<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-17687
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Enstar Income/Growth Program Six-A, L.P.
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(Exact name of Registrant as specified in its charter)
Georgia 58-1755230
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (310) 824-9990
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Exhibit Index located at Page E-1.
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PART I - FINANCIAL INFORMATION
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
CONDENSED BALANCE SHEETS
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<TABLE>
<CAPTION>
December 31, September 30,
1997* 1998
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(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 659,400 $ 558,100
Accounts receivable, less allowance of $5,400 and
$7,000 for possible losses 20,000 35,900
Prepaid expenses and other assets 38,200 31,300
Property, plant and equipment, less accumulated
depreciation and amortization of $4,896,400 and $5,269,600 3,428,900 3,126,100
Franchise cost, net of accumulated
amortization of $2,500,900 and $2,690,800 1,141,500 966,200
Deferred loan costs and other deferred charges, net 71,000 57,500
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$ 5,359,000 $ 4,775,100
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LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 460,200 $ 313,600
Due to affiliates 507,200 431,300
Note payable - affiliate 2,500,000 1,750,000
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TOTAL LIABILITIES 3,467,400 2,494,900
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COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (143,700) (139,800)
Limited partners 2,035,300 2,420,000
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TOTAL PARTNERSHIP CAPITAL 1,891,600 2,280,200
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$ 5,359,000 $ 4,775,100
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</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
CONDENSED STATEMENTS OF OPERATIONS
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<TABLE>
<CAPTION>
Unaudited
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Three months ended
September 30,
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1997 1998
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<S> <C> <C>
REVENUES $ 913,800 $ 896,000
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OPERATING EXPENSES:
Service costs 328,800 262,800
General and administrative expenses 153,200 105,000
General Partner management fees
and reimbursed expenses 129,100 131,300
Depreciation and amortization 212,300 208,000
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823,400 707,100
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OPERATING INCOME 90,400 188,900
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OTHER INCOME (EXPENSE):
Interest income 6,000 7,100
Interest expense (69,400) (49,700)
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(63,400) (42,600)
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NET INCOME $ 27,000 $ 146,300
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Net income allocated to General Partners $ 300 $ 1,500
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Net income allocated to Limited Partners $ 26,700 $ 144,800
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NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 0.33 $ 1.81
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AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 79,818 79,818
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</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
CONDENSED STATEMENTS OF OPERATIONS
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----------------------------------------
<TABLE>
<CAPTION>
Unaudited
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Nine months ended
September 30,
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1997 1998
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<S> <C> <C>
REVENUES $ 2,720,500 $ 2,736,400
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OPERATING EXPENSES:
Service costs 933,300 861,500
General and administrative expenses 385,600 321,400
General Partner management fees
and reimbursed expenses 384,200 393,900
Depreciation and amortization 679,800 626,200
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2,382,900 2,203,000
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OPERATING INCOME 337,600 533,400
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OTHER INCOME (EXPENSE):
Interest income 12,700 25,500
Interest expense (189,100) (170,500)
Gain on sale of cable assets 100 200
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(176,300) (144,800)
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NET INCOME $ 161,300 $ 388,600
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Net income allocated to General Partners $ 1,600 $ 3,900
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Net income allocated to Limited Partners $ 159,700 $ 384,700
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NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 2.00 $ 4.82
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AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 79,818 79,818
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</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
STATEMENTS OF CASH FLOWS
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----------------------------------------
<TABLE>
<CAPTION>
Unaudited
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Nine months ended
September 30,
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1997 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 161,300 $ 388,600
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 679,800 626,200
Amortization of deferred loan costs 26,600 12,700
Gain on sale of cable assets (100) (200)
Increase (decrease) from changes in:
Accounts receivable, prepaid expenses and other assets 83,900 (9,000)
Accounts payable (63,700) (146,600)
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Net cash provided by operating activities 887,800 871,700
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (84,300) (128,000)
Increase in intangible assets (21,900) (16,900)
Proceeds from sale of property, plant and equipment 100 200
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Net cash used in investing activities (106,100) (144,700)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates 95,200 (75,900)
Deferred loan costs (64,300) (2,400)
Repayment of debt (3,125,000) (750,000)
Borrowings from affiliate 2,500,000 -
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Net cash used in financing activities (594,100) (828,300)
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INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 187,600 (101,300)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 169,400 659,400
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 357,000 $ 558,100
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</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
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1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for the three
and nine months ended September 30, 1998 and 1997 are unaudited. These condensed
interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Partnership's latest
Annual Report on Form 10-K. In the opinion of management, such statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The results of
operations for the three and nine months ended September 30, 1998 are not
necessarily indicative of results for the entire year.
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
The Partnership has a management and service agreement with a wholly
owned subsidiary of the Corporate General Partner (the "Manager") for a monthly
management fee of 5% of revenues, excluding revenues from the sale of cable
television systems or franchises. Management fee expense approximated $44,800
and $136,800 for the three and nine months ended September 30, 1998.
In addition to the monthly management fee described above, the
Partnership reimburses the Manager for direct expenses incurred on behalf of the
Partnership and for the Partnership's allocable share of operational costs
associated with services provided by the Manager. All cable television
properties managed by the Corporate General Partner and its subsidiary are
charged a proportionate share of these expenses. The Corporate General Partner
has contracted with Falcon Communications, L.P. ("FCLP"), successor to Falcon
Holding Group, L.P. ("FHGLP"), an affiliated partnership, to provide corporate
management services for the Partnership. Corporate office allocations and
district office expenses are charged to the properties served based primarily on
the respective percentage of basic subscribers or homes passed (dwelling units
within a system) within the designated service areas. The total amount charged
to the Partnership for these services approximated $86,500 and $257,100 for the
three and nine months ended September 30, 1998. Management fees and reimbursed
expenses due the Corporate General Partner are non-interest bearing.
On September 30, 1997, the Corporate General Partner contributed a
$269,300 receivable balance from the Partnership for past due management fees
and reimbursed expenses as an equity contribution to its subsidiary, Enstar
Finance Company, LLC ("EFC"). This balance remains an outstanding obligation of
the Partnership. In the normal course of business, the Partnership pays interest
and principal to EFC, its primary lender.
The Partnership also receives certain system operating management
services from an affiliate of the Corporate General Partner in addition to the
Manager due to the fact that there are no such employees directly employed by
the Partnership. The Partnership reimburses the affiliate for its allocable
share of the affiliate's operational costs. The total amount charged to the
Partnership for these costs approximated $3,700 and $11,200 for the three and
nine months ended September 30, 1998. No management fee is payable to the
affiliate by the Partnership and there is no duplication of reimbursed expenses
and costs paid to the Manager.
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ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
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2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES (CONTINUED)
Certain programming services have been purchased through an affiliate
of the Partnership. In turn, the affiliate charged the Partnership for these
costs based on an estimate of what the Corporate General Partner could negotiate
for such programming services for the 15 partnerships managed by the Corporate
General Partner as a group. The Partnership recorded programming fee expense of
$200,900 and $597,500 for the three and nine months ended September 30, 1998.
Programming fees are included in service costs in the statements of operations.
In the future, programming services will be purchased through another source,
which may include FHGLP or an affiliate of FHGLP. Programming rates may vary in
the near term as a result of the change.
3. EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Earnings and losses per unit of limited partnership interest is based
on the average number of units outstanding during the periods presented. For
this purpose, earnings and losses have been allocated 99% to the Limited
Partners and 1% to the General Partners. The General Partners do not own units
of partnership interest in the Partnership, but rather hold a participation
interest in the income, losses and distributions of the Partnership.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") required the Federal Communications Commission ("FCC")
to, among other things, implement extensive regulation of the rates charged by
cable television systems for basic and programming service tiers, installation,
and customer premises equipment leasing. Compliance with those rate regulations
has had a negative impact on the Partnership's revenues and cash flow. The
Telecommunications Act of 1996 (the "1996 Telecom Act") substantially changed
the competitive and regulatory environment for cable television and
telecommunications service providers. Among other changes, the 1996 Telecom Act
provides that the regulation of cable programming service tier ("CPST") rates
will be terminated on March 31, 1999. Because cable service rate increases have
continued to outpace inflation under the FCC's existing regulations, it is
possible that Congress and the FCC will consider additional methods of
regulating cable service rate increases, including deferral or repeal of the
March 31, 1999 termination of CPST rate regulation. There can be no assurance as
to what, if any, further action may be taken by the FCC, Congress or any other
regulatory authority or court, or the effect thereof on the Partnership's
business. Accordingly, the Partnership's historical financial results as
described below are not necessarily indicative of future performance.
This Report includes certain forward looking statements regarding,
among other things, future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
Partnership. Such forward looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing cable
television operators such as the Partnership. In addition to the information
provided herein, reference is made to the Partnership's Annual Report on Form
10-K for the year ended December 31, 1997 for additional information regarding
such matters and the effect thereof on the Partnership's business.
RESULTS OF OPERATIONS
The Partnership's revenues decreased from $913,800 to $896,000, or by
2.0%, and increased from $2,720,500 to $2,736,400, or by less than 1.0%, for the
three and nine months ended September 30, 1998 as compared to the corresponding
periods in 1997. Of the $17,800 decrease in revenues for the three months ended
September 30, 1998 as compared to the corresponding period in 1997, $38,000 was
due to decreases in the number of subscriptions for basic, premium and equipment
rental services and $8,500 was due to decreases in other revenue producing
items. These decreases were partially offset by an increase of $28,700 due to
increases in regulated service rates that were implemented by the Partnership in
1997. Of the $15,900 increase in revenues for the nine months ended September
30, 1998 as compared to the corresponding period in 1997, $97,600 was due to
increases in regulated service rates that were implemented by the Partnership in
1997. These increases were partially offset by a decrease of $79,400 due to
decreases in the number of subscriptions for basic, premium and equipment rental
services and $2,300 was due to decreases in other revenue producing items. As of
September 30, 1998, the Partnership had approximately 9,100 basic subscribers
and 2,100 premium service units.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Service costs decreased from $328,800 to $262,800, or by 20.1%, and
from $933,300 to $861,500, or 7.7%, for the three and nine months ended
September 30, 1998 as compared to the corresponding periods in 1997. Service
costs represent costs directly attributable to providing cable services to
customers. These decreases were primarily due to 1997 copyright fee expense
estimates that were reduced in 1998. Copyright fees also decreased due to the
industry-wide change in status of one satellite service that resulted in
lower fees.
General and administrative expenses decreased from $153,200 to
$105,000, or by 31.5%, and from $385,600 to $321,400, or by 16.6%, for the three
and nine months ended September 30, 1998 as compared to the corresponding
periods in 1997. These decreases were primarily due to lower bad debt expense
and insurance costs resulting from a non-recurring charge in the second quarter
of 1997 for a workers' compensation premium adjustment.
Management fees and reimbursed expenses increased from $129,100 to
$131,300, or by 1.7%, and from $384,200 to $393,900, or by 2.5%, for the three
and nine months ended September 30, 1998 as compared to the corresponding
periods in 1997. Management fees decreased for the three months and increased
for the nine months ended September 30, 1998 in direct relation to the changes
in revenues as described above. Reimbursed expenses increased primarily due to
the transfer of system operating management of the Partnership's Tennessee
system from an affiliate to the Corporate General Partner.
Depreciation and amortization expense decreased from $212,300 to
$208,000, or by 2.0%, and from $679,800 to $626,200, or by 7.9%, for the three
and nine months ended September 30, 1998 as compared to the corresponding
periods in 1997, primarily due to the effect of certain intangible assets
becoming fully amortized.
The Partnership's operating income increased from $90,400 to $188,900
and from $337,600 to $533,400 for the three and nine months ended September 30,
1998 as compared to the corresponding periods in 1997, primarily due to
decreases in copyright fee expense, depreciation and amortization expense and
insurance premiums as described above.
Interest income increased from $6,000 to $7,100 and from $12,700 to
$25,500 for the three and nine months ended September 30, 1998 as compared to
the corresponding periods in 1997, primarily due to higher average cash balances
available for investment during the 1998 periods.
Interest expense decreased from $69,400 to $49,700, or by 28.4%, and
from $189,100 to $170,500, or by 9.8%, for the three and nine months ended
September 30, 1998 as compared to the corresponding periods in 1997, due to
lower average borrowings in the 1998 periods.
Due to the factors described above, the Partnership's net income
increased from $27,000 to $146,300 and from $161,300 to $388,600 for the three
and nine months ended September 30, 1998 as compared to the corresponding
periods in 1997.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Based on its experience in the cable television industry, the
Partnership believes that operating income before depreciation and amortization
("EBITDA") and related measures of cash flow serve as important financial
analysis tools for measuring and comparing cable television companies in several
areas, such as liquidity, operating performance and leverage. EBITDA is not a
measurement determined under generally accepted accounting principles ("GAAP")
and does not represent cash generated from operating activities in accordance
with GAAP. EBITDA should not be considered by the reader as an alternative to
net income as an indicator of financial performance or as an alternative to cash
flows as a measure of liquidity. In addition, the definition of EBITDA may not
be identical to similarly titled measures used by other companies. EBITDA as a
percentage of revenues increased from 33.1% to 44.3% and from 37.4% to 42.4%
during the three and nine months ended September 30, 1998 as compared to the
corresponding periods in 1997. The increases were primarily due to lower
copyright fee expense and insurance costs as described above. EBITDA increased
from $302,700 to $396,900, or by 31.1%, and from $1,017,400 to $1,159,600, or by
14.0%, for the three and nine months ended September 30, 1998 as compared to the
corresponding periods in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary objective, having invested its net offering
proceeds in cable systems, is to distribute to its partners all available cash
flow from operations and proceeds from the sale of cable systems, if any, after
providing for expenses, debt service and capital requirements relating to the
expansion, improvement and upgrade of its cable systems. The Partnership's
capital expenditures were $128,000 in the first nine months of 1998. As of the
date of this Report, 94% of the available channel capacity is being utilized in
the Partnership's systems that serve 78% of its customers.
Two of the Partnership's franchise areas, which together serve 63% of
the Partnership's total customer base, require upgrades to increase channel
capacity. One of the upgrades is required in an existing franchise agreement.
The estimated cost to upgrade the cable system in this franchise area is
approximately $2.5 million and must be completed by June 2000. The second
franchise agreement is under negotiation for renewal and the Partnership
believes that the renewed franchise agreement may require the Partnership to
upgrade its cable plant at an estimated cost of $1.1 million within 24 months.
The Partnership is party to a loan agreement with EFC which provides
for a revolving loan facility of $4,563,000 (the "Facility"). The Partnership
prepaid $750,000 of its outstanding borrowings under the Facility during the
nine months ended September 30, 1998 and prepaid an additional $150,000 on
October 9, 1998, such that total outstanding borrowings were $1,600,000. The
Partnership's management expects to increase borrowings under the Facility in
the future to fund the upgrade of the Partnership's systems. However, the
Partnership's borrowing capacity and its present cash reserves will be
insufficient to fund its entire upgrade program. Consequently, the Partnership
will need to rely on increased cash flow from operations or new sources of
borrowing in order to meet its future liquidity requirements. There can be no
assurance that such cash flow increases can be attained, or that additional
future borrowings will be available to the Partnership on acceptable terms. If
the Partnership is not able to attain such cash flow increases, or obtain new
sources of borrowings, the Partnership will not be able to complete its full
upgrade program. As
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
a result, the value of the Partnership's systems will be lower than that of
systems rebuilt to a higher technical standard.
The Partnership's Facility will mature on August 31, 2001, at which
time all funds previously advanced will be due in full. Borrowings bear interest
at the lender's base rate (8.25% at September 30, 1998) plus 0.625%, or at an
offshore rate plus 1.875%. Under certain circumstances, the Partnership is
required to make mandatory prepayments, which permanently reduce the maximum
commitment under the Facility. The Facility contains certain financial tests and
other covenants including, among others, restrictions on incurrence of
indebtedness, investments, sales of assets, acquisitions and other covenants,
defaults and conditions. The Partnership believes it was in compliance with the
covenants at September 30, 1998.
The Corporate General Partner contributed its $269,300 receivable
balance from the Partnership for past due management fees and reimbursed
expenses as an equity contribution to EFC. This balance was not paid on
September 30, 1997 and remains an outstanding obligation of the Partnership.
The Facility does not restrict the payment of distributions to partners
unless an event of default exists thereunder or the ratio of debt to cash flow
is greater than 4 to 1. However, as a result of the pending upgrade program
discussed above, the Corporate General Partner has concluded that it is not
prudent for the Partnership to resume paying distributions at this time.
Beginning in August 1997, the Partnership elected to self-insure its
cable distribution plant and subscriber connections against property damage as
well as possible business interruptions caused by such damage. The decision to
self-insure was made due to significant increases in the cost of insurance
coverage and decreases in the amount of insurance coverage available.
While the Partnership made the election to self-insure for these risks
based upon a comparison of historical damage sustained over the previous five
years with the cost and amount of insurance currently available, there can be no
assurance that future self-insured losses will not exceed prior costs of
maintaining insurance for these risks. Approximately 73% of the Partnership's
subscribers are served by its system in Flora, Illinois and neighboring
communities. Significant damage to the system due to seasonal weather conditions
or other events could have a material adverse effect on the Partnership's
liquidity and cash flows. The Partnership continues to purchase insurance
coverage in amounts its management views as appropriate for all other property,
liability, automobile, workers' compensation and other types of insurable risks.
In October 1998, the Partnership reinstated third party insurance
coverage against damage to its cable distribution plant and subscriber
connections and against business interruptions resulting from such damage.
Although this coverage is subject to a significant annual deductible, the policy
is intended to insure the Partnership against catastrophic losses, if any, in
future periods.
During the third quarter, the Corporate General Partner continued its
identification and evaluation of the Partnership's Year 2000 business risks and
its exposure to computer systems, to operating equipment which is date sensitive
and to the interface systems of its vendors and service providers. The
evaluation has
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
focused on identification and assessment of systems and equipment that may fail
to distinguish between the year 1900 and the year 2000 and, as a result, may
cease to operate or may operate improperly when dates after December 31, 1999
are introduced.
Based on a study conducted in 1997, the Corporate General Partner
concluded that certain of the Partnership's information systems were not Year
2000 compliant and elected to replace such software and hardware with
applications and equipment certified by the vendors as Year 2000 compliant. The
Corporate General Partner expects to install substantially all of the new
systems in the fourth quarter of 1998, with the remaining systems to be
installed in the first half of 1999. The total anticipated cost, including
replacement software and hardware, will be borne by FCLP. FCLP is utilizing
internal and external resources to install the new systems. The Partnership does
not believe that any other significant information technology ("IT") projects
affecting the Partnership have been delayed due to efforts to identify and
address Year 2000 issues.
Additionally, the Partnership has inventoried its operating and revenue
generating equipment to identify items that need to be upgraded or replaced and
has surveyed cable equipment manufacturers to determine which of their models
require upgrade or replacement to become Year 2000 compliant. Identification and
evaluation are essentially completed and a plan is being developed to remediate
non-compliant equipment prior to January 1, 2000. The Partnership expects to
complete its planning process by the end of 1998. Upgrade or replacement,
testing and implementation will be performed in 1999. The cost of such
replacement or remediation, currently estimated at $34,000, is not expected to
have a material effect on the Partnership's financial position or results of
operations. The Partnership has not incurred any costs related to the Year 2000
project as of September 30, 1998. The Partnership plans to inventory, assess,
replace and test equipment with embedded computer chips in a separate segment of
its project, presently scheduled for 1999.
The Partnership has continued to survey its significant third party
vendors and service suppliers to determine the extent to which the Partnership's
interface systems are vulnerable should those third parties fail to solve their
own Year 2000 problems on a timely basis. Among the most significant service
providers upon which the Partnership relies are programming suppliers, power and
telephone companies, various banking institutions and the Partnership's customer
billing service. A majority of these service suppliers either have not responded
to the Partnership's inquiries regarding their Year 2000 compliance programs or
have responded that they are unsure if they will become compliant on a timely
basis. Consequently, there can be no assurance that the systems of other
companies on which the Partnership must rely will be Year 2000 compliant on a
timely basis.
The Partnership expects to develop a contingency plan in 1999 to
address possible situations in which various systems of the Partnership, or of
third parties with which the Partnership does business, are not compliant prior
to January 1, 2000. Considerable effort will be directed toward distinguishing
between those contingencies with a greater probability of occurring from those
whose occurrence is considered remote. Moreover, such a plan will necessarily
focus on systems whose failure poses a material risk to the Partnership's
results of operations and financial condition.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Partnership's most significant Year 2000 risk is an interruption of
service to subscribers, resulting in a potentially material loss of revenues.
Other risks include impairment of the Partnership's ability to bill and/or
collect payment from its customers, which could negatively impact its liquidity
and cash flows. Such risks exist primarily due to technological operations
dependent upon third parties and to a much lesser extent to those under the
control of the Partnership. Failure to achieve Year 2000 readiness in either
area could have a material adverse impact on the Partnership. The Partnership is
unable to estimate the possible effect on its results of operations, liquidity
and financial condition should its significant service suppliers fail to
complete their readiness programs prior to the Year 2000. Depending on the
supplier, equipment malfunction or type of service provided, as well as the
location and duration of the problem, the effect could be material. For example,
if a cable programming supplier encounters an interruption of its signal due to
a Year 2000 satellite malfunction, the Partnership will be unable to provide the
signal to its cable subscribers, which could result in a loss of revenues. Due
to the number of individually owned and operated channels the Partnership
carries for its subscribers, and the packaging of those channels, the
Partnership is unable to estimate any reasonable dollar impact of such
interruption.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Cash provided by operating activities decreased by $16,100 in the nine
months ended September 30, 1998 from the corresponding period in 1997. Changes
in receivables and prepaid expenses used $92,900 more cash in the first nine
months of 1998 than in the corresponding period in 1997 due to differences in
the timing of receivable collections and in the payment of prepaid expenses. The
Partnership used $82,900 more cash to pay liabilities owed to third-party
creditors due to differences in the timing of payments.
The Partnership used $38,600 more cash in investing activities during
the nine months ended September 30, 1998 than in the comparable nine months of
1997 primarily due to an increase of $43,700 in expenditures for tangible
assets, partially offset by a decrease of $5,000 in expenditures for intangible
assets. Financing activities used $234,200 more cash in the first nine months of
1998 than in the corresponding period of 1997. The Partnership used $171,100
more cash to pay liabilities owed to the Corporate General Partner in the first
nine months of 1998 than in the corresponding period of 1997 due to differences
in the timing of payments. The Partnership used $125,000 more cash for the
repayment of borrowings in the first nine months of 1998 and $61,900 more cash
for the payment of deferred loan costs related to its Facility in the first nine
months of 1997 than in the comparable period.
INFLATION
Certain of the Partnership's expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation. However, the Partnership does not believe that its
financial results have been, or will be, adversely affected by inflation in a
material way, provided that it is able to increase its service rates
periodically, of which there can be no assurance.
-13-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.21 - Franchise Ordinance thereto
granting a non-exclusive community antenna
television franchise for the city of Salem,
Illinois.
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
a GEORGIA LIMITED PARTNERSHIP
-----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: November 13, 1998 By: /s/ Michael K. Menerey
-------------------------
Michael K. Menerey,
Executive Vice President,
Chief Financial Officer and
Secretary
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
EXHIBIT INDEX
Exhibit
Number Description
10.21 Franchise Ordinance thereto granting a non-exclusive community antenna
television franchise for the city of Salem, Illinois.
E-1
<PAGE>
CABLE TELEVISION FRANCHISE AGREEMENT
CITY OF SALEM, ILLINOIS
MARCH 16, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION SECTION TITLE PAGE
<S> <C> <C>
PREAMBLE 1
1 DEFINITIONS 2
2 GRANT OF NON-EXCLUSIVE FRANCHISE 9
3 TERM OF AGREEMENT 10
4 ACCEPTANCE OF FRANCHISE 10
5 SERVICE AREA COVERED BY FRANCHISE AGREEMENT 14
6 RETRANSMISSION OF SIGNALS WITHIN A STRUCTURE 14
7 SYSTEM IMPROVEMENTS 15
8 CONSTRUCTION STANDARDS 18
9 INSTITUTIONAL NETWORK 22
10 CUSTOMER SERVICE 24
11 RATE REGULATION 29
12 FRANCHISE FEES/USAGE OF FEES OR OTHER SUPPORT 29
13 FRANCHISE FEE AUDITS OR AGREED-UPON PROCEDURES 31
14 SECURITY FUND; PERFORMANCE BOND 32
15 DAMAGES AND DEFENSE 34
16 LIABILITY INSURANCE AND INDEMNIFICATION 34
17 LIQUIDATED DAMAGES 35
18 PROGRAMMING SERVICES 38
19 PUBLIC, EDUCATIONAL, AND GOVERNMENTAL PROGRAMMING 41
20 SERVICES TO SCHOOLS & GOVERNMENT BUILDINGS 45
21 EMERGENCY OVERRIDE 45
22 PERIODIC FRANCHISE REVISITATIONS AND EVALUATIONS 46
</TABLE>
<PAGE>
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
SECTION SECTION TITLE PAGE
<S> <C> <C>
23 MODIFICATIONS TO COMMUNICATIONS AND CABLE ACTS 47
24 REVOCATION 47
25 RIGHTS AND REMEDIES 47
26 RIGHTS AND POWERS RESERVED BY CITY 48
27 SERVICE OF NOTICE 48
28 ORAL MODIFICATION 49
29 SEVERABILITY 49
30 ENTIRE CONTRACT 49
31 OBLIGATIONS TO CONTINUE THROUGHOUT TERM 49
32 HEADINGS 49
33 GOVERNING LAW 50
MAP OF CORPORATE LIMITS - CITY OF SALEM APPENDIX A
GRANTEE'S SCHEDULE FOR RECONSTRUCTION APPENDIX B
HOURS OF OPERATION OF LOCAL OFFICE APPENDIX C
GRANTEE'S CORPORATE GUARANTY OR PROOF OF CASH ESCROW FOR SECURITY FUND APPENDIX D
LISTING AND MAP OF SCHOOLS AND GOVERNMENT BUILDINGS TO BE PROVIDED SUBSCRIBER AND I-NET
CABLE SERVICE APPENDIX E
FALCON CUSTOMER SERVICE RECORDS RETENTION POLICY APPENDIX F
</TABLE>
<PAGE>
CITY OF SALEM, ILLINOIS
CABLE TELEVISION FRANCHISE AGREEMENT
THIS CABLE TELEVISION FRANCHISE AGREEMENT (the "Agreement") is made and
entered into as of the effective date of _______________, 1998 (the
"Effective Date") by and between the City of Salem, a unit of local
government organized under the laws of the State of Illinois (the
"Franchising Authority", and Enstar Income Growth Program Six-A, L.P. d/b/a
Falcon Cable TV, a Georgia Partnership with its principal place of business
located at 11 Clearing Avenue, Taylorville, Illinois 62568 (the "Grantee").
WHEREAS, the Grantee has applied for renewal of its non-exclusive Franchise (the
"Prior Franchise") to provide cable television service in the City of Salem; and
WHEREAS, the Franchising Authority has reviewed the performance of the Grantee
under the Prior Franchise, has examined the technical, financial, and legal
qualifications of the Grantee to operate a cable system, and has ascertained the
cable-related needs and interests of the community, taking into account the
costs of meeting such needs and interests; and
WHEREAS, The Franchising Authority, has relied on the Grantee's representations
and has, after such consideration, analysis, and deliberation as required by
applicable law, has approved and found sufficient the technical, financial, and
legal qualifications of the Grantee, and has determined that the Grantee intends
through the terms and conditions of this Agreement to meet the cable-related
needs and interests of the community; and
WHEREAS, after adequate public notice based on Grantee's representations and
information and in response to Grantee's renewal request, the City Council of
the City of Salem has determined that, subject to the provisions of the City of
Salem Cable Ordinance (the "Cable Ordinance") and the terms and conditions set
forth herein, the grant of a renewed non-exclusive Franchise to Grantee, to
supersede the Prior Franchise, is consistent with the public interest, and thus
has enacted Ordinance No. 98- , more than thirty (30) days after the filing of
Grantee's request for renewal; and
WHEREAS, the Franchising Authority and the Grantee have reached agreement on the
terms and conditions set forth herein;
NOW, THEREFORE in consideration of the City's grant of a new Franchise to the
Grantee and the Grantee's promise to provide cable television service to
residents of the City pursuant to and consistent with the Cable Communications
Ordinance, the terms and conditions set forth herein, and other good and
valuable consideration, the receipt and adequacy are hereby acknowledged;
THE SIGNATORIES DO HEREBY AGREE AS FOLLOWS:
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<PAGE>
SECTION 1: DEFINITIONS
For the purposes of this Section, the following phrases, terms, words, and their
derivations shall have the meaning as stated herein. When not inconsistent with
the context, words in the present tense shall include the future, words
indicating a plural number shall include the singular number and words in the
singular number include the plural number. The word "shall" and "will" are
mandatory, and not directory. The word "may" is permissive. Words not defined
shall be given their common and ordinary meaning. Unless a section provides
otherwise, references to statutory enactments shall include any and all
amendments thereto and any successor provisions. All capitalized words defined
herein, and all other capitalized words utilized within this Agreement, shall
have the meaning ascribed to them in the Cable Act unless said terms are not
defined in the Cable Act, whereupon the definition shall be controlled by this
Agreement. For the purpose of this Franchise Agreement, the terms in the
Franchise Agreement shall prevail where there is a conflict between the
Ordinance and the Franchise Agreement. Where the Franchise Agreement is silent,
the terms of the Ordinance and the Cable Act shall control.
ACT (also CABLE ACT): Shall mean the Communications Act of 1934, the
Telecommunications Act of 1996, the Cable
Communications Policy Act of 1984, and the Cable
Consumer Protection and Competition Act of 1992 (47
USC 521 et. seq.) as now or hereinafter amended.
BASIC SERVICE: Shall consist of all signals carried in fulfillment
of the provisions of Sections 614 and 615 of the
Communications Act of 1934, as amended, any Public,
Educational, and Governmental Access programming
required by the Franchise of the Cable System to be
provided to Subscribers, and any signal of any
television broadcast station that is provided by
the Cable Operator to any Subscriber, except a
signal which is secondarily transmitted by a
satellite carrier beyond the local service area of
such station. Basic Service may also include any
additional video programming signals or services
provided by the Cable Operator to the basic service
tier.
CABLE OPERATOR: Any Person or Persons, including corporations,
partnerships, and joint ventures, who provide cable
programming services through means of a Cable
System and who own a significant interest in the
Cable System, or any Person or Persons, who manage,
control, coordinate, or direct the operations of a
Cable System.
2
<PAGE>
CABLE SYSTEM: The system of antennas, cables, wires, lines,
towers, waveguides, laser beams, satellite uplinks,
microwave links, or other conductors, converters,
amplifiers, Headend equipment, master controls,
earth stations, equipment and facilities, designed,
wired, and constructed for the purpose of
producing, receiving, transmitting, amplifying,
storing, processing, or distributing by coaxial
cable, fiberoptics, fiber distributed data
interface (FDDI), microwave, or other means, audio,
video, and other related forms of electronic or
electrical signals within the City other than those
communication units which are solely wired on
private property. A Cable System shall also mean a
facility as described above which is located within
the corporate limits of the City regardless of the
location of the headend feeding such system is
located within the corporate limits of the City.
CHANNEL: A band of frequencies carrying a width of six (6)
megahertz wide in the electromagnetic spectrum, or
of a width to be specified which constitutes the
acceptable NTSC standard for definition of a
Channel, which is capable of carrying audio, video,
voice, data, and encrypted information signals.
CITY: Means the City of Salem, State of Illinois, its
officers and employees unless otherwise
specifically designated, and all the area within
the territorial limits of the City, its future
corporate boundaries and including any area over
which the City exercises its jurisdiction.
CITY COUNCIL: Means the Corporate Authorities of the City.
CONVERTER: A device which may be provided by the Cable
Operator to Subscribers for the purpose of changing
the frequency of midband, superband, or hyperband
signals to a suitable Channel or Channels which the
television receiver is able to deliver at
designated dial locations.
CUSTOMER SERVICE
FACILITY: A location that is either owned, operated, or under
the control of a Grantee for the purposes of
accepting payments, responding to repair,
Installation, or other service calls, distributing
or receiving Converter boxes, remote control units,
or other related equipment, and receiving service
inquiries.
DOWNSTREAM
CHANNEL: A Channel which is transmitted in a direction from
the Headend to the Subscriber's television set.
3
<PAGE>
DWELLING UNIT: Shall mean a single-family or multiple-family
residential place of occupancy.
EDUCATIONAL
ACCESS SYSTEM: Shall mean an Educational Access Channel or
Channels set aside and so designated for the use of
Schools and related educational institutions, which
may include facilities and equipment for the use of
such Channel, all as agreed to in the Franchise
Agreement.
FCC: Shall mean the Federal Communications Commission
and any legally constituted regulatory body, or
agency, or successor.
FRANCHISE: Shall mean the nonexclusive right and privilege
granted through the authority of a Franchise
Agreement between the City and any Grantee
hereunder which allows the Grantee to own, operate,
construct, reconstruct, dismantle, test, use, and
maintain a Cable System within the corporate
boundaries of the City, or within specified areas
of the City.
FRANCHISE AREA: The area within the corporate boundaries or
jurisdiction of the City of Salem which is subject
to the terms and conditions granted under the
City's cable television franchise.
FRANCHISE FEE: Shall include any assessment imposed herein by the
City on a Grantee or a cable Subscriber solely
because of their status as such. The term
"Franchise Fee" does not include any tax, fee, or
assessment of general applicability (including any
such tax, fee, or assessment imposed on both
utilities and Cable Operators or their services),
but not including a tax, fee, or assessment which
is unduly discriminatory against the Grantee or
cable Subscribers; capital costs which are required
by the Franchise to be incurred by Grantee for, or
in support of the use of Public, Educational, or
Governmental Access facilities; requirements or
charges incidental to the awarding or enforcing, of
the Franchise, including payments for bonds,
security funds, letters of credit, insurance,
indemnification, penalties, or liquidated damages;
any fee imposed under Title 17, U.S. Code.
FRANCHISING
AUTHORITY: Shall mean the City of Salem, its Mayor and City
Council, City Manager, or any of its designated
municipal officers or staff having responsibility
over the supervision of the City's cable television
franchise.
4
<PAGE>
GOVERNMENTAL
ACCESS SYSTEM: Shall mean a Governmental Access Channel or
Channels set aside and so designated for the use of
the City of Salem, which may include facilities and
equipment for the use of such Channel, as agreed to
in the Franchise Agreement.
GRANTEE: Shall mean Enstar Income Growth Program Six-A,
L.P., d/b/a Falcon Cable TV, or any Person(s),
including corporations, partnerships, associations,
joint ventures, or organizations of any type and
its agents, representatives, employees,
subsidiaries, assignees, transferees or lawful
successors having any rights, powers, privileges,
duties, liabilities or obligations under this
Section and also includes all persons having or
claiming any title to or interest in the Cable
System, whether by reason of the Franchise itself
directly or by interest in a subsidiary, parent, or
affiliate company, association, or organization, or
by any subcontract, transfer, assignment,
management agreement or operating agreement, or an
approved assignment or transfer resulting from a
foreclosure of a mortgage security agreement, or
whether otherwise arising or created.
GRANTOR: The City of Salem, Illinois.
GROSS REVENUES: Shall mean all cash derived directly or indirectly
by a Grantee, its affiliates, subsidiaries,
transferees, assignees, or any other Person in
which the Grantee has a financial interest which
arises from or is attributable to the operation of
the Cable System within the City, or other
consideration derived directly or indirectly by a
Grantee, its affiliates, subsidiaries, transferees,
assignees, or any other Person in which the Grantee
has a financial interest, arising from or
attributable to the sale or exchange of cable
services by Grantee or in any way derived from the
Cable Service operation of its system in the City
as pro-rated to the amount received within the
Grantee's Taylorville, Illinois region. Said Gross
Revenues shall include but not limited to, monthly
fees charged Subscribers for Basic Service, monthly
fees charged Subscribers for any optional service;
monthly fees charged Subscribers for any tier of
Cable Service other than Basic Service;
Installation, disconnection and re-connection fees;
leased Channel fees; fees, payments or other
consideration received from programmers, except the
consideration received from programmers for
marketing purposes; Converter rentals; advertising
revenues; revenues from home shopping Channels.
5
<PAGE>
GROSS REVENUES:
(Continued): This sum shall be the basis for computing the fee
imposed pursuant to Section 12.1 hereof. This sum
shall not include any taxes on services furnished
by Grantee which are levied directly upon any
Subscriber or user by the State of Illinois, Marion
County, the City, or any other governmental unit
which is collected by Grantee on behalf of such
governmental unit, or revenue derived from a
similar service that is regulated exclusively at
the state or federal level when said service is a
common carrier or utility service not subject to
regulation.
HEADEND: The control center of a cable television system,
where incoming signals are amplified, converted,
processed, and combined into a common cable along
with any origination cablecasting, for transmission
to Subscribers. Headend usually includes antennas,
preamplifiers, frequency converters, demodulators,
processors, and other related equipment.
INSTALLATION: Shall mean the connection between Subscriber Drop
cable to Subscribers' terminals.
INSTITUTIONAL
NETWORK: The network of cables of frequencies upstream under
control of the City of Salem that connects Schools,
government agencies, and similar institutions to
the Cable System for retransmission Downstream to
the Subscriber network or to a network dedicated
specifically for the private use of Institutional
Network Subscribers.
INTERACTIVE ON-
DEMAND SERVICES: A service providing video programming to
Subscribers over switched networks on an on-demand,
point-to-point basis, but does not include services
providing video programming prescheduled by the
programming provider.
INTERACTIVE
SYSTEM: A two-way Cable System that provides a Subscriber
with the ability to enter commands or responses on
an in-home terminal and general responses or
stimuli at a remote location.
INTERCONNECT: The physical connection of two or more Cable
Systems, or a Cable System and a communications
company facility.
6
<PAGE>
LEASED ACCESS
CHANNEL: A cable television Channel or Channels, including
input facilities and equipment, specifically
designated for broadcasting which is provided by
means of a lease arrangement for cablecast airtime
between the Cable Operator and the Lessee. Shall
include without limitation all use pursuant to
Section 612 of the Act (47 USC 532).
LOCAL ORIGINATION
CHANNEL: A Channel providing programs that are produced by
the Cable Operator rather than those received by
television broadcast stations or pay Channel
distributors and other than those produced on
Public, Educational, and Governmental Channels.
MATERIAL BREACH: Any substantial deviation from the terms and
conditions of this Franchise, including, but not
limited to, one or more causes for revocation as
described in the Franchise Ordinance.
MODIFICATION: Shall mean any Modification, Modification
agreement, or amendment to the Franchise Agreement
entered into and between the Grantee and the City
and made a part of the Franchise Agreement.
ORDINANCE: Shall mean Ordinance #96-19, An Ordinance To
Establish A Cable Telecommunications Franchise For
the City Of Salem, Illinois dated August 5, 1996,
as may be amended from time to time (also referred
to as Franchise Ordinance).
PAY-PER-VIEW: A usage-based fee structure used for cable
television programming in which the Subscriber is
charged a price for individual programs requested.
PERSON: Shall mean any individual, firm, corporation,
company, partnership, association, joint venture,
trust, or organization of any kind and the lawful
trustee, successor, transferee, assignee, or
personal representative thereof.
PUBLIC ACCESS
SYSTEM: A Public Access Channel or Channels specifically
designated as a non-commercial Public Access
Channel available on a first-come,
non-discriminatory basis, which may include
facilities and equipment for such use as agreed to
in the Franchise Agreement. Shall include without
limitation all use pursuant to Sections 611 and 612
of the Act (47 USC 531, 47 USC 532).
7
<PAGE>
PUBLIC STREET: Shall mean the surface and the space above and
below the surface of any public street, road,
highway, lane, path, alley, court, boulevard,
drive, avenue, parkway, driveway, or bridge, now or
hereafter held by the City which shall entitle the
City and the Grantee to the use thereof for the
purpose of erecting, installing, and maintaining
the Grantee's Cable System.
PUBLIC WAY: Shall mean the surface and space above and below
the surface of any conduit, tunnel, park, square,
waterways, utility easements, or other public
property now or hereafter held by the City which
shall entitle the City and the Grantee to the use
thereof for the purpose of erecting, installing,
and maintaining the Grantee's Cable System.
SCHOOLS: Any public or private elementary School, secondary
Schools, junior college, or university which
conducts classes or provides instruction services
which has been granted a certificate of recognition
by the State of Illinois.
SERVICE CALL: Shall include calls to the Grantee regarding
outages, poor picture and sound quality, billing
problems which result in an adjustment to the
Subscriber's account, and Installation and
maintenance practices.
SHALL AND MUST: Each is mandatory.
SUBSCRIBER: Shall mean any Person, firm, company, corporation,
or association who legally receives one or more of
the services provided by the Grantee's Cable System
and does not further distribute such services.
SUBSCRIBER DROP: A cable which connects the tap or coupler of a
feeder cable to Subscriber's premises and
television set.
UPSTREAM CHANNEL: A Channel which is transmitted in a direction from
the Subscriber's television set to the Headend.
VERTICAL BLANKING
INTERVAL: The unused lines in each field of a television
signal (seen as a thick band when the television
picture rolls over, usually at the beginning of
each field), that instruct the television receiver
to prepare for reception of the next field. Some of
these lines may be used for teletext and captioning
or maintain specialized test signals.
8
<PAGE>
SECTION 2: GRANT OF NON-EXCLUSIVE FRANCHISE
SECTION 2.1: GRANT OF OPERATION
The City of Salem hereby grants to Grantee the non-exclusive right and
privilege to construct, erect, operate, and maintain in, upon, along,
across, over and under Public Streets, Public Ways and public places
now laid out or dedicated, and all extensions thereof and thereto, in
the City, poles, wires, cables, underground conduits, manholes, and
other television conductors, and fixtures or appurtenances necessary
for the maintenance and operation of a Cable System for the
interception, production, sale, and distribution of audio, video, data,
voice, and radio signals.
SECTION 2.2: RIGHT OF CITY TO GRANT OTHER FRANCHISES
Nothing in this Franchise Agreement shall affect the right of the
Franchising Authority to grant to any other Person a Franchise or right
to occupy and use the Public Streets, Public Ways or public places or
any part thereof for the erection, installation, construction,
reconstruction, operation, maintenance, dismantling, testing, or repair
or use of the Cable System within the City of Salem.
SECTION 2.3: GRANTEE TO HAVE NO RECOURSE
The Grantee shall have no recourse whatsoever against the City for any
loss, cost, expense, or damage arising out of any provision or
requirement of this Agreement or its regulation or from the City's
authority to grant additional Franchises. This shall not include
negligent acts of the City, its agents, or employees.
SECTION 2.4: COMPLIANCE WITH FRANCHISE ORDINANCE
Having fully examined all of the provisions of the Franchise Ordinance,
Grantee hereby accepts the award of the non-exclusive Franchise and
expressly promises and agrees to comply with all applicable laws. Where
there is a conflict between the Franchise Ordinance and the Franchise
Agreement, the requirements of the Franchise Agreement shall control.
The parties agree that all future amendments to the City's Cable
Ordinance will not be applicable to Grantee without the express
agreement of the Grantee, unless such amendments are for the purpose of
the public health, safety, and welfare, and/or are to comply with
Federal and State laws.
9
<PAGE>
SECTION 3.0: TERM OF AGREEMENT
SECTION 3.1: EFFECTIVE DATE
The Agreement and the Franchise granted hereunder shall become
effective upon execution, establishment, and delivery of the security
fund and certificates of insurance as required in Sections 14 and 16 of
this Agreement.
SECTION 3.2: TERM OF AGREEMENT
The grant of this Franchise shall be for a term of Seven (7) years
beginning on the Effective Date of this Franchise. No later than one
(1) year prior to the expiration date of this Agreement, the City
Council shall evaluate Grantee's overall performance of the terms and
conditions of the Ordinance and this Agreement, including the upgrading
of the Cable System. If the City Council determines, in its sole
discretion, that the Grantee has complied with this Agreement,
including completing the upgrade of the Cable System in a timely
manner, the City Council shall approve extending the term of this
Franchise for an additional Three (3) years.
The Grantor and the Grantee agree that at such time as this Franchise
may expire by its terms, the parties will adhere to the Franchise
renewal procedures contained in 47 U.S.C. 546, as that provision may
exist at the time of renewal.
If the Franchise is not automatically extended after seven (7) years
for an additional three (3) years pursuant to paragraph 3.2 above, the
Grantee shall be deemed to have submitted on a timely basis the renewal
notification required under 47 U.S.C. 546 so as to entitle Grantee to
all legal and procedural rights to which it may be entitled.
SECTION 3.3: MATERIAL BREACH OF FRANCHISE
The Franchise Agreement may be terminated for Material Breach of any
term or condition hereof or for violations of any material provision of
this Agreement, as provided in Section 27 of this Agreement.
SECTION 4.0: ACCEPTANCE OF FRANCHISE
SECTION 4.1: BINDING AGREEMENT OF TERMS AND CONDITIONS
The City and Grantee agree to be bound by, and to timely and fully
perform and fulfill all of the terms, conditions, inducements, offers,
promises, provisions, and representations of this Franchise Agreement.
Anything contained herein to the contrary notwithstanding, all
provisions of this Agreement shall be binding upon the Grantee, its
successors, lessees, delegees, or assignees.
10
<PAGE>
SECTION 4.2: ACCEPTANCE OF POWER AND AUTHORITY OF CITY
The Grantee expressly acknowledges that in accepting the Franchise it
has relied upon its own investigation and understanding of the power
and authority of the City to grant this Franchise.
SECTION 4.3: FILING OF FRANCHISE AGREEMENT
A fully executed copy of the Franchise Agreement shall be filed for
record in the Office of the City Clerk at the Grantee's expense within
thirty (30) days after the same is filed with the Franchising
Authority. The recorded copies of such acceptance shall be obtained and
preserved by the City Clerk. If one or both of the aforementioned fully
executed copies of the Agreement are not filed or deposited as
required, the Agreement shall not take effect but shall be null and
void until said copy or copies are filed or deposited with the
Franchising Authority and/or the City Clerk.
SECTION 4.4: PREVIOUS RIGHTS ABANDONED
This Franchise shall be in lieu of any and all other previous rights,
privileges, powers, immunities, and authorities owned, possessed,
controlled, or exercisable by the Grantee or any successor pertaining
to the construction, operation, or maintenance of a Cable System in the
City. The acceptance of the Franchise shall operate, as between Grantee
and the Franchising Authority, as an abandonment of any and all such
rights, privileges, powers, immunities, and authorities within the
City. All construction, operation, and maintenance by the Grantee of
any Cable System within the City shall be under the Franchise and not
under any other right, privilege, power, immunity, or authority.
SECTION 4.5: REGULATORY AUTHORITY
Grantee agrees that it is and shall be subject to the regulatory
authority of the City as set forth in this Franchise Agreement and as
the Franchise Agreement may from time to time be supplemented or
amended pursuant to agreement of the parties and by applicable law.
SECTION 4.6: COMPLIANCE WITH LAWS, RULES, AND REGULATIONS
In the event any valid law, rule or regulation of any federal and state
governing authority or agency having jurisdiction, including but not
limited to, the Federal Communications Commission or its designated
successor, contravenes the provision of this Agreement subsequent to
its adoption; then the provisions hereof shall be superseded by any
such valid law, rule, regulation, to the extent that the provisions
hereof are in conflict and contrary to any such rule, law, or
regulation.
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<PAGE>
SECTION 4.7: FRANCHISE VALIDITY
The Grantee agrees, by the acceptance of this Franchise, to accept the
validity of the terms and conditions of this Franchise in its entirety
and that it will not, at any time, proceed against the Franchising
Authority in any claim or proceeding challenging any term or provision
of the Franchise as unreasonable, arbitrary, or void, or that the
Franchising Authority did not have the authority to impose such term or
condition.
SECTION 4.8: FEE FOR PROFESSIONAL SERVICES PERTAINING TO FRANCHISE
RENEWAL AND TRANSFER
The Grantee shall provide to the Franchising Authority with the
executed acceptance of the Franchise, a non-refundable fee for the
transfer or renewal of Grantee's cable Franchise which shall be applied
to solely defray costs incurred by the Franchising Authority for
professional services incurred through the Franchise renewal process or
the process of transfer, delegation, or assignment of the Franchise.
The Grantee shall pay to the City the actual costs incurred by the City
for review, analysis, and preparation of documents related to the
process of transfer, delegation, or assignment of the Franchise to an
amount which shall not exceed four thousand dollars ($4,000.00). The
Grantee shall pay to the City the actual costs incurred by the City for
the process of renewal of the Grantee's cable Franchise to an amount
which shall not exceed twenty five thousand dollars ($25,000.00)
multiplied by the Consumer Price Index (CPI) annually over the life of
the Franchise. The Grantee may, at its discretion, pass through its
costs of transfer, delegation, assignment, or renewal of its Franchise
to its Subscribers. Payments made to the City for reimbursement of the
costs of transfer, delegation, assignment, or renewal shall not be
considered as a part of the Franchise Fees paid to the City.
SECTION 4.9: ILLEGAL OR WRONGFUL CONDUCT; INDUCEMENTS
Grantee represents, warrants, and guarantees that neither it, nor its
representatives or agents have committed any illegal acts or engaged in
any wrongful or illicit conduct contrary to, or in violation of any
federal, state, or local law or regulation in connection with the
obtaining of the Franchise. The Grantee by acceptance of this Franchise
acknowledges that it has not been induced to enter into this Franchise
by any understanding or promise or other statement, whether verbal or
written, by or on behalf of the City concerning any term or condition
of this Franchise that is not included in this Agreement.
SECTION 4.10: FURTHER REPRESENTATIONS OF GRANTEE
The Grantee further warrants and represents as follows:
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A. That Grantee is a Georgia partnership
authorized to do business in the State of Illinois,
in good standing and has full legal right and
authority to enter into and fully execute and perform
the terms of this Franchise Agreement;
B. That all corporate action required to authorize the
acceptance of this Franchise Agreement, and execution
and delivery of this Franchise Agreement and all
other documents to be executed and/or delivered by
the Grantee pursuant to this Franchise Agreement, and
to authorize the performance by the Grantee of all
its obligations under this Franchise Agreement have
been validly and duly acted on and are in force and
effect; and
C. That the Franchise Agreement and all other documents
executed and/or delivered by the Grantee have been
duly accepted and executed; and
D. That the Grantee has the financial, legal, technical,
and construction capability to operate, maintain,
rebuild, and upgrade the Cable System pursuant to the
terms and conditions of this Franchise Agreement.
SECTION 4.11: GRANTEE'S AUTHORIZED AGENT
For purposes of this Franchise Agreement, Grantee authorizes and
appoints the Regional Manager, Enstar Income Growth Program Six-A, L.P.
d/b/a Falcon Cable TV, with offices located at 11 Clearing Avenue,
Taylorville, Illinois 62568, to act as its registered agent, and
represents to the Franchising Authority that such agent is authorized
to accept notice and service on its behalf.
SECTION 4.12: APPROVAL OF TRANSFERS, DELEGATIONS, OR ASSIGNMENTS OF
OWNERSHIP
The Grantee shall comply with the provisions regarding transfers,
delegations, and assignments of ownership as stated in Sections 8.1
through 8.10 of the Franchise Ordinance; provided, however, that for
the purposes of this Agreement, the following shall supersede the
relevant provisions of Sections 8.1, 8.3, 8.7, and 8.9 of the
Ordinance:
1. Prior written consent of the City for a transfer,
delegation, or assignment of the Cable System shall
be required in those cases where there is a change in
the General Partner of the Grantee, a change of at
least five percent (5%) of the partnership of the
Grantee, or a change in the managing entity of the
Grantee or a shift in control of the Grantee where
such control is being substantially altered.
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2. The Grantee may undertake limited hypothecation of
the Cable System without the consent of the City
Council where the Grantee seeks to hypothecate any or
all of its assets in order to finance improvements to
the Cable System. Any hypothecation of the Cable
System contemplated by the Grantee shall be conducted
in compliance with appropriate Illinois State
Statutes.
3. The Grantee and the Franchising Authority shall,
prior to review of the information required under
Section 8.6 (H), determine if said information shall
be covered under a confidentiality agreement between
the Franchising Authority and the Grantee, or if such
information shall be reviewed by the Franchising
Authority IN CAMERA. The Grantee shall not be
required to comply with Section 8.6 (L) of the
Franchise Ordinance as a result of an amendment to
Section 617 of the Cable Act regarding information
required under Section 8.6 (L) by the
Telecommunications Act of 1996.
4. The City shall reserve the right to negotiate any
term or condition of the Franchise Agreement before
any final decision to approve the sale, transfer,
delegation, or assignment of the Franchise is
approved. Where the City has requested negotiation of
any term or condition of the Franchise Agreement,
such modifications to the Agreement under negotiation
shall only be accepted upon mutual agreement between
the City and the Grantee.
SECTION 5.0: SERVICE AREA COVERED BY FRANCHISE AGREEMENT
SECTION 5.1: PRIVILEGE TO OPERATE WITHIN MUNICIPAL CORPORATE LIMITS
The Franchising Authority hereby extends to the Grantee the privilege
of operating the Cable System within the corporate limits of the City
as now or in the future may exist as shown on the map found in Appendix
A.
SECTION 6.0: RETRANSMISSION OF SIGNALS WITHIN A STRUCTURE
Installation or Subscriber use of Cable System service which involves
the retransmission of the signal or signals to multiple reception
points within a structure shall be negotiated between the Grantee and
the owner of the structure.
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SECTION 7.0: SYSTEM IMPROVEMENTS
SECTION 7.1: UPGRADE OF CABLE SYSTEM
The Grantee shall upgrade its Cable System within the Franchise Area.
In accordance with its proposal of October 19, 1995, the upgraded Cable
System will include a fiber-optic trunk and node topology. The Grantee
shall have a twenty-four (24) month time period to complete make-ready
and physical reconstruction of its Cable System.
Within one hundred eighty (180) days of the date of this Agreement, the
Grantee shall submit a written report of the status of the upgrade.
Such report shall be in reasonable detail to permit the Grantor to
assess the progress of the Grantee toward completion of the upgrade.
Thereafter, the Grantee shall submit supplemental written reports to
the Grantor not less often than quarterly.
Where the Grantee reasonably believes and can establish that additional
time beyond the aforementioned twenty-four (24) months is necessary for
the completion of the reconstruction of the Cable System due to
circumstances beyond its control as described in Section 7.5 hereunder,
Grantee may be given temporary relief from the twenty-four (24) month
requirement by the City Council upon request to and review by the City
Council. Prior to the Grantee's upgrading of its Cable System, Grantee
shall install auxiliary power sources at its Headend and surge
protectors in the Cable System within ninety (90) days from the
effective date of this Agreement in accordance with the terms of
Section 8.7 hereinbelow.
SECTION 7.2: CHANNEL CAPABILITY OF CABLE SYSTEM
A. Upon completion of the upgrade of the Cable System,
said system shall have a minimum Channel capability on
the Cable System of eighty-three (83) video programming
services. The Cable System shall have the ability to
support digitally compressed signals.
B. Grantee shall provide the Franchising Authority with a
plan for implementation of no fewer than twenty-five
(25) additional Channels within three (3) months of the
completion date of the reconstruction of the Cable
System. Grantee shall begin to add Channels to the
Cable System within two (2) months after the
reconstruction of the Cable System is completed.
Thereafter, the Grantee shall meet with the Franchising
Authority on an informal basis to discuss planned
Channel additions.
C. Grantee shall provide to all of its Subscribers all
components of the television signal (video and audio)
including, but not limited to, subcarriers and
information in the Vertical Blanking Interval to the
extent that such components are required to be carried
by applicable federal law. Notwithstanding the
foregoing, the Grantee shall, at all times during the
term of this Agreement, provide to all Subscribers the
component carried in Line
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21 of the Video Blanking Interval. It is the intention
of the foregoing sentence that the Grantee will provide
the necessary component of the signal required for
reception of closed-captioning data for the hearing
impaired.
D. This Section shall supersede the provisions contained
in Section 13.1 of the Franchise Ordinance.
SECTION 7.3: SERVICE REQUIREMENTS
Grantee shall configure the Cable System to enable Upstream and
Downstream Channel transmission of video, data, and audio signals.
Amplifiers installed by the Grantee shall be capable of supporting
two-way and interactive services throughout the Franchise Area with the
addition of the appropriate modular insertions.
Grantee shall design said Cable System to provide capability for
two-way Interactive System programming, Upstream and Downstream Channel
capacity, digital radio and FM services, and access Channels. Services
shall also include the capability to retransmit stereo audio signals of
commercial AM and FM radio stations and stereo audio signals carried on
video broadcast and cablecast programming. Implementation of the
services as enumerated in this Section shall be at the discretion of
the Grantee.
SECTION 7.4: BENEFITS TO SUBSCRIBERS
During the period between the enactment of the Franchise Agreement and
the completion of reconstruction of the Cable System, Subscribers in
the Franchise Area shall be entitled to all other benefits specified in
this Agreement except for increased Channel capacity and other
facilities or services which are intended to be provided until after
completion of the Cable System upgrade.
SECTION 7.5: FORCE MAJEURE
No penalties of any kind shall be imposed against the Grantee for
delays in completing the upgrade of the Cable System when such delays
are caused by the following: war, riot, insurrection, rebellion,
strike, lockout, unavoidable casualty or damage to personnel,
materials, or equipment, fire, flood, storm, earthquake, tornado,
orders of a court of competent jurisdiction, any act of God, vendor
caused equipment delays, and any cause beyond the control of Grantee.
In the case of a vendor caused equipment delay, the burden of proof
will be on the Grantee to show that the delay was solely the fault of
the vendor and that the vendor was an established equipment provider at
the time the order was placed.
SECTION 7.6: CONTINUOUS AND UNINTERRUPTED SERVICE
During such times when the Cable System is undergoing reconstruction or
modification, the Grantee shall conduct construction activities in such
manner that all Subscribers may reasonably receive continuous,
uninterrupted service, except in the case of an emergency. In
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the event that it is necessary for the Grantee to interrupt Subscriber
service for a period longer than three (3) hours in any part of the
City, the Franchising Authority shall be notified prior to the
interruption. Any interrupted service shall be subject to the
provisions of this Franchise Agreement.
SECTION 7.7: PERIODIC TESTING AND COMPLIANCE WITH FCC STANDARDS
Grantee shall comply with all Cable System testing regulations for
video and audio signal quality, and signal leakage as specified in
Title 47, Section 76, Subpart K of the Code of Federal Regulations.
Regardless of the total number of tests mandated by the FCC or other
federal rules applying to this system, Grantee offers and Franchising
Authority agrees that Grantee shall perform inspection of no less than
four (4) test points within the Franchise Area on a bi-annual basis
when Grantee conducts FCC mandated proof-of-performance testing. No
less than one (1) test point shall be at a widely scattered end of the
longest cascade within the City. Grantee shall maintain periodic
testing on this basis throughout the life of the Franchise. In
conducting video and audio signal testing, Grantee shall follow testing
procedures consistent with those set forth by the FCC. Grantee shall
also comply with technical standards set forth by the FCC in providing
those levels of video and audio signals which the FCC has deemed as
being the minimum standards for cable TV reception. If the Grantee is
found by the Franchising Authority to be in compliance with this
Section, then the Grantee will be deemed to be in compliance with
Section 13.4 of the Franchise Ordinance. In the event that the FCC
allows the Franchising Authority through law or regulation to enact
technical standards which exceed those of the FCC, then the Franchising
Authority shall retain the right to adopt technical standards which
exceed those of the FCC, but shall not do so until the Franchising
Authority has consulted with the Grantee.
SECTION 7.8: NEW SERVICES AND TECHNOLOGIES
This Agreement may not restrain or prohibit Grantee from adding new
services and/or technologies to the Cable System as they become
available. Where Grantee contemplates addition of such services and/or
technologies to the Cable System, Grantee shall make its best effort to
notify the Franchising Authority within forty-five (45) calendar days
of addition of such services and/or technologies, and, at a minimum
within thirty (30) days, and provide a description of the proposed
service(s) and/or technology or technologies to be implemented.
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SECTION 7.9: CONSTRUCTION BOND
Upon initiation of the reconstruction of the Cable System, Grantee
shall maintain and file with the Franchising Authority a Construction
Bond in the amount of no less than Three Hundred Fifty Thousand Dollars
($350,000.00) or a sum of no less than the amount of ten (10) percent
of the estimated Cable System reconstruction costs from a company
authorized to do business in the State of Illinois and rated not lower
than "B+" by Best Insurance Rating Service, to assure the satisfactory
completion of the upgrading of the Cable System in accordance with this
Agreement and the Franchise Ordinance. Once the upgrade has been
completed, the Franchising Authority shall return the Construction Bond
to the Grantee.
SECTION 7.10: CONTINUOUS OPERATION
Grantee shall operate and maintain its Cable System in a manner which
will enable continuous twenty-four (24)-hour operation of all services
as required herein.
SECTION 7.11: TECHNICAL ASSISTANCE
Upon the Franchising Authority's determination based on a reasonable
belief that there are problems or deficiencies in Grantee's Cable
System, and after the Grantee has received notice and opportunity to
cure the problems or deficiencies in question, and such curative action
has not addressed problems or deficiencies within the Cable System, the
Franchising Authority may choose to engage a qualified technical
consultant to aid the Franchising Authority in conducting oversight of
the technical aspects of the Grantee's Cable System. The Franchising
Authority may obtain the services for the technical consultant for a
specific amount of time to be dedicated for said oversight and
inspection. Grantee shall assume up to the amount of two thousand five
hundred dollars ($2,500.00) incurred by the City for said technical
consulting if problems or deficiencies are found.
SECTION 8.0: CONSTRUCTION STANDARDS
SECTION 8.1: CONSTRUCTION TIMETABLE
Grantee shall incorporate into this Franchise Agreement a best estimate
of a schedule for reconstruction of the Cable System, including Grantee's
timetable including phasing-in for commencement or enhancement of cable services
to Subscribers. Said schedule shall be provided to the Grantor within ninety
(90) days of the execution of this Agreement and shall be attached hereto as
Appendix B of this Agreement.
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SECTION 8.2: NON-STANDARD INSTALLATIONS
Grantee shall build its Cable System so that it is capable of providing
service to all residences and businesses located within the Franchise
Area. Service will be provided at then-prevailing Installation charges
except where the Subscriber Drop is not a standard Installation, in
addition to the prevailing Installation charge, Grantee may charge the
Subscriber the difference between Grantee's cost of installing a
standard Installation and the cost of installing the non-standard
Installation. For the purpose of this Agreement, a non-standard
Installation shall mean a cable connection that is located more than
one hundred fifty (150) feet from the existing distribution system, or
such Installations where adverse terrain (such as excessive rocky
conditions) or other factors render the extension of the system
economically or technically more expensive or difficult than typically
encountered by Grantee in its normal operations.
SECTION 8.3: ADHERENCE TO ELECTRICAL AND SAFETY CODES
The construction, installation, activation, re-activation, and
operation of any portion of Grantee's signal origination or signal
processing, or signal distribution system and equipment, including, but
not limited to the towers, antennae, Headend, studio, trunk, and
distribution system, drops, and fixed or portable equipment located on
or off Subscriber-occupied property shall comply with all requirements
of the applicable National Electrical Code (currently ANSI 70-1996 and
replaced by subsequently promulgated editions), and the applicable
National Electrical Safety Code (Currently ANSI C2-1996 and replaced by
subsequently promulgated editions). Grantee shall at all times comply
with other applicable federal, state, and local regulations, codes, and
other ordinances of the City.
SECTION 8.4: OVERHEAD AND UNDERGROUND INSTALLATION
A. All cables and wires shall be installed parallel with
existing telephone and electric utility wires whenever
possible. Where the Grantee has erected or installed
multiple wiring configurations on utility poles, such
configurations shall be in parallel arrangements and be
properly bundled and lashed in accordance with
engineering considerations and the applicable safety
codes identified in Section 8.3. All installations
shall be underground in those areas of the City where
both telephone and electric utilities are underground
at the time of installation of the Cable System.
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B. In areas where both telephone and electric utility
facilities are above ground at the time of the
installation or reconstruction of the Cable System, the
Grantee may install its service above ground, provided,
however, that at such time as those facilities are
placed underground by the utility companies,
underground installations shall be in conformance with
all applicable construction, electrical, and safety
codes. Grantee will bury cable underground when pole
clearance cannot be reasonably obtained. Where
applicable, Grantee shall bury cable underground in
conduit under Public Streets to areas that cannot be
reasonably accessed. Grantee shall place its facilities
underground pursuant to the same terms and conditions
as all other utility companies. Underground
installations shall be in compliance with all
applicable construction, electrical, and safety codes.
SECTION 8.5: GROUNDING
All towers, antennas, satellite receive stations, and other exposed
equipment of Grantee used in the provision of cable television service
shall be properly grounded. Grantee at its discretion may properly
ground said equipment in such a manner that exceeds normal engineering
requirements, provided, however, that such grounding is in compliance
with the National Electrical Code as referenced in Section 8.2 of this
Agreement. Grantee shall also comply with grounding of system equipment
and service connections as required under Section 13.8 of the Franchise
Ordinance.
SECTION 8.6: HEADEND FACILITY
Indoor Headend components shall be wired according to applicable
National Electrical Safety Code standards and shall be placed in a
properly ventilated and air-conditioned environment. Outdoor Headend
components, including but not limited to, towers, antennas, and
satellite receive stations shall be properly anchored and wired in
accordance with NCTA Standards of Good Engineering Practices (NCTA
008-0477 EIA Standard RS-222C, "Structural Standards for Steel Towers
and Antenna Supporting Structures") and shall be properly lighted in
accordance with the appropriate Federal Aviation Administration and
Federal Communications Commission rules and regulations as now or
hereafter amended. The Headend shall be equipped with a standby
auxiliary power supply for the purpose of maintaining operations during
periods of outage, maintenance, or repair-related downtime.
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SECTION 8.7: OUTAGE PREVENTION
Grantee shall take measures necessary to prevent Cable System service
outages. Such measures shall include installing auxiliary power sources
at the Headend within ninety (90) days from the effective date of this
Agreement. As a part of its reconstruction of the Cable System, Grantee
shall enable installation of surge protectors at each optical node
location or included within any amplifier unit throughout the system,
and installation of stand-by power supplies at each optical node
location which shall have a capacity to provide power to the Cable
System for a period of at least three (3) hours in such event where
technology of outage prevention changes to the extent that a more
efficient method of surge protection becomes available, the Franchising
Authority and Grantee shall agree to a reconfiguration of surge
protection devices and locations throughout the system. This Section
shall supersede Section 13.7 of the Franchise Ordinance, provided that
outages which occur as a result of service interruptions or maintenance
are subject to the provisions of this Section.
SECTION 8.8: EMERGENCY REMOVAL OF PLANT
If, at any time, in case of fire or other disaster within the City, it
shall become necessary in the judgment of the City to cut or move any
of the wires, cables, amplifiers, power supplies, appliances, or
appurtenances of the Grantee, City shall not be liable for cutting or
moving, provided, however, that nothing herein shall be construed to
preclude liability for willful and wanton acts.
SECTION 8.9: DAMAGE TO CITY PROPERTY
Where any damage is caused to any City property during construction,
installation, or maintenance by Grantee, the cost of such repairs
including all service and materials required by the City will be billed
to the Grantee. The charges shall be paid within forty-five days of the
date of billing or the City, at its option, may withdraw the cost of
such repairs from the Security Fund established by Section 14 of this
Agreement.
SECTION 8.10: ENFORCEMENT OF USE OF PUBLIC STREETS AND PUBLIC WAYS
Through its acceptance of this Agreement, Grantee agrees to comply with
the provisions of this Agreement, the Franchise Ordinance, and other
applicable ordinances, regulations, and codes of the City regarding the
installation, maintenance, repair, excavation, and replacement of
wires, cables, conduit, pedestal boxes, and other appurtenance
installed upon or beneath the Public Streets and Public Ways belonging
to the City. The City shall have the right to enforce the Franchise
Agreement, Franchise Ordinance, and other appropriate ordinances,
regulations, and codes where the City reasonably believes that Grantee
has committed a violation. This Section shall not limit City from
providing to Grantee a notice and opportunity to cure the violation
when it is believed by the City that a violation has occurred.
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SECTION 8.11: CITY'S RIGHT OF CABLE SYSTEM INSTALLATION
The City reserves the right during the life of this Franchise to
install and maintain free of charge upon or in the poles and conduits
of the Grantee any wire and pole fixtures necessary for municipal
subsystems on the condition that such Installation and maintenance
thereof does not interfere with the operation and any future use of the
Grantee.
SECTION 8.12: FAILURE TO PERFORM
In the case of a failure to perform within the provisions of this
Section, the Franchising Authority shall consider such failures to
perform as a Material Breach of the Franchise. The Franchising
Authority shall provide Grantee with notice and opportunity of no less
than thirty (30) days to cure such violations, however, if Grantee
fails to cure such violations after reasonable notice and opportunity
have been provided, the Franchising Authority may consider Grantee to
be in default of the Franchise and may, at its option, initiate any
proceeding authorized by the Franchise Ordinance or this Agreement.
SECTION 9: INSTITUTIONAL NETWORK
SECTION 9.1: INSTITUTIONAL NETWORK CAPABILITIES AND DETERMINATIONS BY
THE CITY
As part of its system upgrade, Grantee may be required by the City,
pursuant to the procedure below, to provide Institutional Network
(I-Net) capacity to serve locations identified on the list and map in
Appendix E. Following Grantee's completion of initial system design
work, but prior to substantial system construction work, Grantee shall
provide to the City alternative methods and estimated costs to provide
one-way and two-way audio, video, voice, and data transmission from
within the Institutional Network, and capability to connect to the
Internet. The City shall then have a period of sixty (60) days in which
to evaluate alternative Institutional Network approaches, possible
benefits to the community, and the costs which would have to be paid by
the City and cable Subscribers.
Grantee may be required by the City to dedicate no more than two (2)
strands of fiber-optic cable for non-profit institutional use in order
to connect institutional users to the nearest fiber optic cable, either
by fiber or by coaxial cable to one interior connecting point within
each location listed in Appendix E, however, Grantee shall not be
required to provide any additional wiring within such location, unless
the Institutional User (herein defined as an applicable non-profit
governmental unit, library, School, hospital or agency) and the Grantee
have entered into an agreement committing the Institutional User to
utilize the I-Net, including applicable usage charges, and to pay the
Grantee the cost of any additional wiring required.
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If the City makes an initial decision to require Grantee to construct
an I-Net, it shall determine whether the costs of constructing and
installing the I-Net shall be paid directly by the City, or whether
such costs shall be paid by cable Subscribers. If the City agrees to
pay all costs required for construction and installation of the I-Net,
Grantee shall charge only the incremental increase in labor and
materials costs for the I-Net, over and above the costs Grantee
otherwise would have incurred for its system upgrade. If, however,
Grantee has to pass-through the costs of the I-Net to cable Subscribers
as a part of their monthly bills, then Grantee may charge both the
incremental costs of construction and interest costs which are
permitted under FCC rules.
SECTION 9.2: IMPLEMENTATION OF INSTITUTIONAL NETWORK
A. As of the effective date of this Agreement, the Grantee
recognizes that the City and other identified I-Net
users will need a period of time to plan and organize
user applications for use of the I-Net. At such time
after the completion of the reconstruction of the Cable
System that the City and other I-Net user entities have
completed their plans for I-Net applications, the City
shall notify the Grantee that it is ready to begin
implementation of I-Net applications, and the Grantee
shall cooperate to the fullest extent in assisting the
City and any of the other identified I-Net user
entities listed in Appendix E with activating the
network. Such assistance shall include providing
appropriate switching and routing equipment at the
Headend.
B. It is understood that each I-Net user entity shall be
responsible for providing its own end-user equipment;
provided, however, that the Grantee may, at its
discretion, participate in joint grant applications
between the City and the Salem Public School district,
to the State or Federal governments, or to private
sources, for the purpose of receiving outside funding
which would significantly defray the costs of end-user
equipment.
C. The Grantee shall conduct tests of the I-Net cabling on
a bi-annual basis for video, audio, data, signal
quality, and signal leakage at such time when the City
or other user entities are using the I-Net. The grantee
may conduct such tests at the same time as it conducts
FCC Proof-of-Performance testing on the Cable System.
Grantee shall maintain the I-Net cable to the extent
that signal leakage, if any, falls within parameters
set by the FCC.
D. The Grantee shall offer to each I-Net user entity which
has committed to the Grantee that it will use the
I-Net, the opportunity to separately contract with the
Grantee or the Grantee's subcontractor, for I-Net
maintenance, repairs, and technical assistance.
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SECTION 10: CUSTOMER SERVICE
SECTION 10.1: LOCAL FACILITY
A. Grantee shall maintain on its own, or in concert with a
third party, a Customer Service Facility within the
boundaries of the City of Salem with the capacity to
accept payments, respond to repair, Installation, or
other Service Calls, distribute or receive Converter
boxes, remote control units, or other related
equipment, and receive service inquiries. The Grantee
shall notify the Franchising Authority in writing on
how it intends to comply with this provision.
B. Within ninety (90) days of the acceptance of a
Franchise Agreement, said Customer Service Facility
shall be open to the general public at least a minimum
of forty-four (44) hours per week. Of that time, there
shall be a minimum of four hours on Saturday between
9:00 AM and 5:00 PM, and at least one day per week in
which the office is open between 8:00 AM to 10:00 AM,
and one day per week in which the office is open
between 5:00 PM and 7:00 PM.
SECTION 10.2: EQUIPMENT
A. A Subscriber may, at his option, obtain Converter box,
remote control, cable modem and/or digital stereo
equipment from any party for the reception of cable
video and digital audio signals. Grantee shall
condition cable service or the continuation thereof
under this Agreement on a Subscriber's purchase of
Converter box, remote control, cable on-line services,
and/or digital stereo equipment which is technically
compatible with Grantee's system and may be controlled
by the Grantee.
B. In the event that a Subscriber seeks to purchase an
addressable Converter from an outside source other than
the Grantee, Grantee shall provide, upon inquiry by the
Subscriber, the brand and model number of its
addressable Converter box or boxes in use within the
Franchise Area. For the purpose of receiving cable
programming, the Subscriber shall be responsible for
notifying the Grantee and providing Grantee with
terminal and chip serial number information. The
Subscriber shall not be billed for equipment rental
charges, however, Grantee may, at its option, charge a
reasonable fee for activation of said Converter box,
remote control or cable modem unit. The Subscriber's
purchase of the aforementioned Converter box shall be
at his own risk. Grantee shall not be responsible for
any defects in the manufacture of said Converter box,
remote control, or cable modem, any repairs or
maintenance, or any compatibility-related issues.
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C. Upon disconnection of service by a Subscriber, all of
the Grantee's remaining cable equipment, except
internal Dwelling Unit or commercial unit wiring, shall
be removed at the Subscriber's request within a
reasonable time, such time not to exceed one (1) month.
The actual costs of removal of equipment above and
beyond that which is usually removed during a standard
disconnection shall be borne by the Subscriber. Grantee
shall also advise the Subscriber of the additional
costs prior to the removal.
D. Grantee shall not compel a Subscriber to accept and pay
for any Converter Box with addressable capacity for the
Basic Service Tier or expanded basic service if the
Subscriber indicates that he or she does not desire
such equipment.
SECTION 10.3: SOLICITATION OF SUBSCRIBERS
Nothing shall prohibit Grantee from soliciting subscriptions prior to
commencement of operation provided that each such potential Subscriber
is advised in writing:
1) That cable service is not immediately available;
2) Of a reasonable estimate of time when the Cable System
will commence operations;
3) That such Subscriber may cancel his or her subscription
at any time prior to the commencement of service and
thereby accrue no charge or penalty and that deposits,
if any, shall be refunded within thirty (30) calendar
days.
Grantee shall provide to the Franchising Authority all solicitation
materials received by a Subscriber in the solicitation or education of
potential and current subscribers. All marketing, customer service,
management, and salespersons shall identify themselves by name over the
phone; or in person with a visible name/picture ID worn on the outer
clothing.
SECTION 10.4: COMPLAINT RESOLUTION PROCEDURE
As a condition of this Franchise, Grantee shall implement a procedure
to resolve Subscriber complaints in accordance with its internal
policies and Section 19.10 of the Franchise Ordinance.
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SECTION 10.5: COMPLAINT PROCEDURE NOTIFICATION
Grantee shall follow the procedure for handling Subscriber complaints
as delineated in Section 19.10 (A)-(C) of the Franchise Ordinance.
Within three (3) months from the date of execution of this Franchise
Agreement, Grantee shall notify all current Subscribers of the
complaint process, the rights to credits for outages, the service call
response requirement, policies concerning disconnection and
reconnection and the requirement to remove Grantee's equipment from
Subscriber premises upon disconnection. Subsequently, Grantee shall
provide this information on an annual basis. Upon execution of this
Franchise Agreement, Grantee shall begin, within three (3) months,
notifying all new Subscribers of the above specified information at the
time original service is obtained.
SECTION 10.6: COMMUNICATIONS TO SUBSCRIBERS
Grantee shall provide at the time of Installation, at least annually,
when there is a change to information provided Subscribers, and upon
request by a Subscriber, that information which is required to be
provided under Section 19.1 (A)-(F) of the Franchise Ordinance, along
with the Grantee's policies regarding disconnection and reconnection of
service.
SECTION 10.7: REFUNDS
Grantee shall establish and conform to the following policy regarding
refunds to Subscribers:
A. If Grantee collects a deposit or advance charge on
any service or equipment requested by a Subscriber,
Grantee shall provide the service or equipment within
thirty (30) days of the collection of the deposit or
charge or it shall refund the deposit or charge
within 45 days thereafter. Nothing in this Agreement
shall be construed to:
1. relieve the Grantee of any responsibility
to Subscribers under any contractual
agreements into which it enters with them;
or
2. limit Grantee's liability for damages
because of its failure to provide the
service for which the deposit or charge was
made.
SECTION 10.8: RESPONSE TO SUBSCRIBER COMPLAINTS AND SERVICE REQUESTS
A. Grantee shall, under normal operating conditions,
answer telephones staffed by customer service
representatives, or through a service or automated
response system, within thirty (30) seconds, including
wait time, from when the connection is made. If the
call needs to be transferred, transfer time shall not
exceed ninety (90) seconds.
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These standards stated herein shall be met no less than
ninety (90) percent of the time as measured on a
quarterly basis under normal operating conditions.
Grantee shall follow the definition for normal
operating conditions as established by the FCC under
Code of Federal Regulations Title 47, Section
76.309 (c)(4)(ii).
B. Grantee shall, under normal operating conditions,
assure that the customer obtain a busy signal no more
than three (3) percent of the time as measured on a
quarterly basis.
C. Incoming telephone calls from Subscribers to the
Grantee shall not exceed an abandonment rate of five
(5) percent as measured on a quarterly basis.
D. Grantee shall establish a maintenance service capable
of identifying, locating, and correcting system
malfunctions in an expeditious manner. Said service
shall be available on a twenty-four (24) hour basis,
seven (7) days per week to restore service of the Cable
System to Subscribers in the event of significant
deficiencies or failure of the Cable System.
E. Grantee shall provide to Subscribers a listed local or
toll-free telephone number for service and repair
calls. The telephone number may be the same as that
required by Section 19.4 (A) of the Franchise
Ordinance.
F. Excluding conditions beyond the control of the Grantee,
Grantee shall begin working on outages to cable service
promptly, and in no event shall the response time for
calls received between 7:00 AM and 12:00 Midnight
exceed four (4) hours, except that the Grantee or its
employees shall not be required to perform work past
12:00 Midnight, it shall complete the work necessary to
correct the interruption, the following day.
The Grantee shall begin action to correct interruptions not
later than 7:00 AM if the call is received after 12:00
Midnight. Excluding conditions beyond the control of the
Grantee, Grantee shall begin working on service calls and
service requests the same day the request is received, and in
no event shall the response time exceed 24 hours. For the
purpose of this Agreement, an outage shall be defined as
cessation of video and/or audio reception on one or more
Channels affecting three (3) or more Subscribers who receive
services from the same trunk, feeder line, or node, or who
receive service from the same Cable System tap serving a
multi-family dwelling. This Section shall supersede the terms
and conditions of Section 19.5 (C) of the Cable Communications
Ordinance.
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G. For Installation, and Installation-related activity
calls, the Grantee shall establish either a specific
time for an appointment with the customer, or at
maximum: 1. a four-hour time block from the effective
date of this Agreement; 2. Grantee, if feasible, shall
establish a goal of achieving a three-hour time block
for scheduling Installation, and Installation-related
activities within one year from the effective date of
this Agreement, and 3. a goal, if feasible, of
achieving a two-hour time block within two years from
the effective date of this Agreement and thereafter for
the duration of this Agreement. Said time blocks shall
be scheduled during the Grantee's hours of operations.
The Grantee may, at its discretion, schedule
Installation, or Installation-related activities
outside of its usual hours of operations for the
express convenience of the customer. This Section shall
supersede the terms and conditions of Section 19.5 (D)
of the Cable Communications Ordinance.
H. Grantee, or its agents or designees, shall not cancel
an appointment with a customer after the close of
business on the business day prior to the
appointment.
I. Upon completion of the service call, Installation, or
Installation-related activity, the customer shall
receive a notification of the service call. Grantee
may either notify the Customer in person, directly
contact a customer by phone, which may include
placing a message on the customer's answering machine
or voice mail if necessary, leave a notification
attached to the front door of the Subscriber's
premises, or send said report by United States mail
within fourteen (14) days of the service date if the
customer is not present at the time of the service
call.
J. A representative of the Grantee shall contact a
customer in the event that a service repair
technician or other representative of the Grantee is
running late for an appointment and will be unable to
keep the scheduled appointment time. Grantee or its
representative shall reschedule the appointment, as
necessary, at a time which is convenient to the
customer.
K. The Grantee shall issue a credit equal to one day of
service if the Grantee's technician is unable to make
a scheduled Service Call appointment or is unable to
complete a scheduled Service Call due to a late
arrival.
L. The standards promulgated in Section 10.8 D-K shall
be met no less than ninety-five (95) percent of the
time measured on a quarterly basis.
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SECTION 10.9: MAINTENANCE OF CUSTOMER SERVICE COMPLAINT AND OUTAGE
RECORDS
Grantee shall maintain customer service records in accordance with the
records retention policy of Falcon Communications Corporation, a copy
of which is attached as Exhibit F. Grantee shall notify the Franchising
Authority prior to any change in said policy which affects the length
said records are retained.
SECTION 10.10: SUBSCRIBER PRIVACY
The Grantee shall comply with all applicable local and state laws,
rules, and regulations regarding the privacy of cable Subscribers, and
shall fully comply with federal laws concerning the privacy of cable
Subscribers as expressed in Section 631 et. seq. of the Cable
Communications Policy Act of 1984 as now or hereafter amended (47 CFR
551) or any successor provision.
SECTION 11: RATE REGULATION
Grantee shall recognize the right of the City to exercise its authority
to regulate rates for basic cable services and associated equipment and
services necessary to provide basic cable service to Subscribers.
Grantee shall abide by all applicable laws, rules, regulations, and
orders with regard to rates and regulation thereof by the City as
promulgated by the FCC and the City. City and Grantee agree that any
amendment or modification of rules with regard to rates and regulation
now or hereafter amended, shall apply to this Franchise Agreement.
SECTION 12: FRANCHISE FEES/USAGE OF FEES AND OTHER SUPPORT
SECTION 12.1: FRANCHISE FEE CALCULATION
A. As part of the consideration supporting the award of
this Franchise Agreement and City's permission to use
the Public Streets and Public Ways and lands of the
City, Grantee shall pay to the City on a quarterly
basis in the manner as specified in Section 11.1 of the
Ordinance which may include delivery by overnight
courier or a form of registered mail, an amount equal
to five (5) percent per year of Grantee's annual Gross
Revenues received, as permitted by law less refunds for
the quarter. Gross Revenue shall be defined as stated
in Section 1.0 hereinabove. To the extent permitted by
law, and in accordance therewith, increases in
Franchise Fees may be levied by the City after thirty
(30) days advance written notice is given to Grantee.
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B. Within one hundred twenty (120) days of the end of each
fiscal year of the Grantee, the Grantee will submit a
statement, sworn to as true and correct, by the Chief
Financial Officer or Comptroller of the Grantee,
setting forth the Gross Revenues received in the
Franchise Area. The Subscriber-related Gross Revenues
will be derived from the Grantee's Subscriber billing
reports and reported in accordance with the items set
forth in Section 11.1 (A-F) and (I) of the Ordinance.
The non-Subscriber Gross Revenues will be expressed as
a ratio of the number of Subscribers in the Franchise
Area and the total number of Subscribers in the
operational region in which the Franchise Area is
located. Such statement will also include the total
amount of refunds to Subscribers in the Franchise Area.
The provisions of this Subsection shall be deemed by
the Franchising Authority and the Grantee to have
satisfied Section 11.2 of the Cable Ordinance.
C. The Franchising Authority and the Grantee agree that
the accounting records of the Grantee are not
maintained in a manner which permits the Grantee to
produce financial statements pertaining solely to the
operation of the Cable System in the City of Salem, or
to report information on non-Subscriber Franchise Fee
payments as specifically required in Section 11.1 (G-H)
and (J-K) of the Cable Ordinance. Therefore, the
reporting requirements for non-Subscriber Gross
Revenues contained herein shall fulfill the related
requirements for reporting non-Subscriber Gross
Revenues in the Cable Ordinance. The Franchising
Authority shall maintain its right to conduct
agreed-upon procedures evaluations (as stipulated in
this Section 12.1), and to audit, in accordance with
Section 11.3 and 12.1 of the Ordinance, this Section,
and Section 13.1 of this Agreement; provided, however,
that in conducting such agreed-upon procedures
evaluations or audit, the Franchising Authority shall
proceed in accordance with the terms and conditions of
Sections 12 and 13 of this Agreement.
SECTION 12.2: PAYMENT OF FRANCHISE FEE IN THE EVENT OF TERMINATION OR
CANCELLATION
In the event Grantee continues operation of any part or all of the
Cable System beyond the cancellation or expiration of this Franchise
Agreement, Grantee shall pay to the City the compensation as set forth
hereinabove at the rate in effect at the time of such cancellation or
expiration, and in the manner set forth in this Franchise Agreement,
together with all taxes it would have been required to pay had its
operation been duly authorized.
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SECTION 12.3: ACCEPTANCE OF PAYMENT
The acceptance of any payment required hereunder by the City shall not
be construed as an acknowledgment that the amount paid is the correct
amount due nor shall such acceptance of payment be construed as a
release of any claim which the City may have for further or additional
sums due and payable.
SECTION 12.4: FRANCHISE FEE RATE
The City shall have the right to levy a Franchise Fee of no less than
three percent (3%) and no more than five percent (5%) of Gross Revenues
as defined herein. As of the effective date of this Agreement, the City
and the Grantee recognize that the current base rate of the City's
Franchise Fees shall be three percent (3%) of Gross Revenues, and
further recognize that the City shall have the right to increase
Franchise Fees up to a level of five percent (5%) of Gross Revenues
upon ninety (90) days written notice to the Grantee.
SECTION 13: FRANCHISE FEE AUDITS OR AGREED-UPON PROCEDURES
SECTION 13.1: RIGHT OF FRANCHISING AUTHORITY TO INSPECT AND AUDIT
The Franchising Authority shall have the right to inspect Grantee's
income records, worksheets, notes, journals, ledgers, and other such
appropriate and relevant financial records. The Franchising Authority
shall have the right of audit and to conduct agreed-upon procedures
evaluations, and to require recomputation of any amounts determined to
be payable under this Section and Section 12 hereinabove; provided,
however, that those procedures for conducting such agreed-upon
procedures evaluations or audits as performed by either the Grantee or
the Franchising Authority that are stated in the Ordinance shall be
superseded by those stated in this Agreement.
SECTION 13.2: EXAMINATION OF RECORDS; EXPENSES AND COSTS
A. Grantee shall complete an agreed-upon procedures evaluation
by an independent and certified auditing firm every three (3)
years for the most recent year ended, during the life of this
Franchise beginning three (3) years from the effective date of
this Agreement, starting with the Fiscal year ending in 2000.
Such evaluation report shall be submitted within one hundred
twenty (120) days from the end of the fiscal year. The
Franchising Authority shall have the right to review the
agreed-upon procedures evaluation. If, upon the conclusion of
the Franchising Authority's review of the evaluation, the
Franchising Authority finds that based upon a reasonable
justification that sufficient cause exists for further
analysis of the Grantee's financial records, then the
Franchising Authority may conduct its own agreed-upon
procedures evaluation.
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Grantee shall make available all records upon request
and with notice of the Franchising Authority or its
designee as are reasonably required for the
conducting of an agreed-upon procedures evaluation at
a location which the Franchising Authority has agreed
to. Examination of said records by the Franchising
Authority or its designee shall be conducted during
the Grantee's regular business hours. In the event
that certain necessary records or documents cannot be
made available at the location agreed to by the
Franchising Authority, Franchising Authority may, at
its option, send its designee to the location where
Grantee has stored such records.
B. The cost of said agreed-upon procedures evaluation
and audit (as referenced in Section 11.3 and 12.1 of
the Ordinance) shall be borne by the Grantee if it is
determined that the Grantee's annual payment to the
City for the preceding year is increased by more than
four (4) percent, otherwise such costs shall be borne
by the Franchising Authority at its sole expense. The
aforementioned costs shall include all reasonable and
customary travel expenses incurred by the Franchising
Authority.
SECTION 13.3: PAYMENTS OF AMOUNTS DUE
Any additional amount due as a result of such audit or agreed-upon
procedures shall be paid within thirty (30) days following written
notice to the Grantee by the Franchising Authority which notice shall
include a copy of the audit report or agreed-upon procedures report.
SECTION 14: SECURITY FUND; PERFORMANCE BOND
A. In accordance with the provisions of the Franchise Ordinance, the
Grantee shall, as a security fund for the faithful performance by
the Grantee of all terms and conditions of the Franchise, secure
and provide a Security Fund to the City in the form of a cash
escrow in the amount of five thousand dollars ($5,000.00) and a
performance bond or corporate guaranty in substantially the form
attached hereto in Appendix D, in the amount of forty thousand
dollars ($40,000.00) in favor of the City granting the City
authority to unilaterally draw down from said cash escrow,
performance bond or corporate guaranty. Such cash escrow shall be
used by the City to draw down liquidated damages for violation of
the terms and conditions of the Franchise.
In the event that the City should draw down from the cash
escrow provided, the Grantee shall restore the value of said
cash escrow or corporate guaranty to the total amount provided
in this Agreement within thirty (30) calendar days. In the
event that no withdrawals are required by the City during the
first four (4) years of this Franchise Agreement, the amount
of the security fund shall be reduced to three thousand
dollars ($3,000.00).
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In the event that a withdrawal is required by the City within
the first four (4) years of this Agreement, the amount of said
security fund may be increased to an amount not to exceed
seven thousand dollars ($7,000.00) in the reasonable exercise
of the City's sole discretion upon sixty (60) calendar days
notice to Grantee. Grantee shall not use the security fund for
other purposes and shall not assign, pledge, or encumber said
cash escrow or corporate guaranty for any purpose. The
remaining portions of this Section shall continue to apply.
The Grantee shall maintain, and by its acceptance of this
Franchise agrees that it will maintain throughout the term of
this Franchise, or any renewal, or extension thereof or as
required in the Franchise Ordinance, a faithful performance
bond running to the City, with at least one good and
sufficient surety or other financial guaranty approved by the
Franchising Authority, in the penal sum of forty thousand
dollars ($40,000.00) conditioned upon the faithful performance
of the Grantee and upon the further condition that in the
event the Grantee shall fail to comply with any law,
ordinances, or regulation governing the Franchise, there shall
be recoverable jointly and severally from the principal and
surety of the bond, any damages or loss suffered by the City
as a result, including the full amount of any compensation,
indemnification, or cost of removal or abandonment of any
property of the Grantee, plus a reasonable allowance for
attorney's fees and costs, up to the full amount of the bond.
The bond shall contain the following endorsement:
It is hereby understood and agreed that this bond may not be
canceled nor the intention not to renew be stated until thirty
(30) days after receipt by the City Clerk of the City by
registered United States Mail of two (2) copies of a written
notice of such cancellation or intention not to renew.
Two (2) copies of the performance bond or certified copies
thereof and written evidence of payment of required premium,
shall be filed and maintained with the City Clerk during the
term of the Franchise or any renewal thereof. The City Council
shall consider a request from Grantee to reduce the amount of
the performance bond after complete upgrading, construction,
and installation of the Cable System.
B. The security fund provided pursuant to this Franchise
Agreement shall become the property of the City as liquidated
damages, in the event that this Franchise Agreement is
terminated by reason of default of the Grantee or revoked for
cause. Grantee, however, shall be entitled to return of such
security fund or portion thereof as remains on deposit at the
expiration of the term of the Franchise, or upon termination
of the Franchise at an earlier date, provided that there is
then no outstanding default on the part of Grantee.
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C. The rights reserved to City with respect to the security fund
are in addition to other rights of City, whether reserved by
this Agreement or authorized by law, and no action,
proceeding, or exercise of a right with respect to such
Security Fund shall affect any other right that City may have.
SECTION 15: DAMAGES AND DEFENSE
Grantee shall hold harmless City for all damages and penalties as a
result of Grantee's construction, reconstruction, upgrade, operation,
and maintenance of the Cable System. These damages and penalties shall
include, but not be limited to, damages arising out of copyright
infringement, defamation, and all other damages arising out of the
construction, operation, maintenance, reconstruction, or upgrade of the
Cable System authorized herein, whether or not any act or omission
complained of is authorized, allowed, or prohibited by the Franchise.
SECTION 16: LIABILITY INSURANCE AND INDEMNIFICATION
Grantee shall procure and maintain, throughout the term of this
Franchise, liability workers's compensation, and those types of
insurance referred to in Section 15 of the Franchise Ordinance, from an
insurer licensed to do business in the State of Illinois carrying a
rating of B+ by Best's Insurance Rating Services, and approved by the
City. Said insurance shall insure Grantee and City with regard to all
damages mentioned in Section 15 hereinabove and in Section 15.1
(A)(1-3) of the Franchise Ordinance, in the minimum amounts of:
$ 2,000,000 for bodily injury or death to any one (1) person;
$ 2,000,000 for bodily injury or death resulting from any one
(1) occurrence;
$10,000,000 for umbrella liability coverage.
At the time of acceptance, Grantee shall furnish to Franchising
Authority a certificate naming the City, its officers, agents, and
employees as additional insureds. Such certificate shall require that
the Franchising Authority be notified at least thirty (30) days in
advance prior to any expiration, and thirty (30) days in advance prior
to any cancellation. All premiums on policies required by this
Franchise Agreement shall be at the expense of the Grantee.
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SECTION 17: LIQUIDATED DAMAGES
SECTION 17.1: DAMAGE AMOUNTS
By acceptance of a Franchise granted hereunder, the Grantee understands
and agrees that failure to comply with any time and performance
requirements as stipulated under the Ordinance or this Franchise will
result in damage to the City, and that it may be impracticable to
determine the actual amount of such damage in the event of delay or
nonperformance; therefore, the Grantee agrees that it shall pay to the
City the following amounts which shall be chargeable to the Grantee:
A. For failure to substantially complete Cable System
reconstruction in accordance with the provisions of this
Agreement and the Franchise Ordinance unless the Franchising
Authority approves the delay, or unless such delay was
unavoidable under Section 7.5 of this Agreement, the amount
shall be five hundred dollars ($500.00) per day.
B. For failure to obtain a permit where construction,
reconstruction, or relocation of the Cable System or its
components within the Public Ways of the City is undertaken,
the amount shall be fifty dollars ($50.00) per day.
C. For failure of the Grantee to comply with construction,
operation, or maintenance standards, the amount shall be one
hundred dollars ($100.00) per day.
D. For failure to provide customer services as stated in
Section 10 of this Agreement or Section 19.1 et. seq. of the
Franchise Agreement, the amount shall be one hundred dollars
($100.00) per day.
E. For failure to test, analyze, and report on the performance
of the Cable System following a request by the Franchising
Authority, the amount shall be one hundred dollars ($100.00)
per day.
F. For failure to provide data, documents, reports, or
information, or to cooperate with the Franchising Authority
during a performance review of the Cable System or during a
Franchise Fee audit or agreed-upon procedures evaluation,
the amount shall be one hundred dollars ($100.00) per day.
G. For failure to submit timely reports as required under this
Agreement and the Franchise Ordinance, the amount shall be
fifty dollars ($50.00) per day until such reports are
received by the Franchising Authority.
H. For failure to comply with the material provisions of this
Agreement for which an amount is not otherwise specifically
provided pursuant to this Section, the amount shall be one
hundred dollars ($100.00) per day.
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SECTION 17.2: RIGHT TO REDUCE OR WAIVE DAMAGES
The Franchising Authority retains the right, at its sole discretion, to
reduce or waive any of the above listed damage amounts where
extenuating circumstances or conditions beyond the control of the
Grantee are found to exist.
SECTION 17.3: OTHER REMEDIES
Exclusive of the damages provided hereinabove, a violation of any
material provision of the Franchise Agreement shall be considered a
separate violation for which a separate remedy available contractually,
at law or in equity may be imposed.
SECTION 17.4: PROCEDURE
A. The Franchising Authority shall notify the Grantee in
writing of any alleged violation(s) or failure to meet any
of the terms or provisions of this Franchise Agreement or
the Franchise Ordinance. The Grantee shall be given thirty
(30) days from the date of receipt of such notice to respond
in writing, stating its explanation for the alleged
violation(s) and what actions, if any, have been or are
being taken to cure the alleged violation(s) or lack of
compliance.
1. Where the Grantee has failed to perform any of the
provisions of Section 8 of this Agreement, the
Franchising Authority shall consider such failures to
perform as a material breach of the Franchise and shall
provide the Grantee with notice and opportunity of no
less than thirty (30) days to cure such violations.
However, if Grantee fails to cure such violations after
reasonable notice and opportunity have been provided,
the Grantee may be considered to be in default of the
Franchise, and the Franchising Authority may, at its
option, initiate the procedure authorized in this
Section hereinbelow.
B. Upon receipt of the Grantee's response, the Franchising
Authority may accept the Grantee's explanation and/or remedy
proposed. Alternatively, if the Franchising Authority does
not accept the Grantee's explanation or believes that the
violation(s) will not be properly cured within a reasonable
period of time from the date of the original notice of the
violation(s), the Franchising Authority may send to the
Grantee a notice of its intent to penalize the Grantee.
C. Prior to issuing a notice of intent to penalize the Grantee,
the Franchising Authority shall hold a public hearing
providing due process at which testimony and evidence shall
be taken concerning the alleged violation(s).
Representatives of the Franchising Authority and the Grantee
shall be permitted to address the subject of the alleged
violation(s) and related issues
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at the public hearing. The Grantee may submit evidence to
the Franchising Authority that it is diligently pursuing
reasonable actions to cure the alleged violation(s).
If the Grantee shows that there are circumstances beyond its
control ("Force Majeure") which prevent it from immediately
curing the alleged violation(s), such a showing shall be
considered sufficient to relieve the Grantee from being
penalized for the alleged violation(s) or breach of this
Franchise Agreement or the Franchise Ordinance. The
Franchising Authority may require the Grantee to provide
periodic reports on progress being made to cure any
unresolved problem(s).
D. If, following a public hearing, the Franchising Authority
believes that the Grantee has violated this Franchise
Agreement or the Franchise Ordinance, the Franchising
Authority may issue a notice of intent to penalize the
Grantee.
E. The Grantee shall be given a period of fifteen (15) days
from the date of the issuance of the notice to cure any
alleged violation(s) of this Franchise or the Ordinance. If
the alleged violation(s) is not cured within the specified
fifteen (15) day period, the Franchising Authority may
penalize the Grantee.
Provided, however, that nothing in this Section shall be
construed to limit or restrict the Grantee's right to appeal
the Franchising Authority's actions in state or federal
court.
SECTION 17.5: TIME IS OF THE ESSENCE
Whenever any provision of this Agreement shall set forth any time for
any act to be performed by Grantee, such time shall be deemed to be of
the essence and the Grantee's failure to perform within the time
allotted shall, in all cases, be sufficient grounds for the Franchising
Authority to invoke an appropriate remedy or penalty, including the
possible revocation of the Franchise Agreement.
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SECTION 17.6: FORCE MAJEURE
In the event the Grantee is prevented or delayed in the performance of
any of its obligations under this Franchise Agreement or the Franchise
Ordinance by reasons of flood, fires, hurricanes, tornadoes,
earthquakes or other acts of God, unavoidable casualty, insurrections,
war, riot, sabotage, unavailability of materials or supplies,
vandalism, strikes, boycotts, lockouts, labor disputes, shortages of
labor, acts or omissions or delays by utility companies upon whom
Grantee is dependent for pole attachments or easement use, or any other
event which is beyond the reasonable control of the Grantee, the
Grantee shall have a reasonable time under the circumstance to perform
its obligations under this Agreement or the Franchise Ordinance and to
procure a reasonable and comparable substitute for such obligations.
Under such circumstances, the Grantee shall not be held in default or
noncompliance with the provisions of the Agreement or the Franchise
Ordinance nor shall it suffer any penalty relating thereto. In any
event, in the case of technical violations not posing a safety hazard
-- "Safety Hazard" being defined as one posing a reasonable likelihood
of causing significant bodily injury if not repaired immediately -- the
City shall grant the Grantee sufficient time to complete any required
repairs and shall not assess penalties or liquidated damages against
the Grantee so long as the Grantee makes a showing to the City that it
is working promptly, diligently, and in good faith to correct the
problem, and that the Grantee has given the City notice that it is
making a diligent effort to correct the problem.
SECTION 18: PROGRAMMING SERVICES
SECTION 18.1: REQUIRED CABLE TELEVISION PROGRAM SERVICES
A. Grantee shall provide the following cable services:
1. Over-the-Air Broadcast stations, including at least two or
more commercial, broadcast television stations which provide
Salem with news, sports, weather, and related information
specific to the Southern Illinois area, including stations
serving Salem on the effective date of this Franchise. Such
stations shall include Channels from the St. Louis, Missouri
Area of Dominant Influence (ADI) as designated by the FCC,
and may include those serving the Carbondale,
Champaign-Urbana, Charleston-Mattoon, Effingham, Harrisburg,
and Mount Vernon, Illinois ADI and the Paducah, Kentucky
Areas of Dominant Influence (ADI).
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a. Where a broadcaster providing Over-the-Air broadcast
service to the Grantee has not reached an agreement
with the Grantee for carriage of the broadcaster's
signal by the deadline established by the FCC for
consent to transmit said broadcaster's signal
("Retransmission Consent"), the Grantee shall not be
obligated pursuant to this Franchise to carry said
broadcaster's signal until such agreement has been
reached.
2. All Public, Educational, and Governmental Access Channels as
required under Section 19 of this Agreement.
3. The spectrum of categories of broadcast, satellite, and
other cable programming services comparable in quality, mix,
and level to those set forth in Section 18.1 (A-N) of the
Franchise Ordinance and incorporated herein by reference.
Notwithstanding the foregoing, the Franchising Authority
shall not require the Grantee to agree to any specific
programming service or network in order to satisfy this
Section's requirement.
4. A Local Origination Channel which provides Cable System
Subscribers within the Franchise Area information concerning
Salem, Marion County, and south-central Illinois, and such
requirements as stated in Section 18.3 of the Franchise
Ordinance. Such programming may include character-generated
messaging and tapes of local interest programming provided
to the Grantee by Persons or institutions located within
Salem. In the event that no taped programming is provided to
the Grantee from the community during a calendar year, the
Grantee shall not be penalized for failing to meet the
requirements of this Section.
B. Notwithstanding the commitment as stated in Subsection
A hereinabove, Grantee shall make its best effort to
provide all Channels from the St. Louis, Missouri ADI
as they exist as of the Effective Date of this Agreement.
SECTION 18.2: FM PROGRAMMING
Beginning in January, 1999, the Grantee shall survey its Subscribers to
determine the need for a music service carrying FM radio signals in an
analog or digital format. The Grantee may provide such music service if
a market is present for receiving the music service.
39
<PAGE>
SECTION 18.3: MODIFICATIONS
To the extent that Section 5.2 of the Cable Communications Ordinance is in
accordance with Section 625 of the Cable Act, during the period in which
this Agreement is in effect, the Grantee or the Franchising Authority may
obtain Modifications of the requirements in the Franchise Agreement in the
following manner and in accordance with Section 625 of the Cable
Communications Policy Act of 1984, as now or hereafter amended:
A. Where the Grantee has requested that Modifications made to the
Franchise be made on the basis of commercial impracticability,
Grantee shall adhere to the requirements set forth in Section 5.2
of the Franchise Ordinance regarding commercial impracticability.
B. In the case of any requirement for services, if the Grantee
demonstrates that the mix, quality, and level of services
required by this Franchise Agreement at the time it was granted
will be maintained after Modification.
C. Upon receipt of a request by the Grantee for Modification of any
requirement for facilities, equipment, or services, the
Franchising Authority shall consider the request and grant or
deny the request in a public proceeding within one hundred twenty
(120) days of receipt of the request of Modification.
D. Notwithstanding the aforementioned sections herein above, Grantee
may, upon thirty (30) days advance notice to the Franchising
Authority, rearrange, replace, or remove a particular service
required by this Agreement if: 1) the service is no longer
available to the Grantee, or 2) the service is available only
upon payment of a royalty required under 17 CFR 801(b)(2). The
Grantee must be able to document and support the contention that
the amount of the royalty constitutes an amount substantially in
excess of the amount of payment required on the date of execution
of this Franchise Agreement and the Grantee has not been
specifically compensated through a rate increase or other
adjustment.
E. The City may prohibit award of any proposed Modification to this
Agreement pertaining to provision of services relating to Public,
Educational, or Governmental Access.
40
<PAGE>
SECTION 19: PUBLIC, EDUCATIONAL, GOVERNMENTAL (PEG) PROGRAMMING
SECTION 19.1: ALLOCATION OF CHANNEL SPACE
Within three (3) years from the effective date of this Agreement,
Grantee shall dedicate an amount of bandwidth which is the equivalent
of three NTSC six megahertz (6 Mhz) Channels for the allocation of
Public, Educational, and Governmental Access System programming as
specified herein.
SECTION 19.2: USE OF PEG FACILITIES
At such time during the life of this Franchise when the City of Salem
is ready to utilize facilities to develop PEG access programming, and
has notified the Grantee of its intent to begin to utilize Channel
space and facilities to develop PEG access programming, use of
facilities for Public, Educational, and Governmental Access System upon
the Cable System shall be made available as provided herein under the
conditions and in the manner provided by rules required hereinbelow, in
connection with the production of that Public, Educational, and
Governmental Access programming cablecast upon the system. The Grantee
shall establish reasonable rules and procedures that are designed to
promote the utilization of such Public, Educational, and Governmental
Access programming upon the system and subject to the approval of the
Franchising Authority, which approval shall not be unreasonably
withheld, whereby the Grantee shall accept and cablecast such Public,
Educational, and Governmental Access programming upon the system as
shall be provided to the Grantee by all Persons and entities. The
Grantee shall allow all Persons and entities desiring to cablecast
Public, Educational, or Governmental broadcasting to produce such
programming upon and electronically interface directly with the Cable
System of the Grantee so as to effectively cablecast the Public,
Educational, or Governmental Access programming. In determining the
decision to cablecast said programming deriving from Public,
Educational, or Governmental Access System, Grantee shall comply with
all applicable laws and regulations established by the FCC concerning
programming content. Grantee shall assist Public, Educational, and
Governmental Access users with identification of programming resources
which may benefit said users or their respective audiences.
SECTION 19.3: PUBLIC ACCESS SYSTEM CHANNEL DESIGNATION
A. The Public Access System Channel shall be made available to the
residents, organizations, and institutions of Salem. The
facilities and equipment serving this Channel shall be made
available to access users on a first-come, first-served basis, or
where necessary, by a scheduled time for use on a reservation
basis. No user shall encounter discrimination with respect to the
scheduling or use of Public Access facilities or equipment.
41
<PAGE>
B. The Grantee may establish rules and regulations governing the use
of any studio, equipment, staff, or related resources. The
Grantee may require the placement of a reasonable cash or credit
deposit as a condition for the use of any studio equipment, or in
lieu of said deposit, Grantee may require that users of access
studio equipment present evidence of liability insurance covering
the access user in the event of damage to said studio equipment.
Grantee may also charge a reasonable fee for the reproduction of
programming produced and completed by access users. Grantee may
charge a reasonable fee for videotape necessary for the
production or reproduction of access programming.
SECTION 19.4: EDUCATIONAL ACCESS SYSTEM CHANNEL DESIGNATION
The Educational Access System Channel shall be made available to
educational institutions serving the City of Salem at no charge to such
institutions. The Grantee may, in conjunction with local educational
institutions, develop rules and regulations for the use of the
Educational Access System Channel. Upon the request of an educational
institution user of the Channel, Grantee shall provide educational
programming available through cable operators or their consortiums, and
assist said institutions with implementing curricula associated with
such programming. Where charges or fees are required for such
programming, the user shall be responsible for the payment of such
charges or fees.
SECTION 19.5: GOVERNMENTAL ACCESS SYSTEM CHANNEL DESIGNATION
A. The Governmental Access System Channel shall be reserved for
the use of the City of Salem, Marion County, such Townships
whose boundaries include any portion of the City of Salem,
and any other unit of local government which provides
services to all or any portion of the City of Salem.
B. The Governmental Access System Channel shall be available to
the City of Salem on a priority basis, then to other
governmental users on a first-come, first-served basis,
twenty-four hours a day. Grantee shall not levy a charge for
the use of the Governmental Access Channel. Grantee shall
provide to the City such devices necessary for text
insertion and modulation equipment.
SECTION 19.6: CHANNEL AVAILABILITY TIMETABLE
The Grantee shall observe the following timetable for implementing
access Channels:
A. Within six (6) months of the time of notification from the
Grantee to the Grantor that the Grantor is ready to utilize
Channel space and facilities to develop PEG access
programming within the Franchise Area, Grantee shall
commence operation of the Governmental Access System
Channel.
42
<PAGE>
B. Within nine (9) months of the time of notification from the
Grantee to the Grantor that the Grantor is ready to utilize
Channel space and facilities to develop PEG access
programming within the Franchise Area, Grantee shall
commence operation of a Channel which combines Public Access
and Educational Access programming.
C. One (1) year from the date of activation of service of the
combined Public and Educational Access System programming
Channel, the Franchising Authority and the Grantee shall
determine, based on usage of the combined Channel, the need
to implement a separate Public Access Channel. The
determination that a need for an additional (or second)
Channel shall be conditioned upon the following formula:
Anytime the first Channel is in continuous use with the
cablecasting of locally produced programming during at least
sixty percent (60%) of forty-five (45) hours per week during
any consecutive ten (10) week period, need will be
determined to exist. Provided, however, that printed or
character messages and repeat showings of programming shall
be excluded for purposes of determining the number of hours
utilized. If the usage ratio of the additionally designated
Channel should at any time fall below thirty percent (30%)
for ten (10) weeks based on the same formula, usage of that
Channel shall revert back to the Grantee.
If Grantee and the Franchising Authority find that such need
exists, Grantee shall commence operation of a separate
Public Access System Channel within two (2) months from the
date of such determination. In the event that determination
of need is not found to exist, Grantee and the Franchising
Authority shall meet every eighteen (18) months to determine
the need for a separate Channel, or upon the request of
either Public Access users or educational institutions.
D. Upon evidence provided by the Franchising Authority to the
Grantee that need for additional Channel space for Public,
Educational, or Governmental Access System programming
exists based upon the formula in Subsection C, Grantee and
the Franchising Authority shall discuss the terms and
conditions for provision of such amount of Channel space as
will be necessary to meet demonstrated community needs.
Provided that no more than four (4) Channels are dedicated
for PEG Access purposes at any one time.
43
<PAGE>
SECTION 19.7: PLAYBACK FACILITIES
Grantee shall provide facilities and related television equipment for
playback of live and taped access programming, including automated
playback.
SECTION 19.8: ACCESS PROGRAMMING TRAINING
Grantee shall have the option of providing to the City in lieu of the
requirements for training to users of the access Channels of a studio,
its equipment and facilities, a sum of monies to be paid to the City
for the City's costs in providing said training and for developing
appropriate rules and regulations governing the training of access
users.
SECTION 19.9: ACCESS FACILITIES AND SERVICES IN LIEU OF REQUIREMENTS
HEREIN
Grantee shall have the option of providing to the City, or to the
School District based upon the sole discretion of the City, in lieu of
the requirements for provision of studio facilities, equipment, or
other related services required under this Agreement, with the
exception of Channel space, a sum of monies equivalent to the cost of
studio facilities, equipment, training, maintenance, or other related
services in the amount of up to One Hundred Thousand Dollars
($100,000.00) for the provision of Public, Educational, and
Governmental Access programming. Said funding shall be provided to the
City within three (3) months from the time of notification from the
Grantee to the Grantor that the Grantor is ready to utilize Channel
space and facilities to develop PEG access programming within the
Franchise Area. The City, at its sole discretion, may request a portion
of the aforementioned amount of funds based upon its initial needs and
determination of costs for the provision of PEG access programming, and
may, at a later date, request all or part of the remaining amount of
funds available in order to pay for additional PEG programming
equipment, training, maintenance, or services related directly to PEG
access usage.
SECTION 19.10: LEASED ACCESS CHANNEL SPACE
Grantee shall, upon request by a Channel lessee, make available Channel
space for leased access programming. The Grantee shall establish
operating rules for Leased Access Channel space which shall be filed
with the Franchising Authority prior to activation. With respect to the
content of Leased Access Channel programming, Grantee shall adhere to
all applicable FCC regulations. Grantee shall set forth a rate
schedule, and shall file said schedule with the Franchising Authority
on an annual basis. Grantee shall promulgate rules permitting public
inspection of records of Persons requesting access time. Such records
shall be retained on file by the Grantee for a period of three (3)
years.
44
<PAGE>
SECTION 20: SERVICES TO SCHOOLS AND GOVERNMENT BUILDINGS
In accordance with the provisions of Section 20.1 (A-C) of the
Franchise Ordinance, The Grantee shall provide, at no charge,
Subscriber cable connections to all Schools and government buildings as
identified in Appendix E. The Grantee shall provide at least one Cable
System outlet to City Hall and the other government buildings
identified in Appendix E. Grantee shall provide all Cable System
connections free of charge, however, Grantee may charge the City for
the labor and materials cost of any non-standard Installation as
defined in this Agreement to any City building. Services to be provided
at no charge to the aforementioned Schools and government buildings
shall include Basic Service as defined in Section 1.0 of this
Agreement, and all satellite programming tiers provided by the Grantee.
In addition, Grantee shall provide Cable In The Classroom programming
services to all Schools covered by the provisions of this Section.
Where a governmental facility has requested premium cable services,
including, but not limited to, Channels such as Home Box Office,
Showtime, Cinemax, The Movie Channel, and Encore and any multiplexed
Channels derived from such programming networks, such services shall be
at the expense of the governmental entity and provided where allowable
by law.
SECTION 21: EMERGENCY OVERRIDE
A. Grantee shall maintain appropriate equipment at its Headend facility
which is designed to override the audio portion of each video cable
Channel and substitute an audio emergency message which may be used by
the Mayor or City Manager of Salem or an authorized designee. Said
override equipment shall be used by the Mayor or City Manager or his
designee to broadcast alerts of civil emergency in the event of fire,
flood, tornadoes, or other similar severe weather, or civil defense.
Grantee shall configure the emergency override equipment to accept
remote activation by touch-tone telephone. Said configuration shall
include backup by a standby power facility. Where necessary, Grantee
and City agree to work jointly in incorporating the emergency alert
notification into the City's disaster plan.
B. Upon requirement by the FCC to participate in the Emergency Alert
System (EAS), Grantee shall provide notification to the City within
thirty (30) calendar days of receipt of such notification from the
FCC, and shall provide its procedures for emergency broadcast to the
City.
45
<PAGE>
SECTION 22: PERIODIC FRANCHISE REVISITATIONS AND EVALUATIONS
A. PERIODIC REVISITATIONS. Grantee and Franchising Authority shall,
during the years of the third and fifth anniversaries of the Franchise
Agreement, meet to revisit certain and limited elements of the
Franchise Agreement and discuss potential changes to the Franchise
which are necessitated due to technological or marketing changes in
the field of cable telecommunications and the changing needs and
interests of the community, or to bring the Franchise into compliance
with state and/or federal law. At such meeting, Franchising Authority
and the Grantee may discuss those issues related to the technologies
and system upgrades affecting the operation of the Cable System, and
services not addressed in this Agreement which may, as a result of new
technology or marketing, be made available to the community. Based on
the outcomes of said meeting(s) and discussion(s), the parties may
request to amend the Franchise Agreement to incorporate proposed
changes which have been agreed upon by the Franchising Authority and
the Grantee. Franchising Authority and Grantee may, at their
discretion, jointly agree to meet at more frequent intervals than
those indicated hereinabove if so warranted. Franchising Authority
shall provide Grantee with reasonable written notice of such meetings
as referred to hereinabove for the purpose of discussing proposed
changes to the Franchise Agreement.
B. EVALUATIONS. The Franchising Authority shall conduct an evaluation of
Grantee's performance within ninety (90) days of the third and fifth
anniversaries of the effective date of this Agreement, in accordance
with the provisions of Section 6.1 through 6.5 of the Franchise
Ordinance, and no later than one (1) year prior to the expiration of
this Franchise in accordance with Section 3.2 of this Agreement. Where
costs have been incurred by the Franchising Authority in conducting
the evaluation, the Grantee shall be responsible for no more than
one-half of the costs of only the Cable System testing portion of the
evaluation if it is found that the Grantee has found that the Grantee
did not follow proper testing procedures as prescribed by the FCC or
the cable industry, or indicated that faults uncovered by repeated
tests and assessments were caused by the Grantee. Where the evaluation
has found the Grantee to be in compliance with the Franchise, and that
Grantee's performance is in accord with the terms and conditions of
the Franchise, including the ability of the Cable System to perform
within FCC Technical Standards and the standards established by the
National Electrical Code and National Electrical Safety Code, then the
Grantee shall not be responsible for any portion of the costs of the
evaluation. This Subsection shall supersede Section 6.6 of the
Franchise Ordinance.
46
<PAGE>
SECTION 23: MODIFICATIONS TO COMMUNICATIONS AND CABLE ACTS
In the event that the Communications Act of 1934, the Cable
Communications Policy Act of 1984, or the Cable Television Consumer
Protection and Competition Act of 1992 or the Telecommunications Act of
1996 are modified or amended in any manner that is mandatory, or the
FCC modifies or alters any of its regulations pertaining to cable
television which may affect any provision(s) of this Franchise
Agreement, such provisions shall remain in effect until the effective
date of such modifications, amendments, or alterations. The Franchising
Authority and Grantee, upon notice that said modifications, amendments,
or alterations may affect any provision(s) of this Agreement and prior
to the effective date of said modifications, amendments, or
alterations, or as soon thereafter as practical, shall meet in good
faith to amend this Franchise Agreement accordingly.
SECTION 24: REVOCATION
In addition to all other rights and powers retained by the Franchising
Authority under this Franchise Agreement, the Franchising Authority
reserves the right to revoke this Franchise Agreement and all rights
and privileges of the Grantee in the event of a Material Breach of its
terms and conditions. In interpreting the Franchise Agreement, material
provisions shall include all labeled as such and all others, which
under the facts and circumstances indicated, constitute a significant
portion of this Franchise Agreement. A Material Breach by Grantee shall
include, but is not limited to, those infractions contained in Section
9.1 (A)-(G) of the Franchise Ordinance and those three uncured
infractions of the provisions contained in Section 9.1 (H) of the
Franchise Ordinance.
SECTION 25: RIGHTS AND REMEDIES
A. All rights and remedies given to City and Grantee by this Agreement
shall be in addition to and cumulative with any and all other rights
and remedies, existing or implied, now or hereafter available to City
or Grantee, at law or in equity, and such rights and remedies shall
not be exclusive, but each and every right and remedy specifically
given by this Franchise Agreement may be exercised from time to time
and as often and in such order as may be deemed expedient by City or
Grantee and the exercise of one or more rights or remedies shall not
be deemed a waiver of right to exercise at the same time or thereafter
any other right or remedy. No delay or omission of City or Grantee to
exercise any right or remedy, nor any such delay or omission shall be
construed to be a waiver of or acquiescence of any default.
B. In the event that the Grantee contemplates the transfer, assignment,
or delegation of its Cable System to a potential buyer, the City shall
have the right to request information from the Grantee of such
potential transfer, assignment, or delegation of the Cable System.
Upon receipt of such request, the Grantee shall be required to respond
in writing within twenty-one (21) calendar days.
47
<PAGE>
SECTION 26: RIGHTS AND POWERS RESERVED BY CITY
A. Neither the granting of the Franchise nor any provision
governing the Franchise shall constitute a waiver or bar to
the exercise of any governmental right or power of the City.
B. The City shall have the right to intervene in any act or other
proceeding to which the Grantee is a party, in accordance with
applicable law or regulation. The Grantee specifically agrees
by its acceptance of the Franchise not to oppose such
intervention by the City.
C. The City reserves every right and power which is required to
be reserved or provided by an ordinance of the City, and the
Grantee by its acceptance of this Franchise, agrees to be
bound thereby and to comply with any action or requirements of
the City in its exercise of such rights and powers which have
been or may be enacted or established.
SECTION 27: SERVICE OF NOTICE
A. For purposes of this Franchise Agreement, Grantee authorizes
and appoints Enstar Growth Program Six-A, L.P. d/b/a Falcon
Cable TV, with offices located at 11 Clearing Avenue,
Taylorville, Illinois 62568 to act as its registered agent and
represents to the Franchising Authority that such agent is
authorized to accept notice and service on its behalf.
B. Grantee shall notify the Franchising Authority in writing,
thirty (30) days in advance, of any change in the registered
agent or representative(s) referenced hereinabove and provide
information regarding any change upon request by the
Franchising Authority.
C. Any notice or service served upon Grantee's registered agent
shall also be provided to the Local and Regional Managers and
Operations/Legal representatives as specified below. All
notices or other written communications required to be
provided to Franchising Authority or Grantee under any
provision of this Agreement, shall be deemed to be received by
the recipient thereof only when said notices or other written
communications are actually received in the office of the
recipient at the following addresses:
Franchising Authority: Office of the City Clerk
City of Salem
101 South Broadway
Salem, Illinois 62886
48
<PAGE>
Grantee: Enstar Income Growth Program
Six-A, L.P.
d/b/a
Falcon Cable TV
Regional Manager
11 Clearing Avenue
Taylorville, Illinois 62568
Grantee: Falcon Cable TV
Division Office
Division Vice-President
1015-A Washington Square
Washington, Missouri 63090
SECTION 28: ORAL MODIFICATION
This Franchise Agreement shall not be changed, modified, or amended in
whole or in part except in writing and signed by all of the parties.
SECTION 29: SEVERABILITY
If any provision of this Franchise Agreement or the particular
application thereof, shall be held invalid, the remaining provisions
and their application, shall not be affected.
SECTION 30: ENTIRE CONTRACT
This Franchise Agreement constitutes the entire contract between the
parties and there are no other understandings, oral and written
relating to the subject hereof.
SECTION 31: OBLIGATIONS TO CONTINUE THROUGHOUT TERM
Unless otherwise specifically stated, all obligations under this
Franchise Agreement shall continue throughout the entire term or
extension of this Franchise Agreement.
SECTION 32: HEADINGS
Section headings used in this Agreement are for convenience of
reference only and shall not affect the construction of this Franchise
Agreement.
49
<PAGE>
SECTION 33: GOVERNING LAW
This Franchise Agreement shall be governed insofar as applicable with
the laws of the State of Illinois. Where federal jurisdiction applies,
this Franchise Agreement shall be governed by the applicable laws and
agencies of the United States Government.
Accepted By:
Enstar Income Growth Program Six-A, L.P.
d/b/a Falcon Cable TV
a California corporation
by: Enstar Income Growth Program Six-A, L.P. City of Salem, Illinois
subject to applicable federal,
state, and local law
BY: /s/ Howard Gan BY: /s/ Leonard E. Ferguson
------------------------------ --------------------------
TITLE: V.P. TITLE: Mayor
-------------------------- ------------------------
ATTEST: /s/ Laura Dainko ATTEST: /s/ Jane Marshall
-------------------------- -----------------------
City Clerk
50
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1998, AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 558,100
<SECURITIES> 0
<RECEIVABLES> 42,900
<ALLOWANCES> 7,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,395,700
<DEPRECIATION> 5,269,600
<TOTAL-ASSETS> 4,775,100
<CURRENT-LIABILITIES> 744,900
<BONDS> 1,750,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,775,100
<SALES> 0
<TOTAL-REVENUES> 2,736,400
<CGS> 0
<TOTAL-COSTS> 2,203,000
<OTHER-EXPENSES> (25,700)
<LOSS-PROVISION> 26,100
<INTEREST-EXPENSE> 170,500
<INCOME-PRETAX> 388,600
<INCOME-TAX> 0
<INCOME-CONTINUING> 388,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 388,600
<EPS-PRIMARY> 4.82
<EPS-DILUTED> 0
</TABLE>
