Partnership to its
Limited Partners....................................... $34,444,891
===========
</TABLE>
Based on financial information available at September 30, 1997, the
following table presents the estimated results of the Partnership when the
sale of the Surfside System is completed:
<TABLE>
<S> <C>
Dollar Amount Raised................................................. $130,676,500
Number of Cable Television Systems Purchased Directly................ Two
Number of Cable Television Systems Purchased Indirectly.............. One
Date of Closing of Offering.......................................... August 1987
Tax and Distribution Data per $1,000 of Limited Partnership Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations............................................ $(717)
--from recapture............................................. $ 152
Capital Gain (Loss).......................................... $ -0-
Cash Distributions to Investors
Source (on GAAP basis)
--investment income.......................................... $ -0-
--return of capital.......................................... $ 264
Source (on cash basis)
--sales...................................................... $ 264
</TABLE>
21
<PAGE>
INDEX OF UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Unaudited Pro Forma Consolidated Financial Information
Assuming the Approval of Proposal A Only--
Sale of the Broward System.............................................. 23-27
Unaudited Pro Forma Consolidated Financial Information
Assuming the Approval of Proposal B Only--
Sale of the Surfside System............................................. 28-32
Unaudited Pro Forma Consolidated Financial Information
Assuming the Approval of Proposals A and B--
Sale of the Broward System and Sale of the Surfside System.............. 33-38
</TABLE>
22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
OF CABLE TV FUND 14-B, LTD.
(ASSUMING THE APPROVAL OF PROPOSAL A ONLY--SALE OF THE BROWARD SYSTEM)
The following unaudited pro forma consolidated financial statements assume
that as of September 30, 1997, the Venture had sold the Broward System for
$140,000,000. The funds available to the Venture from the Broward System's
sale, adjusting for the estimated net closing adjustments of the Broward
System, are expected to total approximately $139,371,452. Such funds will be
used to repay all indebtedness of the Venture and a brokerage fee, and the
balance will be distributed to the two constituent partnerships of the Venture
pursuant to their percentage ownership interests in the Venture and then each
partnership will distribute its share of the net sales proceeds pursuant to
the terms of their partnership agreements. The Partnership will receive
$70,583,138 from the Venture from the Broward System's sale. Pursuant to the
terms of the Partnership Agreement, the Partnership will distribute this
amount to its limited partners as a partial return of capital initially
contributed to the Partnership by the limited partners.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the appropriate notes to the unaudited pro forma consolidated
financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
IS BASED UPON AMOUNTS AS OF SEPTEMBER 30, 1997 AND CERTAIN ESTIMATES OF
LIABILITIES AT CLOSING. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
23
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(ASSUMING THE APPROVAL OF PROPOSAL A ONLY--SALE OF THE BROWARD SYSTEM)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents............ $ 489,312 $ 96,385,261 $ 96,874,573
Trade Receivables, net............... 1,450,884 (933,031) 517,853
Investment in Cable Television
Properties:
Property, plant and equipment, net. 49,716,560 (28,498,878) 21,217,682
Franchise costs and other
intangibles, net.................. 47,918,117 (24,443,364) 23,474,753
------------ ------------ ------------
Total investment in cable
television properties........... 97,634,677 (52,942,242) 44,692,435
Deposits, Prepaid Expenses and
Deferred Charges.................... 798,101 (669,633) 128,468
------------ ------------ ------------
Total Assets..................... $100,372,974 $ 41,840,355 $142,213,329
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt............................... $ 54,108,713 $(39,571,339) $ 14,537,374
General Partner advances........... 475,162 -- 475,162
Deferred brokerage fee............. 920,000 -- 920,000
Trade accounts payable and accrued
liabilities....................... 2,172,916 (1,662,644) 510,272
Subscriber prepayments............. 577,554 (483,420) 94,134
Distribution payable to joint
venture partner................... -- 26,248,213 26,248,213
Accrued distribution to limited
partners.......................... -- 70,583,138 70,583,138
------------ ------------ ------------
Total Liabilities................ 58,254,345 55,113,948 113,368,293
------------ ------------ ------------
Minority Interest in Joint Venture... 3,500,884 (3,353,990) 146,894
Partners' Capital (Deficit):
General Partner.................... (739,918) (10,444) (750,362)
Limited Partners................... 39,357,663 (9,909,159) 29,448,504
------------ ------------ ------------
Total Partners' Capital
(Deficit)....................... 38,617,745 (9,919,603) 28,698,142
------------ ------------ ------------
Total Liabilities and Partners'
Capital (Deficit)................. $100,372,974 $ 41,840,355 $142,213,329
============ ============ ============
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated balance sheet.
24
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMING THE APPROVAL OF PROPOSAL A ONLY--SALE OF THE BROWARD SYSTEM)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ -----------
<S> <C> <C> <C>
REVENUES............................... $37,768,924 $(25,519,105) $12,249,819
COSTS AND EXPENSES:
Operating expenses................... 21,066,729 (13,997,847) 7,068,882
Management fees and allocated
overhead from
the General Partner................. 4,392,877 (2,939,840) 1,453,037
Depreciation and Amortization........ 13,404,578 (8,281,459) 5,123,119
----------- ------------ -----------
OPERATING LOSS......................... (1,095,260) (299,959) (1,395,219)
----------- ------------ -----------
OTHER INCOME (EXPENSE):
Interest expense..................... (4,088,951) 2,779,854 (1,309,097)
Other, net........................... (101,084) 38,902 (62,182)
----------- ------------ -----------
Total other income (expense), net.. (4,190,035) 2,818,756 (1,371,279)
----------- ------------ -----------
CONSOLIDATED LOSS BEFORE MINORITY
INTEREST.............................. $(5,285,295) $ 2,518,797 $(2,766,498)
MINORITY INTEREST IN CONSOLIDATED LOSS. 815,252 (388,522) 426,730
NET LOSS............................... (4,470,043) 2,130,275 (2,339,768)
=========== ============ ===========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST.............................. $ (16.93) $ (8.86)
=========== ===========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated statement.
25
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMING THE APPROVAL OF PROPOSAL A ONLY--SALE OF THE BROWARD SYSTEM)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ -----------
<S> <C> <C> <C>
REVENUES............................... $30,635,555 $(20,596,170) $10,039,385
COSTS AND EXPENSES:
Operating expenses................... 17,066,669 (11,441,295) 5,625,374
Management fees and allocated
overhead from the General Partner... 3,318,269 (2,200,437) 1,117,832
Depreciation and amortization........ 10,389,159 (6,450,202) 3,938,957
----------- ------------ -----------
OPERATING LOSS......................... (138,542) (504,236) (642,778)
----------- ------------ -----------
OTHER INCOME (EXPENSE):
Interest expense..................... (2,939,157) 2,069,152 (870,005)
Other, net........................... 20,137 (32,331) (12,194)
----------- ------------ -----------
Total other income (expense), net.. (2,919,020) 2,036,821 (882,199)
----------- ------------ -----------
CONSOLIDATED LOSS BEFORE MINORITY
INTEREST.............................. $(3,057,562) $ 1,532,585 $(1,524,977)
MINORITY INTEREST IN CONSOLIDATED LOSS. 462,936 (232,044) 230,892
NET LOSS............................... (2,594,626) 1,300,541 (1,294,085)
=========== ============ ===========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST.............................. $ (9.83) $ (4.90)
=========== ===========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated statement.
26
<PAGE>
CABLE TV FUND 14-B, LTD.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(ASSUMING THE APPROVAL OF PROPOSAL A ONLY--SALE OF THE BROWARD SYSTEM)
1) The accompanying unaudited consolidated financial statements include 100
percent of the accounts of the Partnership and those of the Venture reduced by
Fund 14-A's 27 percent minority interest in the Venture. All interpartnership
accounts and transactions have been eliminated.
2) The Partnership has a 73 percent ownership interest in the Venture
through capital contributions made in 1988. The following calculations present
the sale of the Broward System by the Venture and the resulting estimated
distributions expected to be received by the Partnership.
3) The unaudited pro forma consolidated balance sheet of the Partnership
assumes that the Venture had sold the Broward System for $140,000,000 as of
September 30, 1997. The unaudited pro forma consolidated statements of
operations of the Partnership assume that the Venture had sold the Broward
System for $140,000,000 as of January 1, 1996.
4) The Partnership will receive $70,583,138 from the Venture's sale of the
Broward System, which the Partnership in turn will distribute to its limited
partners. The limited partner distribution of $70,583,138 represents $270 for
each $500 limited partnership interest or $540 for each $1,000 invested in the
Partnership.
5) The estimated gain recognized from the sale of the Broward System and
corresponding estimated distribution to limited partners as of September 30,
1997 has been computed as follows:
GAIN ON SALE OF THE BROWARD SYSTEM:
<TABLE>
<S> <C>
Contract sales price of the Broward System....................... $140,000,000
Less: Net book value of investment in the Broward System at
September 30, 1997......................................... (52,942,242)
------------
Gain on sale of the Broward System............................... $ 87,057,758
============
DISTRIBUTION TO PARTNERS:
Contract sales price of the Broward System....................... $140,000,000
Add: Trade receivables, net..................................... 933,031
Prepaid expenses........................................... 669,633
Less: Trade accounts payable and accrued liabilities............. (1,662,644)
Subscriber prepayments..................................... (483,420)
------------
Adjusted cash received........................................... 139,456,600
Less: Outstanding debt to third parties.......................... (39,571,339)
Brokerage fee to The Jones Group, Ltd...................... (3,500,000)
Add: Cash on hand............................................... 446,090
------------
Cash Available for Distribution by the Venture................... 96,831,351
Cash Distributed to Fund 14-A.................................... 26,248,213
------------
Cash Available for Distribution by the Partnership to its Limited
Partners........................................................ $ 70,583,138
============
</TABLE>
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
OF CABLE TV FUND 14-B, LTD.
(ASSUMING THE APPROVAL OF PROPOSAL B ONLY--SALE OF THE SURFSIDE SYSTEM)
The following unaudited pro forma consolidated financial statements assume
that as of September 30, 1997, the Partnership had sold the Surfside System
for $51,500,000. The funds available to the Partnership from the Surfside
System's sale, adjusting for the estimated net closing adjustments of the
Surfside System, are expected to total $51,154,020. Such funds will be used to
repay a portion of the amount owed by the Partnership under its credit
facility and certain capital leases, pay a brokerage fee and a deferred
acquisition fee, and the balance will be distributed to the Partnership's
limited partners as a partial return of capital initially contributed to the
Partnership by the limited partners.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the appropriate notes to the unaudited pro forma consolidated
financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
IS BASED UPON AMOUNTS AS OF SEPTEMBER 30, 1997 AND CERTAIN ESTIMATES OF
LIABILITIES AT CLOSING. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
28
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(ASSUMING THE APPROVAL OF PROPOSAL B ONLY--SALE OF THE SURFSIDE SYSTEM)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents............ $ 489,312 $ 34,444,891 $ 34,934,203
Trade Receivables, net............... 1,450,884 (285,743) 1,165,141
Investment in Cable Television
Properties:
Property, plant and equipment, net. 49,716,560 (16,859,146) 32,857,414
Franchise costs and other
intangibles, net.................. 47,918,117 (22,611,844) 25,306,273
------------ ------------ ------------
Total investment in cable
television properties........... 97,634,677 (39,470,990) 58,163,687
Deposits, Prepaid Expenses and
Deferred Charges.................... 798,101 (102,187) 695,914
------------ ------------ ------------
Total Assets..................... $100,372,974 $ (5,414,029) $ 94,958,945
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt............................... $ 54,108,713 $(14,501,629) $ 39,607,084
General Partner advances........... 475,162 -- 475,162
Deferred brokerage fee............. 920,000 (920,000) --
Trade accounts payable and accrued
liabilities....................... 2,172,916 (643,595) 1,529,321
Subscriber prepayments............. 577,554 (90,315) 487,239
Distribution payable to joint
venture partner................... -- -- --
Accrued distribution to limited
partners.......................... -- 34,444,891 34,444,891
------------ ------------ ------------
Total Liabilities................ 58,254,345 18,289,352 76,543,697
------------ ------------ ------------
Minority Interest in Joint Venture... 3,500,884 (226,570) 3,274,314
Partners' Capital (Deficit):
General Partner.................... (739,918) (18,145) (758,063)
Limited Partners................... 39,357,663 (23,458,666) 15,898,997
------------ ------------ ------------
Total Partners' Capital
(Deficit)....................... 38,617,745 (23,476,811) 15,140,934
------------ ------------ ------------
Total Liabilities and Partners'
Capital (Deficit)................. $100,372,974 $ (5,414,029) $ 94,958,945
============ ============ ============
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated balance sheet.
29
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMING THE APPROVAL OF PROPOSAL B ONLY--SALE OF THE SURFSIDE SYSTEM)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES................................ $37,768,924 $(9,900,156) $27,868,768
COSTS AND EXPENSES:
Operating Expenses ................... 21,066,729 (5,589,033) 15,477,696
Management fees and allocated overhead
from
the General Partner.................. 4,392,877 (1,136,953) 3,255,924
Depreciation and Amortization......... 13,404,578 (4,329,395) 9,075,183
----------- ----------- -----------
OPERATING LOSS.......................... (1,095,260) 1,155,225 59,965
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense ..................... (4,088,951) 1,080,358 (3,008,593)
Other, net............................ (101,084) 63,344 (37,740)
----------- ----------- -----------
Total other income (expense), net... (4,190,035) 1,143,702 (3,046,333)
----------- ----------- -----------
CONSOLIDATED LOSS BEFORE MINORITY
INTEREST............................... $(5,285,295) $ 2,298,927 $(2,986,368)
MINORITY INTEREST IN CONSOLIDATED LOSS.. 815,252 (354,607) 460,645
NET LOSS................................ (4,470,043) 1,944,320 (2,525,723)
=========== =========== ===========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST............................... $ (16.93) $ (9.57)
=========== ===========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated statement.
30
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMING THE APPROVAL OF PROPOSAL B ONLY--SALE OF THE SURFSIDE SYSTEM)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES................................ $30,635,555 $(8,146,592) $22,488,963
COSTS AND EXPENSES:
Operating expenses.................... 17,066,669 (4,681,103) 12,385,566
Management fees and allocated overhead
from the General Partner............. 3,318,269 (864,962) 2,453,307
Depreciation and amortization......... 10,389,159 (3,349,145) 7,040,014
----------- ----------- -----------
OPERATING LOSS.......................... (138,542) 748,618 610,076
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense...................... (2,939,157) 766,994 (2,172,163)
Other, net............................ 20,137 (19,182) 955
----------- ----------- -----------
Total other income (expense), net... (2,919,020) 747,812 (2,171,208)
----------- ----------- -----------
CONSOLIDATED LOSS BEFORE MINORITY
INTEREST............................... $(3,057,562) $ 1,496,430 $(1,561,132)
MINORITY INTEREST IN CONSOLIDATED LOSS.. 462,936 (226,570) 236,366
NET LOSS................................ (2,594,626) 1,269,860 (1,324,766)
=========== =========== ===========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST............................... $ (9.83) $ (5.02)
=========== ===========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated statement.
31
<PAGE>
CABLE TV FUND 14-B, LTD.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(ASSUMING THE APPROVAL OF PROPOSAL B ONLY--SALE OF THE SURFSIDE SYSTEM)
1) The accompanying unaudited consolidated financial statements include 100
percent of the accounts of the Partnership and those of the Venture reduced by
Fund 14-A's 27 percent minority interest in the Venture. All interpartnership
accounts and transactions have been eliminated.
2) The Partnership has a 73 percent ownership interest in the Venture
through capital contributions made in 1988. The following calculations present
the sale of the Surfside System by the Partnership and the resulting estimated
distributions expected to be received by the Partnership.
3) The unaudited pro forma consolidated balance sheet of the Partnership
assumes that the Partnership had sold the Surfside System for $51,500,000 as
of September 30, 1997. The unaudited pro forma consolidated statements of
operations of the Partnership assume that the Partnership had sold the
Surfside System for $51,500,000 as of January 1, 1996.
4) The Partnership will have $34,444,891 of net sale proceeds from the sale
of the Surfside System, which it will distribute to its limited partners. The
limited partnership distribution of $34,444,891 represents $132 for each $500
limited partnership interest or $264 for each $1,000 invested in the
Partnership.
5) The estimated gain recognized from the sale of the Surfside System and
corresponding estimated distribution to limited partners as of September 30,
1997 has been computed as follows:
GAIN ON SALE OF THE SURFSIDE SYSTEM:
<TABLE>
<S> <C>
Contract sales price of the Surfside System...................... $ 51,500,000
Less: Net book value of investment in the Surfside System at
September 30, 1997........................................ (39,470,990)
------------
Gain on sale of the Surfside System.............................. $ 12,029,010
============
DISTRIBUTION TO PARTNERS:
Contract sales price of the Surfside System...................... $ 51,500,000
Add: Trade receivables, net.................................... 285,743
Prepaid expenses.......................................... 102,187
Less: Trade accounts payable and accrued liabilities............ (643,595)
Subscribers prepayments................................... (90,315)
------------
Adjusted cash received........................................... 51,154,020
Less: Outstanding debt to third parties......................... (14,400,000)
Capital lease repayments.................................. (101,629)
Brokerage fee............................................. (1,287,500)
Deferred acquisition fee.................................. (920,000)
------------
Cash Available for Distribution by the Partnership to its Limited
Partners........................................................ $ 34,444,891
============
</TABLE>
32
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
OF CABLE TV FUND 14-B, LTD.
(ASSUMING THE APPROVAL OF PROPOSALS A AND B--
SALE OF THE BROWARD SYSTEM AND SALE OF THE SURFSIDE SYSTEM)
The following unaudited pro forma consolidated financial statements assume
that as of September 30, 1997, the Venture had sold the Broward System for
$140,000,000 and the Partnership had sold the Surfside System for $51,500,000.
The funds available to the Venture from the Broward System's sale, adjusting
for the estimated net closing adjustments of the Broward System, are expected
to total approximately $139,456,600. Such funds will be used to repay all
indebtedness of the Venture and a brokerage fee, and the balance will be
distributed to the two constituent partnerships of the Venture pursuant to
their percentage ownership interests in the Venture and then each partnership
will distribute its share of the net sales proceeds pursuant to the terms of
their partnership agreements. The Partnership will receive $70,583,138 from
the Venture from the Broward System's sale. Pursuant to the terms of the
Partnership Agreement, the Partnership will distribute this amount to its
limited partners as a partial return of capital initially contributed to the
Partnership by the limited partners. The funds available to the Partnership
from the Surfside System's sale, adjusting for the estimated net closing
adjustments of the Surfside System, are expected to total $51,154,020. Such
funds will be used to repay a portion of the amount owed by the Partnership
under its credit facility and certain capital leases, pay a brokerage fee and
a deferred acquisition fee, and the balance will be distributed to the
Partnership's limited partners as a partial return of capital initially
contributed to the Partnership by the limited partners.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the appropriate notes to the unaudited pro forma consolidated
financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
IS BASED UPON AMOUNTS AS OF SEPTEMBER 30, 1997 AND CERTAIN ESTIMATES OF
LIABILITIES AT CLOSING. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
33
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(ASSUMING THE APPROVAL OF PROPOSALS A AND B--
SALE OF THE BROWARD SYSTEM AND SALE OF THE SURFSIDE SYSTEM)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents............ $ 489,312 $130,830,152 $131,319,464
Trade Receivables, net............... 1,450,884 (1,218,774) 232,110
Investment in Cable Television
Properties:
Property, plant and equipment, net. 49,716,560 (45,358,024) 4,358,536
Franchise costs and other
intangibles, net.................. 47,918,117 (47,055,208) 862,909
------------ ------------ ------------
Total investment in cable
television properties........... 97,634,677 (92,413,232) 5,221,445
Deposits, Prepaid Expenses and
Deferred Charges.................... 798,101 (771,820) 26,281
------------ ------------ ------------
Total Assets..................... $100,372,974 $ 36,426,326 $136,799,300
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt............................... $ 54,108,713 $(54,072,968) $ 35,745
General Partner advances........... 475,162 -- 475,162
Deferred brokerage fee............. 920,000 (920,000) --
Trade accounts payable and accrued
liabilities....................... 2,172,916 (2,306,239) (133,323)
Subscriber prepayments............. 577,554 (573,735) 3,819
Distribution payable to joint
venture partner................... -- 26,248,213 26,248,213
Accrued distribution to limited
partners.......................... -- 105,028,029 105,028,029
------------ ------------ ------------
Total Liabilities................ 58,254,345 73,403,300 131,657,645
------------ ------------ ------------
Minority Interest in Joint Venture... 3,500,884 (3,580,560) (79,676)
Partners' Capital (Deficit):
General Partner.................... (739,918) (28,589) (768,507)
Limited Partners................... 39,357,663 (33,367,825) 5,989,838
------------ ------------ ------------
Total Partners' Capital
(Deficit)....................... 38,617,745 (33,396,414) 5,221,331
------------ ------------ ------------
Total Liabilities and Partners'
Capital (Deficit)................. $100,372,974 $ 36,426,326 $136,799,300
============ ============ ============
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated balance sheet.
34
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMING THE APPROVAL OF PROPOSALS A AND B--
SALE OF THE BROWARD SYSTEM AND SALE OF THE SURFSIDE SYSTEM)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ ----------
<S> <C> <C> <C>
REVENUES................................ $37,768,924 $(35,419,261) $2,349,663
COSTS AND EXPENSES:
Operating expenses.................... 21,066,729 (19,586,880) 1,479,849
Management fees and allocated overhead
from
the General Partner.................. 4,392,877 (4,076,793) 316,084
Depreciation and Amortization......... 13,404,578 (12,610,854) 793,724
----------- ------------ ----------
OPERATING LOSS.......................... (1,095,260) 855,266 (239,994)
----------- ------------ ----------
OTHER INCOME (EXPENSE):
Interest expense...................... (4,088,951) 3,860,212 (228,739)
Other, net............................ (101,084) 102,246 1,162
----------- ------------ ----------
Total other income (expense), net... (4,190,035) 3,962,458 (227,577)
----------- ------------ ----------
CONSOLIDATED LOSS BEFORE MINORITY
INTEREST............................... $(5,285,295) $ 4,817,724 $ (467,571)
MINORITY INTEREST IN CONSOLIDATED LOSS.. 815,252 (743,129) 72,123
NET LOSS................................ (4,470,043) 4,074,595 (395,448)
=========== ============ ==========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST............................... $ (16.93) $ (1.50)
=========== ==========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated statement.
35
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMING THE APPROVAL OF PROPOSALS A AND B--
SALE OF THE BROWARD SYSTEM AND SALE OF THE SURFSIDE SYSTEM)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ ----------
<S> <C> <C> <C>
REVENUES................................ $30,635,555 $(28,742,762) $1,892,793
COSTS AND EXPENSES:
Operating expenses.................... 17,066,669 (16,122,398) 944,271
Management fees and allocated overhead
from the General Partner............. 3,318,269 (3,065,399) 252,870
Depreciation and amortization......... 10,389,159 (9,799,347) 589,812
----------- ------------ ----------
OPERATING LOSS.......................... (138,542) 244,382 105,840
----------- ------------ ----------
OTHER INCOME (EXPENSE):
Interest expense...................... (2,939,157) 2,836,146 (103,011)
Other, net............................ 20,137 (51,513) (31,376)
----------- ------------ ----------
Total other income (expense), net... (2,919,020) 2,784,633 (134,387)
----------- ------------ ----------
CONSOLIDATED LOSS BEFORE MINORITY
INTEREST............................... $(3,057,562) $ 3,029,015 $ (28,547)
MINORITY INTEREST IN CONSOLIDATED LOSS.. 462,936 (458,614) 4,322
NET LOSS................................ (2,594,626) 2,570,401 (24,225)
=========== ============ ==========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST............................... $ (9.83) $ (0.09)
=========== ==========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated statement.
36
<PAGE>
CABLE TV FUND 14-B, LTD.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(ASSUMING THE APPROVAL OF PROPOSALS A AND B--
SALE OF THE BROWARD SYSTEM AND SALE OF THE SURFSIDE SYSTEM)
1) The accompanying unaudited consolidated financial statements include 100
percent of the accounts of the Partnership and those of the Venture reduced by
Fund 14-A's 27 percent minority interest in the Venture. All interpartnership
accounts and transactions have been eliminated.
2) The Partnership has a 73 percent ownership interest in the Venture
through capital contributions made in 1988. The following calculations present
the sale of the Broward System by the Venture and the sale of the Surfside
System by the Partnership and the resulting estimated distributions expected
to be received by the Partnership.
3) The unaudited pro forma consolidated balance sheet of the Partnership
assumes that the Venture had sold the Broward System for $140,000,000 as of
September 30, 1997 and that the Partnership had sold the Surfside System for
$51,500,000 as of such date. The unaudited pro forma consolidated statements
of operations of the Partnership assume that the Venture had sold the Broward
System for $140,000,000 as of January 1, 1996 and that the Partnership had
sold the Surfside System for $51,500,000 as of such date.
4) The Partnership will receive $70,583,138 from the Venture's sale of the
Broward System, which the Partnership in turn will distribute to its limited
partners. The limited partner distribution of $70,583,138 represents $270 for
each $500 limited partnership interest or $540 for each $1,000 invested in the
Partnership. The Partnership will have $34,444,891 of net sale proceeds from
the sale of the Surfside System, which it will distribute to its limited
partners. The limited partnership distribution of $34,444,891 represents $132
for each $500 limited partnership interest or $264 for each $1,000 invested in
the Partnership.
5) The estimated gain recognized from the sale of the Broward System and
corresponding estimated distribution to limited partners as of September 30,
1997 has been computed as follows:
GAIN ON SALE OF THE BROWARD SYSTEM:
<TABLE>
<S> <C>
Contract sales price of the Broward System....................... $140,000,000
Less: Net book value of investment in the Broward System at
September 30, 1997......................................... (52,942,242)
------------
Gain on sale of the Broward System............................... $ 87,057,758
============
DISTRIBUTION TO PARTNERS:
Contract sales price of the Systems.............................. $140,000,000
Add: Trade receivables, net..................................... 933,031
Prepaid expenses........................................... 669,633
Less: Trade accounts payable and accrued liabilities............. (1,662,644)
Subscriber prepayments..................................... (483,420)
------------
Adjusted cash received........................................... 139,456,600
Less: Outstanding debt to third parties.......................... (39,571,339)
Brokerage fee to The Jones Group, Ltd...................... (3,500,000)
Add: Cash on hand............................................... 446,090
------------
Cash Available for Distribution by the Venture................... 96,831,351
Cash Distributed to Fund 14-A.................................... 26,248,213
------------
Cash Available for Distribution by the Partnership to its Limited
Partners........................................................ $ 70,583,138
============
</TABLE>
37
<PAGE>
6) The estimated gain recognized from the sale of the Surfside System and
corresponding estimated distribution to limited partners as of September 30,
1997 has been computed as follows:
GAIN ON SALE OF THE SURFSIDE SYSTEM:
<TABLE>
<S> <C>
Contract sales price of the Surfside System...................... $ 51,500,000
Less: Net book value of investment in the Surfside System at
September 30, 1997........................................ (39,470,990)
------------
Gain on sale of the Surfside System.............................. $ 12,029,010
============
DISTRIBUTION TO PARTNERS:
Contract sales price of the Surfside System...................... $ 51,500,000
Add: Trade receivables, net.................................... 285,743
Prepaid expenses.......................................... 102,187
Less: Trade accounts payable and accrued liabilities............ (643,595)
Subscribers prepayments................................... (90,315)
------------
Adjusted cash received........................................... 51,154,020
Less: Outstanding debt to third parties......................... (14,400,000)
Capital lease repayments.................................. (101,629)
Brokerage fee............................................. (1,287,500)
Deferred acquisition fee.................................. (920,000)
------------
Cash Available for Distribution by the Partnership to its Limited
Partners........................................................ $ 34,444,891
============
</TABLE>
38
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 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, 1996 and the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 are
incorporated by reference in their entirety in this Proxy Statement.
39
<PAGE>
[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Cable TV Fund 14-B, Ltd., a Colorado
limited partnership, hereby votes on the proposed system sales, as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
PROPOSAL A--SALE OF THE BROWARD SYSTEM [_] [_] [_]
PROPOSAL B--SALE OF THE SURFSIDE SYSTEM [_] [_] [_]
</TABLE>
(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 WITH RESPECT TO
PROPOSAL A, THIS PROXY WILL BE VOTED FOR PROPOSAL A. IF NO DIRECTION IS MADE
WITH RESPECT TO PROPOSAL B, THIS PROXY WILL BE VOTED FOR PROPOSAL B.
PLEASE SIGN EXACTLY AS NAME
APPEARS ON LABEL.
DATED: _________________, 1998
___________________________________
Beneficial Owner Signature
(Investor)
___________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Cable TV Fund 14-B, Ltd., a Colorado
limited partnership, hereby votes on the proposed system sales, as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
PROPOSAL A--SALE OF THE BROWARD SYSTEM [_] [_] [_]
PROPOSAL B--SALE OF THE SURFSIDE SYSTEM [_] [_] [_]
</TABLE>
(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 WITH RESPECT TO
PROPOSAL A, THIS PROXY WILL BE VOTED FOR PROPOSAL A. IF NO DIRECTION IS MADE
WITH RESPECT TO PROPOSAL B, THIS PROXY WILL BE VOTED FOR PROPOSAL B.
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 corpo-ration,
please sign in full corporation
name by autho-rized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: _________________, 1998
___________________________________
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
DATED NOVEMBER 4, 1997
BETWEEN
CABLE TV FUND 14-B, LTD.
AND
CABLE ONE, INC.
REGARDING THE SURFSIDE BEACH, SOUTH CAROLINA SYSTEM
<PAGE>
TABLE OF CONTENTS
Page
Article 1. Certain Definitions.............................................. 1
1.1 Terms Defined in Other Sections..................................... 7
1.2 Accounting Terms.................................................... 8
Article 2. Purchase and Sale................................................ 8
2.1 Covenant of Purchase and Sale; Assets............................... 8
2.2 Excluded Assets..................................................... 9
2.3 Assumed Obligations and Liabilities................................. 9
2.4 Purchase Price...................................................... 10
2.5 Current Items Amount................................................ 10
2.6 Current Items Amount Calculated..................................... 12
Article 3. Related Matters.................................................. 13
3.1 Noncompetition Covenant............................................. 13
3.2 Use of Names and Logos.............................................. 13
3.3 Bulk Sales.......................................................... 13
3.4 Transfer Taxes...................................................... 13
Article 4. Buyer's Representations and Warranties........................... 14
4.1 Organization of Buyer............................................... 14
4.2 Authority........................................................... 14
4.3 No Conflict; Consents............................................... 14
4.4 Litigation.......................................................... 15
4.5 Accuracy of Schedules............................................... 15
4.6 No Misrepresentation................................................ 15
4.7 Finders and Brokers................................................. 15
4.8 Taxpayer Identification Number...................................... 15
Article 5. Seller's Representations and Warranties.......................... 15
5.1 Organization and Qualification of Seller............................ 15
5.2 Authority........................................................... 16
5.3 No Conflict; Consents............................................... 16
5.4 Assets; Title, Condition, and Sufficiency........................... 16
5.5 System Franchises, System Licenses, and System Contracts............ 17
5.6 Real Property....................................................... 17
5.7 Litigation.......................................................... 18
5.8 Financial Statements................................................ 18
5.9 Tax Returns; Other Reports.......................................... 19
5.10 System Information................................................. 19
i
<PAGE>
5.11 Bonds.............................................................. 20
5.12 Compliance with Legal Requirements................................. 22
5.13 No Adverse Change.................................................. 22
5.14 Employees.......................................................... 23
5.15 Employee Benefits.................................................. 23
5.16 Environmental...................................................... 25
5.17 Intangibles........................................................ 25
5.18 Books and Records.................................................. 25
5.19 Accounts Receivable................................................ 25
5.20 No Overbuilds...................................................... 25
5.21 No Rights of First Refusal......................................... 25
5.22 Accuracy of Schedules.............................................. 25
5.23 No Misrepresentation............................................... 26
5.24 Finders and Brokers................................................ 26
5.25 Tier Penetration................................................... 26
5.26 Taxpayer Identification Number..................................... 26
Article 6. Covenants........................................................ 26
6.1 Certain Affirmative Covenants of Seller............................. 26
6.2 Certain Negative Covenants of Seller................................ 28
6.3 Confidentiality and Publicity....................................... 30
6.4 Title Insurance Commitments......................................... 30
6.5 HSR Act Compliance.................................................. 30
6.6 Cooperation with Seller............................................. 31
6.7 Supplements to Schedules............................................ 31
6.8 Transitional Billing Services....................................... 31
6.9 Employee Benefit Matters............................................ 32
6.10 Post-Closing Obtaining of Consents, Authorizations and Approvals... 33
6.11 Designation of Retransmission Consent Agreements................... 34
6.12 Leased Vehicles.................................................... 34
6.13 Distant Signals.................................................... 34
6.14 Seller Approvals................................................... 34
6.15 Marketing Plan for 1998............................................ 34
Article 7. Conditions Precedent............................................. 35
7.1 Conditions to Buyer's Obligations................................... 35
7.2 Conditions to Seller's Obligations.................................. 37
Article 8. Closing.......................................................... 38
8.1 Closing; Time and Place............................................. 38
8.2 Seller's Obligations................................................ 38
8.3 Buyer's Obligations................................................. 39
Article 9. Termination and Default.......................................... 40
9.1 Termination Events.................................................. 40
9.2 Effect of Termination............................................... 41
ii
<PAGE>
9.3 Sole Remedy........................................................ 41
Article 10. Indemnification................................................. 41
10.1 Indemnification by Seller.......................................... 41
10.2 Indemnification by Buyer........................................... 42
10.3 Procedure for Indemnified Third Party Claim........................ 43
10.4 Interest........................................................... 43
10.5 Time and Manner of Certain Claims.................................. 43
10.6 Other Indemnification.............................................. 44
10.7 Limitation on Indemnification...................................... 44
Article 11. Miscellaneous Provisions........................................ 44
11.1 Expenses........................................................... 44
11.2 Brokerage.......................................................... 44
11.3 Waivers............................................................ 45
11.4 Notices............................................................ 45
11.5 Entire Agreement; Amendments....................................... 46
11.6 Binding Effect; Benefits........................................... 47
11.7 Headings, Schedules, and Exhibits.................................. 47
11.8 Counterparts....................................................... 47
11.9 Governing Law...................................................... 47
11.10 Severability...................................................... 47
11.11 Third Parties; Joint Ventures..................................... 48
11.12 Construction...................................................... 48
11.13 Attorneys' Fees................................................... 48
11.14 Risk of Loss...................................................... 48
11.15 Remedies Cumulative............................................... 49
iii
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of November 4, 1997,
by and between Cable One, Inc., a Delaware corporation ("Buyer"), whose U.S.
Taxpayer Identification Number is 13-3060083, and Cable TV Fund 14-B, Ltd., a
Colorado limited partnership ("Seller"), whose U.S. Taxpayer Identification
Number is 84-1024658.
RECITALS
A. Seller owns and operates a cable television system that is franchised
or holds other operating authority and operates in and around the communities
listed on Schedule A (the "System").
----------
B. Seller is willing to convey to Buyer, and Buyer is willing to purchase
from Seller, substantially all of the tangible and intangible assets comprising
the System, upon the terms and conditions set forth in this Agreement.
C. Buyer and Time Warner Entertainment-Advance/Newhouse Partnership, a New
York general partnership ("TWEAN"), have entered into an Asset Exchange
Agreement of even date herewith (the "Asset Exchange Agreement") whereby,
following the purchase by Buyer from Seller of the assets of the System, TWEAN
would acquire from Buyer the assets of the System and Buyer would acquire from
TWEAN the assets of certain cable television systems owned by TWEAN.
AGREEMENTS
In consideration of the mutual promises and covenants set forth herein,
Buyer and Seller hereby agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
As used in this Agreement, the following terms, whether in singular or
plural form, shall have the following meanings:
"Adjustment Time" means 11:58 P.M., eastern time, on the Closing Date.
"Basic Cable" means the cable television services described as Basic on
Schedule 5.10.
- -------------
"Basic Plus" means the cable television services described as Basic Plus on
Schedule 5.10.
- -------------
<PAGE>
"Benefit Arrangement" means any material benefit arrangement that is not an
Employee Benefit Plan, including, but not limited to, (i) any employment or
consulting agreement, (ii) any arrangement providing for insurance coverage or
workers' compensation benefits, (iii) any incentive or deferred bonus
arrangement, (iv) any arrangement providing termination allowance, severance or
similar benefits, (v) any equity compensation plan, (vi) any deferred
compensation plan and (vii) any compensation policy or practice.
"Business" means the cable television business conducted by Seller with
respect to the System on the date of this Agreement.
"Cable Act" means Title VI of the Communications Act, the Communications
Policy Act of 1984, Pub. L. No. 98-549, and the Cable Television Consumer
Protection and Competition Act of 1992, Pub. L. No. 102-385, as such statutes
may be amended from time to time, and the rules and regulations promulgated
thereunder.
"CLI" means Cumulative Leakage Index, as defined by the FCC.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
"Communications Act" means the Communications Act of 1934, as amended, 47
U.S.C. (S) 151, et. seq., and rules and regulations promulgated thereunder.
"Contract" means any written contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant, right,
or other instrument, document, obligation, or agreement, and any oral
obligation, right or agreement.
"Copyright Act" means the Copyright Act of 1976, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and rules and regulations promulgated thereunder and published
interpretations with respect thereto.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"GAAP" means generally accepted accounting principles applicable to the
cable television industry, consistently applied, as from time to time in effect,
including the
2
<PAGE>
statements and interpretations of the United States Financial Accounting
Standards Board.
"Governmental Authority" means (i) the United States of America, any state,
commonwealth, territory, or possession thereof and any political subdivision or
quasi-governmental authority of any of the same, including, but not limited to,
courts, tribunals, departments, commissions, boards, bureaus, agencies,
counties, municipalities, provinces, parishes, and other instrumentalities, and
(ii) any foreign (as to the United States of America) sovereign entity,
including, but not limited to, nations, states, republics, kingdoms and
principalities, any state, province, commonwealth, territory or possession
thereof, and any political subdivision, quasi-governmental authority, or
instrumentality of any of the same.
"Hazardous Substances" means any pollutant, contaminant, chemical,
industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including, but not limited to, (a) any petroleum or
petroleum compounds (refined or crude), flammable substances, explosives,
radioactive materials, or any other materials or pollutants which pose a hazard
or potential hazard to the Real Property or to persons in or about the Real
Property or cause the Real Property to be in violation of any Legal
Requirements, (b) asbestos or any asbestos-containing material of any kind, (c)
polychlorinated biphenyls ("PCBs"), as regulated by the Toxic Substances
Controls Act, 15 U.S.C. (S)2601 et seq., as amended, and rules and regulations
promulgated thereunder ("TSCA"), (d) any materials or substances designated as
"hazardous substances" pursuant to the Clean Water Act, 33 U.S.C. (S)1251 et
seq., as amended, and rules and regulations promulgated thereunder, (e)
"economic poison", as defined in the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. (S)135 et seq., as amended, and the rules and
regulations promulgated thereunder, (f) "chemical substance", "new chemical
substance", or "hazardous substance or mixture" pursuant to TSCA, (g) "hazardous
substances" pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. (S)9601 et seq., as amended, and the rules and
regulations promulgated thereunder ("CERCLA"), and (h) "hazardous waste"
pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. (S)6901 et
seq., as amended and the rules and regulations promulgated thereunder ("RCRA"),
but excluding immaterial amounts of the following substances, to the extent used
in the ordinary course of the Business: (i) lubricating, cleaning, coolant, and
other compounds customarily used in building and System maintenance; (ii)
materials routinely used in the day-to-day operations of an office, such as
copier toner; (iii) consumer products; (iv) fuel oil and natural gas for
heating; (v) materials reasonably necessary and customarily used in office and
System construction and repair and System vehicle operation and maintenance; and
(vi) fertilizers, pesticides, and herbicides commonly used for routine office
landscaping.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
3
<PAGE>
"Individual Subscriber" means, as of the date of determination, any
subscriber of the System at the System's regular monthly subscriber rate for
Basic Cable, who has been an active subscriber of the System's Basic Cable for
at least one full month and has paid at least one month's payment in full
without discount, together with applicable installation fees, who is not pending
disconnection for any reason, who is not, as of the last full month ending on or
prior to such date, more than two monthly billing cycles in arrears in payment
for service (provided that a subscriber's account shall not be considered past
due as a result of unpaid amounts not exceeding $8.00 in respect of (i)
customary late charges imposed by the System and/or (ii) disputed amounts),
determined as of the first day of the month as of such date , and who has become
a subscriber only pursuant to customary marketing promotions conducted in the
ordinary course of business consistent with the Marketing Plan. "Individual
Subscriber" shall not include any "courtesy account" subscriber of the System
who is receiving Basic Cable at no charge.
"Judgment" means any judgment, writ, order, injunction, award, or decree of
any court, judge, justice, or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
"Knowledge" of any Person of or with respect to any matter means actual
awareness or knowledge on the date hereof and on any other date, including the
Closing Date, on which a representation or warranty is given hereunder;
provided, however, that (a) the phrase "Knowledge of Seller" or "to Seller's
Knowledge" means (i) the actual awareness or knowledge of any of Seller's
general partner's executive officers and (ii) the actual awareness or knowledge
of Seller's System manager(s), which shall include such System managers'
knowledge of facts or circumstances that would lead a reasonably prudent person
in the System managers' position to investigate and, more likely than not,
acquire such knowledge, and (b) the phrase "Knowledge of Buyer" or "to Buyer's
Knowledge" means the actual awareness or knowledge of any of Buyer's executive
officers.
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, order, technical or other
standard, requirement, or procedure enacted, adopted, promulgated, applied, or
followed by any Governmental Authority, including, without limitation, Judgments
and the System Franchises.
"Lien" means any security agreement, financing statement filed with any
Governmental Authority, conditional sale or other title retention agreement, any
lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, encumbrance, adverse interest, constructive
trust or other trust, claim, attachment, exception to or defect in title or
other ownership interest (including, but not limited to, reservations, rights of
entry, possibilities of reverter, encroachments, easement, rights-of-way,
restrictive covenants, leases, and licenses) of any kind, which
4
<PAGE>
otherwise constitutes an interest in or claim against property, whether arising
pursuant to any Legal Requirement, Contract, or otherwise.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing, or other activity or procedure that could result in a
Judgment, and any notice of any of the foregoing.
"Losses" means any claims, losses, liabilities, damages, Judgments, Liens,
penalties, costs, and expenses, including but not limited to interest which may
be imposed in connection therewith, expenses of investigation, reasonable fees
and disbursements of counsel and other experts, and the cost to any Person
making a claim or seeking indemnification under this Agreement with respect to
funds expended by such Person by reason of the occurrence of any event with
respect to which indemnification is sought, but shall in no event include
incidental or consequential damages.
"Marketing Plan" means, with respect to all periods from and after the
execution of this Agreement through December 31, 1997, the Marketing Plan for
1997, and, with respect to all periods from and after December 31, 1997 through
the Closing Date, the Marketing Plan for 1998, subject to Section 6.15.
"Marketing Plan for 1997" means the marketing plan for the System for the
1997 calendar year, a copy of which is attached hereto as Schedule B.
----------
"Permitted Liens" means (i) Liens for Taxes not due and payable, (ii) Liens
for Taxes for which the payment thereof is being contested in good faith during
the permitted contest period, and for which adequate reserves have been
provided, (iii) zoning laws and ordinances and similar governmental regulations,
(iv) rights reserved to any Governmental Authority to regulate the affected
property, (v) as to real property, any liens, encumbrances, easements, rights-
of-way, servitudes, permits, leases, conditions, covenants, restrictions and
minor imperfections or irregularities in title which are reflected in the public
records and which do not individually or in the aggregate interfere with the
right or ability to own, use, enjoy or operate such real property or to convey
goo, marketable and indefeasible title to the same, and (vi) such liens and
liabilities as are Assumed Obligations and Liabilities; provided that "Permitted
Liens" will not include any Lien that could prevent or inhibit in any material
way the conduct of the Business as it is currently being conducted.
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, joint venture, trust, association, or
unincorporated entity of any kind.
"Subscriber Equivalent" means an equivalent to an Individual Subscriber,
the number of Subscriber Equivalents served by the System being equal to, as of
the date of determination, the quotient of (i) the aggregate billings by the
System for Basic Cable
5
<PAGE>
and Basic Plus provided by the System during the last full month ending on or
prior to such date to subscribers other than Individual Subscribers, including,
but not limited to, residential multiple dwelling units, commercial
establishments, other subscribers that are billed for such service on a bulk
basis and single family households that pay less than the System's regular
monthly rate for Basic Cable or Basic Plus, divided by (ii) the sum of (A) the
System's regular monthly rate for Basic Cable in effect during such month plus
(B) the System's regular monthly rate for Basic Plus in effect during such
month. For purposes of the foregoing there shall be excluded all billings to any
bulk account or discounted family household (a) that has not been an active
subscriber of the System for at least one full month and made at least one
month's payment, (b) that is more than two monthly billing cycles past due based
on billing reports for the System prepared in the ordinary course of business,
(c) that is pending disconnection for any reason, (d) that has become a
subscriber other than pursuant to customary marketing promotions conducted in
the ordinary course of business consistent with the Marketing Plan, or (e) that
represent an installation or other non-recurring charge, a late fee or other
charge for late payment, a charge for equipment, a charge for any outlet or
connection other than the first outlet or first connection in any single family
household or, with respect to a bulk account, in any residential unit (e.g., an
individual apartment or rental unit), charges for premium services or pay TV, or
a pass-through charge for sales Taxes, line-itemized franchise fees and charges,
FCC fees and similar items.
"Taxes" means all levies and assessments of any kind or nature imposed by
any Governmental Authority, including but not limited to all income, sales, use,
ad valorem, value added, franchise, severance, net or gross proceeds,
withholding, payroll, employment, excise, or property taxes, together with any
interest thereon and any penalties, additions to tax, or additional amounts
applicable thereto.
"Tentative Subscriber" shall mean, as of the date of determination, any
subscriber of the System at the System's regular monthly subscriber rate for
Basic Cable, who has become a subscriber only pursuant to customary marketing
promotions conducted in the ordinary course of business consistent with the
Marketing Plan and who has paid at least one month's payment in full without
discount, but who has not yet been an active subscriber of the System for one
full month.
"Transaction Documents" means all instruments and documents executed and
delivered by Buyer or Seller or any officer, director, or affiliate of either of
them in connection with this Agreement or the transactions contemplated hereby.
1.1 Terms Defined in Other Sections. The following terms, whether used in
-------------------------------
singular or plural form, have the meanings given in the Sections indicated:
"Advertising Accounts Receivable" 2.5(b)
"Adjustment Amount" 2.6(b)
"Asset Exchange Agreement" Recital C
6
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"Assets" 2.1
"Assumed Obligations and Liabilities" 2.3
"Closing" 8.1
"Copyright Liability" 6.13
"Current Items Amount" 2.5
"Eligible Accounts Receivable" 2.5(b)
"Employee Benefit Plan" 5.15
"Estoppel Certificate" 6.1(f)
"Excluded Assets" 2.2
"Final Adjustment Certificate" 2.6(b)
"Financial Statements" 5.8
"Hired Employees" 6.9(b)
"Indemnitee" 10.3
"Indemnitor" 10.3
"Initial Adjustment Certificate" 2.6(a)
"Leased Property" 2.1(b)
"Lien Releases" 7.1
"Marketing Plan for 1998" 6.15
"Minimum Subscriber Amount" 2.5(e)
"Multiemployer Plan" 5.15
"Noncompetition Covenant" 3.1
"Operational Information" 5.8
"Outside Closing Date" 8.1
"Owned Property" 2.1(b)
"Purchase Price" 2.4
"Real Property" 2.1(b)
"Surveys" 6.4
"System" Recital A
"System Contracts" 2.1(e)
"System Franchises" 2.1(c)
"System Licenses" 2.1(d)
"Tangible Personal Property" 2.1(a)
"Title Commitments" 6.4
"Title Company" 6.4
"Title Defect" 6.4
"Transitional Billing Services" 6.8
"TWEAN" Recital C
"WARN" 6.9(a)
1.2 Accounting Terms. All accounting terms used in this Agreement,
----------------
unless otherwise provided in this Agreement, shall have the meanings given under
GAAP.
7
<PAGE>
ARTICLE 2.
PURCHASE AND SALE
2.1 Covenant of Purchase and Sale; Assets. Subject to the terms and
-------------------------------------
conditions set forth in this Agreement, at Closing, Seller shall convey, assign,
and transfer to Buyer, and Buyer shall acquire from Seller, for the Purchase
Price, free and clear of all Liens (except Permitted Liens), all of the assets
and properties, real and personal, tangible and intangible, used by or useful to
Seller primarily in its operation of, or otherwise relating to, the System (the
"Assets"), including, but not limited to, the following:
(a) Tangible Personal Property. All tangible personal property owned
--------------------------
by Seller, including, but not limited to, towers, tower equipment, antennae,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, feeder line cable, distribution plant, programming signal
decoders for each satellite service which scrambles its signal, housedrops,
installed subscriber devices, utility poles, local origination equipment, motor
vehicles and trailers, earth satellite receive stations and related equipment,
microwave equipment, converters, testing equipment, office equipment, furniture,
fixtures, supplies, inventory, and other physical assets, including, but not
limited to, the items described on Schedule 2.1(a) (the "Tangible Personal
Property").
(b) Real Property. All real property and interests in real property,
-------------
including, but not limited to, the fee interests in the real property
described as Owned Property on Schedule 2.1(b) and all improvements thereon
---------------
(the "Owned Property"), the leasehold interests in the real property
described as Leased Property on Schedule 2.1(b) and improvements thereon or
---------------
thereto owned or leased by Seller (the "Leased Property"), and all easements,
rights of access and other interests in real property, including, but not
limited to, the real property interests described on Schedule 2.1(b) (together
---------------
with the Owned Property and the Leased Property, the "Real Property").
(c) Franchises. All franchises and similar authorizations or permits
----------
issued by any Governmental Authority or other Person to Seller, including, but
not limited to, those described on Schedule 2.1(c) (the "System Franchises").
---------------
(d) Licenses. All cable television relay service (CARS), domestic
--------
satellite receive only (TVRO), business radio and other registrations or
licenses held by Seller, all copyright notices, and all other licenses,
authorizations, consents, or permits issued by the FCC or any other Governmental
Authority to Seller, including, but not limited to, those described on
Schedule 2.1(d) (excluding the System Franchises)(the "System Licenses").
- ---------------
(e) Contracts. All leases, pole line or joint line agreements,
----------
underground conduit agreements, crossing agreements, construction permits, bulk
and commercial
8
<PAGE>
service agreements, ad sales agreements, subscriber billing agreements,
retransmission consent agreements, must-carry elections and other Contracts to
which Seller is a party, including, but not limited to, those described on
Schedule 2.1(e) (the "System Contracts").
- ---------------
(f) Accounts Receivable. All subscriber, trade, and other accounts
-------------------
receivable owed to Seller as payment for services rendered by Seller prior to
the Adjustment Time in connection with the operation of the System, as reflected
on the billing records of Seller.
(g) Books and Records. All records located at the System office or
-----------------
elsewhere to the extent necessary to operate the System as currently operated
and conduct the Business as currently conducted, including engineering records,
files, data, drawings, blueprints, schematics, reports, lists, plans and
processes, and all files of correspondence, lists, records, and reports
concerning subscribers and prospective subscribers of the System, signal and
program carriage, and dealings with Governmental Authorities, including, but not
limited to, all reports filed by or on behalf of Seller with the FCC and
statements of account filed by or on behalf of Seller with the U.S. Copyright
Office, subject to the right of Seller to have such records made available to it
for three years after the Closing Date.
2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1, the
--------------
Assets shall not include the following, which shall be retained by Seller (the
"Excluded Assets"): (i) programming Contracts; (ii) insurance policies and
rights and claims thereunder; (iii) bonds, letters of credit, surety
instruments, and other similar items; (iv) cash and cash equivalents; (v) any
books and records that Seller is required by law to retain, subject to the right
of Buyer to have access to and to copy for a period of three years after the
Closing Date, and Seller's minute books and other books and records related to
the internal matters and financial relationships with Seller's lenders; (vi) any
claims, rights and interests in and to any refunds of federal, state or local
franchise, income or other taxes or fees for periods prior to the Adjustment
Time; (vii) subject to Section 3.2, Seller's trademarks, trade names, service
marks, service names, logos, and similar proprietary rights; and (viii) the
rights, assets, and properties described on Schedule 2.2.
------------
2.3 Assumed Obligations and Liabilities. As of the Adjustment Time, Buyer
-----------------------------------
shall assume, pay, discharge, and perform the following (the "Assumed
Obligations and Liabilities"): (i) those obligations and liabilities
attributable to periods after the Adjustment Time under the System Contracts,
System Franchises and System Licenses assigned and transferred to Buyer at
Closing; (ii) other obligations and liabilities of Seller only to the extent
that there shall be an adjustment in favor of Buyer with respect thereto
pursuant to Section 2.5; and (iii) all obligations and liabilities arising out
of Buyer's ownership of the Assets or operation of the System after the
Adjustment Time. All obligations and liabilities arising out of or relating to
the Assets or the System other
9
<PAGE>
than the Assumed Obligations and Liabilities shall remain and be the obligations
and liabilities solely of Seller, including, but not limited to, all liabilities
and obligations arising under the discrimination complaint disclosed on
Schedule 5.14(d).
- ----------------
2.4 Purchase Price. At Closing, Buyer shall pay to Seller, by wire
--------------
transfer to the account designated in writing by Seller, the sum of $51,500,000
as consideration for the Assets and the Noncompetition Covenant (the "Purchase
Price").
2.5 Current Items Amount. Buyer or Seller, as appropriate, shall pay to
--------------------
the other (by increasing or decreasing the funds paid as the Purchase Price) the
net amount of the adjustments and prorations effected pursuant to this Section
2.5 (the "Current Items Amount").
(a) Advance Payments and Deposits. Buyer shall be entitled to an amount
-----------------------------
equal to the aggregate of (i) all deposits of subscribers of the System for
converters, decoders, and similar items, and (ii) all payments made to Seller
for (A) services to be rendered by Buyer to subscribers of the System after the
Adjustment Time or (B) other services to be rendered by Buyer to other third
parties after the Adjustment Time for cable television commercials, channel
leasing, or other services or rentals, to the extent all obligations of Seller
relating thereto are assumed by Buyer at Closing.
(b) Eligible Accounts Receivable; Advertising Accounts Receivable.
-------------------------------------------------------------
Seller shall be entitled to an amount equal to the sum of (i) 95% of the face
amount of all Eligible Accounts Receivable that are current or 60 days or less
past due as of the Adjustment Time, plus (ii) 95% of the face amount of all
Advertising Accounts Receivable that are current or 60 days or less past due as
of the Adjustment Time, plus (iii) 80% of the face amount of all Advertising
Accounts Receivable that are between 61 and 120 days past due as of the
Adjustment Time. "Eligible Accounts Receivable" shall mean accounts receivable
resulting from the provision of cable television service by the System to active
subscribers (as of the Adjustment Time) that relate to periods of time prior to
the Adjustment Time. "Advertising Accounts Receivable" shall mean accounts
receivable representing amounts owed to Seller in connection with advertising on
the System whether sold directly by Seller, by an advertising sales
representative or an advertising agency, or through an advertising interconnect
partnership. For purposes of making "past due" calculations under subpart (i) of
this paragraph, an Eligible Account Receivable shall be deemed "past due" when
the payment due under an original monthly billing statement of Seller has not
been received by the System within 30 days following the date of such original
monthly billing statement, and for purposes of making "past due" calculations
under subparts (ii) and (iii) of this paragraph, an Advertising Account
Receivable shall be deemed due and payable on the date of the invoice.
(c) Expenses. As of the Adjustment Time, the following expenses shall be
--------
prorated, in accordance with GAAP, so that all expenses for periods prior to the
10
<PAGE>
Adjustment Time shall be for the account of Seller, and all expenses for periods
after the Adjustment Time shall be for the account of Buyer:
(i) all payments and charges under the System Franchises, the
System Licenses, and the System Contracts transferred to Buyer at Closing;
(ii) Taxes levied or assessed against any of the Assets or payable
with respect to cable television service and related sales to System
subscribers;
(iii) charges for utilities and other goods or services furnished
to the System;
(iv) copyright fees based on signal carriage by the System; and
(v) all other items of expense relating to the System;
provided, however, that Seller and Buyer shall not prorate any items of expense
payable under any Excluded Assets, all of which shall remain and be solely for
the account of Seller.
(d) Accrued Vacation. Buyer shall be entitled to an amount equal to the
----------------
economic value of all accrued vacation time permitted by Buyer to be carried
over by the Hired Employees to be taken by such Hired Employees after the
Adjustment Time, pursuant to Section 6.9(e).
(e) Subscriber Adjustment. If the aggregate number of Individual
---------------------
Subscribers and Subscriber Equivalents as of Closing is less than 25,500 (the
"Minimum Subscriber Amount"), Buyer shall be entitled to an amount equal to the
product of (A) the difference between (i) the Minimum Subscriber Amount and (ii)
the aggregate number of Individual Subscribers and Subscriber Equivalents as of
Closing multiplied by (B) $2,020; provided, however, that in no event shall such
amount exceed the product of 24,800 and $2,020.
(f) Tentative Subscribers. At Closing, Seller shall provide TWEAN with
---------------------
a list of all Tentative Subscribers as of the Closing Date. For purposes of
determining the number of Individual Subscribers as of the Closing Date pursuant
to Section 2.5(e) and 7.1(k), all Tentative Subscribers as of the Closing Date
shall count as Individual Subscribers; provided, however, that for purposes of
making the final adjustments described in Section 2.6(b)(with respect to Section
2.5(e) only), all Tentative Subscribers as of the Closing Date that would have
been counted as Individual Subscribers pursuant to this Agreement had such
calculation been made 30 days after the Closing Date shall be deemed to be
Individual Subscribers.
2.6 Current Items Amount Calculated.
-------------------------------
11
<PAGE>
(a) Initial Adjustment Certificate. The Current Items Amount shall be
------------------------------
estimated in good faith by Seller, and set forth, together with a detailed
statement of the calculation thereof, in a certificate (the "Initial Adjustment
Certificate") executed by a duly authorized representative of Seller and
delivered to Buyer and TWEAN not later than ten days prior to Closing. If
accepted by Buyer, the Initial Adjustment Certificate shall constitute the basis
on which the Current Items Amount is calculated for purposes of Closing. Each of
Buyer and Seller shall cause their representatives to diligently attempt to
jointly determine prior to Closing, on the basis of the Initial Adjustment
Certificate and such other information as they deem relevant, their best
estimate of the Current Items Amount. At Closing, the party against whose favor
the estimated Current Items Amount is so determined shall pay to the other the
estimated Current Items Amount by way of adjustment to the Purchase Price paid
by Buyer at Closing.
(b) Final Adjustment Certificate. Within 60 days after Closing, Buyer
----------------------------
shall deliver to Seller a certificate (the "Final Adjustment Certificate")
showing in detail the final determination of the Current Items Amount, which
certificate shall be accompanied by appropriate documentation supporting the
adjustments proposed in such certificate, and which shall be executed by a duly
authorized representative of Buyer. Seller and Buyer shall use their best
reasonable efforts to resolve any objections within 30 days after Buyer delivers
the Final Adjustment Certificate to Seller. Not later than 10 days after Buyer
and Seller have finally agreed upon the Current Items Amount, Buyer or Seller,
as appropriate, shall pay to the other by wire transfer the amount by which the
Current Items Amount as finally determined differs from the Current Items Amount
as estimated in the Initial Adjustment Certificate. If any disputes have not
been resolved within such 30-day period, then the disputed portion of the
Current Items Amount shall be determined within 90 days thereafter by an
accounting firm mutually agreed upon by the parties, whose determination shall
be conclusive and binding upon the parties. Buyer and Seller each shall pay one-
half of the fees and expenses payable to such accounting firm in connection with
such determination. The payment required after determination of all disputed
amounts shall be made by the appropriate party within ten days after the final
determination.
ARTICLE 3.
RELATED MATTERS
3.1 Noncompetition Covenant. At Closing, Seller and its general partner
-----------------------
shall execute and deliver to Buyer and TWEAN a noncompetition covenant in the
form of Exhibit A (the "Noncompetition Covenant").
---------
3.2 Use of Names and Logos. For a period of 60 days after Closing, Buyer
----------------------
shall be entitled to use the trademarks, trade names, service marks, service
names, logos, and similar proprietary rights of Seller to the extent
incorporated in or on the Assets, provided that Buyer shall exercise good faith
efforts to remove all such names, marks,
12
<PAGE>
logos, and similar proprietary rights from the Assets as soon as reasonably
practicable following Closing.
3.3 Bulk Sales. Seller shall comply with the Legal Requirements
----------
relating to bulk sales applicable to the transactions contemplated hereby.
Seller shall indemnify and hold Buyer harmless with respect to all Losses
resulting from any noncompliance with bulk sales Legal Requirements applicable
to the transactions contemplated hereby.
3.4 Transfer Taxes. All sales, use, transfer, and similar taxes or
--------------
assessments, including, but not limited to, transfer fees, recording fees and
similar assessments for System Franchises, System Licenses, System Contracts,
vehicles or Real Property, arising from or payable by reason of the conveyance
of the Assets shall be paid one-half by Seller and one-half by Buyer.
Notwithstanding the foregoing, Seller shall pay all transfer and similar costs
or fees in connection with the transfer to Buyer or TWEAN of the Cable
Television Installation and Service Subscription Agreement dated February 1,
1990 between Seller and Wilson Springs Pirateland Campground, as amended, and
any other similar agreements requiring a payment upon transfer to Buyer. Seller
shall use commercially reasonable efforts to obtain, in writing, an
acknowledgment, release or other assurance from Wilson Springs Pirateland
Campground stating that only one transfer fee shall be charged in connection
with the transfer of the System from Seller to Buyer and then from Buyer to
TWEAN, the terms of which shall have been previously approved by TWEAN, which
approval shall not be unreasonably withheld or delayed.
ARTICLE 4.
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller, as of the date of this
Agreement and as of Closing, as follows:
4.1 Organization of Buyer. Buyer is a corporation, duly organized,
---------------------
validly existing, and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to own and lease the
properties and assets it currently owns and leases and to conduct its activities
as such activities are currently conducted. Buyer is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of its business or the character of its properties and
assets that it owns makes such qualification necessary, except any such
jurisdiction where the failure to be so qualified and in good standing would not
have a material adverse effect on the validity, binding effect or enforceability
of this Agreement, or on the ability of Buyer to perform its obligations
hereunder.
4.2 Authority. Buyer has all requisite corporate power and authority
---------
to execute, deliver, and perform this Agreement and consummate the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby by Buyer have been
duly and
13
<PAGE>
validly authorized by all necessary action on the part of Buyer. This Agreement
has been duly and validly executed and delivered by Buyer, and is the valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors rights generally or the availability of equitable
remedies.
4.3 No Conflict; Consents. Except as described on Schedule 4.3, and
--------------------- ------------
subject to compliance with the HSR Act, the execution, delivery, and performance
by Buyer of this Agreement and the Transaction Documents do not and will not:
(i) conflict with or violate any provision of the certificate or articles of
incorporation or by-laws of Buyer; (ii) violate any provision of any Legal
Requirements; or (iii) conflict with, violate, result in a breach of, constitute
a default under (without regard to requirements of notice, lapse of time, or
elections of other Persons, or any combination thereof) or accelerate or permit
the acceleration of the performance required by, any Contract or Lien to which
Buyer is a party or by which Buyer or the assets or properties owned or leased
by it are bound or affected or (iv) require any consent, approval, or
authorization of, or filing of any certificate, notice, application, report, or
other document with, any Governmental Authority or other Person.
4.4 Litigation. There is no Litigation pending, or to the best of Buyer's
----------
Knowledge, threatened, in any court or before any Governmental Authority or any
arbitrator, by or against or affecting or relating to Buyer or any of its
affiliates that, if adversely determined, would be reasonably likely to restrain
or materially hinder or delay the consummation of the transactions contemplated
by this Agreement or cause any of such transactions to be rescinded.
4.5 Accuracy of Schedules. All Schedules to this Agreement relating to
---------------------
Buyer's representations and warranties are accurate and complete in all material
respects as of the date of this Agreement.
4.6 No Misrepresentation. No representation or warranty by Buyer in this
--------------------
Agreement, nor any statement or certificate furnished to Seller by Buyer
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will at Closing contain any untrue statement of a material fact, or
omits or will at Closing omit to state a material fact necessary to make the
statements contained therein not misleading.
4.7 Finders and Brokers. Buyer has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller will in any way
have any liability.
4.8 Taxpayer Identification Number. Cable One, Inc.'s U.S. Taxpayer
------------------------------
Identification Number is as set forth in the introductory paragraph of this
Agreement.
14
<PAGE>
ARTICLE 5.
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer, as of the date of this Agreement
and as of Closing, as follows:
5.1 Organization and Qualification of Seller. Seller is a limited
----------------------------------------
partnership duly organized, validly existing and in good standing under the laws
of the State of Colorado, and has all requisite power and authority to own and
lease the properties and assets it currently owns and leases and to conduct its
activities as such activities are currently conducted. Seller is duly qualified
to do business as a foreign limited partnership and is in good standing in all
jurisdictions in which the ownership or leasing of the Assets or the nature of
its activities in connection with the System makes such qualification necessary,
except any such jurisdiction where the failure to be so qualified and in good
standing would not have a material adverse effect on the validity, binding
effect or enforceability of this Agreement, or on the ability of Seller to
perform its obligations under this Agreement.
5.2 Authority. Seller has all requisite partnership power and authority
---------
to execute, deliver, and perform this Agreement and consummate the transactions
contemplated hereby. Other than the receipt of the approval of Seller's limited
partners, the execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby on the part of Seller have
been duly and validly authorized by all necessary action on the part of Seller.
This Agreement has been duly and validly executed and delivered by Seller, and
is the valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
5.3 No Conflict; Consents. Except as described on Schedule 5.3, and
--------------------- ------------
subject to compliance with the HSR Act, the execution, delivery, and performance
by Seller of this Agreement and the Transaction Documents do not and will not:
(i) conflict with or violate any provision of the certificate of limited
partnership or Limited Partnership Agreement of Seller; (ii) violate any
provision of any Legal Requirements; (iii) conflict with, violate, result in a
breach of, constitute a default under (without regard to requirements of notice,
lapse of time, or elections of other Persons, or any combination thereof),
accelerate, or permit the acceleration of the performance required by, any
Contract or Lien to which Seller is a party or by which Seller or the assets or
properties owned or leased by it are bound or affected; (iv) result in the
creation or imposition of any Lien against or upon any of the Assets; or (v)
require any consent, approval or authorization of, or filing of any certificate,
notice, application, report, or other document with, any Governmental Authority
or other Person.
15
<PAGE>
5.4 Assets; Title, Condition, and Sufficiency. Schedule 2.1(a)
----------------------------------------- ---------------
identifies all material items of Tangible Personal Property included in the
Assets and Schedule 2.1(b) contains descriptions of all Real Property included
---------------
in the Assets. Except as described on Schedule 5.4, Seller has good and
------------
marketable title to (or, in the case of Assets that are leased, valid leasehold
interests in) all of the Assets, free and clear of all Liens, except Permitted
Liens. The tangible Assets are in good operating condition and repair, ordinary
wear and tear excepted. All items of cable plant and headend equipment included
in the Assets (i) currently are being maintained in a manner consistent with
generally accepted standards of good engineering practice, and (ii) will permit
the System to operate in accordance with the terms of the Franchises and other
Legal Requirements. Except for the Excluded Assets, the Assets constitute all
property and rights, real and personal, tangible and intangible, necessary or
required, to operate the System as currently operated and conduct the Business
as currently conducted in compliance with all Legal Requirements.
5.5 System Franchises, System Licenses, and System Contracts.
--------------------------------------------------------
(a) Except for the System Franchises, System Licenses, and System
Contracts described on Schedules 2.1(c), 2.1(d) and 2.1(e), respectively,
---------------- ------ ------
Contracts included in the Excluded Assets, subscription agreements made in the
ordinary course of business with individual resident subscribers for the cable
television services provided by the System, and except as described on Schedules
---------
5.5, Seller is not bound or affected by any of the following that relate to the
- ---
System: (i) leases of real or personal property (whether as lessor or lessee);
(ii) Contracts granting any Person a Lien on or against any of the Assets; (iii)
franchises or similar authorizations; (iv) licenses or permits authorized or
issued by any Governmental Authority or other Person; (v) Contracts of
employment, or Contracts with consultants or independent contractors; or (vi)
Contracts other than those described in any other paragraph of this Section 5.5
that contemplate payments by or to Seller in any twelve-month period exceeding
$20,000 individually or $50,000 in the aggregate. The System Franchises, System
Contracts and System Licenses are sufficient to permit Buyer to operate the
System lawfully in the manner in which it currently is operated. Except as
stated in the System Franchises, there are no outstanding, material cable plant
construction, equipment acquisition or other capital commitments with respect to
the System that have been requested by any Governmental Authority or to which
Seller has otherwise committed.
(b) Seller has delivered to TWEAN true and complete copies of each
of the System Franchises, System Licenses, and System Contracts, including any
amendments, assignments and consents thereto (or, in the case of oral System
Contracts, true and complete written summaries thereof). Except as described in
Schedule 5.5: (i) each of the System Franchises, System Licenses, and System
- ------------
Contracts is valid, in full force and effect, and, to Seller's Knowledge,
enforceable in accordance with its terms against the parties thereto other than
Seller, and Seller has fulfilled when due, or has taken all action necessary to
enable it to fulfill when due, all of its obligations
16
<PAGE>
thereunder; (ii) there has not occurred any default (without regard to lapse of
time, the giving of notice, the election of any Person other than Seller, or any
combination thereof) by Seller nor, to the Knowledge of Seller, has there
occurred any default (without regard to lapse of time, the giving of notice, the
election of Seller, or any combination thereof) by any Person other than Seller
under any of the System Franchises, System Licenses, or System Contracts; and
(iii) neither Seller nor, to the Knowledge of Seller, any other Person is in
arrears in the performance or satisfaction of its obligations under any of the
System Franchises, System Licenses, or System Contracts, and no waiver or
indulgence has been granted by any of the parties thereto.
5.6 Real Property. The Real Property comprises all real property
-------------
interests necessary to conduct the Business as now conducted. To Seller's
Knowledge, there is no easement or other real property interest, other than the
Real Property, that is required, or that has been asserted by a Governmental
Authority or a third-party to be required, to conduct the Business or operations
of the System. Except for routine repairs, all of the improvements, leasehold
improvements, and the premises of the Real Property are in good condition and
repair and are suitable for the purposes used. To Seller's Knowledge, the
current use and occupancy of the Real Property do not constitute nonconforming
uses under any applicable zoning Legal Requirements. Each parcel of Owned
Property and each parcel of Leased Property (i) has access to and over public
streets, or private streets for which Seller has a valid right of ingress and
egress, (ii) conforms in its current use in all material respects to all
material zoning requirements without reliance upon a variance issued by a local
government or a classification of the parcel in question as a nonconforming use,
and (iii) conforms in its use in all material respects to all material
restrictive covenants, if any, or other material encumbrances affecting all or
part of such parcel.
5.7 Litigation. Except as set forth in Schedule 5.7: (i) there is no
---------- ------------
Litigation pending or, to Seller's Knowledge, threatened, by or before any
Governmental Authority or private arbitration tribunal, against Seller which if
determined adversely, would be reasonably likely to materially adversely affect
the financial condition or operations of the System, the Assets, or the ability
of Seller to perform its obligations under this Agreement, or which seeks or
reasonably is likely to result in the modification, revocation, termination,
suspension, or other limitation of any of the System Franchises, System
Licenses, or System Contracts; and (ii) there is not in existence any Judgment
requiring Seller to take any action of any kind with respect to the Assets or
the operation of the System, or to which Seller (with respect to the System),
the System, or the Assets are subject or by which they are bound or affected.
5.8 Financial Statements. Seller has delivered to TWEAN (i) unaudited
--------------------
balance sheets of the System as of the fiscal years ended December 31, 1994,
1995 and 1996 and an unaudited balance sheet of the System as of June 30, 1997,
(ii) unaudited statements of operation for the System for the twelve-month
periods ended December 31, 1994, 1995 and 1996, and an unaudited statement of
operations for the System for
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the six months ended June 30, 1997, (collectively, the "Financial Statements"),
and (iii) information for the System regarding subscribers for each month since
January 1, 1995 through the date of this Agreement, together with an accounts
receivable aging report for the most recent month (the "Operational
Information"). The Financial Statements and the Operational Information are in
accordance with all books, records, and accounts of Seller and are true,
correct, and complete in all material respects. The Financial Statements were
prepared in accordance with GAAP, present fairly the financial position of the
System as of the dates indicated and the results of operations of the System for
the periods indicated subject to normal year-end adjustments, and were prepared
on a basis consistent in all material respects with all other financial
statements, balance sheets, and operating cash flow statements of Seller. The
assets and liabilities and items of income and expense on the Financial
Statements are bona fide.
5.9 Tax Returns; Other Reports. Except as described on Schedule 5.9,
-------------------------- ------------
and with respect to the System and the Assets only, (i) Seller has duly and
timely filed in true and correct form all federal, state, local, and foreign tax
returns and other reports required to be filed and has duly and timely paid all
Taxes which have become due and payable by Seller, whether or not so shown on
any such return or report, (ii) Seller has received no notice of, nor does
Seller have any Knowledge of, any notice of deficiency or assessment of proposed
deficiency or assessment from any taxing Governmental Authority, and (iii) other
than as may relate to Seller generally, there are no audits pending, there are
no outstanding agreements or waivers that extend the statutory period of
limitations applicable to any federal, state, local, or foreign tax returns or
Taxes for any period, and there are no determined tax deficiencies or proposed
tax assessments against Seller.
5.10 System Information. Schedule 5.10 sets forth a materially true and
------------------ -------------
accurate description of the following information as of the date set forth in
the Schedule:
(i) the approximate number of miles of activated aerial and
underground plant included in the Assets;
(ii) the approximate number of Individual Subscribers and
Subscriber Equivalents served by the System;
(iii) a description of basic and optional or tier services
available from the System, the rates charged by Seller for each, and the
approximate number of Individual Subscribers and Subscriber Equivalents
receiving each optional or tier service;
(iv) the approximate number of passings of the System;
(v) the stations and signals carried by the System, the
channel position of each such signal and station, and all frequencies utilized
by the System;
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(vi) the MHz and channel capacity of the System;
(vii) a list of the multiple dwelling units, commercial
establishments and other subscribers served by Seller that are billed for cable
television service on a bulk basis (including names and addresses), the number
of units in each such multiple dwelling unit or commercial establishment, and
the monthly rates charged for each such service; and
(viii) a list of the cities, towns, villages, boroughs and
counties served by the System.
5.11 Bonds. Except as set forth in Schedule 5.11, there are no
----- -------------
franchise, construction, fidelity, performance or other bonds, or letters of
credit, posted or required to be posted by Seller in connection with the System
or the Assets.
5.12 Compliance with Legal Requirements.
----------------------------------
(a) The operation of the System as currently conducted does not
violate or infringe in any material respect any Legal Requirements currently in
effect or, to the Knowledge of Seller, proposed to become effective. Seller has
received no notice of any violation by Seller or the System of any Legal
Requirement applicable to the operation of the System as currently conducted,
and knows of no basis for the allegation of any such violation.
(b) Without limiting the generality of the foregoing, Seller,
the Business, and the operation of the System are each in compliance with the
Communications Act and the Cable Act, except for violations(s) which,
individually or in the aggregate, reasonably could not be expected to have a
material adverse effect on the System. Seller has submitted to the FCC all
filings, including but not limited to cable television registration statements,
annual reports, and aeronautical frequency usage notices, that are required
under the rules and regulations of the FCC. The operation of the System has been
and is in compliance in all material respects with the rules and regulations of
the FCC, and Seller has not received notice from the FCC of any violation of its
rules and regulations. Seller has delivered to TWEAN copies of all reports and
filings for the past three years, made or filed pursuant to FCC and Copyright
rules and regulations by Seller with respect to the System and shall make
available to TWEAN all other past reports and filings made or filed pursuant to
FCC and Copyright rules and regulations by Seller with respect to the System.
Seller has delivered to TWEAN true and complete copies of all FCC Forms 159,
159(C), 328, 329, 393, 1200, 1205, 1210 (or 1240), 1215 and 1220 that have been
prepared with respect to the System, copies of all correspondence with any
Governmental Authority relating to rate regulation generally or specific rates
charged to subscribers with respect to the System, including copies of any
complaints filed with the FCC with respect to any rates charged to subscribers
of the System, and any other documentation supporting an exemption from the rate
regulation provisions of
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the Cable Act claimed by Seller with respect to the System. Seller has provided
TWEAN with true and complete copies of all requests for franchise renewal that
have been filed since 1993 with Governmental Authorities with respect to the
System Franchises.
(c) Seller is presently permitted under all applicable System
Franchises and FCC rules, regulations and orders to distribute the transmissions
(whether television, satellite, radio or otherwise) of video programming or
other information that Seller makes available to subscribers of the System and
to utilize all carrier frequencies generated by the operations of the System,
and is licensed to operate all the facilities required by law to be licensed,
including any business radio and any cable television relay service system,
being operated as part of the System. Other than requests for network
nonduplication, sports blackout and syndex protection and notices of election of
must-carry status and retransmission consents or other communications made
pursuant to the Cable Act, no written requests or notices or demands (written or
oral) have been received by Seller during the three year period preceding the
date of this Agreement from the FCC, the United States Copyright Office, any
local or other television station or system, any Governmental Authority or other
Person challenging or questioning the right of Seller's operation of the System,
or requesting signal carriage or challenging the right of Seller to carry or
deliver any signal. Seller has not violated any laws or any duty or obligation
with regard to protecting the privacy rights of any past or present subscribers
of the System. The System is carrying all of the "must carry" signals required
to be carried pursuant to the FCC's rules and regulations. Seller has obtained
all necessary retransmission consent for broadcast stations that are carried by
the System and that have elected carriage pursuant to retransmission consent.
(d) Seller has conducted all system and microwave proof-of-
performance tests and all CLI-related tests as are required to be conducted with
respect to the System. Seller has (i) maintained appropriate log books and other
recordkeeping which accurately and completely reflect in all material respects
all results required to be shown thereon; (ii) to the extent required by the
rules and regulations of the FCC, corrected any radiation leakage of the System
required to be corrected in connection with Seller's monitoring obligations
under the rules and regulations of the FCC; and (iii) otherwise complied in all
material respects with all applicable CLI rules and regulations in connection
with the operation of the System. Seller has filed all required FCC
notifications for the operation of the System in all necessary aeronautical
frequency bands.
(e) Seller has deposited with the United States Copyright Office
all statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the United States
Copyright Office required under the Copyright Act with respect to the Business
and operations of the System as are required to obtain, hold and maintain the
compulsory license for cable television systems prescribed in Section 111 of the
Copyright Act. Seller and the System are in compliance in all material respects
with the Copyright Act and the rules and
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regulations of the Copyright Office with respect to the operation of the System,
except as to potential copyright liability arising from the performance,
exhibition or carriage of any music on the System, as to which Seller makes no
representation. Seller is entitled to hold and does hold the compulsory
copyright license described in Section 111 of the Copyright Act, which
compulsory copyright license is in full force and effect and has not been
revoked, canceled, encumbered or adversely affected in any manner. To Seller's
Knowledge, there is no inquiry, claim, action or demand pending before the
United States Copyright Office or from any other party which questions the
copyright filings or payments made by Seller with respect to the System with
respect to which Buyer will incur any Losses.
(f) All required FAA no hazard determinations have been obtained
with respect to the construction and/or alteration of towers used in connection
with the operation of the System. The towers have been marked and lit, where
required, in compliance in all material respects with applicable FCC and FAA
rules.
(g) All of the broadcast television signals carried by the System
are carried either pursuant to the must-carry requirements or pursuant to
executed retransmission consent agreements.
5.13 No Adverse Change. Since the date of this Agreement, the
-----------------
Assets and the financial condition and operations of the System have not been
materially and adversely affected as a result of any fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm, condemnation, or act of
God or public force or otherwise. Since December 31, 1996, there has been no
material adverse change in the Assets or the financial condition or operations
of the System, other than changes arising out of matters of a general economic
nature or matters affecting the cable television industry generally (including,
without limitation, competition caused by or arising from multichannel
multipoint distribution service, direct broadcast satellite and/or operators of
cable television systems, and legislation, rulemaking or regulation).
5.14 Employees.
---------
(a) Schedule 5.14(a) sets forth a true and complete list of the
----------------
names, titles and rates of compensation of all individuals employed by Seller as
of the date of this Agreement who render services primarily to the System.
(b) There are no collective bargaining agreements applicable to
any individual employed by Seller who renders services primarily in connection
with the System, and Seller has not bargained, and has no duty to bargain, with
any labor organization with respect to any such individuals. There are not
pending any unfair labor practice charges against Seller, nor any demand for
recognition, or any other request or
21
<PAGE>
demand from a labor organization for representative status with respect to any
persons employed by Seller that render services in connection with the System.
(c) With respect to any individuals employed by Seller that render
services primarily in connection with the System, Seller is in compliance in all
material respects with all applicable Legal Requirements respecting employment
conditions and practices, has withheld all amounts required by any applicable
Legal Requirements or Contracts to be withheld from the wages or salaries of its
employees, and is not liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing.
(d) With respect to any individuals employed by Seller that render
services primarily in connection with the System, (i) Seller has not engaged in
any unfair labor practice within the meaning of the National Labor Relations Act
and has not violated any Legal Requirements prohibiting discrimination on the
basis of race, color, national origin, sex, religion, age, marital status, or
handicap in its employment conditions or practices, and (ii) except as described
on Schedule 5.14(d), there are no pending or, to Seller's Knowledge, threatened
unfair labor practice charges or discrimination complaints relating to race,
color, national origin, sex, religion, age, marital status, or handicap against
Seller before any Governmental Authority nor, to Seller's Knowledge, does any
basis therefor exist.
(e) There are no existing or, to Seller's Knowledge, threatened, labor
strikes, disputes, or grievances affecting the System or other labor
controversies that could reasonably be expected to have a material and adverse
effect on the financial condition or operations of the System. There are no
pending or, to the Knowledge of Seller, threatened, arbitration or other legal
proceedings under any System Contracts respecting Seller's employees, nor to the
Knowledge of Seller, does any basis therefor exist.
(f) Except as set forth on Schedule 5.14(f), Seller is not a party to
-------------
any employment agreement, written or oral, relating to employees of the System
which cannot be terminated at will by Seller and, except as set forth on
Schedule 5.14(f), Seller has not had and does not currently have any pension or
- ----------------
profit sharing or other employee benefit plan relating to employees of the
System. True, correct and complete copies of the material provisions of all
agreements and plans listed on Schedule 5.14(f) have been delivered by Seller to
----------------
TWEAN.
5.15 Employee Benefits. Neither Seller nor any "Employee Benefit Plan", or
-----------------
to Seller's Knowledge, any "Multiemployer Plan" (as those terms are defined in
ERISA) maintained by Seller or to which Seller has or has had the obligation to
contribute in respect of any employees that render services in connection with
the System is in violation of any provision of ERISA; no reportable event,
within the meaning of Section 4043 of ERISA, has occurred and is continuing with
respect to any such Employee
22
<PAGE>
Benefit Plan, or, to Seller's Knowledge, any such Multiemployer Plan; and no
prohibited transaction, within the meaning of Title I of ERISA, has occurred
with respect to any such Employee Benefit Plan or, to Seller's Knowledge, any
such Multiemployer Plan.
5.16 Environmental.
-------------
(a) Seller has received no notice that it is, and to Seller's
Knowledge it is not, (i) the subject of any "Superfund" evaluation or
investigation, or (ii) the subject of any investigation or proceeding of any
Governmental Authority evaluating whether any remedial action is necessary to
respond to any release of Hazardous Substances on or in connection with the Real
Property. None of the Real Property is included, nor to Seller's Knowledge has
it been considered for inclusion, in any federal, state, or local list or
registry of properties contaminated by Hazardous Substances, including but not
limited to the National Priorities List or the CERCLIS List.
(b) All material permits, licenses, permissions, and other
authorizations relating to the Real Property which are required under applicable
Legal Requirements with respect to pollution or protection of the environment
have been obtained, including Legal Requirements relating to actual or
threatened emissions, discharges, or releases of Hazardous Substances into
ambient air, surface water, ground water, land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Substances. Seller is in compliance in all
material respects with all terms and conditions of such permits, licenses,
permissions, and authorizations, and is in compliance in all material respects
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and time-tables of such Legal Requirements
or of any other environmental, health, or safety Legal Requirements relating to
the Real Property. Seller has not received notice of, and has no Knowledge of
circumstances relating to, any past, present, or future events, conditions,
circumstances, activities, practices, incidents, actions, or plans, including
but not limited to the presence, use, generation, manufacture, disposal,
release, or threatened release of any Hazardous Substances from the Real
Property, that could interfere or prevent continued compliance with, or that are
reasonably likely to give rise to any liability under, any environmental Legal
Requirement, based upon or related to the processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release, or threatened release into the environment, of any Hazardous
Substance from or attributable to the Real Property.
(c) Seller has delivered to TWEAN copies of all environmental
reports and studies that Seller has commissioned with respect to the Real
Property, and such copies are true, complete and accurate copies of such reports
and studies.
(d) Except as disclosed on Schedule 5.16, no underground storage
-------------
tanks currently are located on the Real Property, and, to Seller's Knowledge,
(i) no underground storage tanks have been located on the Real Property; (ii) no
Real Property
23
<PAGE>
has been used at any time as a gasoline service station or any other facility
for storing, pumping, dispensing, or producing gasoline or any other petroleum
products or wastes; (iii) no solid waste or Hazardous Substances have been
disposed of at the Real Property; and (iv) no asbestos containing materials or
polychlorinated biphenyls are present in or on the Real Property.
5.17 Intangibles. The operation of the System as currently conducted
-----------
does not infringe upon, or otherwise violate, the rights of any person or entity
in any copyright, trade name, trademark right, service mark, service name, trade
name, patent, patent right, license, trade secret or franchise, and there is not
pending or, to Seller's Knowledge, threatened any action with respect to any
such infringement or breach.
5.18 Books and Records. All of the books, records, and accounts of the
-----------------
System are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements and
accurately present and reflect in all material respects all of the transactions
therein described.
5.19 Accounts Receivable. Seller is the true and lawful owner of its
-------------------
accounts receivable and has good and clear title to each account, free and clear
of all Liens, with the absolute right to transfer any interest therein. Each
such account is (i) a valid obligation of the account debtor enforceable in
accordance with its terms, and (ii) in all material respects, a true and correct
statement of the account for merchandise actually sold and delivered to, or for
actual services performed for and accepted by, such account debtor.
5.20 No Overbuilds. Except as described on Schedule 5.20 and other than
------------- -------------
direct satellite broadcast services, to Seller's Knowledge, as of the date of
this Agreement, (i) Seller is currently the only Person operating a cable
television system, multipoint multichannel distribution service or other
multichannel video programming service in the service area of the System; (ii)
no Person other than Seller has been granted a franchise, permit or license to
build or operate a cable television system, multipoint multichannel distribution
service or other multichannel video programming service in any of the
communities or unincorporated areas presently served by the System; and (iii) no
Person is contemplating the operation of a cable television system,
multipoint multichannel distribution service, or other multichannel video
programming service in the service area of the System. Seller has provided to
TWEAN copies of all documents, filings, correspondence and other written
information in Seller's possession relating to the overbuilds with each of Horry
Telephone Cablevision, Cable Vision and Genesis Cable, Inc., other than certain
documents which were prepared by Seller's attorneys and are subject to the
attorney-client privilege. Such documents subject to the attorney-client
privilege contain no material factual information not otherwise contained in the
documents provided by Seller to TWEAN hereunder.
24
<PAGE>
5.21 No Rights of First Refusal. There is not outstanding any right of
--------------------------
first refusal, option or other similar right granting any Person the right or
option to purchase, lease or obtain any other ownership interest in any of the
Assets or the System.
5.22 Accuracy of Schedules. All Schedules to this Agreement relating to
---------------------
(i) Seller's representations and warranties and (ii) the Assets or the System
are accurate and complete in all material respects as of the date of this
Agreement.
5.23 No Misrepresentation. No representation or warranty by Seller
--------------------
in this Agreement, nor any statement or certificate furnished to Buyer by Seller
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will at Closing contain any untrue statement of a material fact, or
omits or will at Closing omit to state a material fact necessary to make the
statements contained therein not misleading.
5.24 Finders and Brokers. Seller has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer will in any way have
any liability.
5.25 Tier Penetration. The number of Individual Subscribers who
----------------
subscribe to Basic Plus is at least 93% of the total number of Individual
Subscribers.
5.26 Taxpayer Identification Number. Seller's U.S. Taxpayer
------------------------------
Identification Number is as set forth in the introductory paragraph of this
Agreement.
ARTICLE 6.
COVENANTS
6.1 Certain Affirmative Covenants of Seller. Except as TWEAN may
---------------------------------------
otherwise consent in writing, between the date of this Agreement and Closing
Seller shall:
(a) Operate the System in the usual and ordinary course and in
accordance with past practices (including, but not limited to, maintaining
appropriate staff and management personnel consistent with past practices) and,
to the extent consistent with such operation, use commercially reasonable
efforts to (i) preserve the current business organization of the System intact,
including preserving existing relationships with franchising authorities, (ii)
keep available the services of its employees providing services in connection
with the System, (iii) preserve any beneficial business relationships with all
customers, suppliers, and others having business dealings with Seller relating
to the System, (iv) subject to Section 6.2, continue normal marketing,
advertising, and promotional expenditures with respect to the System in the
ordinary course of business consistent with the Marketing Plan, and (v) maintain
inventories of equipment and supplies at levels consistent with past practices;
25
<PAGE>
(b) Maintain (i) the Assets in good condition and repair, ordinary wear
excepted, and (ii) in full force and effect policies of insurance with respect
to the Assets and the operation of the System, in such amounts and with respect
to such risks as are customarily maintained by operators of cable television
systems of the size and in the geographic location of the System;
(c) (i) duly comply in all material respects with all applicable Legal
Requirements; (ii) perform in all material respects all of its obligations under
all of the System Franchises, System Licenses, and System Contracts without
default; and (iii) maintain its books, records, and accounts with respect to the
Assets and the Business in the usual, regular, and ordinary manner on a basis
consistent with past practices.
(d) (i) give to TWEAN, and its counsel, accountants, and other
representatives, full access during normal business hours to the premises of the
System, the Real Property, all of the Assets, Seller's books and records, and
the System's personnel; and (ii) furnish to Buyer, TWEAN and such
representatives all such additional documents, financial information, and other
information as Buyer or TWEAN may from time to time reasonably request; provided
that no investigation by Buyer, TWEAN or their respective representatives shall
affect or limit the scope of any of the representations and warranties of Seller
herein or in any Transaction Document or limit the liability of Seller for any
breach of such representations and warranties; and provided further that Buyer
and TWEAN shall perform any investigation pursuant to this paragraph in such a
manner as not to interfere materially with the conduct of the Business;
(e) use commercially reasonable efforts to obtain in writing as
promptly as possible all approvals, authorizations, and consents relating to the
System required to consummate the transactions contemplated hereby and the
subsequent transfer and assignment of Assets from Buyer to TWEAN pursuant to the
Exchange Agreement, and deliver to Buyer and TWEAN copies, satisfactory in form
and substance to Buyer and TWEAN, of such approvals, authorizations, and
consents; provided, however, that Seller (i) shall afford Buyer and TWEAN the
opportunity to review, approve and revise the form of consent prior to delivery
to the party whose consent is sought, and (ii) shall not accept or agree or
accede to any modifications or amendments to, or any conditions to the transfer
of, any of the System Franchises, System Licenses, or System Contracts that are
not acceptable to TWEAN;
(f) use commercially reasonable efforts to obtain certificates in form
reasonably acceptable to TWEAN, executed by the lessor of each of the real
property leases included in the System Contracts under which Seller is a lessee
(the "Estoppel Certificates"), each certifying that the respective real property
lease is in full force and effect and that the parties are not in default
thereunder;
26
<PAGE>
(g) promptly deliver to TWEAN true and complete copies of all monthly
and quarterly financial statements and operating reports with respect to the
System and any other reports with respect to the operation of the System
prepared by or for Seller at any time from the date hereof until Closing, and
any other similar materials which TWEAN may reasonably request;
(h) terminate the employment of all employees of Seller working for the
System on the Closing Date but prior to the Adjustment Time;
(i) promptly upon becoming aware of such matter, notify Buyer and TWEAN
of any fact, event, circumstance, action or omission which would prohibit Seller
from complying with or performing any covenant, agreement or obligation required
to be performed or complied with prior to the Closing Date;
(j) promptly notify Buyer and TWEAN of any fact, event, circumstance,
action or omission (i) that, if known at the date of this Agreement, would have
been required to be disclosed in or pursuant to this Agreement, or (ii) the
existence or occurrence of which would cause any of Seller's representations or
warranties under this Agreement or in any Transaction Document not to be true in
any material respect, and with respect to clause (ii), use commercially
reasonable efforts to remedy the same; and
(k) use commercially reasonable efforts to obtain in writing as
promptly as possible renewals or extensions of System Contracts that have
expired or will expire prior to the anticipated Closing Date, and deliver to
Buyer and TWEAN copies of such extensions, as well as copies of such renewals
which are satisfactory in form and substance to TWEAN in its reasonable
judgment; provided, however, that Seller (i) shall afford TWEAN the opportunity
to review, approve and revise the form of renewal agreement prior to delivery to
the party whose agreement is sought, and (ii) shall not accept, agree to or
accede to any conditions materially more burdensome than the System Contract
that preceded such renewal or extension agreement without the prior consent of
TWEAN.
6.2 Certain Negative Covenants of Seller. Except as TWEAN may otherwise
------------------------------------
consent in writing, or as contemplated by this Agreement, between the date of
this Agreement and Closing Seller shall not:
(a) modify, terminate, renew, suspend or abrogate any System Contract,
including, but not limited to, retransmission consent agreements, other than in
the ordinary course of business;
(b) modify, terminate, renew, suspend, or abrogate any System Franchise
or System License;
27
<PAGE>
(c) sell, assign, transfer or otherwise dispose of any of the Assets
other than in the ordinary course of business and on an arms' length basis;
(d) take any action that would result in the creation of a Lien on any
of the Assets which would not be released prior to or at Closing;
(e) enter into any transaction or permit the taking of any action that
would result in any of the representations and warranties contained in this
Agreement or in any Transaction Document not being true and correct in all
material respects when made or at Closing;
(f) (1) engage in any marketing, subscriber installation, or collection
practices that are inconsistent with the Marketing Plan, (2) notwithstanding the
Marketing Plan, conduct any "$.99" discount or similar campaigns within three
months prior to Closing, or (3) notwithstanding the Marketing Plan, conduct any
"Sprint Partnership" or similar campaigns unless agreed to in writing by Buyer
and TWEAN;
(g) change the compensation or benefits payable, or to become payable,
by Seller to any Person employed in connection with the conduct of the Business
or operations of the System, including benefits under any Employee Benefit Plan
or Benefit Arrangement, except (i) as required by existing written agreement,
(ii) such staying bonuses as Seller may deem appropriate to retain key employees
and which bonuses shall be paid by Seller; provided, however, that Buyer shall
not be obligated to make or continue any such incentives or similar payments
after the Closing Date, or (iii) in the ordinary course of business consistent
with past practices;
(h) except as set forth on Schedule 6.2(h), implement any increase or
---------------
decrease in rates for Basic Cable, Basic Plus or any other tier of service or
charges for remotes or installation, make any changes in channel lineups,
including channel additions, deletions or substitutions, or implement any
retiering or repackaging of, or any changes in, cable television programming
offered by the System, except as required pursuant to a Legal Requirement or
Judgment; or
(i) solicit or participate in negotiations with or accept (and Seller
shall use its best efforts to prevent any affiliate, partner, director, officer,
employer, agent or other representative of Seller from negotiating with,
soliciting or participating in negotiations with or accepting) any offer of any
third party with respect to the sale, transfer or other disposition of any
material portion of the Assets or the System or any transaction inconsistent
with those contemplated by this Agreement.
6.3 Confidentiality and Publicity.
-----------------------------
(a) Each party shall hold in strict confidence all documents and
information concerning the other party and its business and properties (except
that either party may disclose such documents and information to any
Governmental Authority
28
<PAGE>
reviewing the transactions contemplated hereby or as required in either party's
reasonable judgment pursuant to any Legal Requirement), and if the transaction
contemplated hereby should not be consummated, such confidence shall be
maintained, and all such documents and information (in whatever form) and copies
thereof shall immediately thereafter be destroyed, or returned to the party
originally furnishing the same.
(b) Buyer and Seller each shall consult with and cooperate with each
other with respect to the content and timing of all press releases and other
public announcements. Except as required by applicable Legal Requirements,
neither Buyer nor Seller shall make any such release or announcement without the
prior written approval of the other, which approval shall not be unreasonably
withheld.
6.4 Title Insurance Commitments. Seller shall provide to TWEAN, at Seller's
---------------------------
cost, within 45 days after the date of this Agreement, (i) commitments of title
insurance (the "Title Commitments") issued by a nationally-recognized title
insurance company (the "Title Company") containing policy limits and other terms
reasonably acceptable to TWEAN, together with photocopies of all documents
described as exception therein, committing to insure in TWEAN fee title to each
parcel of the Owned Property by ALTA (1992) policies of title insurance, and
(ii) ALTA-ACSM (1992 Standards) surveys of each parcel of the Owned Property,
which shall show the property boundaries, locations and dimensions of
improvements, and all easements of record or visible on the ground, and locating
the property by reference to an identifiable benchmark for each parcel of the
Owned Property (the "Surveys"), certified to TWEAN and the Title Company. If
TWEAN shall notify Seller within 30 days of its receipt of both the Title
Commitments and the Surveys of any Lien (other than Permitted Liens) or other
matter affecting title to Owned Property which, in the determination of TWEAN,
renders title to any parcel of Owned Property uninsurable or unmerchantable, or
that could adversely affect the use of any parcel of Owned Property for the
purposes for which it is currently used by Seller (each a "Title Defect"),
Seller shall exercise its reasonable best efforts to remove or, with the consent
of TWEAN, cause the Title Company to commit to insure over, each Title Defect
prior to Closing.
6.5 HSR Act Compliance. Within 30 days after the date hereof, Seller and
------------------
Buyer shall, and Buyer shall use its commercially reasonable efforts to cause
TWEAN to, prepare and file proper premerger notification forms and affidavits in
compliance with the HSR Act with respect to the transactions contemplated by
this Agreement. Buyer and Seller shall each pay one-half of all fees payable to
Governmental Authorities in connection with the filings made by Buyer and
Seller. If following the filing of such forms any Governmental Authority shall
challenge the transactions contemplated hereby, or request additional filings or
information relating hereto, then Buyer and Seller shall use commercially
reasonable efforts to overcome such challenge or comply with such request to the
extent that the efforts related thereto are neither materially burdensome nor
would require a disclosure adverse to a party's legitimate business interests.
If
29
<PAGE>
Buyer or Seller reasonably determines that contesting such challenge or making
or providing any such additional filing or information would be materially
burdensome or require a disclosure adverse to such party's legitimate business
interests, then, such party shall be entitled, at its option, to withdraw its
filing and terminate this Agreement.
6.6 Cooperation with Seller. Buyer shall use commercially reasonable
-----------------------
efforts to cooperate and to cause TWEAN to use its commercially reasonable
efforts to cooperate with Seller in obtaining all necessary approvals, waivers,
and consents including, but not limited to, to the extent commercially
reasonable, attending meetings with the parties who must provide such approvals,
waivers, and consents and by providing the appropriate financial statements,
insurance certificates, and surety bonds required in order to obtain such
approvals, waivers, and consents.
6.7 Supplements to Schedules. Each of Seller and Buyer shall, from time to
------------------------
time prior to Closing, supplement the Schedules to this Agreement with
additional information that, if existing or known to it on the date of this
Agreement, would have been required to be included in one or more Schedules to
this Agreement. For purposes of determining the satisfaction of any of the
conditions to the obligations of Buyer and Seller in Sections 7.1 and 7.2 and
the liability of Seller or of Buyer following Closing for breaches of its
representations and warranties under this Agreement, the Schedules to this
Agreement shall be deemed to include only (a) the information contained therein
on the date of this Agreement and (b) information added to the Schedules by
written supplements to this Agreement delivered no later than three days prior
to Closing by the party making such amendment that (i) are accepted in writing
by the other party or (ii) reflect actions permitted by this Agreement to be
taken prior to Closing.
6.8 Transitional Billing Services. Upon TWEAN's written request, which
-----------------------------
shall be made at least 30 days prior to Closing, and at the actual out-of-pocket
cost of Seller, Seller shall provide to Buyer subscriber billing services
("Transitional Billing Services") in connection with the System for a period of
up to 90 days following Closing to allow for conversion of existing billing
arrangements. Seller shall cooperate with all reasonable requests of TWEAN in
connection with the first billing cycle following Closing.
6.9 Employee Benefit Matters.
------------------------
(a) Seller shall remain solely responsible for, and shall indemnify and
hold harmless Buyer from and against all Losses arising with respect to, all
salaries and all severance, vacation (other than vacation that is allowed to be
carried over pursuant to Section 6.9(e)), holiday pay, and all other benefits to
which employees of Seller may be entitled for periods prior to the Adjustment
Time in connection with any welfare, medical, insurance, disability or other
Employee Benefit Plans or Benefit Arrangements, as a result of (i) consummation
of the transactions contemplated hereby, including any costs relating to the
continuation of health benefits under COBRA, (ii) their employment by Seller or
its Affiliates prior to the Adjustment Time, (iii) the termination of their
30
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employment prior to the Adjustment Time, (iv) the obligation, if any, to notify
or bargain with any labor organization prior to the Adjustment Time, or (iv)
pursuant to any applicable Legal Requirement (including the Worker Adjustment
and Retraining Notification Act, 29 U.S.C. 2101, et seq. ("WARN")), or
otherwise, relating to their employment prior to the Adjustment Time. Seller
shall retain full responsibility and liability for compliance with the
provisions of COBRA with respect to any employee or former employee of Seller,
or any beneficiary of any such employee or former employee, who is covered under
any group health plan, within the meaning of Section 5000(b)(i) of the Code,
maintained by Seller or its ERISA Affiliates as of the Closing Date, whether
pursuant to the provisions of COBRA or otherwise. Seller shall hold Buyer and
any ERISA Affiliate of Buyer harmless from and fully indemnify them against any
Losses that relate to continuation coverage under COBRA arising as a result of
any action or omission by Seller or because Buyer is deemed to be a successor
employer to Seller.
(b) TWEAN may, but shall have no obligation to, employ or offer
employment to any employee of the System who is actively at work on the Closing
Date. Seller agrees to cooperate in all reasonable respects with TWEAN to allow
TWEAN to evaluate and interview employees of the System to make hiring
decisions, including allowing TWEAN to contact employees during normal business
hours and making personnel records available to TWEAN, subject to applicable
Legal Requirements. At least 60 days prior to the anticipated Closing Date,
Buyer shall provide to Seller a list of the names of Seller's employees to whom
TWEAN plans to offer employment. As of the Closing Date but prior to the
Adjustment Time, Seller shall terminate the employment of all employees of the
System who TWEAN plans to hire as of the Adjustment Time ("Hired Employees").
(c) Seller shall pay to all employees of the System all compensation,
including salaries, commissions, bonuses, deferred compensation, severance,
insurance, pensions, profit sharing, accrued vacation (other than vacation that
is allowed to be carried over pursuant to Section 6.9(e)) and other compensation
or benefits to which they are entitled for periods prior to the Adjustment Time,
including all amounts, if any, payable on account of the termination of their
employment.
(d) Seller shall be responsible for maintenance and distribution of
benefits accrued under any Employee Benefit Plan (within the meaning of Section
3(3) of ERISA) maintained by Seller or its ERISA Affiliates pursuant to the
provisions of such plans. Buyer shall not assume any obligation or liability for
any such accrued benefits or any fiduciary or administrative responsibility to
account for or dispose of any such accrued benefits under any Employee Benefit
Plans maintained by Seller or its ERISA Affiliates.
(e) Notwithstanding anything to the contrary herein, Buyer shall credit
each Hired Employee for, and allow each Hired Employee to take as vacation days,
the number of vacation days accrued but not used by such Hired Employee during
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employment with Seller as of the Closing Date, up to the maximum number of
vacation days that such Hired Employee would have accrued under the applicable
vacation policy of TWEAN had TWEAN owned the System during the same period of
employment. If a Hired Employee carries over a number of accrued vacation days
exceeding the maximum number of vacation days permitted under TWEAN's vacation
leave policy for that same period, Buyer shall have no obligation to permit such
Hired Employee to take such excess vacation days, but, if it does not, shall pay
such Hired Employee for such excess vacation days an amount equal to that
portion of the adjustment effected pursuant to Section 2.5(d) that corresponds
to such excess vacation days. In no event shall the liability assumed by Buyer
as of Closing under this paragraph exceed the amount by which an adjustment for
accrued vacation pay is made in favor of Buyer under Section 2.5(d).
(f) After the Closing Date, in order to permit Seller to make
distributions to any former employee who is a Hired Employee of the balance of
such employee's 401(k) account in Seller's tax qualified plan, if any, as soon
as legally permitted, Buyer shall notify Seller of the date of the termination
of each such employee's employment with Buyer for any reason within 45 days
thereafter; provided, however, that, Buyer's failure to so inform Seller shall
not constitute a breach by Buyer of this Agreement and Buyer shall have no
liability to Seller in connection with such a failure.
(g) Nothing in this Section 6.9 or elsewhere in this Agreement shall be
deemed to make any employee of Seller or its Affiliates a third party
beneficiary of this Agreement.
6.10 Post-Closing Obtaining of Consents, Authorizations and Approvals.
----------------------------------------------------------------
Subsequent to Closing, each party shall continue to use its commercially
reasonable efforts at its own expense to obtain in writing as promptly as
possible any consent, authorization or approval required to be obtained by it
that was not obtained on or before Closing, and deliver copies of such,
reasonably satisfactory in form and substance, to the other. The obligations
set forth in this subsection shall survive Closing and shall not be merged in
the consummation of the transactions contemplated hereby. From Closing until
each such consent, authorization or approval is obtained, each party shall act
as the agent for the other, and shall preserve the benefit of and
enforce the System Contract or other right to which such consent, authorization
or approval pertains to the fullest extent permissible under the applicable
System Contract or other right. Upon request of the other, at Closing, Buyer
and Seller shall enter into an agency agreement in a form mutually satisfactory
to each party specifying the terms of such agency.
6.11 Designation of Retransmission Consent Agreements. By written notice
------------------------------------------------
delivered to Seller no later than 30 days prior to the Closing Date, TWEAN may
designate those retransmission consent agreements relating to the System that it
desires Buyer to assume. The retransmission consent agreements that TWEAN so
designates shall be deemed System Contracts and assigned to Buyer at Closing,
and the agreements
32
<PAGE>
that TWEAN does not so designate shall be deemed Excluded Assets. Upon receipt
of such notice, Seller shall use commercially reasonable efforts to obtain in
writing all approvals, authorizations or consents required to be obtained to
transfer such System Contracts to Buyer and to transfer such System Contracts
from Buyer to TWEAN.
6.12 Leased Vehicles. Seller shall pay the remaining balances on any leases
---------------
for vehicles included in its Tangible Personal Property, and deliver title to
such vehicles free and clear of all Liens to Buyer at Closing.
6.13 Distant Signals. For a period ending on November 14, 1997, TWEAN may
---------------
identify any potential, material copyright liabilities that could arise out of
the carriage by TWEAN of distant signals after the Closing Date (a "Copyright
Liability"). Upon receipt on or prior to November 14, 1997 of notice from TWEAN
of a Copyright Liability, Seller shall take such steps as may be reasonably
necessary to eliminate such Copyright Liability prior to December 31, 1997.
6.14 Seller Approvals. As soon as reasonably practicable after the
----------------
execution of this Agreement, Seller shall submit this Agreement for approval to
its limited partners. Seller shall cause its general partner to recommend that
Seller's limited partners approve this agreement and the transactions
contemplated hereby and Seller shall make commercially reasonable efforts to
obtain such approval from its limited partners.
6.15 Marketing Plan for 1998. If the Closing has not occurred by December
-----------------------
31, 1997, then Buyer and Seller shall use commercially reasonable efforts to
agree upon a marketing plan for the System for the 1998 calendar year (the
"Marketing Plan for 1998"). Until Buyer and Seller agree upon the Marketing
Plan for 1998, Seller shall continue its marketing efforts with respect to the
System consistent with the Marketing Plan for 1997 and the term "Marketing Plan"
shall be deemed to mean the Marketing Plan for 1997.
ARTICLE 7.
CONDITIONS PRECEDENT
7.1 Conditions to Buyer's Obligations. The obligations of Buyer to
---------------------------------
consummate the transactions contemplated by this Agreement shall be subject to
the following conditions, any of which may be waived by Buyer in its sole
discretion:
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Seller in this Agreement or in any Transaction Document shall
be true and accurate in all material respects at and as of Closing with the same
effect as if made at and as of Closing.
(b) Performance Of Agreements. Seller shall have performed in all
-------------------------
material respects all obligations and agreements and complied with all covenants
in this
33
<PAGE>
Agreement or in any Transaction Document to be performed and complied with by it
at or before Closing.
(c) Officer's Certificate. Buyer shall have received a certificate
---------------------
executed by an executive officer of the General Partner of Seller, dated as of
Closing, reasonably satisfactory in form and substance to Buyer, certifying that
the conditions specified in Sections 7.1(a), 7.1(b) and 7.1(k) have been
satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
-----------------
Judgment shall have been entered and not vacated by any Governmental Authority
of competent jurisdiction in any Litigation or other matter, which (i) enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated by this Agreement or by any Transaction Document, or (ii) requires
separation or divestiture by Buyer or TWEAN of all or any significant portion of
the Assets after Closing, and there shall be no Litigation pending or threatened
seeking, or which if successful would have the effect of, any of the foregoing.
(e) Seller's Counsel Opinion. Buyer shall have received an opinion of
------------------------
Elizabeth M. Steele, general counsel of the General Partner of Seller, addressed
to Buyer and TWEAN and dated as of Closing, in the form of Exhibit B.
---------
(f) Opinion of FCC Counsel. Buyer shall have received an opinion of
----------------------
Cole, Raywid & Braverman, special FCC counsel to Seller, addressed to Buyer and
TWEAN and dated as of Closing, in the form of Exhibit C.
---------
(g) HSR Act Compliance. All waiting periods under the HSR Act
------------------
applicable to this Agreement or the transactions contemplated hereby shall have
expired or been terminated.
(h) Consents. Buyer shall have received evidence, in form and
--------
substance reasonably satisfactory to it, that there have been obtained all
consents, approvals and authorizations identified with an asterisk on Schedule
--------
5.3 as material consenting to, approving or authorizing the transfer and
- ---
assignment of the particular Assets first from Seller to Buyer and then from
Buyer to TWEAN; provided, however, that to the extent such material consents,
approvals and authorizations relate to consents by the FCC to assignments of the
System Licenses, this condition shall be deemed met if such consents to
assignment have been requested prior to Closing and TWEAN is entitled to operate
such System Licenses pursuant to conditional use authorizations until the FCC's
consent is received.
(i) Lien Releases. Buyer shall have received evidence satisfactory to
-------------
it that all Liens (other than Permitted Liens) affecting or encumbering the
Assets have been terminated, released, or waived, as appropriate, or shall have
received original, executed
34
<PAGE>
instruments in form satisfactory to Buyer effecting such terminations, releases,
or waivers ("Lien Releases").
(j) Environmental Assessments. Buyer shall be reasonably satisfied
-------------------------
that any environmental audits or assessments conducted by Buyer or TWEAN with
respect to the Real Property have not indicated the presence thereon, or the
likelihood of presence thereon, of Hazardous Substances in amounts or under
conditions reasonably likely to lead to the imposition of material fines,
penalties or compliance actions by applicable Governmental Authorities.
(k) Subscribers. The aggregate number of Individual Subscribers and
-----------
Subscriber Equivalents as of the Closing Date shall not be less than 24,800.
(l) Estoppel Certificates. Buyer shall have received the Estoppel
---------------------
Certificates, dated as of Closing.
(m) Noncompetition Covenant. Buyer shall have received the
-----------------------
Noncompetition Covenant, dated as of Closing, executed by Seller and its general
partner.
(n) Title Defects; Title Encumbrances. There shall exist no Title
---------------------------------
Defects which the Title Company shall not have deleted from the Title
Commitments or, with the consent of TWEAN, committed to insure over, and Seller
shall have secured the termination of all material title encumbrances on the
Assets other than Permitted Liens.
(o) Rate Rollbacks. Neither the FCC nor any franchising Governmental
--------------
Authority shall have announced any rate rollback relating to any of the rates
established by or for the System pursuant to cost-of-service showings which is
reasonably likely to have a material adverse effect on the Business or the
operation (financial or otherwise) of the System.
(p) Tier Penetration. The number of Individual Subscribers who
----------------
subscribe to Basic Plus shall be at least 93% of the total number of Individual
Subscribers.
(q) Related Closing. All of the conditions to the obligation of Buyer
---------------
to close the transactions contemplated by the Asset Exchange Agreement shall
have been satisfied or waived and Buyer shall be reasonably satisfied that the
exchange transactions contemplated thereunder shall be consummated in all
material respects immediately after and on the same day as the Closing in
accordance with the terms of the Asset Exchange Agreement.
35
<PAGE>
7.2 Conditions to Seller's Obligations. The obligations of Seller to
----------------------------------
consummate the transactions contemplated by this Agreement shall be subject to
the following conditions, any of which may be waived by Seller in its sole
discretion:
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Buyer in this Agreement or in any Transaction Document to
which Buyer is a party shall be true and accurate in all material respects at
and as of Closing with the same effect as if made at and as of Closing.
(b) Performance of Agreements. Buyer shall have performed in all
-------------------------
material respects all obligations and agreements and complied with all covenants
in this Agreement or in any Transaction Document to which it is a party to be
performed and complied with by it at or before Closing.
(c) Officer's Certificate. Seller shall have received a certificate
---------------------
executed by an executive officer of Buyer, dated as of Closing, reasonably
satisfactory in form and substance to Seller, certifying that the conditions
specified in Sections 7.2(a) and 7.2(b) have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
-----------------
Judgment shall have been entered and not vacated by any Governmental Authority
of competent jurisdiction in any Litigation or other matter, which enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated hereby or by any Transaction Document, and there shall be no
Litigation pending or threatened seeking, or which if successful would have the
effect of, any of the foregoing.
(e) Buyer's Counsel Opinion. Seller shall have received an opinion of
-----------------------
Alan H. Silverman, Esq., General Counsel of Buyer, dated as of Closing, in the
form of Exhibit D.
---------
(f) HSR Act Compliance. All waiting periods under the HSR Act
------------------
applicable to this Agreement or the transactions contemplated hereby shall have
expired or been terminated.
(g) Consents. Seller shall have received evidence, in form and
--------
substance reasonably satisfactory to it that there have been obtained all
consents, approvals and authorizations identified with an asterisk on Schedule
--------
4.3 as material.
- ---
(h) Seller Approvals. This Agreement and the transactions contemplated
----------------
hereby shall have been approved by Seller's limited partners, provided, however,
that this condition shall be deemed satisfied unless Seller provides notice to
Buyer and TWEAN within 180 days after the execution of this Agreement that
Seller's limited partners have not approved this Agreement, in which case either
Buyer or Seller shall have the right to terminate this Agreement without further
obligation to the other.
36
<PAGE>
(i) Subscribers. As of the Closing Date, either (A) the aggregate
-----------
number of Individual Subscribers and Subscriber Equivalents shall not be less
than 24,800 or (B) Buyer shall have waived its right to an adjustment pursuant
to Section 2.5(e) only to the extent that the aggregate number of Individual
Subscribers and Subscriber Equivalents is less than 24,800.
ARTICLE 8.
CLOSING
8.1 Closing; Time and Place. The closing of the transactions contemplated
-----------------------
by this Agreement ("Closing") shall take place, immediately before and on the
same day as the closing under the Asset Exchange Agreement, on the last calendar
day of the month in which all conditions set forth in Sections 7.1 and 7.2 have
been satisfied or waived, at a time and location mutually determined by Buyer
and Seller, or on such other date as Buyer and Seller may mutually agree, but in
no event later than June 30, 1998 (the "Outside Closing Date"). If the last
calendar day of such month is not a day on which financial institutions are open
and operating, then Buyer shall pay the Purchase Price, as adjusted in
accordance with Section 2.5, to Seller by 12:00 noon, eastern time, on the
immediately following business day on which financial institutions are open and
operating.
8.2 Seller's Obligations. At Closing, Seller shall deliver or cause to be
--------------------
delivered to Buyer, the following:
(a) Bill of Sale and Assignment and Assumption Agreement. An executed
----------------------------------------------------
counterpart of the Bill of Sale and Assignment and Assumption Agreement in the
form of Exhibit E.
---------
(b) Vehicle Titles. Title certificates to all vehicles included among
--------------
the Assets, endorsed in blank, and separate bills of sale therefor, if required
by the laws of the States in which such vehicles are titled.
(c) Deeds. Executed general warranty deeds conveying to Buyer, subject
-----
only to the permitted exceptions reflected on the updated Title Commitments,
each parcel of the Owned Property, along with a check made payable to the Title
Company covering all reasonable expenses relating to the Title Company's
subsequent issuance of a title insurance policy to TWEAN, including, but not
limited to, charges for the title insurance premium, recording fees and other
such fees and charges.
(d) Updated Title Commitments. Updated Title Commitments, to the
-------------------------
extent required to remove or insure over any Title Defects reflected on
previously delivered Title Commitments, along with the Title Company's
irrevocable commitment to issue title insurance policies.
37
<PAGE>
(e) Officer's Certificate. The certificate described in Section
---------------------
7.1(c).
(f) Seller's Counsel Opinion. Seller's Counsel Opinion.
------------------------
(g) Opinion of FCC Counsel. Opinion of FCC Counsel of Seller.
----------------------
(h) Lien Releases. The Lien Releases.
-------------
(i) FIRPTA Affidavit. FIRPTA Non-Foreign Seller Affidavit certifying
----------------
that Seller is not a foreign person within the meaning of Section 1445 of the
Code, reasonably satisfactory in form and substance to Buyer.
(j) Noncompetition Covenant. The Noncompetition Covenant.
-----------------------
(k) Other. Such other documents and instruments as shall be necessary
-----
to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
8.3 Buyer's Obligations. At Closing, except as otherwise provided below,
-------------------
Buyer shall deliver or cause to be delivered to Seller the following:
(a) Purchase Price. The Purchase Price, increased or decreased, as the
--------------
case may be, by the net aggregate amount of the Current Items Amount estimated
in accordance with Section 2.5.
(b) Bill of Sale and Assignment and Assumption Agreement. An executed
----------------------------------------------------
counterpart of the Bill of Sale and Assignment and Assumption Agreement.
(c) Officer's Certificate. The certificate described in Section
---------------------
7.2(c).
(d) Buyer's Counsel Opinion. Buyer's Counsel Opinion.
-----------------------
(e) Other. Such other documents and instruments as shall be necessary
-----
to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
ARTICLE 9.
TERMINATION AND DEFAULT
9.1 Termination Events. This Agreement may be terminated and the
------------------
transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual written agreement of Buyer and Seller;
(b) by either Buyer or Seller, upon written notice to the other, at any
time, if the other is in breach or default of its respective covenants,
agreements, or other
38
<PAGE>
obligations herein or in any Transaction Document, or if any of its
representations herein or in any Transaction Document are not true and accurate
in all material respects when made or when otherwise required by this Agreement
or any Transaction Document to be true and accurate in all material respects,
and such breach, default or failure is not cured within 30 days of receipt of
notice that such breach, default or failure exists or has occurred;
(c) by either Buyer or Seller upon written notice to the other, if
Closing shall not have occurred by the Outside Closing Date for any reason other
than a breach or default by such party of its respective covenants, agreements,
or other obligations hereunder, or any of its representations herein not being
true and accurate in all material respects when made or when otherwise required
by this Agreement to be true and accurate in all material respects;
(d) by either Buyer or Seller, upon written notice to the other, if the
Closing has not occurred by July 31, 1998;
(e) by Buyer upon written notice to Seller, if the Asset Exchange
Agreement is terminated for any reason and if Cable One, Inc. has not been
required by TWEAN to assign this Agreement to TWEAN or its designee in
accordance with Section 11.6, provided, that any such termination shall not
affect TWEAN's obligations under the Performance Agreement to consummate the
transactions contemplated hereby; or
(f) as otherwise provided herein.
9.2 Effect of Termination. If the transactions contemplated by this
---------------------
Agreement are terminated and abandoned as provided herein, then (i) each party
shall pay the costs and expenses incurred by it in connection with this
Agreement in accordance with Section 11.1; (ii) each party shall redeliver all
documents, work papers and other materials of the other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; (iii) all confidential
information received by either party hereto shall be treated in accordance with
Section 6.3; and (iv) neither party shall have any liability or further
obligation to the other party to this Agreement except (A) as stated in (ii) and
(iii) of this Section and (B) to the extent applicable, as set forth in Section
9.3.
9.3 Sole Remedy. If both (i) this Agreement is terminated by one party
-----------
pursuant to Section 9.1 for any reason and (ii) the other party shall be in
breach in a material respect of any of its representations, warranties,
covenants or agreements made herein, then the terminating party shall have as
its sole and exclusive remedy the right to seek monetary damages from the other
party.
39
<PAGE>
ARTICLE 10.
INDEMNIFICATION
10.1 Indemnification by Seller. Notwithstanding Closing, and regardless of
-------------------------
any investigation made at any time by or on behalf of Buyer or TWEAN or any
information Buyer or TWEAN may have, and in addition to any other remedies that
Buyer may have, Seller shall defend, indemnify and hold Buyer, its affiliates,
officers and directors, employees, agents, and representatives, and any Person
claiming by or through any of them, as the case may be, harmless from and
against any and all Losses arising out of or resulting from:
(a) any representations and warranties made by Seller in this Agreement
or in any Transaction Document not being true and accurate in all material
respects when made or when required by this Agreement or any Transaction
Document to be true and accurate in all material respects;
(b) any failure by Seller to perform in all material respects any of
its covenants, agreements, or obligations in this Agreement or in any
Transaction Document;
(c) all actual or purported liabilities and obligations of Seller, and
all claims and demands made in respect thereof whether or not known or asserted
at or prior to Closing (except the Assumed Obligations and Liabilities),
relating to the System;
(d) the operation of the System prior to the Adjustment Time;
(e) all obligations and liabilities arising out of or relating to the
Excluded Assets; and
(f) any liabilities relating to any non-Hired Employee asserted under
any Legal Requirement or otherwise pertaining to any labor or employment matter
arising out of actions occurring prior to Closing.
If, by reason of the claim of any third party relating to any of the matters
subject to indemnification hereunder, a Lien, attachment, garnishment, or
execution is placed or made upon any of the properties or assets owned or leased
by Buyer or any other Indemnitee under this Section, in addition to any
indemnity obligation of Seller under this Section, Seller shall furnish a bond
sufficient to obtain the prompt release thereof within five days from receipt of
notice relating thereto.
10.2 Indemnification by Buyer. Notwithstanding Closing, and regardless of
------------------------
any investigation made at any time by or on behalf of Seller or any information
Seller may have, and in addition to any other remedies that Seller may have,
Buyer shall defend, indemnify and hold Seller, its affiliates, officers and
directors, employees, agents, and
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representatives, and any Person claiming by or through any of them, as the case
may be, harmless from and against any and all Losses arising out of or resulting
from:
(a) any representations and warranties made by Buyer in this Agreement
or in any Transaction Document not being true and accurate in all material
respects when made or when required by this Agreement or any Transaction
Document to be true and accurate in all material respects;
(b) any failure by Buyer to perform in all material respects any of its
covenants, agreements, or obligations in this Agreement or in any Transaction
Document;
(c) the Assumed Obligations and Liabilities; or
(d) the operation of the System after the Adjustment Time.
If, by reason of the claim of any third party relating to any of the matters
subject to indemnification hereunder, a Lien, attachment, garnishment, or
execution is placed or made upon any of the properties or assets owned or leased
by Seller or any other Indemnitee under this Section, in addition to any
indemnity obligation of Buyer under this Section, Buyer shall furnish a bond
sufficient to obtain the prompt release thereof within five days from receipt of
notice relating thereto.
10.3 Procedure for Indemnified Third Party Claim. Promptly after receipt by a
-------------------------------------------
party entitled to indemnification under this Agreement ("Indemnitee") of written
notice of the assertion or the commencement of any Litigation with respect to
any matter referred to in Sections 10.1 or 10.2, Indemnitee shall give written
notice thereof to the party from whom indemnification is sought pursuant hereto
("Indemnitor") and thereafter shall keep Indemnitor reasonably informed with
respect thereto if Indemnitor does not assume the defense of such claim;
provided, however, that failure of Indemnitee to give Indemnitor notice as
provided herein shall not relieve Indemnitor of its obligations hereunder. In
case any Litigation shall be brought against any Indemnitee, Indemnitor shall be
entitled to assume the defense thereof and, at the request of Indemnitee,
Indemnitor promptly shall assume the defense thereof with counsel reasonably
satisfactory to Indemnitee, at Indemnitor's sole expense. Within five days of
such request by Indemnitee, Indemnitor shall give Indemnitee reasonable written
assurances that Indemnitor has assumed the defense of such Litigation, and, if
Indemnitee does not receive such written assurances, then Indemnitee shall be
permitted to defend against any such Litigation at Indemnitor's sole expense .
If Indemnitor shall assume the defense of any Litigation, it shall not settle
the Litigation unless the settlement shall include as an unconditional term
thereof the giving by the claimant or the plaintiff of a release of Indemnitee,
satisfactory to Indemnitee, from all liability with respect to such Litigation.
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10.4 Interest. Amounts payable by Indemnitor to Indemnitee in respect of any
--------
Losses under Sections 10.1 or 10.2 shall be payable by Indemnitor as incurred by
Indemnitee, and shall bear interest at the rate per annum equal to the interest
rate announced and charged from time to time by The Bank of New York as its
prime rate plus 2% per annum from the date the Losses for which indemnification
is sought were incurred by Indemnitee until the date of payment of
indemnification by Indemnitor.
10.5 Time and Manner of Certain Claims. All of the representations,
---------------------------------
warranties, covenants and agreements of Buyer and Seller in this Agreement and
any Transaction Document shall be deemed continuing representations, warranties,
covenants and agreements and shall survive Closing for a period of one year,
except (i) those stated in Sections 4.1, 4.2, 4.7, 4.8, 5.1, 5.2, 5.24 and 5.26,
which shall survive indefinitely, (ii) those stated in Section 5.10, which shall
survive Closing for a period of sixty days, (iii) and those stated in Sections
5.14, 5.15 and 5.16, which shall survive Closing for the period of the
applicable statute of limitations. Neither party shall have any liability under
Sections 10.1(a) or 10.2(a), respectively, unless a claim for Losses for which
indemnification is sought thereunder is asserted by the party seeking
indemnification by written notice to the party from whom indemnification is
sought within the respective survival periods.
10.6 Other Indemnification. The provisions of Sections 10.3 and 10.4 shall
---------------------
be applicable to any claim for indemnification made under any other provision of
this Agreement, and all references in Sections 10.3 and 10.4 to Sections 10.1
and 10.2 shall be deemed to be references to such other provisions of this
Agreement.
10.7 Limitation on Indemnification. Notwithstanding anything to the
-----------------------------
contrary contained in this Article 10, except as provided in this Section,
neither party shall make a claim for indemnification hereunder until the date on
which such party's indemnification claims equal or exceed $50,000 (the "Initial
Indemnification Claim Date"). Following the Initial Indemnification Claim Date,
either party may make a claim for indemnification for any amount exceeding one
dollar. Notwithstanding the foregoing or anything to the contrary in this
Agreement, Buyer shall be permitted to make a claim for indemnification
hereunder at any time and for any amount with respect to obligations and
liabilities arising out of or relating to the Assets or the System that are not
Assumed Obligations and Liabilities.
ARTICLE 11.
MISCELLANEOUS PROVISIONS
11.1 Expenses. Except as otherwise provided in Section 11.13 or elsewhere
--------
in this Agreement, each of the parties shall pay its own expenses and the fees
and expenses of its counsel, accountants, brokers, finders and other experts in
connection with this Agreement.
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11.2 Brokerage. Seller shall indemnify and hold Buyer harmless from and
---------
against any and all Losses arising from any employment by it of, or services
rendered to it by, any finder, broker, agency, or other intermediary, in
connection with the transactions contemplated hereby, or any allegation of any
such employment or services. Buyer shall indemnify and hold Seller harmless
from and against any and all Losses arising from any employment by it of, or
services rendered to it by, any finder, broker, agency, or other intermediary,
in connection with the transactions contemplated hereby, or any allegation of
any such employment or services.
11.3 Waivers. No action taken pursuant to this Agreement, including any
-------
investigation by or on behalf of any party hereto, shall be deemed to constitute
a waiver by the party taking the action of compliance with any representation,
warranty, covenant or agreement contained herein or in any Transaction Document.
The waiver by any party hereto of any condition or of a breach of another
provision of this Agreement or any Transaction Document shall not operate or be
construed as a waiver of any other condition or subsequent breach. The waiver
by any party of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
11.4 Notices. All notices, requests, demands, applications, services of
-------
process, and other communications which are required to be or may be given under
this Agreement or any Transaction Document shall be in writing and shall be
deemed to have been duly given if sent by telecopy or facsimile transmission,
answer back requested, courier, certified first class mail, postage prepaid,
return receipt requested, or overnight delivery service to the parties hereto at
the following addresses:
To Seller: Cable TV Fund 14-B, Ltd.
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
Englewood, Colorado 80112
Attn: President
Telecopy: (303) 799-4675
Copies: Cable TV Fund 14-B, Ltd.
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
Englewood, Colorado 80112
Attn: General Counsel
Telecopy: (303) 799-1644
To Buyer: Cable One, Inc.
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4742 North 24th Street
Suite 270
Phoenix, AZ 85016
Attn: Thomas O. Might
Telecopy: (602) 468-9216
Copies (which shall not constitute notice):
Cable One, Inc.
4742 North 24th Street
Suite 270
Phoenix, AZ 85016
Attn: Alan H. Silverman, Esq.
Telecopy: (602) 468-0116
Fleischman and Walsh, L.L.P.
1400 Sixteenth St., N.W.
Washington, D.C. 20036
Attn: Jeffry L. Hardin, Esq.
Telecopy: (202) 265-5706
Time Warner Entertainment - Advance/Newhouse Partnership
c/o Time Warner Cable Ventures
290 Harbor Drive
Stamford, Connecticut 06902
Attn: Bonnie Blecha
Telecopy: (203) 328-0691
Holland & Hart
P.O. Box 8749
555 17th Street, Suite 3200
Denver, Colorado 80201 (mail)
80202 (delivery)
Attn: Daniel J. Glivar, Esq.
Telecopy: (303) 295-8261
Sabin, Bermant & Gould
350 Madison Avenue
New York, New York 10017
Attn: Arthur J. Steinhauer, Esq.
Telecopy: (212) 692-4406
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or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if sent by telecopy or facsimile transmission, when answer back is received,
or (ii) otherwise, upon actual receipt by the intended recipient.
11.5 Entire Agreement; Amendments. This Agreement embodies the entire
----------------------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect thereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification, or discharge may be sought to be enforced.
11.6 Binding Effect; Benefits. This Agreement shall inure to the benefit of
------------------------
and shall be binding upon the parties hereto and their respective legal
representatives, successors, and permitted assigns. Neither Buyer nor Seller
shall assign this Agreement or delegate any of its duties hereunder to any other
Person without the prior written consent of the other. For purposes of this
Section any change in control of Buyer or Seller shall constitute an assignment
of this Agreement. Notwithstanding anything to the contrary in this Section,
Buyer shall be required to assign this Agreement, in its entirety, without the
consent of Seller, prior to, on or after the Closing Date, to (i) TWEAN, (ii)
any affiliate of TWEAN, or (iii) a third party designated by TWEAN pursuant to
the terms of that certain Performance Agreement of even date herewith among
Buyer, Seller and TWEAN, and, upon such assignment, such assignee automatically
shall be entitled to all of the rights, benefits and privileges of Buyer under
this Agreement and shall be subject to all of the duties, restrictions and
obligations of Buyer under this Agreement, in full substitution of Buyer as the
"Buyer" for all purposes under this Agreement.
11.7 Headings, Schedules, and Exhibits. The section and other headings
---------------------------------
contained in this Agreement are for reference purposes only and will not affect
the meaning or interpretation of this Agreement. Reference to Schedules shall,
unless otherwise indicated, refer to the Schedules attached to this Agreement,
which shall be incorporated in and constitute a part of this Agreement by such
reference.
11.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together will be deemed to be one and the same instrument.
11.9 Governing Law. The validity, performance and enforcement of this
-------------
Agreement and all Transaction Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Colorado without giving
effect to the principles of conflicts of law of such state.
11.10 Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability
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without rendering invalid or unenforceable the remaining rights of the Person
intended to be benefitted by such provision or any other provisions of this
Agreement.
11.11 Third Parties; Joint Ventures. This Agreement constitutes an
-----------------------------
agreement solely among the parties hereto and for the benefit of TWEAN, and,
except as otherwise provided herein, is not intended to and will not confer any
rights, remedies, obligations, or liabilities, legal or equitable, including any
right of employment, on any Person (including but not limited to any employee or
former employee of Seller) other than the parties hereto, TWEAN and their
respective successors, or assigns, or otherwise constitute any Person other than
TWEAN a third party beneficiary under or by reason of this Agreement. Nothing
in this Agreement, expressed or implied, is intended to or shall constitute the
parties hereto partners or participants in a joint venture.
11.12 Construction. This Agreement has been negotiated by Buyer, TWEAN and
------------
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
11.13 Attorneys' Fees'. If any Litigation between Buyer and Seller with
---------------
respect to this Agreement or the transactions contemplated hereby shall be
resolved or adjudicated by a Judgment of any court, the party prevailing under
such Judgment shall be entitled, as part of such Judgment, to recover from the
other party its reasonable attorneys' fees and costs and expenses of Litigation.
11.14 Risk of Loss. The risk of any loss or damage to the Assets resulting
------------
from fire, theft or any other casualty (except reasonable wear and tear) shall
be borne by Seller at all times prior to the Adjustment Time. In the event that
any such loss or damage shall be sufficiently substantial so as to preclude and
prevent resumption of normal operations of any material portion of the System or
the replacement or restoration of the lost or damaged property within 30 days
from the occurrence of the event resulting in such loss or damage, Seller shall
immediately notify Buyer and TWEAN in writing of its inability to resume normal
operations or to replace or restore the lost or damaged Assets, and Buyer, at
any time within ten days after receipt of such notice, may elect by written
notice to Seller to either (i) waive such defect and proceed toward consummation
of the transaction in accordance with terms of this Agreement, or (ii) terminate
this Agreement. If Buyer elects to so terminate this Agreement, Buyer and Seller
shall stand fully released and discharged of any and all obligations hereunder.
If Buyer shall elect to consummate the transactions contemplated by this
Agreement notwithstanding such loss or damage and does so, all insurance
proceeds payable as a result of the occurrence of the event resulting in such
loss or damage shall be delivered by Seller to Buyer, or the rights thereto
shall be assigned by Seller to Buyer if not yet paid over to Seller, and Seller
shall pay to Buyer an amount equal to the difference
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between the amount of such insurance costs and the full replacement cost of the
damaged or lost Assets.
11.15 Remedies Cumulative. Except as otherwise specifically set forth in
-------------------
this Agreement, the remedies provided herein shall be cumulative and in addition
to any other remedies provided by law or equity.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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Buyer and Seller have executed this Agreement as of the date first written
above.
CABLE TV FUND 14-B, LTD.
By: Jones Intercable, Inc., its
general partner
By: /s/ Elizabeth Steele
---------------------
Name: Elizabeth Steele
Title: Vice President
CABLE ONE, INC.
By: /s/ Thomas O. Might
----------------------
Name: Thomas O. Might
Title: President
48
