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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
JONES GROWTH PARTNERS L.P.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Limited
Partnership Interests
(2) Aggregate number of securities to which transaction applies: 85,740
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Pursuant to
Rule 0-11(c)(2), the transaction valuation is based upon the
$103,000,000 sales price that is to be paid to Jones Growth Partners
L.P. in connection with the transaction that is the subject of the proxy
solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$103,000,000
(5) Total fee paid: $20,600
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS OF JONES GROWTH PARTNERS L.P.
To the Limited Partners of Jones Growth Partners L.P.:
A special vote of the limited partners of Jones Growth Partners L.P. (the
"Partnership") is being conducted through the mails on behalf of the
Partnership by Jones Spacelink Cable Corporation, the managing general partner
of the Partnership, for the purpose of obtaining limited partner approval of
the sale, to TCI Communications, Inc. or one of its affiliates, of the cable
television system serving the municipalities of Addison, Glen Ellyn, St.
Charles, Warrenville, West Chicago, Wheaton, Winfield and Geneva, and certain
portions of unincorporated areas of Du Page and Kane counties, all in the
State of Illinois (the "Wheaton System"), owned by the Partnership for
$103,000,000 in cash, subject to customary working capital closing adjustments
that may have the effect of increasing or decreasing the sales price by a non-
material amount. Information relating to this matter is set forth in the
accompanying Proxy Statement.
If the limited partners approve the proposed sale of the Wheaton System and
if the transaction is closed, the Partnership will repay all of its third
party indebtedness, which totaled $36,243,870 at June 30, 1998, repay advances
from the Managing General Partner, which totaled $2,083,098 at June 30, 1998,
settle working capital adjustments and deposit $3,118,500 into an indemnity
escrow account, and then the Partnership will distribute the remaining
$61,500,000 to its limited partners of record as of the closing date of the
sale of the Wheaton System. Because the distribution to be made to the limited
partners on the sale of the Wheaton System will not exceed 100 percent of the
amounts originally contributed to the Partnership by the limited partners plus
an amount equal to eight percent per annum, cumulative and noncompounded, on
an amount equal to their initial capital contributions, the general partners
will not receive general partner distributions on the sale of the Wheaton
System. The $61,500,000 distribution to the limited partners will give the
Partnership's limited partners an approximate return of $717 for each $1,000
limited partnership interest. Distribution checks will be issued to limited
partners' account registration or payment instruction of record.
There have been no prior distributions to the limited partners and it is
anticipated that there will be no further distributions to the limited
partners other than from any amounts remaining after November 15, 1999 in the
indemnity escrow account. Once the Partnership has completed the distribution
of the net proceeds from the sale of the Wheaton System, the limited partners
of the Partnership will have received a total of only $717 for each $1,000
limited partnership interest (excluding escrowed proceeds). After the closing
of the sale of the Wheaton System and the distribution of the net sale
proceeds therefrom, including the amounts, if any, remaining after November
15, 1999 in an indemnity escrow account, the Partnership will be liquidated
and dissolved, most likely in the fourth quarter of 1999.
Only limited partners of record at the close of business on October 15, 1998
are entitled to notice of, and to participate in, this vote of limited
partners. It is very important that all limited partners participate in the
voting. The Partnership's ability to complete the transaction discussed in the
Proxy Statement and the Partnership's ability to make a distribution to its
limited partners of the net proceeds of the sale of the Wheaton System are
dependent upon the approval of the transaction by the holders of a majority of
the Partnership's limited partnership interests.
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The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement") requires that the proposal to sell the
Wheaton System be approved by the holders of a majority of the limited
partnership interests, abstentions and non-votes will be treated as votes
against the proposal. A properly executed consent returned to the managing
general partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Wheaton System. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Wheaton System, if the holders of a majority of the
limited partnership interests approve the proposal, all limited partners will
receive a distribution of the net sale proceeds in accordance with the
procedures prescribed by the Partnership Agreement regardless of how or
whether they vote on the proposal.
Jones Spacelink Cable Corporation, as managing general partner of the
Partnership, urges you to sign and return the enclosed proxy as promptly as
possible. The proxy should be returned in the enclosed envelope.
JONES SPACELINK CABLE CORPORATION
Managing General Partner
/s/ Elizabeth M. Steele
Elizabeth M. Steele
Secretary
Dated: October 30, 1998
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[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS
OF JONES GROWTH PARTNERS L.P.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Jones Growth Partners L.P.
(the "Partnership") by Jones Spacelink Cable Corporation, the managing general
partner of the Partnership (the "Managing General Partner"), on behalf of the
Partnership, for the purpose of obtaining limited partner approval of the sale
of the cable television system serving the municipalities of Addison, Glen
Ellyn, St. Charles, Warrenville, West Chicago, Wheaton, Winfield and Geneva,
and certain portions of unincorporated areas of Du Page and Kane counties, all
in the State of Illinois (the "Wheaton System") owned by the Partnership for
$103,000,000 in cash, subject to normal working capital closing adjustments,
to TCI Communications, Inc. or one of its affiliates ("TCI"). The
Partnership's associate general partner is Growth Partners, Inc., an affiliate
of Lehman Brothers Inc. (the "Associate General Partner"), and the Managing
General Partner and the Associate General Partner are referred to in this
Proxy Statement collectively as the "General Partners." TCI is not an
affiliate of the Partnership or of either of the General Partners.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Limited partners are urged
to sign and return the enclosed proxy as promptly as possible. Proxies cannot
be revoked except by delivery of a proxy dated as of a later date. Officers
and other employees of the Managing General Partner may solicit proxies by
mail, by fax, by telephone or by personal interview. The deadline for the
receipt of proxy votes is December 15, 1998, unless extended, but the vote of
the Partnership's limited partners will be deemed to be concluded on the date,
at least 20 business days from the date the proxy materials are sent to
limited partners, that the Managing General Partner, on behalf of the
Partnership, is in receipt of proxies executed by the holders of a majority of
the limited partnership interests either consenting to or disapproving of the
proposed transaction. The Managing General Partner may extend the deadline for
receipt of proxy votes if a majority of the limited partners fail to express
an opinion on the transaction by December 15, 1998. If the Managing General
Partner extends the deadline for receipt of proxy votes, the limited partners
will be informed by mail of the reason for the extension and the new deadline.
The cost of the proxy solicitation will be paid by the Partnership.
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest for
each $1,000 of capital contributed to the Partnership.
As of October 15, 1998, the Partnership had 85,740 limited partnership
interests outstanding, held by 8,119 persons. There is no established trading
market for such interests. To the best of the Managing General Partner's
knowledge, no person or group of persons beneficially own more than five
percent of the limited partnership interests. During the past several years,
Smithtown Bay, LLC and Madison Partnership Liquidity
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Investors 30, LLC, two firms unaffiliated with the Partnership, the General
Partners and each other, have conducted tender offers for interests in the
Partnership. As of October 15, 1998, Smithtown Bay, LLC and its affiliates
owned 3,271 limited partnership interests, or 3.8 percent of the limited
partnership interests. As of such date, Madison Partnership Liquidity
Investors 30, LLC and its affiliates owned 4,051 limited partnership
interests, or 4.7 percent of the limited partnership interests. Pursuant to
the terms of agreements between the Partnership and the Managing General
Partner and such firms, all of the limited partnership interests held by these
firms will be voted in the same manner as the majority of all limited partners
who vote on the sale of the Wheaton System. Thus, for example, if the limited
partnership interests voted in favor of the transaction constitute a majority
of all limited partnership interests voted but not a majority of all limited
partnership interests, these firms will be required to vote their limited
partnership interests in favor of the transaction, and in such event the votes
of these firms could be sufficient to cause the transaction to be approved by
a majority of all limited partnership interests, which is the vote necessary
to cause the transaction to be approved. The Managing General Partner owns 850
limited partnership interests. The Associate General Partner owns no limited
partnership interests. The limited partnership interests owned by the Managing
General Partner will be voted in favor of the sale of the Wheaton System to
TCI. The officers and directors of the General Partners do not own any limited
partnership interests. Only limited partners of record at the close of
business on October 15, 1998 will be entitled to notice of, and to participate
in, the vote.
Upon the consummation of the proposed sale of the Wheaton System, the
Partnership will repay all of its third party indebtedness, which totaled
$36,243,870 at June 30, 1998, repay advances from the Managing General
Partner, which totaled $2,083,098 at June 30, 1998, settle working capital
adjustments and deposit $3,118,500 into an indemnity escrow account, and then
the Partnership will distribute the remaining $61,500,000 to its limited
partners of record as of the closing date of the sale of the Wheaton System.
Because the distribution to be made to the limited partners on the sale of the
Wheaton System will not exceed 100 percent of the amounts originally
contributed to the Partnership by the limited partners plus an amount equal to
eight percent per annum, cumulative and noncompounded, on an amount equal to
their initial capital contributions, the General Partners will not receive
general partner distributions on the sale of the Wheaton System. As a result
of the Wheaton System's sale, the limited partners of the Partnership will
receive a $61,500,000 distribution, or $717 for each $1,000 limited
partnership interest. Distribution checks will be issued to limited partners'
account registration or payment instruction of record.
There have been no prior distributions and it is anticipated that there will
be no further distributions to the limited partners other than from any
amounts remaining after November 15, 1999 in the indemnity escrow account.
Once the Partnership has completed the distribution of the net proceeds from
the sale of the Wheaton System, the limited partners of the Partnership will
have received a total of only $717 for each $1,000 limited partnership
interest (excluding escrowed proceeds). Limited partners should note that
there are certain federal income tax consequences of the proposed transaction.
See "Federal Income Tax Consequences."
The Partnership's only asset is the Wheaton System. After the sale of the
Wheaton System and after the termination of the indemnity escrow period on
November 15, 1999, the Partnership will be liquidated and dissolved. The
Partnership will cease to be a public entity subject to the informational
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), when the Partnership is liquidated and dissolved, most likely
before the end of 1999.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement") requires that the proposal to sell the
Wheaton System be approved by the holders of a majority of the limited
partnership interests, abstentions and non-votes will be treated as votes
against the proposal. A properly executed consent returned to the Managing
General Partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Wheaton System. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Wheaton System, if the holders of a majority of the
limited partnership interests approve the proposal, all limited partners will
receive a distribution of the net sale proceeds in accordance with the
procedures prescribed by the Partnership Agreement regardless of how or
whether they vote on the proposal.
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The Board of Directors of Jones Intercable, Inc., the parent of the Managing
General Partner ("Intercable"), approved the proposed sale of the Wheaton
System and the Associate General Partner has given its consent to the proposed
sale of the Wheaton System. The General Partners therefore recommend approval
of the transaction by the holders of the Partnership's limited partnership
interests.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is October 30, 1998.
PARTNERSHIP INFORMATION
THE PARTNERSHIP'S INVESTMENT OBJECTIVES
The Partnership was formed to acquire, develop, operate and, ultimately,
sell cable television systems. The primary objectives of the Partnership have
been to obtain capital appreciation in the value of the Partnership's cable
television properties; to obtain equity build-up through debt reduction; and
to generate tax losses that could be utilized to offset passive income. It was
contemplated from the outset of the Partnership's existence that capital
appreciation in Partnership cable television properties would be converted to
cash by a sale of such properties at such time as the General Partners
determined that the Partnership's investment objectives had substantially been
achieved and after a holding period of five to seven years.
The Partnership was formed in June 1989 as a Colorado limited partnership in
connection with a public offering of its limited partnership interests. Sales
of limited partnership interests in the Partnership commenced in May 1989 and
closed in February 1990. The Partnership raised gross offering proceeds of
$85,740,000. The Partnership invested all of its net offering proceeds in the
Wheaton System. The Partnership acquired the Wheaton System on October 4,
1989.
Based upon the track record of prior public partnerships sponsored by the
Managing General Partner and its affiliates that had liquidated or were in the
process of liquidating their assets during the period that limited partnership
interests in the Partnership were being sold, and based upon disclosures made
to prospective investors about the Partnership's investment objectives in the
Jones Growth Partners L.P. Prospectus and in the accompanying sales brochure,
investors in the Partnership reasonably could have anticipated that the
Partnership's investment objectives would be achieved and its assets
liquidated after a holding period of approximately five to seven years. Due to
the uncertain and then adverse regulatory environment that developed in the
mid 1990s for the cable television industry, the resulting decline in the
prices for cable television systems and the subsequent inactivity in the cable
television system marketplace, the Managing General Partner determined that it
would be prudent to delay the sale of the Wheaton System until market
conditions improved and, as a result, the Wheaton System has been held by the
Partnership for nine years.
The purpose of the sale of the Wheaton System, from the Partnership's
perspective, is to convert the Partnership's illiquid investment in the
Wheaton System to cash. The sale proceeds will be used to repay all
outstanding indebtedness of the Partnership, pay certain fees and expenses of
the transaction, settle working capital adjustments and deposit funds into an
indemnity escrow account, and then the remaining sale proceeds will be
distributed to the limited partners of the Partnership of record as of the
closing date of the sale of the Wheaton System in accordance with the
distribution procedures established by the Partnership Agreement. The sale of
the Wheaton System is thus the necessary final step in the Partnership's
accomplishment of its investment objectives with respect to the Wheaton
System.
All distributions of the Partnership from the proceeds of the sales of cable
television systems are to be distributed 100 percent to the limited partners
until the limited partners receive amounts equal to 100 percent of their
initial capital contributions plus an amount equal to eight percent per annum,
cumulative and noncompounded, on an amount equal to their initial capital
contributions, and thereafter all such distributions are to be shared 75
percent to the limited partners, 15 percent to the Managing General Partner
and 10 percent to
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the Associate General Partner. The limited partners of the Partnership will
not receive distributions in an amount equal to 100 percent of their initial
capital contributions plus an amount equal to eight percent per annum,
cumulative and noncompounded, on an amount equal to their initial capital
contributions and thus the sharing arrangement between the limited partners
and the General Partners will never be triggered. The limited partners, as a
group, will receive $61,500,000 of the Wheaton System's net sale proceeds.
This distribution will provide the Partnership's limited partners with an
approximate return of $717 for each $1,000 limited partnership interest.
VOTING PROVISION OF THE PARTNERSHIP AGREEMENT
Section 2.2(k) of the Partnership Agreement provides that the sale of all or
substantially all of the Partnership's assets is subject to the approval of
the holders of a majority of the Partnership's limited partnership interests.
Because the Wheaton System is the Partnership's sole asset, the proposed sale
of the Wheaton System to TCI is being submitted for limited partner approval.
PROPOSED SALE OF ASSETS
GENERAL
Pursuant to the terms and conditions of an asset purchase agreement dated as
of August 7, 1998 (the "Asset Purchase Agreement") by and between the
Partnership and TCI, the Partnership has agreed to sell the Wheaton System to
TCI for a sales price of $103,000,000, subject to customary working capital
closing adjustments. TCI is a Delaware corporation headquartered at 5619 DTC
Parkway, Englewood, Colorado 80111. TCI is not an affiliate of the Partnership
or of either of the General Partners. The Partnership has been informed that
TCI intends to finance its acquisition of the Wheaton System through cash on
hand and borrowings.
THE CLOSING
The closing of the sale of the Wheaton System is scheduled to occur during
the first quarter of 1999. Because the closing is conditioned upon, among
other things, the approvals of the limited partners of the Partnership and the
receipt of material third party consents necessary for the transfer of the
Wheaton System to TCI, there can be no assurance that the proposed sale will
occur. See "Proposed Sale of Assets, Conditions to Closing" for a description
of the material consents necessary for the transfer of the Wheaton System to
TCI.
THE WHEATON SYSTEM
The assets to be acquired by TCI consist primarily of the tangible and
intangible assets of the Wheaton System. The Wheaton System was purchased by
the Partnership in October 1989 for an aggregate purchase price of $97,100,000
paid to unaffiliated parties. The Partnership also paid acquisition fees to
affiliates of the General Partners totalling $2,427,500 as compensation to
such affiliates for acting as brokers and financial advisors in connection
with the transaction.
At acquisition in October 1989, the Wheaton System served approximately
33,600 basic subscribers and 40,700 premium units using 700 miles of cable
plant passing approximately 72,000 homes. At acquisition in October 1989, the
Wheaton System's basic penetration rate was 47 percent. The Wheaton System
currently is operated from one headend, with approximately 43 percent of the
system at 400 MHz, approximately 55 percent of the system at 450 MHz and the
remaining 2 percent of the system at 550 MHz. The Wheaton System now has a
total of 1,349 miles of cable plant (with 542 miles underground and 807 miles
aerial) passing approximately 87,000 homes. At closing, the Wheaton System is
expected to serve approximately 56,500 basic equivalent subscribers and have
approximately 35,400 premium units. The Wheaton System's basic penetration
rate at closing is expected to be 64 percent. The Wheaton System had annual
revenues in 1997 of $23,744,000 and annual cash flow of $9,338,000. The
Wheaton System is projected to have annual revenues in 1998 of $25,458,000 and
annual cash flow of $10,182,000. The $103,000,000 sales price therefore
represents 11.0 times 1997 cash flow and 10.1 times the projected 1998 cash
flow, and it also represents a sales price of $1,823 per
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subscriber. The most recent independent appraisal of the Wheaton System's fair
market value, which was completed at the direction of the Managing General
Partner in July 1997, valued the Wheaton System at $87,101,000. The proposed
sales price of $103,000,000 therefore represents a significant premium over
this most recent independent fair market value appraisal.
TCI will purchase all of the tangible assets of the Wheaton System that are
leased or owned by the Partnership and used in the operation of the system,
including the system's real estate, vehicles, headend equipment, underground
and aboveground cable distribution systems, towers, earth satellite receive
stations and furniture and fixtures. TCI also will acquire certain of the
intangible assets of the system, including all of the franchises, leases,
agreements, permits, licenses and other contracts and contract rights
necessary for the operation of the system. Also included in the sale are the
subscriber accounts receivable of the system and all of the system's records,
files, schematics, maps, reports, promotional graphics, marketing materials
and reports filed with federal, state and local regulatory agencies. The
foregoing notwithstanding, certain of the Wheaton System's assets will be
retained by the Partnership, including cash or cash equivalents on hand and in
banks, insurance policies, and any federal, state or local income or other tax
refunds to which the Partnership may be entitled.
SALES PRICE
Subject to the closing adjustments described below, the sales price for the
Wheaton System is $103,000,000. The Asset Purchase Agreement provides for
closing adjustments that may increase or reduce the sales price by a non-
material amount.
Adjustments on a pro rata basis as of the closing date will be made for all
prepaid expenses (to the extent the full benefit thereof will be realized by
TCI within twelve months after the closing date), accrued expenses (including
real and personal property taxes and the economic value of all accrued
vacation time permitted by TCI's policies to be taken after the closing date
by the employees of the Wheaton System hired by TCI), prepaid income,
subscriber prepayments and accounts receivable related to the Wheaton System,
all as determined in accordance with GAAP consistently applied and to reflect
the principle that all expenses and income attributable to the Wheaton System
for the period prior to the closing date are for the account of the
Partnership and all expenses and income attributable to the Wheaton System for
the period on and after the closing date are for the account of TCI.
The Partnership will receive no credit for any accounts receivable resulting
from (a) cable service sales any portion of which is 60 days or more past due
as of the closing date, (b) subscribers whose accounts are inactive or whose
services are pending disconnection for any reason as of the closing date or
(c) advertising sales any portion of which is 120 days or more past due as of
the closing date. TCI's account will be credited for the amount of all advance
payments to, or funds of third parties on deposit with, the Partnership as of
the closing date, relating to the Wheaton System, including advance payments
and deposits by subscribers served by the Wheaton System for converters,
encoders, decoders, cable television service and related sales, and the
liability therefore will be assumed by TCI.
If the number of basic equivalent subscribers delivered to TCI at closing is
less than 56,500, the sales price will be reduced by an amount equal to $1,823
multiplied by the number by which the number of basic equivalent subscribers
is less than 56,500. The Partnership will not have an obligation to close the
sale if the sales price would be reduced pursuant to this adjustment by an
amount greater than $5,469,000. TCI will not have an obligation to close if
the number of basic equivalent subscribers at closing is less than 53,500.
The Managing General Partner believes that these closing adjustments will
neither increase nor decrease the sales price by a material amount. Please see
the Notes to Unaudited Pro Forma Financial Statements for a detailed
accounting of the Managing General Partner's current best estimate of the
anticipated closing adjustments.
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CONDITIONS TO THE CLOSING
The obligations of both the Partnership and TCI to consummate the closing
are subject to the satisfaction or waiver of the following conditions: (a) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") relating to the transactions contemplated by the
Asset Purchase Agreement shall have expired or been terminated; (b) no action,
suit or proceeding is pending or threatened by or before any governmental
authority and no legal requirement has been enacted, promulgated or issued or
become or deemed applicable to any of the transactions contemplated by the
Asset Purchase Agreement by any governmental authority that would (i) prohibit
TCI's ownership or operation of all or a material portion of the Wheaton
System, its business or its assets, (ii) compel TCI to dispose of or hold
separate all or a material portion of the Wheaton System, its business or its
assets as a result of any of the transactions contemplated by the Asset
Purchase Agreement, (iii) if determined adversely to TCI's interest,
materially impair the ability of TCI to realize the benefits of the
transactions contemplated by the Asset Purchase Agreement or have a material
adverse effect on the right of TCI to exercise full rights of ownership of the
Wheaton System or (iv) prevent or make illegal the consummation of any of the
transactions contemplated by the Asset Purchase Agreement; and (c) the holders
of a majority of the limited partnership interests of the Partnership shall
have voted to approve the Partnership's sale of the Wheaton System to TCI.
The obligation of TCI to consummate the closing is further subject to the
satisfaction or waiver of other customary conditions, including the following
conditions: (a) all of the representations and warranties of the Partnership
in the Asset Purchase Agreement and any related document are, if specifically
qualified by materiality, true and correct in all respects and, if not so
qualified, are true and correct in all material respects, in each case on and
as of the closing date with the same effect as if made at and as of the
closing date, except for changes permitted or contemplated by the Asset
Purchase Agreement; (b) the Partnership has performed in all material respects
all obligations and agreements and complied in all material respects with all
covenants and conditions in the Asset Purchase Agreement and any related
document to be performed or complied with by the Partnership at or before the
closing; (c) the Partnership has delivered to TCI a bill of sale, a special
warranty deed related to the Wheaton System's real estate, an assignment and
assumption of contracts, assignments of leases, a guarantee signed by
Intercable, motor vehicle title certificates and such other transfer
instruments as TCI may deem necessary or advisable to transfer the assets of
the Wheaton System to TCI and to perfect TCI's rights in such assets, a legal
opinion of the Managing General Partner's general counsel, evidence
satisfactory to TCI that all encumbrances affecting any of the Wheaton
System's assets have been terminated and released, title insurance
commitments, the indemnity escrow agreement and such other closing agreements
as TCI may reasonably request in connection with the transactions contemplated
by the Asset Purchase Agreement; (d) the Partnership has delivered to TCI
evidence, in form and substance satisfactory to TCI, that all of the required
consents to the transaction, including without limitation, all consents of
franchising authorities, have been obtained or given (or deemed to have been
given) and are in full force and effect; (e) the environmental reports
prepared by the Partnership and delivered to TCI and any other environmental
audits or assessments conducted with respect to the Wheaton System's assets do
not indicate the existence of any conditions that could reasonably be expected
to give rise to any material risk of liability; (f) there has not been any
material adverse change in the business or the assets of the Wheaton System
since the date of the Asset Purchase Agreement other than any material adverse
change caused by or arising from other multiple channel distribution services
or any material adverse change affecting the United States cable television
industry as a whole, including any change arising from legislation,
litigation, rulemaking, regulation or competition; (g) as of the closing date
the Wheaton System has no fewer than 53,500 basic equivalent subscribers; (h)
cable television franchises covering at least 85 percent of the basic
equivalent subscribers of the Wheaton System have a term expiring no earlier
than March 31, 2001; and (i) the closing of TCI's sale of certain systems in a
separate transaction to permit TCI to accomplish a like-kind exchange under
Section 1031 of the Internal Revenue Code shall have occurred; provided,
however, if this last condition shall not have occurred on or before the day
that is nine months after the date of the Asset Purchase Agreement, this
condition shall no longer be a condition to the obligations of TCI to
consummate the transactions contemplated by the Asset Purchase Agreement. To
the extent that the Partnership must obtain an extension or renewal of any
cable television franchise to meet the condition that cable television
franchises covering at least
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85 percent of the basic equivalent subscribers of the Wheaton System have a
term expiring no earlier than March 31, 2001, any such extension or renewal
shall be on terms and conditions reasonably satisfactory to TCI and the
Partnership evaluated in the context of extensions or renewals of similarly
situated franchises in the greater Chicago metropolitan area that have been
extended or renewed (or granted) for a comparable period of time or duration,
and the Partnership and TCI will allocate the costs associated with obtaining
such extensions or renewals between them.
The obligation of the Partnership to consummate the closing is further
subject to the satisfaction or waiver of other customary conditions, including
the following conditions: (a) all of the representations and warranties of TCI
contained in the Asset Purchase Agreement and any related document are, if
specifically qualified by materiality, true and correct in all respects and,
if not so qualified, are true and correct in all material respects, in each
case on and as of the closing date with the same effect as if made on and as
of the closing date, except for changes permitted or contemplated by the Asset
Purchase Agreement; (b) TCI has performed in all material respects all
obligations and agreements and has complied in all material respects with all
covenants and conditions in the Asset Purchase Agreement and any related
document to be performed or complied with by TCI at or before the closing; (c)
TCI has delivered to the Partnership the purchase price for the Wheaton
System, a bill of sale, an assignment and assumption of contracts, a legal
opinion of TCI's counsel, the indemnity escrow agreement and such other
documents as the Partnership may reasonably request in connection with the
transactions contemplated by the Asset Purchase Agreement; and (d) as of the
closing date, either the Wheaton System shall have no fewer than 53,500 basic
equivalent subscribers or TCI shall agree to limit the sales price reduction
due to a basic equivalent subscriber shortfall to $5,469,000.
GUARANTEE AND COVENANTS TO TCI
In order to induce TCI to enter into the Asset Purchase Agreement,
Intercable will execute and deliver to TCI a guarantee by which Intercable
will guarantee all of the liabilities and obligations of the Partnership to
TCI under the Asset Purchase Agreement. TCI informed Intercable that it would
be unwilling to enter into the Asset Purchase Agreement without having
received Intercable's guarantee. Intercable received no payment from the
Partnership in return for giving this guarantee.
The parties have agreed that none of the Partnership, the General Partners
or Intercable, nor any of their respective affiliates, nor any of their
respective representatives or agents shall, directly or indirectly, solicit or
initiate discussions or negotiations with or provide any information to, any
entity concerning the sale of the Wheaton System so long as the Asset Purchase
Agreement is in effect. The Managing General Partner agreed with TCI that the
Managing General Partner would prepare and, as soon as practicable, and in any
event within 60 days after the date of the Asset Purchase Agreement, file with
the Securities and Exchange Commission a preliminary proxy statement
comprising preliminary proxy materials of the Partnership under the Exchange
Act with respect to the transactions contemplated by the Asset Purchase
Agreement.
In addition, the Partnership has agreed with TCI that the Partnership will
perform certain customary covenants, including the following covenants: (a)
the Partnership has agreed to give TCI and its counsel, accountants and other
representatives full access during normal business hours upon reasonable
notice to all of the premises and books and records of the business and assets
of the Wheaton System and to the Wheaton System's personnel and the
Partnership has agreed to furnish to TCI and its representatives all
documents, financial information and other information regarding the business
and assets of the Wheaton System as TCI may reasonably request; (b) the
Partnership has agreed to conduct the business and operations of the Wheaton
System in the usual, regular and ordinary course consistent with past
practices and in material compliance with the system's 1998 operating and
capital budgets; (c) the Partnership has agreed to maintain the assets of the
Wheaton System in good repair, order and condition and to maintain equipment
and inventory at historical levels consistent with past practices (and will
have at least a 30-day supply of inventory on hand for the Wheaton
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System at closing) and to maintain in full force and effect insurance policies
with respect to the Wheaton System in such amounts and with respect to such
risks as is customarily maintained by operators of cable television systems of
the size and geographic location as the Wheaton System and to continue to
implement its procedures for disconnection and discontinuance of service to
subscribers whose accounts are delinquent in accordance with those procedures
in effect on the date of the Asset Purchase Agreement; (d) the Partnership has
agreed that without the prior approval of TCI, the Partnership will not (i)
change the rates charged for its cable television services or add, delete, re-
tier or repackage any programming services except to the extent required by
law, (ii) make any cost of service elections with respect to the Wheaton
System, (iii) sell, transfer or assign any portion of the assets other than
sales in the ordinary course of business or permit the creation of any
encumbrance on any asset of the system other than an encumbrance that will be
released at or prior to closing, (iv) modify in any material respect,
terminate, suspend or abrogate any governmental permits or any other contract
or agreement with respect to the Wheaton System, (v) enter into any contract
or commitment or incur any indebtedness or other liability or obligation of
any kind relating to the Wheaton System involving an expenditure in excess of
$50,000 under a single contract or commitment, or $100,000 in the aggregate
under all such contracts and commitments, other than contracts or commitments
that are cancelable on 30 days' notice or less without penalty, (vi) take or
omit to take any action that would result in any of its representations or
warranties in the Asset Purchase Agreement or in any related document not
being true and correct when made or as of the closing date, (vii) engage in
any marketing, subscriber installation or collection practices that are
inconsistent with past practices other than marketing and/or installation
practices that are reasonably necessary to match offers being made by any
competitor of the Wheaton System or (viii) enter into any agreement with or
commitment to any competitive access providers with respect to the Wheaton
System; (e) the Partnership has agreed with TCI that it will duly and timely
file a valid notice of renewal with the appropriate governmental authorities
with respect to all cable television franchises of the Wheaton System that
will expire within 36 months after any date between the date of the Asset
Purchase Agreement and the closing date; (f) the Partnership has agreed to pay
the remaining balances on any leases for vehicles or capital leases on
equipment to be included in the equipment to be delivered at closing and the
Partnership has agreed to deliver title to such vehicles and equipment free
and clear of all encumbrances to TCI at the closing; (g) the Partnership has
agreed that it will use commercially reasonable efforts to obtain in writing
as promptly as possible and at its expense, all consents, authorizations and
approvals required to be obtained by the Partnership in connection with the
sale of the Wheaton System to TCI, in form and substance reasonably
satisfactory to TCI, and the Partnership has agreed to deliver to TCI copies
of such consents, authorizations and approvals promptly after they are
obtained by the Partnership; (h) the Partnership has agreed to work with TCI
to deliver, no later than 30 days after the date of the Asset Purchase
Agreement, to the appropriate governmental authority requests for the
necessary consents to transfer the Wheaton System's governmental permits to
operate the cable television system; (i) the Partnership has agreed that it
will use commercially reasonable efforts and TCI has agreed that it will
cooperate with and assist the Partnership in all reasonable respects
(including attendance at meetings and hearings before local franchising
authorities) to have cable television franchises covering at least 85 percent
of the basic equivalent subscribers of the Wheaton System extended or renewed
so that they expire no earlier than March 31, 2001, on terms and conditions
reasonably satisfactory to TCI and the Partnership, which terms and conditions
shall be evaluated by TCI and the Partnership in the context of extensions and
renewals of similarly situated franchises in the greater Chicago metropolitan
area that have been extended or renewed (or granted) for a comparable period
of time or duration and the Partnership has agreed to bear all costs required
to remedy any item of noncompliance with the terms of any franchise or to meet
current obligations under the terms of any franchise in connection with
obtaining such extension or renewal and TCI has agreed to bear all costs
associated with commitments made for capital expenditures to be made after the
closing date related to obtaining an extension or renewal; (j) the Partnership
has agreed that, within 60 days after the date of the Asset Purchase
Agreement, it will, at its expense, obtain and deliver to TCI for each parcel
of real property owned by the Partnership, an environmental site assessment
report prepared by a nationally known environmental engineering firm
reasonably satisfactory to TCI; and (k) the Partnership and TCI have agreed
that they will cooperate with each other in order that the transactions
contemplated by the Asset Purchase Agreement may be accomplished as part of a
deferred exchange pursuant to Section 1031 of the Internal Revenue Code and
applicable Treasury Regulations.
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INDEMNITY ESCROW
From the closing date until November 15, 1999, $3,118,500 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify TCI under the Asset Purchase Agreement. Pursuant to the terms of the
Asset Purchase Agreement, the Partnership has agreed to indemnify and hold TCI
harmless from all losses resulting from or arising out of (i) any breach of
any representation or warranty made by the Partnership in the Asset Purchase
Agreement or in the related documents delivered by the Partnership to TCI in
connection with the closing of the sale of the Wheaton System, (ii) any breach
of any covenant, agreement or obligation of the Partnership contained in the
Asset Purchase Agreement or in any of the related documents delivered by the
Partnership to TCI in connection with the closing of the sale of the Wheaton
System, (iii) any act or omission of the Partnership with respect to, or any
event or circumstance related to, the ownership or operation of the Wheaton
System or the conduct of its business, which act, omission, event or
circumstance occurred or existed prior to or at the closing date, without
regard to whether a claim with respect to such matter is asserted before or
after the closing date, (iv) any liability or obligation relating to the
Wheaton System not specifically assumed by TCI, (v) any title defect that the
Partnership fails to eliminate as an exception from the title insurance
commitment required to be provided to TCI at closing, (vi) any claim that the
transactions contemplated by the Asset Purchase Agreement violate the Workers
Adjustment Retraining and Notification Act or any similar state or local law
or any bulk transfer or fraudulent conveyance laws of any jurisdiction, (vii)
the presence, generation, removal or transportation of a hazardous substance
on or from any of the real property relating to the Wheaton System, including
the costs of removal or cleanup of such hazardous substance and other
compliance with the provisions of any environmental laws (whether before or
after closing) or (viii) any rate refund ordered to be made by the Wheaton
System by any governmental authority for periods prior to the closing date. In
addition, the Partnership has agreed to indemnify TCI from and against all
claims, actions, suits, proceedings, demands, judgments, assessments, fines,
interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts and other fees, costs and expenses)
incident or relating to or resulting from any of the foregoing matters.
The Partnership's primary exposure, if any, will arise from the
representations and warranties made about the Wheaton System in the Asset
Purchase Agreement. The Partnership will not be liable for any claim for a
breach of a representation or warranty unless and until the aggregate amount
of all claims is at least $250,000. TCI will have the right to make claims
against the indemnity escrow account and TCI must notify the Partnership of
such claims. If the Partnership objects to the payment of any claims by the
escrow agent, and if TCI and the Partnership are unable to agree on how the
escrowed funds should be distributed, the escrow agent will be authorized to
submit the dispute to arbitration.
Any amounts remaining from this indemnity escrow account at the end of the
escrow period and not subject to a claim by TCI will be returned to the
Partnership and distributed to the limited partners of the Partnership. If the
entire $3,118,500 escrow amount ultimately is distributed to limited partners,
of which there can be no assurance, the limited partners would receive $36 for
each $1,000 limited partnership interest from this portion of the sale
proceeds. The Partnership will continue in existence at least until any
amounts remaining from the indemnity escrow account have been distributed. If
any disputes with respect to indemnification arise, the Partnership would not
be dissolved until such disputes were resolved, which could result in the
Partnership continuing in existence beyond 1999.
REASONS FOR THE TIMING OF THE SALE
The Managing General Partner, through The Jones Group, Ltd., an affiliate of
the Managing General Partner, first marketed the Wheaton System for sale in
1996. The Jones Group, Ltd. prepared information books on the Wheaton System
in June 1996 and delivered them to six unaffiliated cable television system
operators that the Managing General Partner and The Jones Group, Ltd. deemed
to be the most likely potential buyers of the Wheaton System. One of the
prospective purchasers was TCI. The Jones Group, Ltd. communicated to each of
the recipients of the information books that due diligence visits could be
scheduled in August or September 1996 and that bids for the Wheaton System
would be accepted and were due by October 15, 1996. Of the
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prospective purchasers, only TCI made a due diligence visit to the Wheaton
System, which visit occurred in August 1996. The October 15, 1996 deadline
passed, however, without a bid from any of the parties, including TCI.
During 1996, Ameritech, the regional telephone service provider in Illinois
and neighboring states, began construction of cable television systems in
certain communities in the vicinity of the Wheaton System, including in the
Glen Ellyn franchise area served by the Wheaton System. The threat of
competition from Ameritech in the communities served by the Wheaton System was
a major factor in the lack of interest in the Wheaton System by other cable
television system operators. During the remainder of 1996 and throughout 1997,
The Jones Group, Ltd. continued to attempt to stimulate potential buyers'
interest in the Wheaton System. During most of this period, however, the cable
television industry was facing developing competition from direct broadcast
satellite providers, and Wall Street investors generally were bearish on the
industry. The continuing threat of competition from Ameritech made the market
for cable television properties in the Chicago metropolitan area very soft.
Throughout this period, Ameritech continued to acquire cable franchises in
suburban Chicago communities and it began constructing 750 MHz cable systems
in certain of those communities.
In November 1997, The Jones Group, Ltd. began a second serious dialogue with
TCI about the Wheaton System. Through the end of 1997 and the first quarter of
1998, The Jones Group, Ltd. provided TCI with additional information about the
Wheaton System, including information specifically requested by TCI to enable
it to evaluate the Wheaton System. By that time, TCI had agreed in principle
to acquire the other major cable television systems in the Chicago area that
it did not already own, making the Chicago area a more attractive potential
acquisition market for TCI and diminishing the onus of the potential Ameritech
competition. In February 1998, The Jones Group, Ltd. provided information
about the Wheaton System to three other potential purchasers of the system.
While these three companies indicated an interest in an investment in the
suburban Chicago cable system market, they expressed serious reservations
about acquiring the Wheaton System due to the potential Ameritech competition.
One of these three potential purchasers made a verbal offer to Intercable to
purchase all of the Chicago-area systems operated by Intercable for
$400,000,000. Because this bidder did not make an offer for such Chicago-area
systems individually, the Managing General Partner does not know what this
potential purchaser would have offered for the Wheaton System itself. Because
this offer was significantly lower than the cumulative offer being negotiated
with TCI for all of the Chicago-area systems operated by Intercable, The Jones
Group, Ltd. did not pursue it.
TCI made its initial formal bid for all of the Chicago-area systems managed
by Intercable on March 3, 1998. TCI offered to purchase the Wheaton System for
$100,000,000 conditioned upon the Wheaton System having 55,000 basic
equivalent subscribers at closing. This offer equated to a sales price of
$1,818 per subscriber and represented 10.7 times 1997 cash flow and 9.8 times
1998 budgeted cash flow. The Jones Group, Ltd. presented this offer to the
Managing General Partner on March 11, 1998. While the Managing General Partner
concluded that this offer was not unreasonable, it instructed The Jones Group,
Ltd. to attempt to negotiate a better price for the Wheaton System. After a
series of further negotiations, TCI made a revised offer for the Wheaton
System on April 8, 1998, increasing its bid to $103,000,000 conditioned on the
Wheaton System having 56,500 basic equivalent subscribers at closing. The
revised offer for the Wheaton System represented a sales price of $1,823 per
subscriber and represented 11.0 times 1997 cash flow and 10.1 times 1998
budgeted cash flow. The Managing General Partner deemed this revised offer
sufficient and fair, particularly in light of the fact that the most recent
independent fair market value appraisal of the Wheaton System undertaken in
July 1997 valued the Wheaton System at only $87,101,000. The Managing General
Partner accepted the revised offer on the Partnership's behalf on April 10,
1998.
The Partnership has a finite legal existence of 17 years, over nine of which
have passed. It was not intended or expected, however, that the Partnership
would hold its cable systems for as long as 17 years. Although it was not
possible at the outset of the Partnership to determine precisely how quickly
the investment objectives with respect to any particular system would be
achieved, investors were informed that past experience with prior partnerships
had shown that five to seven years was the average length of time from the
acquisition of a cable
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system to its sale. Investors in the Partnership also were able to examine the
track record of prior partnerships because such track record was set forth in
the prospectus delivered in connection with the Partnership's initial public
offering. At the time of the formation of the Partnership, the track record
showed that prior partnerships had rarely held their cable systems for any
longer than six years.
When investing in the Partnership, by virtue of the provisions of the
Partnership Agreement, the limited partners vested in the Managing General
Partner the right and the responsibility to determine when the Partnership's
investment objectives had been achieved. The Wheaton System was acquired by
the Partnership because, in the opinion of the General Partners at the time of
the Wheaton System's acquisition, it had the potential for capital
appreciation within a reasonable period of time. Due to the developing threat
of competition from Ameritech in the suburban Chicago area, the rate re-
regulation of the cable television industry during the early 1990s and the
general decline in the values of cable television systems since the Wheaton
System was acquired in October 1989, the Wheaton System has not significantly
appreciated in value during the holding period. The Managing General Partner
determined nevertheless that now rather than later was the appropriate time
for the Partnership to sell the Wheaton System. The Managing General Partner
used no specific benchmarks or measurement tools in determining that now was
the time for the Partnership to sell the Wheaton System. The Managing General
Partner conducted a subjective evaluation of a variety of factors including
the length of the holding period and the prospects for future growth as
compared to the potential risks of a decline in the size and/or value of the
system.
The Managing General Partner generally considered the benefits to the
limited partners that might be derived by holding the Wheaton System for an
additional period of time. On the one hand, the Managing General Partner
assumed that the Wheaton System probably would continue to appreciate in value
and that as a result the Wheaton System might be able to be sold for a greater
sales price in the future. The Managing General Partner weighed these
assumptions against the potential risks to investors from a longer holding
period, i.e., the risk that regulatory, technology and/or competitive
developments could cause the Wheaton System to decline in value, which would
result in a lesser sales price in the future, and the risk that, if the offer
from TCI were not accepted, no other potential buyer of the Wheaton System
could be found or no other offer would be at such a fair price. A longer
holding period would expose investors to the risk that competition from direct
broadcast satellite companies, telephone companies, especially Ameritech,
and/or neighboring cable companies could diminish the number of subscribers to
the Wheaton System's basic and premium services, thereby decreasing the value
of the Wheaton System. A longer holding period also would expose investors to
the risk that changes in the regulations promulgated by the governmental
agencies that oversee cable operations could make cable systems a less
desirable investment, thereby decreasing the value of the Wheaton System.
Weighing all of these factors, the Managing General Partner concluded that now
rather than later was the time to sell the Wheaton System.
RECOMMENDATION OF THE MANAGING GENERAL PARTNER AND FAIRNESS OF THE PROPOSED
SALE OF ASSETS
The Managing General Partner believes that the proposed sale of the Wheaton
System and the distribution of the net proceeds therefrom are fair to all
partners of the Partnership, and it recommends that the limited partners
approve the transaction. In determining the fairness of the proposed
transaction, the Managing General Partner considered each of the following
factors, all of which had a positive effect on its fairness determination:
(i) The limited partnership interests are at present illiquid and the
cash to be distributed to limited partners as a result of the proposed sale
of the Wheaton System will provide limited partners with liquidity and with
the means to realize the appreciation in the value of the Wheaton System;
(ii) The sales price represents the fair market value of the Wheaton
System because the sales price was determined in an arm's-length
negotiation between the Managing General Partner, representing the
Partnership, and TCI;
(iii) The Partnership has held the Wheaton System for nine years, a
holding period beyond that originally anticipated;
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(iv) The conditions and prospects of the cable television industry in
which the Partnership is engaged, including the developing threat of
competition from DBS services and telephone companies, especially
Ameritech, and the working capital and other financial needs of the
Partnership if it were to continue to operate and upgrade the Wheaton
System, portions of which may need to be rebuilt as a condition to the
renewal of certain of the system's cable franchises; and
(v) The terms and conditions of the Asset Purchase Agreement by and
between the Partnership and TCI, including the fact that the sales price
will be paid in cash and the fact that TCI's obligation to close is not
contingent upon its ability to obtain financing.
The Managing General Partner negotiated the terms of the Asset Purchase
Agreement and the sales price and, based on its general knowledge of cable
television system transactions undertaken by cable television companies, the
Managing General Partner has concluded that the sales price and other
transaction terms were fair and were within industry norms for comparable
transactions.
CONSENT OF THE ASSOCIATE GENERAL PARTNER
Pursuant to Section 2.3(c)(ii) of the Partnership Agreement, the Partnership
could not proceed with the sale of the Wheaton System unless the Associate
General Partner consents to the transaction. After an independent review of
all of the terms and conditions of the proposed sale of the Wheaton System to
TCI, the Associate General Partner consented to the transaction in October
1998.
CERTAIN EFFECTS OF THE SALE
Upon the consummation of the proposed sale of the Wheaton System, the
proceeds of the sale will be used to repay all third party indebtedness of the
Partnership, which totaled $36,243,870 at June 30, 1998, repay advances from
the Managing General Partner, which totaled $2,083,098 at June 30, 1998,
settle working capital adjustments and deposit $3,118,500 into an indemnity
escrow account, and then the Partnership will distribute the remaining
$61,500,000 to its limited partners of record as of the closing date of the
sale of the Wheaton System. Because the distribution to be made to the limited
partners on the sale of the Wheaton System will not exceed 100 percent of the
amounts originally contributed to the Partnership by the limited partners plus
an amount equal to eight percent per annum, cumulative and noncompounded, on
an amount equal to their initial capital contributions, the General Partners
will not receive general partner distributions on the sale of the Wheaton
System. As a result of this distribution, the limited partners of the
Partnership will receive $61,500,000 of the net proceeds from the sale of the
Wheaton System. The limited partners will be subject to federal income tax on
the income resulting from the sale of the Wheaton System. See the detailed
information below under the caption "Federal Income Tax Consequences."
After the sale of the Wheaton System and the distribution of the net
proceeds therefrom and after the termination of the indemnity escrow period on
November 15, 1999, the Partnership will be liquidated and dissolved, most
likely in 1999. Neither Colorado law nor the Partnership Agreement afford
dissenters' or appraisal rights to limited partners in connection with the
proposed sale of the Wheaton System. If the proposed transaction is approved
by the holders of a majority of limited partnership interests, all limited
partners will receive a distribution in accordance with the procedures
prescribed by the Partnership Agreement regardless of how or whether they vote
on the proposal. It is anticipated that if the proposed transaction is not
consummated, the Managing General Partner's current management team will
continue to manage the Wheaton System on behalf of the Partnership until such
time as the Wheaton System can be sold.
All distributions to the limited partners of the Partnership from the
proceeds of the sale of the Wheaton System will be made to the Partnership's
limited partners of record as of the closing date of the sale of the Wheaton
System. This includes the distribution of the net sale proceeds to be made
shortly following the closing of the sale and the distribution of the amounts
remaining, if any, from the indemnity escrow account to be made late in 1999.
Because transferees of limited partnership interests following the closing
date of the sale of the Wheaton System would not be entitled to any
distributions from the Partnership, a transfer of limited partnership
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interests following the closing date of the sale of the Wheaton System would
have no economic value. The Managing General Partner therefore has determined
that, pursuant to the authority granted to it by Section 3.5 of the
Partnership Agreement, it will not approve any transfers of limited
partnership interests following the closing of the sale of the Wheaton System.
Sales of limited partnership interests pursuant to limited tender offers, in
the secondary market or otherwise will not be possible following the closing
of the sale of the Wheaton System.
FEDERAL INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transaction is to inform the limited partners of the Partnership
of the federal income tax consequences to the Partnership and to its partners
arising from the sale of the Wheaton System. The tax information included
herein was prepared by the tax department of the Managing General Partner. The
tax information is taken from tax data compiled by the Managing General
Partner in its role as the Partnership's tax administrator and is not based
upon the advice or formal opinion of counsel. The tax discussion that follows
is merely intended to inform the limited partners of factual information and
should not be considered tax advice.
PROJECTED 1999 TAX RESULTS
By the expected date of the Wheaton System's sale, the limited partners will
have been allocated ordinary taxable losses of approximately $95,257,000
($1,111 per $1,000 invested). Except for 1989 and 1990, when a 20 percent and
a 10 percent deduction of current allocated losses were allowed, respectively,
application of the passive activity loss rules has fully limited the deduction
of Partnership losses except against passive income from other investments.
Assuming that limited partners have not utilized their previously limited
Partnership passive losses, the Managing General Partner estimates that
passive loss carryforwards of $93,007,936 ($1,085 per $1,000 invested) will be
available to fully offset the current year allocated income from the sale of
the Wheaton System.
The sale of the Wheaton System will result in a gain for federal income tax
purposes. The amount of this gain allocated to limited partners is
approximately $81,921,790 ($955 per $1,000 invested). The Managing General
Partner estimates that all of this gain will be treated as ordinary income.
This ordinary income characterization results from the recapture of
depreciation on personal property under Internal Revenue Code ("IRC") Section
1245. The Managing General Partner does not estimate that any of the gain will
be treated as long term capital gain under IRC Section 1231.
The taxable income will be reported in the year of the closing of the
Wheaton System's sale, which is expected to be 1999. The Managing General
Partner estimates that the reported gain should be completely offset by the
deduction of passive loss carryforwards of the limited partners resulting in
no federal taxable income. If prior year passive losses were deducted by
limited partners, their tax results will vary accordingly.
FEDERAL TAX WITHHOLDING ON FOREIGN LIMITED PARTNERS
Limited partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a withholding tax on their share of the
Partnership's income from the sale of the Wheaton System without consideration
of loss carryforwards. The withholding rates are 39.6 percent for individual
partners and 35 percent for corporate partners. The tax withheld will be
remitted to the Internal Revenue Service and the foreign person will receive a
credit on their U.S. tax return for the amount of the tax withheld by the
Partnership. The tax withheld will be treated as a distribution to the limited
partner.
SECONDARY MARKET PURCHASERS
Limited partners that have recently acquired their partnership interests in
the limited partnership secondary market or through tender offers will have
allocable income from the Wheaton System sale in the amounts
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reported above. Because the Partnership does not have an IRC Section 754
election in effect, the purchase of a limited partnership interest in the
Partnership places the new investor in the same position as the limited
partner from whom the interest was purchased.
Newer investors in the Partnership will not have their net tax basis in
their partnership interests reflected on their annual Schedule K-1. Such
limited partners must track their tax basis by adjusting their original cost
by allocable income or loss and partnership distributions. Their adjusted tax
basis will be deductible as a long term capital loss under IRC Section 731 in
a manner similar to the Partnership syndication costs discussed below.
FEDERAL REPORTING BY TAX EXEMPT ENTITIES
The 1999 Wheaton System sale will generate Unrelated Business Taxable Income
(UBTI) to tax exempt entities, which will require the filing of Form 990-T.
Although many trust administrators complete the required tax returns,
responsibility for completion of the Form 990-T ultimately rests with the
beneficiaries of trusts, IRAs and other tax exempt entities. Because this is
an area in which there is a variance of policy among trust administrators,
each limited partner who is a beneficiary is advised to confirm with his or
her trust administrator how this filing requirement will be fulfilled.
The Managing General Partner has learned that some trust administrators will
file a Form 990-T without consideration of prior year loss carryforwards. If
your plan administrator employs this methodology, your tax exempt plan will be
subject to significant tax liabilities that would not be incurred if prior
year losses were reported. Each limited partner who is a beneficiary of a tax
exempt entity is advised to inquire about the reporting methodology employed
by his or her trust administrator if the trust administrator is filing the
Form 990-T for 1999.
PROJECTED TAX CONSEQUENCES
As previously reported, a portion of the proceeds from the sale of the
Wheaton System will remain in an indemnity escrow account from the closing
date until November 15, 1999. At that time, the escrow account will be
distributed to the limited partners in liquidation of the Partnership. The
final capital account balance reported on the 1999 Schedule K-1 of each
limited partner is anticipated to reflect a positive amount approximating
$11,101,200 ($129 per $1,000 invested). This balance represents partnership
syndication costs that may be deducted on the limited partners' tax return as
a long term capital loss under IRC Section 731. The deduction of long term
capital losses may be limited depending on each partners' specific income tax
situation.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP, THE GENERAL
PARTNERS AND THE PURCHASER OF THE WHEATON SYSTEM
The principal executive offices of the Partnership and the Managing General
Partner are located at 9697 East Mineral Avenue, Englewood, Colorado 80112,
and their telephone number is (303) 792-3111. The principal executive offices
of the Associate General Partner are located at 3 World Financial Center, 29th
Floor, New York, New York 10285, and its telephone number is (212) 526-7000.
The principal executive offices of TCI are located at 5619 DTC Parkway,
Englewood, Colorado 80111.
The limited partnership interests of the Partnership are registered pursuant
to Section 12(g) of the Exchange Act. As such, the Partnership currently is
subject to the informational reporting requirements of the Exchange Act and,
in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Securities and Exchange Commission
relating to its business, financial condition and other matters. Reports and
other information filed by the Partnership can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the following regional offices
of the Commission: 7 World Trade Center, Suite 1300, New York, New York 10048
and Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The SEC also maintains a World Wide Web site on the Internet
that contains reports, proxy statements and other
14
<PAGE>
information of registrants (including the Partnership) that file
electronically with the SEC at http://www.sec.gov. After the net proceeds from
the sale of the Wheaton System, including amounts to be held in an indemnity
escrow account until November 15, 1999, finally are distributed to the
Partnership's limited partners of record as of the closing date of the sale of
the Wheaton System, the Partnership will be liquidated and dissolved. The
Partnership's registration and reporting requirements under the Exchange Act
will be terminated upon the dissolution of the Partnership, most likely before
the end of 1999.
USE OF PROCEEDS FROM THE WHEATON SYSTEM'S SALE
The following is a brief summary of the Partnership's estimated use of the
proceeds from the sale of the Wheaton System. All of the following selected
financial information is based upon amounts as of June 30, 1998 and certain
estimates of liabilities at closing. Final results may differ from these
estimates. A more detailed discussion of the financial consequences of the
sale of the system is set forth below under the caption "Unaudited Pro Forma
Financial Information." All limited partners are encouraged to review
carefully the unaudited pro forma financial statements and notes thereto.
If the holders of a majority of limited partnership interests of the
Partnership approve the proposed sale of the Wheaton System and the
transaction is closed, the Partnership will pay all of its indebtedness, pay
certain fees and expenses of the transaction, settle working capital
adjustments, deposit funds into an indemnity escrow account and then the
Partnership will distribute the net sale proceeds to its limited partners of
record as of the closing date pursuant to the terms of the Partnership
Agreement. The estimated uses of the sale proceeds are as follows:
<TABLE>
<S> <C>
Contract Sales Price of the Wheaton System...................... $103,000,000
Add:Cash on Hand................................................ 65,943
Less:Estimated Net Closing Adjustments.......................... (120,475)
Repayment of Debt............................................ (38,326,968)
Indemnity Escrow............................................. (3,118,500)
------------
Cash Available for Distribution by the Partnership......... $ 61,500,000
============
</TABLE>
Based on financial information available at June 30, 1998, the following
table presents the estimated results of the Partnership when it has completed
the sale of the Wheaton System:
<TABLE>
<S> <C>
Dollar Amount Raised........................................ $ 85,740,000
Number of Cable Television Systems Purchased................ One
Date of Closing of Offering................................. February 1990
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations....................................... $ (1,109)
--from recapture........................................ $ 955
Capital Gain (Loss)..................................... $ (129)
Cash Distributions to Investors
Source (on GAAP basis)
--investment income..................................... $ 0
--return of capital..................................... $ 717
Source (on cash basis)
--sales................................................. $ 717
</TABLE>
15
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF JONES GROWTH PARTNERS L.P.
The following unaudited pro forma balance sheet assumes that as of June 30,
1998, the Partnership had sold the Wheaton System for $103,000,000. The funds
available to the Partnership, adjusting for the estimated net closing
adjustments of the Wheaton System, are expected to total approximately
$102,879,525. Such funds will be used to repay all indebtedness of the
Partnership, pay certain fees and expenses of the transaction, settle working
capital adjustments and deposit funds into an indemnity escrow account, and
then the Partnership will distribute the remaining $61,500,000 to its limited
partners of record as of the closing date of the sale of the Wheaton System.
Because the distribution to be made to the limited partners on the sale of the
Wheaton System will not exceed 100 percent of the amounts originally
contributed to the Partnership by the limited partners plus an amount equal to
eight percent per annum, cumulative and noncompounded, on an amount equal to
their initial capital contributions, the General Partners will not receive
general partner distributions on the sale of the Wheaton System.
The unaudited pro forma balance sheet should be read in conjunction with the
appropriate notes to the unaudited pro forma balance sheet.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL INFORMATION IS BASED UPON
AMOUNTS AS OF JUNE 30, 1998 AND CERTAIN ESTIMATES OF LIABILITIES AT CLOSING.
FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
16
<PAGE>
JONES GROWTH PARTNERS L.P.
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents............... $ 65,943 $ 64,552,557 $64,618,500
Trade Receivables, net.................. 503,980 (503,980) --
Investment in Cable Television
Properties:
Property, plant and equipment, net.... 25,378,288 (25,378,288) --
Franchise costs and other intangibles,
net.................................. 9,985,828 (9,985,828) --
----------- ------------ -----------
Total investment in cable television
properties......................... 35,364,116 (35,364,116) --
Deposits, Prepaid Expenses and Deferred
Charges................................ 1,102,026 (1,102,026) --
----------- ------------ -----------
Total Assets............................ $37,036,065 $ 27,582,435 $64,618,500
=========== ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt.................................. $36,243,870 $(36,243,870) $ --
Trade accounts payable and accrued
liabilities.......................... 3,745,102 (3,745,102) --
Subscriber prepayments................ 68,765 (68,765) --
Accrued distribution to limited
partners............................. -- 61,500,000 61,500,000
----------- ------------ -----------
Total Liabilities................... 40,057,737 21,442,263 61,500,000
----------- ------------ -----------
Partners' Capital:
General Partners...................... (775,613) 775,613 --
Limited Partners...................... (2,246,059) 5,364,559 3,118,500
----------- ------------ -----------
Total Partners' Capital............. (3,021,672) 6,140,172 3,118,500
----------- ------------ -----------
Total Liabilities and Partners'
Capital ............................. $37,036,065 $ 27,582,435 $64,618,500
=========== ============ ===========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited balance sheet.
17
<PAGE>
JONES GROWTH PARTNERS L.P.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ ---------
<S> <C> <C> <C>
REVENUES.................................. $23,744,294 $(23,744,294) $ --
COSTS AND EXPENSES:
Operating expenses...................... 14,414,215 (14,414,215) --
Management and supervisory fees to the
General Partners and allocated overhead
from the Managing General Partner...... 2,736,695 (2,736,695) --
Depreciation and amortization........... 11,166,245 (11,166,245) --
----------- ------------ -----
OPERATING LOSS............................ (4,572,861) 4,572,861 --
----------- ------------ -----
OTHER INCOME (EXPENSE):
Interest expense........................ (2,542,388) 2,542,388 --
Other, net.............................. 19,996 (19,996) --
----------- ------------ -----
Total other income (expense), net..... (2,522,392) 2,522,392 --
----------- ------------ -----
NET LOSS.................................. $(7,095,253) $ 7,095,253 $ --
=========== ============ =====
NET LOSS PER LIMITED PARTNERSHIP
INTEREST ................................ $ (81.92) $ --
=========== =====
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
18
<PAGE>
JONES GROWTH PARTNERS L.P.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ ---------
<S> <C> <C> <C>
REVENUES.................................. $12,271,868 $(12,271,868) $ --
COSTS AND EXPENSES:
Operating expenses...................... 7,437,401 (7,437,401) --
Management and supervisory fees to the
General Partners and allocated overhead
from the Managing General Partner...... 1,433,641 (1,433,641) --
Depreciation and amortization........... 3,378,030 (3,378,030) --
----------- ------------ -----
OPERATING INCOME.......................... 22,796 (22,796) --
----------- ------------ -----
OTHER INCOME (EXPENSE):
Interest expense........................ (1,285,230) 1,285,230 --
Other, net.............................. 3,297 (3,297) --
----------- ------------ -----
Total other income (expense), net..... (1,281,933) 1,281,933 --
----------- ------------ -----
NET LOSS.................................. (1,259,137) 1,259,137 $ --
=========== ============ =====
NET LOSS PER LIMITED PARTNERSHIP
INTEREST................................. $ (14.54) $ --
=========== =====
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
19
<PAGE>
JONES GROWTH PARTNERS L.P.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1) The unaudited pro forma balance sheet of the Partnership assumes that the
Partnership had sold the Wheaton System for $103,000,000 as of June 30, 1998.
The unaudited pro forma statements of operations of the Partnership assume
that the Partnership had sold the Wheaton System for $103,000,000 as of
January 1, 1997.
2) The limited partners' distribution of $61,500,000 represents $717 for
each $1,000 limited partnership interest.
3) The estimated gain recognized from the sale of the Wheaton System and
corresponding estimated distribution to limited partners as of June 30, 1998
has been computed as follows:
GAIN ON SALE OF ASSETS:
<TABLE>
<S> <C>
Contract sales price.............................................. $103,000,000
Less: Net book value of investment in cable television properties
at June 30, 1998............................................ (35,364,116)
------------
Gain on sale of assets............................................ $ 67,635,884
============
DISTRIBUTION TO PARTNERS:
Contract sales price.............................................. $103,000,000
Working Capital Adjustment:
Add: Trade receivables, net...................................... 503,980
Prepaid expenses............................................ 1,102,026
Less: Accrued liabilities......................................... (1,657,716)
Subscriber prepayments...................................... (68,765)
------------
Adjusted cash received............................................ 102,879,525
Less: Outstanding debt to third parties........................... (36,243,870)
Outstanding advances from the Managing General Partner...... (2,083,098)
Add: Cash on hand................................................ 65,943
------------
Cash available from sale proceeds........................... 64,618,500
Portion of sale proceeds to be held in indemnity escrow..... (3,118,500)
------------
Cash available for distribution by the Partnership.......... $ 61,500,000
============
</TABLE>
20
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1998 and June 30, 1998 are being mailed to the
limited partners of the Partnership together with this Proxy Statement.
INCORPORATION BY REFERENCE
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1998 and June 30, 1998 are incorporated by
reference in their entirety in this Proxy Statement.
21
<PAGE>
[JONES INTERCABLE, INC. LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE MANAGING GENERAL
PARTNER
The undersigned Limited Partner of Jones Growth Partners L.P., a Colorado
limited partnership, hereby votes on the sale of the Partnership's Wheaton,
Illinois cable television system to TCI Communications, Inc. or one of its
affiliates for a sales price of $103,000,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of August 7, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
<PAGE>
---------------------------------------
---------------------------------------
LOGO
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
All owners must sign exactly as
name(s) appear on label.
When limited partnership inter-
ests are held by more than one
person, all owners must sign.
When signing as attorney, as ex-
ecutor, administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporation name by
authorized officer. If a partner-
ship, please sign in partnership
name by authorized person.
DATED: _____________________, 1998
__________________________________
Signature--Investor 1
__________________________________
Signature--Investor 2
__________________________________
Signature--Investor 3
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
[JONES INTERCABLE, INC. LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE MANAGING GENERAL
PARTNER
The undersigned Limited Partner of Jones Growth Partners L.P., a Colorado
limited partnership, hereby votes on the sale of the Partnership's Wheaton,
Illinois cable television system to TCI Communications, Inc. or one of its
affiliates for a sales price of $103,000,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of August 7, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
<PAGE>
---------------------------------------
---------------------------------------
LOGO
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
PLEASE SIGN EXACTLY AS NAME
APPEARS.
DATED: _____________________, 1998
__________________________________
Beneficial Owner Signature
(Investor)
__________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
EXECUTION COPY
================================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TCI COMMUNICATIONS, INC.
AND
JONES GROWTH PARTNERS L.P.
DATED AS OF
AUGUST 7, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 1. Definitions............................................................. 1
1.1 Affiliate......................................................... 1
1.2 Assets............................................................ 1
1.3 Basic Service..................................................... 2
1.4 Business.......................................................... 2
1.5 Business Day...................................................... 2
1.6 Closing........................................................... 2
1.7 Encumbrance....................................................... 2
1.8 Environmental Law................................................. 2
1.9 Equipment......................................................... 2
1.10 Equivalent Basic Subscribers (or EBSs)............................ 3
1.11 Expanded Basic Service............................................ 3
1.12 FCC............................................................... 3
1.13 GAAP.............................................................. 3
1.14 Governmental Authority............................................ 3
1.15 Governmental Permits.............................................. 3
1.16 Hazardous Substances.............................................. 4
1.17 Intangibles....................................................... 4
1.18 Intercable........................................................ 4
1.19 JSCC.............................................................. 4
1.20 Knowledge......................................................... 4
1.21 Legal Requirement................................................. 4
1.22 Losses............................................................ 4
1.23 Pay TV............................................................ 5
1.24 Permitted Encumbrances............................................ 5
1.25 Person............................................................ 5
1.26 Real Property..................................................... 5
1.27 Related Transactions.............................................. 5
1.28 Required Consents................................................. 5
1.29 Seller Contracts.................................................. 5
1.30 Service Area...................................................... 6
1.31 System............................................................ 6
1.32 Taxes6
1.33 Other Definitions................................................. 6
Section 2. Sale of Assets.......................................................... 7
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 3. Consideration.......................................................... 7
3.1 Base Purchase Price............................................... 7
3.2 Adjustments to Base Purchase Price................................ 7
3.3 Determination of Adjustments...................................... 8
3.4 Allocation of Consideration....................................... 9
Section 4. Assumed Liabilities and Excluded Assets................................ 9
4.1 Assignment and Assumption......................................... 9
4.2 Excluded Assets................................................... 10
Section 5. Representations and Warranties of Seller............................... 10
5.1 Organization and Qualification.................................... 10
5.2 Authority and Validity............................................ 10
5.3 No Conflict; Required Consents.................................... 11
5.4 Assets............................................................ 11
5.5 Governmental Permits.............................................. 12
5.6 Seller Contracts.................................................. 12
5.7 Real Property..................................................... 12
5.8 Environmental Matters............................................. 13
5.9 Compliance with Legal Requirements................................ 14
5.10 Patents, Trademarks and Copyrights............................... 15
5.11 Financial Statements............................................. 15
5.12 Absence of Certain Changes....................................... 16
5.13 Legal Proceedings................................................ 16
5.14 Tax Returns; Other Reports....................................... 16
5.15 Employment Matters............................................... 16
5.16 Systems Information.............................................. 17
5.17 Bonds18
5.18 Finders and Brokers.............................................. 18
Section 6. Representations and Warranties of Buyer................................ 18
6.1 Organization and Qualification.................................... 18
6.2 Authority and Validity............................................ 18
6.3 No Conflicts; Required Consents................................... 19
6.4 Finders and Brokers............................................... 19
6.5 Legal Proceedings................................................. 19
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 7. Additional Covenants................................................... 19
7.1 Access to Premises and Records................................... 19
7.2 Continuity and Maintenance of Operations; Financial Statements... 20
7.3 Employee Matters................................................. 22
7.4 Leased Vehicles; Other Capital Leases............................ 22
7.5 Required Consents; Estoppel Certificates......................... 23
7.6 Renewal or Extension of Franchises............................... 23
7.7 Title Commitments and Surveys.................................... 24
7.8 HSR Notification................................................. 25
7.9 No Shopping...................................................... 25
7.10 Lien and Judgment Searches....................................... 25
7.11 Transfer Taxes................................................... 26
7.12 Distant Broadcast Signals........................................ 26
7.13 Guaranty......................................................... 26
7.14 Letter to Programmers............................................ 26
7.15 Updated Schedules................................................ 26
7.16 Use of Names and Logos........................................... 26
7.17 Subscriber Billing Services...................................... 27
7.18 Satisfaction of Conditions....................................... 27
7.19 Confidentiality and Publicity.................................... 27
7.20 Bulk Transfers................................................... 27
7.21 Environmental Reports............................................ 27
7.22 Section 1031..................................................... 28
7.23 MDU Agreements................................................... 28
7.24 Services Agreement............................................... 28
7.25 Year 2000 Matters................................................ 29
Section 8. Conditions Precedent................................................... 30
8.1 Conditions to the Obligations of Buyer and Seller................ 30
8.2 Conditions to the Obligations of Buyer........................... 30
8.3 Conditions to Obligations of Seller.............................. 32
8.4 Waiver of Conditions............................................. 32
Section 9. Closing................................................................ 32
9.1 The Closing; Time and Place...................................... 32
9.2 Seller's Delivery Obligations.................................... 33
9.3 Buyer's Delivery Obligations..................................... 34
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 10. Termination............................................................ 35
10.1 Termination Events............................................... 35
10.2 Effect of Termination............................................ 35
Section 11. Survival of Representations and Warranties; Indemnification............ 35
11.1 Survival of Representations and Warranties....................... 35
11.2 Indemnification by Seller........................................ 36
11.3 Indemnification by Buyer......................................... 37
11.4 Third Party Claims............................................... 37
11.5 Limitations on Indemnification - Seller.......................... 38
11.6 Limitations on Indemnification - Buyer........................... 38
Section 12. Miscellaneous.......................................................... 39
12.1 Parties Obligated and Benefited.................................. 39
12.2 Notices.......................................................... 39
12.3 Attorneys' Fees.................................................. 40
12.4 Waiver........................................................... 40
12.5 Captions......................................................... 41
12.6 Choice of Law.................................................... 41
12.7 Terms............................................................ 41
12.8 Rights Cumulative................................................ 41
12.9 Further Actions.................................................. 41
12.10 Time............................................................. 41
12.11 Late Payments.................................................... 41
12.12 Counterparts..................................................... 41
12.13 Entire Agreement................................................. 41
12.14 Severability..................................................... 42
12.15 Construction..................................................... 42
12.16 Expenses......................................................... 42
12.17 Risk of Loss; Condemnation....................................... 42
</TABLE>
-iv-
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <S>
A - Bill of Sale, Assignment and Assumption Agreement
B - Assignment and Assumption of Contracts
C - Assignment of Leases
D - Guaranty
E - Letter to Programmers
F - FIRPTA Affidavit
G - Opinion of Seller's Counsel
H - Opinion of Buyer's Counsel
I - Escrow Agreement
SCHEDULES
- ---------
1.9 - Owned Equipment and Vehicles
4.2 - Excluded Assets
5.3 - Required Consents
5.4-I - Encumbrances to Be Discharged Prior to Closing and Rights
of First Refusal
5.4-II - Conduct of Business
5.5 - Governmental Permits
5.6 - Seller Contracts
5.7 - Real Property
5.8 - Environmental Matters
5.9 - Cost of Service Filings/Customer Service Standards
5.13 - Proceedings and Judgments
5.14 - Tax Matters
5.15 - Employee Matters
5.16 - The Business/Systems Information (including Rate Schedule)
5.17 - Bonds
</TABLE>
-v-
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is made as of August
7, 1998, by and between TCI Communications, Inc., a Delaware corporation
("Buyer"), and Jones Growth Partners L.P., a Colorado limited partnership
("Seller").
RECITALS
--------
A. Seller is engaged in the business of providing cable
television service to subscribers in and around the Service Area. Buyer desires
to purchase and Seller desires to sell substantially all the assets of Seller
used or useful in connection with that business.
B. Buyer intends to complete the transfer of the Assets in a
transaction to which Section 1031 of the Internal Revenue Code of 1986, as
amended (the "Code"), applies, and Seller is willing to take such steps as are
reasonably necessary on its part to enable the transactions contemplated hereby
to so qualify, including permitting the assignment of this Agreement by Buyer to
one or more Affiliates of Buyer and by such Affiliates of Buyer to a qualified
intermediary in order that Buyer's acquisition of the Assets may be accomplished
as part of a deferred exchange pursuant to applicable Treasury Regulations;
provided that if such exchange is not accomplished, Buyer desires to purchase
the Assets directly, subject to the terms and conditions described herein.
AGREEMENT
---------
In consideration of the above recitals and the mutual agreements
stated in this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have the meanings
set forth below:
1.1 Affiliate. With respect to any Person, any other Person
---------
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
1.2 Assets. All properties, privileges, rights, interests and
------
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, held, used or useful in the Business,
including advertising sales related to the Business, in which Seller has any
right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing
<PAGE>
Date, or in which Intercable has, or acquires prior to the Closing Date, any
right, title or interest if such property, privilege, right or interest is used
or useful primarily in connection with the Business and/or the businesses that
are the subject of the Related Transactions, including advertising sales related
thereto, including Governmental Permits, Intangibles, Seller Contracts,
Equipment, Real Property, partnership interests in The Greater Chicago Cable
Interconnect and deposits relating to the Business that are held by third
parties for the account of Seller or for security for Seller's performance of
its obligations, but excluding any Excluded Assets.
1.3 Basic Service. The lowest tier of service offered to
-------------
subscribers of a System.
1.4 Business. The cable television business conducted by Seller
--------
on the date of this Agreement through one or more Systems, as described on
SCHEDULE 5.16.
1.5 Business Day. Any day other than Saturday, Sunday or a day
------------
on which banking institutions in Denver, Colorado are required or authorized
to be closed.
1.6 Closing. The consummation of the transactions contemplated
-------
by this Agreement, as described in SECTION 9, the date of which is referred to
as the Closing Date.
1.7 Encumbrance. Any security interest, security agreement,
-----------
financing statement filed with any Governmental Authority, conditional sale or
other title retention agreement, any lease, consignment or bailment given for
purposes of security, any mortgage, lien, indenture, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment, exception to or defect in title or other ownership interest
(including reservations, rights of entry, possibilities of reverter,
encroachments, easements, rights-of-way, restrictive covenants, leases and
licenses) of any kind, which constitutes an interest in or claim against
property, whether arising pursuant to any Legal Requirement, Governmental
Permit, Seller Contract or otherwise.
1.8 Environmental Law. Any Legal Requirement relating to
-----------------
pollution or protection of public health, safety or welfare or the environment,
including those relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into the environment (including ambient air,
surface water, ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
1.9 Equipment. All electronic devices, trunk and distribution
---------
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Business, the principal items of which are
described on SCHEDULE 1.9 (and with respect to leased Equipment, on SCHEDULE
5.6).
-2-
<PAGE>
1.10 Equivalent Basic Subscribers (or EBSs). The number determined by
--------------------------------------
dividing (i) the total monthly revenues billed for sales of Basic Service and
Expanded Basic Service by the System during the most recent month ended prior to
the date of calculation to active customers, including residential customers in
single-family households, commercial establishments and multiple dwelling units,
whether on a discounted or undiscounted basis and whether billed individually or
on a bulk basis, but excluding billings in excess of a single month's charges
for any account, by (ii) the product of (A) the sum of the standard monthly
rates (without discount of any kind) charged by Seller during such month to
single-family households for Basic Service and Expanded Basic Service sold by
the System (such rates not to be less than the rates for such System set forth
on SCHEDULE 5.16) multiplied by (B) 95.72%. For purposes of this definition,
there will be excluded all revenues from (i) any subscriber who is more than 60
days past due in the payment of any amount in excess of $5 payable to Seller,
(ii) any subscriber who has not paid at least one full month's payment for
services ordered by such subscriber, (iii) that portion of the billings
representing an installation or other non-recurring charge, a charge for
equipment or for any outlet or connection other than the first outlet or first
connection in any residential unit (e.g., an individual apartment or rental
----
unit), a charge for any a la carte or premium service or a pass-through charge
for sales taxes, line-itemized franchise fees, fees charged by the FCC and the
like, (iv) any subscriber who was solicited within the six-month period prior to
the date of calculation by marketing techniques not permitted by SECTION
7.2.3(G) hereof, and (v) any subscriber pending disconnection for any reason.
For purposes of this definition, the number of days past due of a customer
account will be determined from the first day of the period for which the
applicable billing relates.
1.11 Expanded Basic Service. Any video programming provided over
----------------------
the System, regardless of service tier other than (a) Basic Service, (b) any new
product tier and (c) video programming offered on a per channel or per program
basis.
1.12 FCC. The Federal Communications Commission.
---
1.13 GAAP. Generally accepted accounting principles as in effect from
----
time to time in the United States of America.
1.14 Governmental Authority. The United States of America, any state,
----------------------
commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
county, municipality, province, parish or other instrumentality of any of the
foregoing.
1.15 Governmental Permits. All franchises, approvals, authorizations,
--------------------
permits, licenses, easements, registrations, qualifications, leases, variances
and similar rights obtained with respect to the Business or Assets from any
Governmental Authority, including those set forth on SCHEDULE 5.5.
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1.16 Hazardous Substances. Any pollutant, contaminant, chemical,
--------------------
industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a hazard or potential hazard to the
Real Property or to Persons in or about the Real Property or cause the Real
Property to be in violation of any laws, regulations or ordinances of federal,
state or applicable local governments, (b) asbestos or any asbestos-containing
material of any kind or character, (c) polychlorinated biphenyls ("PCBs"), as
regulated by the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., (d)
-- ----
any materials or substances designated as "hazardous substances" pursuant to the
Clean Water Act, 33 U.S.C. (S) 1251 et seq., (e) "economic poison," as defined
-- ----
in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 135 et
--
seq., (f) "chemical substance," "new chemical substance" or "hazardous chemical
- ---
substance or mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
(S) 2601 et seq., (g) "hazardous substances" pursuant to the Comprehensive
-- ----
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
--
seq. and (h) "hazardous waste" pursuant to the Resource Conservation and
- ----
Recovery Act, 42 U.S.C. (S) 6901 et seq.
-- ----
1.17 Intangibles. All intangible assets, including subscriber lists,
-----------
accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Business.
1.18 Intercable. Jones Intercable, Inc.
----------
1.19 JSCC. Jones Spacelink Cable Corporation, a wholly owned
----
subsidiary of Jones Intercable, Inc.
1.20 Knowledge. The actual knowledge of a particular matter of one or
---------
more of the executive officers of a Person or the general manager or one or more
of the managers of such Person's Systems.
1.21 Legal Requirement. Applicable common law and any statute,
-----------------
ordinance, code, or other law, rule, regulation, order, technical or other
written standard or procedure enacted, adopted or applied by any Governmental
Authority, including judicial decisions applying common law or interpreting any
other Legal Requirement.
1.22 Losses. Any claims, losses, liabilities, damages, penalties,
------
costs and expenses, including interest that may be imposed in connection
therewith, expenses of investigation, reasonable fees and disbursements of
counsel and other experts, and the cost to any Person making a claim or seeking
indemnification under this Agreement with respect to funds expended by such
Person by reason of the occurrence of any event with respect to which
indemnification is sought.
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<PAGE>
1.23 Pay TV. Premium programming services selected by and sold to
------
subscribers on a per channel or per program basis.
1.24 Permitted Encumbrances. The following Encumbrances: (a) liens
----------------------
securing Taxes, assessments and governmental charges not yet due and payable,
(b) any zoning law or ordinance or any similar Legal Requirement, (c) any right
reserved to any Governmental Authority to regulate the affected property and (d)
as to Real Property interests, any Encumbrance reflected in the public records
and that does not individually or in the aggregate interfere with the right or
ability to own, use or operate the Real Property or to convey good, marketable
and indefeasible fee simple title to such Real Property, provided that
"Permitted Encumbrances" will not include any Encumbrance which could prevent or
inhibit in any way the conduct of the business of the affected System and
provided further that classification of any Encumbrance as a "Permitted
Encumbrance" will not affect any liability Seller may have for such Encumbrance,
including pursuant to any indemnity obligation under this Agreement.
1.25 Person. Any natural person, corporation, partnership, trust,
------
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.26 Real Property. All assets held by Seller related to the Business
-------------
consisting of realty, including appurtenances, improvements and fixtures located
on such realty, and any other interests in real property, including fee
interests, leasehold interests and easements, wire crossing permits, rights of
entry (except agreements related to multiple dwelling units) described on
SCHEDULE 5.7.
1.27 Related Transactions. The transactions contemplated by the Asset
--------------------
Purchase Agreements by and between Buyer and entities affiliated with Seller
executed simultaneously with the execution of this Agreement, or, if requested
by Buyer to facilitate the 1031 Transaction, to be executed after the date of
this Agreement, pursuant to which Buyer has agreed or will agree to acquire the
assets of the cable television systems located in and around (a) Lake County and
Orland Park, (b) Lake Zurich and South Suburban, (c) Naperville, and (d) Aurora,
all in the State of Illinois.
1.28 Required Consents. All franchises, licenses, authorizations,
-----------------
approvals and consents required under Governmental Permits, Seller Contracts or
otherwise for (a) Seller to transfer the Assets and the Business to Buyer, (b)
Buyer to conduct the Business and to own, lease, use and operate the Assets at
the places and in the manner in which the Business is conducted as of the date
of this Agreement and on the Closing Date and (c) Buyer to assume and perform
the Governmental Permits, Seller Contracts and the other Assumed Liabilities.
1.29 Seller Contracts. All contracts and agreements, other than
----------------
Governmental Permits and those relating to Real Property, pertaining to the
ownership, operation and maintenance of the Assets or the Business or used or
held for use in the Business, as described on SCHEDULE 5.6 or, in the case of
contracts and agreements relating to Real Property, on SCHEDULE 5.7.
-5-
<PAGE>
1.30 Service Area. The area in which Seller operates the Business,
------------
specifically in and around the Villages of Addison, Glen Ellyn, and Winfield,
the Cities of Geneva, St. Charles, Warrenville, West Chicago, and Wheaton, and
the Counties of DuPage and Kane, all in the State of Illinois.
1.31 System. A complete cable television reception and distribution
------
system operated in the conduct of the Business, consisting of one or more
headends, subscriber drops and associated electronic and other equipment, and
which is, or is capable of being without modification, operated as an
independent system without interconnections to other systems. Any systems which
are interconnected or which are served in total or in part by a common headend
will be considered a single System.
1.32 Taxes. All levies and assessments of any kind or nature imposed
-----
by any Governmental Authority, including all income, sales, use, ad valorem,
value added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto.
1.33 Other Definitions. The following terms are defined in the
-----------------
Sections indicated:
<TABLE>
<CAPTION>
Term Section
---- --------
<S> <C>
Action 11.4
Antitrust Division 7.8
Approval Deadline 10.1.4
Assumed Liabilities 4.1
Base Purchase Price 3.1
Buyer Damages 11.5
Closing Date 1.6
Code Recital B
Cost of Service Election 5.9.4
EBS Condition 8.2.7
EBS Shortfall Adjustment 3.2.1
Employee Benefit Plans 5.15.2
Environmental Report 7.21
ERISA 5.15.1
Escrow Agent 3.1.2
Excluded Assets 4.2
Final Adjustments Report 3.3.2
Financial Statements 5.11
FTC 7.8
HSR Act 7.8
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Indemnified Party 11.4
Indemnifying Party 11.4
MDU 7.23
1992 Cable Act 5.9.4
Preliminary Adjustments Report 3.3.1
Prime Rate 12.11
Rate Regulation Documents 5.9.4
Seller Damages 11.6
Services Agreement 7.24
Survival Period 11.1
Taking 12.17.2
TCI/AT&T Transaction 7.5.1
1031 Closing Date 8.2.9
1031 Condition 8.2.9
1031 Transaction 7.22
Transaction Documents 5.2
</TABLE>
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this Agreement,
at the Closing, Seller will sell to Buyer, and Buyer will purchase from Seller,
all of Seller's rights, titles and interests in, to and under the Assets. Except
as otherwise specifically provided in this Agreement, all the Assets are
intended to be transferred to Buyer, whether or not described in the Schedules.
SECTION 3. CONSIDERATION.
3.1 Base Purchase Price. Buyer will pay to Seller total cash
-------------------
consideration of $103,000,000 (the "Base Purchase Price"), subject to adjustment
as provided in SECTIONS 3.2 and 3.3. Such consideration will be paid as follows:
3.1.1 The sum of $99,881,500 will be paid at Closing by wire
transfer of immediately available funds pursuant to wire instructions delivered
by Seller to Buyer no later than two Business Days prior to the Closing Date;
and
3.1.2 The sum of $3,118,500 will be delivered to an escrow
agent reasonably satisfactory to Seller and Buyer (the "Escrow Agent") to be
held in escrow until November 15, 1999, to provide a fund for the payment of any
post-closing indemnification claims and unpaid working capital adjustments in
accordance with the terms of the Escrow Agreement to be entered into at Closing
in the form of EXHIBIT I.
3.2 Adjustments to Base Purchase Price. The Base Purchase Price
----------------------------------
will be adjusted as follows:
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<PAGE>
3.2.1 Reduced by an amount equal to $1,823 multiplied by the
positive difference, if any, between (a) 56,500 and (b) the number of EBSs as of
the Closing Date (the "EBS Shortfall Adjustment");
3.2.2 Adjustments on a pro rata basis as of the Closing Date
will be made for all prepaid expenses (but only to the extent the full benefit
thereof will be realizable by Buyer within 12 months after the Closing Date),
accrued expenses (including real and personal property Taxes and the economic
value of all accrued vacation time permitted by Buyer's policies to be taken
after the Closing Time by Seller's System employees hired by Buyer), prepaid
income, subscriber prepayments and accounts receivable related to the Business,
all as determined in accordance with GAAP consistently applied, and to reflect
the principle that all expenses and income attributable to the Business for the
period prior to the Closing Date are for the account of Seller, and all expenses
and income attributable to the Business for the period on and after the Closing
Date are for the account of Buyer. Seller will receive no credit for any
accounts receivable (a) resulting from cable service sales any portion of which
is 60 days or more past due as of the Closing Date, (b) from subscribers whose
accounts are inactive or whose service is pending disconnection for any reason
as of the Closing Date or (c) resulting from advertising sales any portion of
which is 120 days or more past due as of the Closing Date.
3.2.3 Buyer's account will be credited for the amount of all
advance payments to, or funds of third parties on deposit with, Seller as of the
Closing Date, relating to the Business, including advance payments and deposits
by subscribers served by the Business for converters, encoders, decoders, cable
television service and related sales, and the liability therefor will be assumed
by Buyer.
3.3 Determination of Adjustments. Preliminary and final
----------------------------
adjustments to the Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at
least 10 Business Days prior to the expected Closing Date, Seller will deliver
to Buyer a report (the "Preliminary Adjustments Report"), certified as to
completeness and accuracy by Seller, showing in detail the preliminary
determination of the adjustments referred to in SECTION 3.2, which are
calculated as of the Closing Date (or as of any other date agreed by the
parties) and any documents substantiating the adjustments proposed in the
Preliminary Adjustments Report. The Preliminary Adjustments Report will include
a complete list of subscribers, a detailed calculation of the number of
Equivalent Basic Subscribers and a schedule setting forth advance payments made
to or by Seller and deposits made by Seller, as well as accounts receivable
information relating to the Business (showing sums due and their respective
aging as of the Closing Date). Seller also will furnish to Buyer its billing
report for the most current period as of the Closing Date. Following receipt of
such Preliminary Adjustments Report and supporting information, Buyer will have
five Business Days to review such Preliminary Adjustments Report and supporting
information and to notify Seller of any disagreements with Seller's estimates.
If Buyer provides a notice of disagreement with Seller's estimates of the
-8-
<PAGE>
adjustments referred to in SECTION 3.2 within such five Business Day period,
Buyer and Seller will negotiate in good faith to resolve any such dispute and to
reach an agreement prior to the Closing Date on such estimated adjustments as of
the Closing Date. The basis for determining the Base Purchase Price to be paid
at Closing will be (a) the estimate so agreed upon by Buyer and Seller or (b) if
no notice of disagreement is provided, or if such notice is provided but the
parties do not reach such an agreement prior to the Closing Date, the estimate
of such adjustments set forth in the Preliminary Adjustments Report.
3.3.2 Within 90 days after the Closing, Seller will deliver
to Buyer a report (the "Final Adjustments Report"), similarly certified by
Seller, showing in detail the final determination of all adjustments which were
not calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together with any documents substantiating the
adjustments proposed in the Final Adjustments Report. Buyer will provide Seller
with reasonable access to all records which Buyer has in its possession and
which are necessary for Seller to prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments
Report, Buyer will give Seller written notice of Buyer's objections, if any, to
the Final Adjustments Report. If Buyer makes any such objection, the parties
will agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Any disputed amounts will be determined within 120 days after the
Closing Date by the accounting firm of Price Waterhouse, whose determination
will be conclusive. Seller and Buyer will bear equally the fees and expenses
payable to such firm in connection with such determination. The payment
required after such determination will be made by the responsible party by wire
transfer of immediately available funds to the other party within three Business
Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by
---------------------------
Buyer under this Agreement will be allocated among the Assets as set forth in a
schedule to be prepared not later than 180 days after the Closing Date (or April
1 of the year following the Closing Date if earlier) by an independent appraiser
with significant experience in the cable television industry. Such appraiser
will be selected by the mutual agreement of Buyer and Seller within 30 days
after the date of this Agreement, and the fees of such appraiser will be shared
equally by Buyer and Seller. Buyer and Seller agree to be bound by the
allocation and will not take any position inconsistent with such allocation and
will file all returns and reports with respect to the transactions contemplated
by this Agreement, including all federal, state and local Tax returns, on the
basis of such allocation.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. Seller will assign, and Buyer
-------------------------
will assume and after the Closing will pay, discharge and perform the following
(the "Assumed Liabilities"): (a) Seller's obligations to subscribers of the
Business for (i) subscriber deposits held by Seller as of the Closing Date and
which are refundable, in the amount for which Buyer received credit under
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<PAGE>
SECTION 3.2, (ii) subscriber advance payments held by Seller as of the Closing
Date for services to be rendered by a System after the Closing Date, in the
amount for which Buyer received credit under SECTION 3.2 and (iii) the delivery
of cable television service to subscribers of the Business after the Closing
Date; and (b) obligations accruing and relating to periods after the Closing
Date under Governmental Permits listed on SCHEDULE 5.5 (to the extent that such
Governmental Permits are transferrable) and Seller Contracts. Buyer will not
assume or have any responsibility for any liabilities or obligations of Seller
other than the Assumed Liabilities. In no event will Buyer assume or have any
responsibility for any liabilities or obligations associated with the Excluded
Assets.
4.2 Excluded Assets. The Excluded Assets, which will be
---------------
retained by Seller, will consist of the following: (a) programming contracts
(including programming guide contracts), retransmission consent agreements and
pole attachment agreements (except for those set forth on SCHEDULE 5.6); (b)
Employee Benefit Plans; (c) insurance policies and rights and claims thereunder
(except as otherwise provided in SECTION 12.17); (d) bonds, letters of credit,
surety instruments and other similar items; (e) cash and cash equivalents and
notes receivable; (f) Seller's trademarks, trade names, service marks, service
names, logos and similar proprietary rights (subject to Buyer's rights under
SECTION 7.16); (g) Seller's rights under any agreement governing or evidencing
an obligation of Seller for borrowed money; (h) Seller Contracts for subscriber
billing and equipment; (i) Seller's rights under any contract, license,
authorization, agreement or commitment other than those creating or evidencing
Assumed Liabilities; (j) any claims, rights and interests in and to any refunds
of federal, state or local franchise, income or other taxes or fees for periods
prior to the Closing Date; and (k) the assets described on SCHEDULE 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of the Closing, as follows:
5.1 Organization and Qualification. Seller is a limited
------------------------------
partnership duly organized, validly existing and in good standing under the laws
of the State of Colorado and has all requisite partnership power and authority
to own, lease and use the Assets owned, leased or used by it and to conduct the
Business as it is currently conducted. Seller is duly qualified to do business
and is in good standing under the laws of each jurisdiction in which the
ownership, leasing or use of the Assets owned, leased or used by it or the
nature of Seller's activities makes such qualification necessary, except in any
such jurisdiction where the failure to be so qualified and in good standing
would not have a material adverse effect on the Business, the Assets or the
Systems or on the ability of Seller to perform its obligations under this
Agreement. The general partner of Seller is JSCC.
5.2 Authority and Validity. Seller has all requisite
----------------------
partnership power and authority to execute and deliver, to perform its
obligations under, and to consummate the transactions contemplated by, this
Agreement and all other documents and instruments to be executed and delivered
in connection with the transactions contemplated by this Agreement
(collectively, the
-10-
<PAGE>
"Transaction Documents") to which Seller is a party. The execution and delivery
by Seller of, the performance by Seller of its obligations under, and the
consummation by Seller of the transactions contemplated by, this Agreement and
the Transaction Documents to which Seller is a party have been duly and validly
authorized by all necessary action by or on behalf of Seller. This Agreement has
been, and when executed and delivered by Seller the Transaction Documents will
be, duly and validly executed and delivered by Seller and the valid and binding
obligations of Seller, enforceable against Seller in accordance with their
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to the enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
5.3 No Conflict; Required Consents. Except for the Required
------------------------------
Consents, all of which are listed on SCHEDULE 5.3, the execution and delivery by
Seller, the performance of Seller under, and the consummation of the
transactions contemplated by, this Agreement and the Transaction Documents to
which Seller is a party do not and will not: (a) violate any provision of the
Partnership Agreement of Seller; (b) violate any Legal Requirement; (c) require
any consent, approval or authorization of, or filing of any certificate, notice,
application, report or other document with any Governmental Authority or other
Person; or (d) (i) violate or result in a breach of or default under (without
regard to requirements of notice, lapse of time, or elections of any Person, or
any combination thereof), (ii) permit or result in the termination, suspension
or modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under any Seller Contract or any other
instrument evidencing any of the Assets or by which Seller or any of its assets
is bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications, and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on any System, the Business or Seller, the validity, binding
effect or enforceability of this Agreement or on the ability of Seller to
perform its obligations under this Agreement or the Transaction Documents to
which Seller is a party.
5.4 Assets. Seller has exclusive, good and marketable title to (or,
------
in the case of Assets that are leased, valid leasehold interests in) the Assets
(other than Real Property, as to which the representations and warranties in
SECTION 5.7 apply). The Assets are free and clear of all Encumbrances, except
(a) Permitted Encumbrances and (b) Encumbrances described on SCHEDULE 5.4-I, all
of which will be terminated, released or, in the case of rights of refusal
listed on SCHEDULE 5.4-I, waived, as appropriate, at or prior to the Closing.
Except as described on SCHEDULE 5.6, none of the Equipment is leased by Seller
from any other Person. All the Equipment is in good operating condition and
repair (ordinary wear and tear excepted). Except for items included in the
Excluded Assets, and the items described in SCHEDULE 5.4-II, the Assets
constitute all the assets necessary to permit Buyer to (i) conduct the Business
and to operate the Systems substantially as they are being conducted and
operated on the date of this Agreement and in compliance in all material
respects with all Legal Requirements, Governmental Permits and Seller Contracts
and (ii) perform all the Assumed Liabilities.
-11-
<PAGE>
5.5 Governmental Permits. All Governmental Permits are listed on
--------------------
SCHEDULE 5.5. Complete and correct copies of all Governmental Permits have been
delivered by Seller to Buyer. Each Governmental Permit is in full force and
effect and is valid under all applicable Legal Requirements according to its
terms, and Seller is not and, to Seller's Knowledge, the other party thereto is
not, in breach or default of any material terms or conditions thereunder. There
is no legal action, governmental proceeding or investigation, pending or, to
Seller's Knowledge threatened, to terminate, suspend or modify any Governmental
Permit and Seller is in compliance with the material terms and conditions of all
the Governmental Permits and with other material applicable requirements of all
Governmental Authorities (including the FCC and the Register of Copyrights)
relating to the Governmental Permits, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
Except as described on SCHEDULE 5.5, as of the date of this Agreement, to
Seller's Knowledge, no third party has been granted or has applied for a cable
television franchise or is providing or intending to provide cable television
services in any of the communities or unincorporated areas currently served by
the Business.
5.6 Seller Contracts. All Seller Contracts (other than those
----------------
constituting Excluded Assets) are described on SCHEDULE 5.6 or 5.7. Complete
and correct copies of all Seller Contracts have been delivered by Seller to
Buyer. Each Seller Contract is in full force and effect and constitutes the
valid, legal, binding and enforceable obligation of Seller and Seller is not and
to Seller's Knowledge each other party thereto is not, in breach or default of
any material terms or conditions thereunder.
5.7 Real Property.
-------------
5.7.1 All the Assets consisting of Real Property interests are
described on SCHEDULE 5.7. Except as otherwise disclosed on SCHEDULE 5.7,
Seller holds good, marketable and indefeasible fee simple title to the Real
Property shown as being owned by Seller on SCHEDULE 5.7 and the valid and
enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Seller has valid and enforceable leasehold interests in
Real Property shown as being leased by Seller on SCHEDULE 5.7 and, with respect
to other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 5.7, subject only
to Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in good condition and repair and are suitable for the purposes used. The
current use and occupancy of the Real Property do not constitute nonconforming
uses under any applicable zoning Legal Requirements.
5.7.2 The documents delivered by Seller to Buyer as evidence of
each Seller Contract that is a lease of Real Property constitute the entire
agreement with the landlord in question. There are no leases or other
agreements, oral or written, granting to any Person other than Seller the right
to occupy or use any Real Property, except as described on SCHEDULE 5.7. All
easements, rights-of-way and other rights appurtenant to, or which are necessary
for Seller's current use of, any
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<PAGE>
Real Property are valid and in full force and effect, and Seller has not
received any notice with respect to the termination, breach or impairment of any
of those rights. Each parcel of Real Property, any improvements constructed
thereon and their current use (a) has access to and over all public streets, or
private streets for which Seller has a valid right of ingress and egress, (b)
conforms in its current use and occupancy to all zoning requirements without
reliance upon a variance issued by a Governmental Authority or a classification
of the parcel in question as a nonconforming use, and (c) conforms in all
material respects in its use to all restrictive covenants, if any, or other
Encumbrances affecting all or part of such parcel.
5.8 Environmental Matters.
---------------------
5.8.1 The Real Property currently complies in all material
respects with and, to Seller's Knowledge, has previously been operated in
compliance in all material respects with, all Environmental Laws. Seller has
not directly or indirectly (a) generated, released, stored, used, treated,
handled, discharged or disposed of any Hazardous Substances at, on, under, in or
about, or in any other manner affecting, any Real Property, (b) transported any
Hazardous Substances to or from any Real Property or (c) undertaken or caused to
be undertaken any other activities relating to the Real Property which could
reasonably give rise to any liability under any Environmental Law, and, to
Seller's Knowledge, no other present or previous owner, tenant, occupant or user
of any Real Property or any other Person has committed or suffered any of the
foregoing. To Seller's Knowledge, (i) no release of Hazardous Substances
outside the Real Property has entered or threatens to enter any Real Property,
nor (ii) is there any pending or threatened claim based on Environmental Laws
which arises from any condition of the land surrounding any Real Property. No
litigation based on Environmental Laws which relates to any Real Property or any
operations on conditions on it (A) has been asserted or conducted in the past or
is currently pending against or with respect to Seller or, to Seller's
Knowledge, any other Person, or (B) to Seller's Knowledge is threatened or
contemplated.
5.8.2 To Seller's Knowledge, other than as described on SCHEDULE
5.8, (a) no aboveground or underground storage tanks are currently or have been
located on any Real Property, (b) no Real Property has been used at any time as
a gasoline service station or any other facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products or wastes and
(c) no building or other structure on any Real Property contains asbestos-
containing material.
5.8.3 Seller has provided Buyer with complete and correct copies
of (a) all studies, reports, surveys or other materials in Seller's possession
or, to Seller's Knowledge to which it has access, relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(b) all notices or other materials in Seller's possession or, to Seller's
Knowledge to which it has access, that were received from any Governmental
Authority having the power to administer or enforce any Environmental Laws
relating to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (c) all materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to any litigation or
allegation by any Person concerning any Environmental Law.
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<PAGE>
5.9 Compliance with Legal Requirements.
----------------------------------
5.9.1 The ownership, leasing and use of the Assets as they are
currently owned, leased and used and the conduct of the Business and the
operation of the Systems as they are currently conducted and operated do not
violate or infringe, in any material respect, any Legal Requirements currently
in effect (other than the Legal Requirements described in SECTION 5.9.4, as to
which the provisions of SECTION 5.9.4 will apply). Seller has received no
notice of any violation by Seller or the Business of any Legal Requirement
applicable to the Business or the Systems as currently conducted, and to
Seller's Knowledge, there is no basis for the allegation of any such a
violation.
5.9.2 A valid request for renewal has been duly and timely filed
under Section 626 of the Cable Communications Policy Act of 1984 with the proper
Governmental Authority with respect to applicable Governmental Permits with
franchising authorities that have expired prior to, or will expire within 36
months after, the date of this Agreement.
5.9.3 Seller has complied, and the Business is in compliance, in
all material respects, with the specifications set forth in Part 76, Subpart K
of the rules and regulations of the FCC, Section 111 of the U.S. Copyright Act
of 1976 and the applicable rules and regulations thereunder and the applicable
rules and regulations of the U.S. Copyright Office, the Register of Copyrights,
the Copyright Royalty Tribunal and the Communications Act of 1934, including
provisions of any thereof pertaining to signal leakage, to utility pole make
ready and to grounding and bonding of cable television systems (in each case as
the same is currently in effect), and all other applicable Legal Requirements
relating to the construction, maintenance, ownership and operation of the
Assets, the Systems and the Business.
5.9.4 Notwithstanding the foregoing, to Seller's Knowledge, each
System is in compliance in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the FCC
rules and regulations promulgated thereunder (the "1992 Cable Act") as such
Legal Requirements relate to the operation of the Business; provided, however,
that Seller does not hereby make any representation about rates charged to
subscribers, other than the representation regarding the rates charged to
subscribers set forth below. Seller has complied in all material respects with
the must carry and retransmission consent provisions of the 1992 Cable Act.
Seller has used reasonable good faith efforts to establish rates charged to
subscribers, effective since September 1, 1993, that are or were allowable under
the 1992 Cable Act and any authoritative interpretation thereof now or then in
effect, whether or not such rates are or were subject to regulation at that date
by any Governmental Authority, including any local franchising authority and/or
the FCC, unless such rates were not subject to regulation pursuant to a specific
exemption from rate regulation contained in the 1992 Cable Act other than the
failure of any franchising authority to have been certified to regulate rates.
Notwithstanding the foregoing, Seller makes no representation or warranty that
the rates charged to subscribers (a) are allowable under any rules and
regulations of the FCC or any authoritative interpretation thereof, or (b) would
be allowable
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<PAGE>
under any rules and regulations of the FCC or any authoritative interpretation
thereof promulgated after the date of the Closing. Seller has delivered to Buyer
complete and correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215, 1220,
1225, 1235 and 1240 filed with respect to the Systems and copies of all other
FCC Forms filed by Seller and of all correspondence with any Governmental
Authority relating to rate regulation generally or specific rates charged to
subscribers with respect to the Systems, including copies of any complaints
filed with the FCC with respect to any rates charged to subscribers of the
Systems, and any other documentation supporting an exemption from the rate
regulation provisions of the 1992 Cable Act claimed by Seller with respect to
any of the Systems (collectively, "Rate Regulation Documents"). Except as
described in SCHEDULE 5.9, as of the date of this Agreement, Seller has received
no notice from any Governmental Authority with respect to an intention to
enforce customer service standards pursuant to the 1992 Cable Act and Seller has
not agreed with any Governmental Authority to establish customer service
standards that exceed the customer service standards promulgated pursuant to the
1992 Cable Act. In addition, Seller has also delivered to Buyer documentation
for each of the Systems in which the franchising authority has not certified to
regulate rates as of the date of this Agreement showing a determination of
allowable rates using a benchmark methodology. Except as described in SCHEDULE
5.9, Seller has not made any election with respect to any cost of service
proceeding conducted in accordance with Part 76.922 of Title 47 of the Code of
Federal Regulations or any similar proceeding (a "Cost of Service Election")
with respect to any of the Systems.
5.10 Patents, Trademarks and Copyrights. Seller has timely and
----------------------------------
accurately made all requisite filings and payments with the Register of
Copyrights with respect to the Business. Seller has delivered to Buyer complete
and correct copies of all current reports and filings, and all reports and
filings for the past three years, made or filed pursuant to copyright rules and
regulations with respect to the Business. Seller does not possess any patent,
patent right, trademark or copyright material to the operation of the Business
and Seller is not a party to any license or royalty agreement with respect to
any patent, trademark or copyright except for licenses respecting program
material and obligations under the Copyright Act of 1976 applicable to cable
television systems generally. The Business and the System have been operated in
such a manner so as not to violate or infringe upon the rights of, or give rise
to any rightful claim of any Person for copyright, trademark, service mark,
patent, license, trade secret infringement or the like.
5.11 Financial Statements. Seller has delivered to Buyer a correct
--------------------
copy of the audited financial statements for the Systems as of December 31,
1997, including an audited income statement and balance sheet which fairly
present the financial condition of the Systems (collectively, the "Financial
Statements"). At the date of the Financial Statements, Seller had no liability
or obligation, whether accrued, absolute, fixed or contingent (including
liabilities for Taxes or unusual forward or long-term commitments), required by
GAAP to be reflected or reserved against therein that were not fully reflected
or reserved against on the balance sheet included in the Financial Statements,
other than liabilities included in current liabilities, and none of which was or
would be material to the Business.
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<PAGE>
5.12 Absence of Certain Changes. Since December 31, 1997, (a) Seller
--------------------------
has not incurred any obligation or liability (contingent or otherwise), except
normal trade or business obligations incurred in the ordinary course of
business, the performance of which would be reasonably likely, individually or
in the aggregate, to have a material adverse effect on the financial condition
or results of operations of the Business, (b) there has been no material adverse
change (except any material adverse change caused by or arising from other
multiple channel distribution services or any material adverse change affecting
the United States cable industry as a whole, including any change arising from
(i) legislation, litigation, rulemaking or regulation or (ii) competition) in
the business, condition (financial or otherwise) or liabilities of the Business,
and (c) the Business has been conducted only in the ordinary course of business.
5.13 Legal Proceedings. Except as set forth in SCHEDULE 5.13: (a)
-----------------
there is no claim, investigation or litigation pending or, to Seller's
Knowledge, threatened, by or before any Governmental Authority or private
arbitration tribunal against Seller which, if adversely determined, would
materially adversely affect the financial condition or operations of the
Business, the Systems, the Assets or the ability of Seller to perform its
obligations under this Agreement, or which, if adversely determined, would
result in the modification, revocation, termination, suspension or other
limitation of any of the Governmental Permits, Seller Contracts or leases or
other documents evidencing the Real Property; and (b) there is not in existence
any judgment requiring Seller to take any action of any kind with respect to the
Assets or the operation of the Systems, or to which Seller (with respect to the
Systems), the Systems or the Assets are subject or by which they are bound or
affected.
5.14 Tax Returns; Other Reports. Seller has duly and timely filed in
--------------------------
correct form all federal, state and local Tax returns and all other Tax reports
required to be filed by Seller and has timely paid all Taxes which have become
due and payable, whether or not shown on any such report or return, the failure
of which to be filed or paid could adversely affect the Assets or result in the
imposition of an Encumbrance upon the Assets, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as specifically identified on SCHEDULE 5.14, Seller has received no
notice of, nor does Seller have any Knowledge of, any deficiency, assessment or
audit, or proposed deficiency, assessment or audit from any taxing Governmental
Authority which could affect or result in the imposition of an Encumbrance upon
the Assets.
5.15 Employment Matters.
------------------
5.15.1 SCHEDULE 5.15 contains a complete and correct list of
names and positions of all employees of Seller engaged in the Business as of the
date set forth in such SCHEDULE. Seller has no employment agreements, either
written or oral, with any employee of the Business. Seller has complied in all
material respects with applicable Legal Requirements relating to the employment
of labor, including WARN, the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), continuation coverage requirements with respect to group
health plans, and those relating to wages, hours, collective bargaining,
unemployment insurance, worker's
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<PAGE>
compensation, equal employment opportunity, age and disability discrimination,
immigration control and the payment and withholding of Taxes.
5.15.2 Each "employee benefit plan" or "multiemployer plan" (as
those terms are defined in ERISA) with respect to which Seller or any ERISA
Affiliate (as defined in ERISA) of Seller has any liability is set forth on
SCHEDULE 5.15 (the "Employee Benefit Plans"). Neither Seller nor its ERISA
Affiliates nor any Employee Benefit Plan is in material violation of any
provision of ERISA. No "reportable event," as defined in Section 4043 of ERISA,
has occurred and is continuing with respect to any Employee Benefit Plan. No
"prohibited transaction," within the meaning of Section 406 of ERISA, has
occurred with respect to any such Employee Benefit Plan, and no "accumulated
funding deficiency" or "withdrawal liability" (both as defined in Section 302 of
ERISA) exists with respect to any such Employee Benefit Plan. After the
Closing, Buyer will not be required, under ERISA, the Code or any collective
bargaining agreement, to establish, maintain or continue any Employee Benefit
Plan currently maintained by Seller or any of its ERISA Affiliates, other than
those required by the collective bargaining agreement described on SCHEDULE
5.15.
5.15.3 Other than as described on SCHEDULE 5.15, Seller is not
a party to any collective bargaining agreements and Seller has not recognized or
agreed to recognize and has no duty to bargain with any labor organization or
collective bargaining unit. Other than as described on SCHEDULE 5.15, as of the
date of this Agreement, there are not pending any unfair labor practice charges
against Seller, any demand for recognition or any other request or demand from a
labor organization for representative status with respect to any Person employed
by Seller; provided, however, that if any of the matters described in this
sentence occur between the date of this Agreement and the Closing Date, they
will not be considered Assumed Liabilities and Seller will indemnify Buyer with
respect thereto in accordance with SECTION 11.2(A)(IV) of this Agreement. Other
than as described on SCHEDULE 5.15, to Seller's Knowledge, its employees are not
engaged in organizing activity with respect to any labor organization. Seller
has no employment agreement, either written or oral, express or implied, that
would require Buyer to employ any Person after the Closing Date.
5.16 Systems Information. SCHEDULE 5.16 sets forth a materially true
-------------------
and accurate description of the following information relating to the Business
as of the most recent monthly report generated by Seller in the ordinary course
of business containing the information required to prepare such SCHEDULE
(provided that such date is no earlier than two months prior to the date of this
Agreement):
(a) the approximate number of miles of plant included in the
Assets;
(b) the number of EBSs served by the Systems for each franchise;
(c) the approximate number of single family homes and residential
dwelling units passed by the Systems;
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<PAGE>
(d) a description of basic and optional or tier services
available from the Systems, the rates charged by Seller for each and the number
of subscribers and subscriber equivalents receiving each optional or tier
service;
(e) the stations and signals carried by the Systems and the
channel position of each such signal and station; and
(f) the cities, towns, villages, townships, boroughs and counties
served by the Systems.
5.17 Bonds. Except as set forth on SCHEDULE 5.17, as of the date of
-----
this Agreement, there are no franchise, construction, fidelity, performance, or
other bonds or letters of credit posted by Seller in connection with its
operation or ownership of any of the Systems or Assets.
5.18 Finders and Brokers. Seller has not employed any financial
-------------------
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer could be liable.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.
To induce Seller to enter into this Agreement, Buyer represents
and warrants to Seller, as of the date of this Agreement and as of the Closing,
as follows:
6.1 Organization and Qualification. Buyer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
use the assets owned, leased or used by it and to conduct its business as it is
currently conducted. Buyer is duly qualified to do business and is in good
standing under the laws of the State of Illinois, and of each jurisdiction in
which the ownership, leasing or use of the assets owned, leased or used by it or
the nature of Buyer's activities makes such qualification necessary, except in
any such jurisdiction where the failure to be so qualified and in good standing
would not have a material adverse effect on Buyer or on the ability of Buyer to
perform its obligations under this Agreement.
6.2 Authority and Validity. Buyer has all requisite corporate
----------------------
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party. The execution and delivery by
Buyer of, the performance by Buyer of its obligations under, and the
consummation by Buyer of the transactions contemplated by, this Agreement and
the Transaction Documents to which Buyer is a party have been duly and validly
authorized by all necessary action by or on behalf of Buyer. This Agreement has
been, and when executed and delivered by Buyer the Transaction Documents will
be, duly and validly executed and delivered by Buyer and the valid and
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<PAGE>
binding obligations of Buyer, enforceable against Buyer in accordance with their
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to the enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
6.3 No Conflicts; Required Consents. Except for the Required
-------------------------------
Consents, the execution and delivery by Buyer, the performance of Buyer under,
and the consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party do not and will not (a) violate
any provision of the charter or bylaws of Buyer, (b) violate any Legal
Requirement, (c) require any consent, approval or authorization of, or filing of
any certificate, notice, application, report or other document with any
Governmental Authority or other Person or (d) (i) violate or result in a breach
of or constitute a default under (without regard to requirements of notice,
lapse of time or elections of any Person or any combination thereof), (ii)
permit or result in the termination, suspension, modification of, (iii) result
in the acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of any
Encumbrance under, any instrument or other agreement to which Buyer is a party
or by which Buyer or any of its assets is bound or affected, except for purposes
of this clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have a material adverse effect on the validity, binding effect or
enforceability of this Agreement or on the ability of Buyer to perform its
obligations under this Agreement or the Transaction Documents to which it is a
party.
6.4 Finders and Brokers. Buyer has not employed any financial
-------------------
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller could be liable.
6.5 Legal Proceedings. There are no claims, actions, suits,
-----------------
proceedings or investigations pending or, to Buyer's Knowledge, threatened, by
or before any Governmental Authority, or any arbitrator, by or against or
affecting or relating to Buyer which, if adversely determined, would restrain or
enjoin the consummation of the transactions contemplated by this Agreement or
declare unlawful the transactions or events contemplated by this Agreement or
cause any of such transactions to be rescinded.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this
------------------------------
Agreement and the Closing Date, Seller will give Buyer and its counsel,
accountants and other representatives full access during normal business hours
upon reasonable notice to all the premises and books and records of the Business
and to all the Assets and to the System personnel and will furnish to Buyer and
such representatives all such documents, financial information, and other
information regarding the Business and the Assets as Buyer from time to time
reasonably may request; provided that no such
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<PAGE>
investigation will affect or limit the scope of any of Seller's representations,
warranties, covenants and indemnities in this Agreement or any Transaction
Document or limit liability for any breach of any of the foregoing.
7.2 Continuity and Maintenance of Operations; Financial Statements.
--------------------------------------------------------------
Except as Buyer may otherwise consent in writing, between the date of this
Agreement and the Closing (including between the 1031 Closing Date and the
Closing Date, if applicable):
7.2.1 Seller will conduct the Business and operate the Systems
only in the usual, regular and ordinary course consistent with past practices
and in material compliance with the 1998 operating and capital budgets for the
Systems, true and complete copies of which have been provided by Seller to Buyer
(including making budgeted capital expenditures, completing line extensions
consistent with prudent business practices, and fulfilling installation
requests), and will use commercially reasonable efforts to (a) preserve its
current business intact, including preserving existing relationships with
franchising authorities, suppliers, customers and others having business
dealings with Seller relating to the Business unless Buyer requests otherwise,
(b) keep available the services of its employees and agents providing services
in connection with the Business and (c) continue making marketing, advertising
and promotional expenditures with respect to the Business consistent with past
practices.
7.2.2 Seller will maintain the Assets in good repair, order and
condition (ordinary wear and tear excepted), will maintain equipment and
inventory at historical levels consistent with past practices (and will have at
least a 30-day supply of inventory on hand for each System at Closing), will
maintain in full force and effect policies of insurance with respect to the
Business in such amounts and with respect to such risks as customarily
maintained by operators of cable television systems of the size and geographic
location as the Systems and will maintain its books, records and accounts in the
usual, regular and ordinary manner on a basis consistent with past practices.
Seller will not itself, and will not permit any of its partners, officers,
directors, shareholders, agents or employees to, pay any of Seller's subscriber
accounts receivable (other than for their own residences) prior to the Closing
Date. Seller will continue to implement its procedures for disconnection and
discontinuance of service to subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement.
7.2.3 Without the prior approval of Buyer, Seller will not (a)
change the rate charged for Basic Service, Expanded Basic Service or Pay TV or
add, delete, retier or repackage any programming services except to the extent
required under the 1992 Cable Act or any other Legal Requirement, provided
however if Seller changes such rates in order to so comply, Seller will provide
Buyer with copies of any FCC forms (even if not filed with any Governmental
Authority) that Seller used to determine that the new rates were allowable, (b)
make any Cost of Service Election with respect to any of the Systems other than
those Cost of Service Elections described on SCHEDULE 5.9, (c) sell, transfer or
assign any portion of the Assets other than sales in the ordinary course of
business or permit the creation of any Encumbrance on any Asset other than a
Permitted Encumbrance or any
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<PAGE>
Encumbrance which will be released at or prior to Closing, (d) modify in any
material respect, terminate, suspend or abrogate any Governmental Permits,
Seller Contracts or any other contract or agreement (other than those
constituting Excluded Assets), (e) enter into any contract or commitment or
incur any indebtedness or other liability or obligation of any kind relating to
any System or the Business involving an expenditure in excess of $50,000 under
any single contract or commitment, or $100,000 in the aggregate under all such
contracts and commitments (other than any leases for real property which shall
not be entered into without Buyer's consent regardless of the monetary
commitment involved), other than contracts or commitments which are cancellable
on 30 days' notice or less without penalty, (f) take or omit to take any action
that would result in any of its representations or warranties in this Agreement
or in any Transaction Document not being true and correct when made or as of the
Closing, (g) engage in any marketing, subscriber installation or collection
practices that are inconsistent with past practices other than marketing and/or
installation practices which are reasonably necessary to match offers being made
by any competitor of the Systems, or (h) enter into any agreement with or
commitment to any competitive access providers with respect to the Systems.
7.2.4 Seller promptly will deliver to Buyer true and complete
copies of monthly and quarterly financial statements and operating reports and
any reports with respect to the operations of the Business prepared by or for
Seller at any time between the date of this Agreement and the Closing Date. All
financial statements so delivered will be prepared in accordance with GAAP on a
basis consistent with the Financial Statements.
7.2.5 Seller will give or cause to be given to Buyer as soon as
reasonably possible but in any event no later than 5 Business Days prior to the
date of submission to the appropriate Governmental Authority, copies of all Rate
Regulation Documents prepared with respect to any of the Systems, and Seller
will make a good faith effort to address any specific concerns raised by Buyer
with respect to such documents.
7.2.6 Seller will duly and timely file a valid notice of renewal
under Section 626 of the Cable Communications Policy Act of 1984 with the
appropriate Governmental Authority with respect to all cable television
franchises of the Business that will expire within 36 months after any date
between the date of this Agreement and the Closing Date.
7.2.7 Seller will promptly notify Buyer of any fact,
circumstance, event or action by it or otherwise (a) which, if known at the date
of this Agreement, would have been required to be disclosed in or pursuant to
this Agreement or (b) the existence, occurrence or taking of which would result
in any of Seller's representations and warranties in this Agreement or any
Transaction Document not being true, complete and correct when made or at the
Closing, and, with respect to clause (b) use its best efforts to remedy the
same.
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<PAGE>
7.3 Employee Matters.
----------------
7.3.1 Buyer will have no obligation to employ or offer employment
to any of the employees of Seller. As of the Closing Date, Seller will
terminate the employment of all its employees who were employed incidental to
the conduct of the Business whose employment will not continue with Seller after
the Closing and will promptly pay to all such employees all compensation,
including salaries, commissions, bonuses, deferred compensation, severance,
insurance, pensions, profit sharing, vacation (except for accrued vacation
included in the adjustments pursuant to SECTION 3.2), sick pay and other
compensation or benefits to which they are entitled for periods prior to the
Closing, including all amounts, if any, payable on account of the termination of
their employment. Seller agrees to cooperate in all reasonable respects with
Buyer to allow Buyer to evaluate and interview employees of the Business to make
hiring decisions. Such cooperation will include allowing Buyer to contact
employees during work time and, with the consent of the employee, making
personnel records available. Buyer will give Seller written notice on or before
60 days after the date of this Agreement of the names of all employees of the
System to whom Buyer desires to offer employment on and after the Closing Date
(subject to satisfaction of Buyer's conditions for employment). Seller will
not, without the prior written consent of Buyer, change the compensation or
benefits of any employees of the Business except in accordance with past
practice.
7.3.2 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other employee
benefit plans of Seller or arising under any Legal Requirement affecting
employees of Seller incurred on or before the Closing Date or resulting or
arising from events or occurrences occurring or commencing on or before the
Closing Date will remain the responsibility of Seller, whether or not such
employees are hired by Buyer after the Closing.
7.3.3 Seller will remain solely responsible for, and will
indemnify and hold harmless Buyer from and against all Losses arising from or
with respect to, all salaries and all severance, vacation (except for accrued
vacation included in the adjustments pursuant to SECTION 3.2), medical, sick,
holiday, continuation coverage and other compensation or benefits to which
Seller's employees (whether or not hired by Buyer) may be entitled as a result
of their employment by Seller prior to the Closing, the termination of their
employment prior to the Closing, the consummation of the transactions
contemplated hereby or pursuant to any applicable Legal Requirement (including
WARN) or otherwise relating to their employment prior to the Closing.
7.3.4 Nothing in this Agreement will require Buyer to assume any
collective bargaining agreement between Seller and any labor organization other
than the collective bargaining agreements described on SCHEDULE 5.15.
7.4 Leased Vehicles; Other Capital Leases. Seller will pay the
-------------------------------------
remaining balances on any leases for vehicles or capital leases included in the
Equipment and will deliver title to such
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<PAGE>
vehicles and other Equipment free and clear of all Encumbrances (other than
Permitted Encumbrances) to Buyer at the Closing.
7.5 Required Consents; Estoppel Certificates.
----------------------------------------
7.5.1 Seller will use commercially reasonable efforts to obtain
in writing, as promptly as possible and at its expense, all the Required
Consents and any other consent, authorization or approval required to be
obtained by Seller in connection with the transactions contemplated by this
Agreement, in form and substance reasonably satisfactory to Buyer and deliver to
Buyer copies of such Required Consents and such other consents, authorizations
or approvals promptly after they are obtained by Seller. Such Required Consents
will be proposed in a form that provides confirmation from the third party of
the continued existence of and the absence of defaults under the applicable
Seller Contract or Governmental Permit. Buyer will cooperate with Seller to
obtain all Required Consents, but Buyer will not be required to accept or agree
or accede to any modifications or amendments to, or changes in, or the
imposition of any condition to the transfer to Buyer of (in each case other than
inconsequential matters with no adverse effect on Buyer), any Seller Contract or
Governmental Permit that are not acceptable to Buyer in its sole discretion. As
soon as practicable after the execution of this Agreement, but in any event no
later than 30 days after such execution, the parties will deliver to the
appropriate Governmental Authority requests for the necessary consents to
transfer the Governmental Permits, and will complete, execute and deliver to the
appropriate Governmental Authority, the FCC Forms 394 prepared by Buyer with
respect to each Governmental Permit. Seller acknowledges that such requests for
consent and FCC Forms 394 may contain, if necessary under the terms of the
applicable Governmental Permit and if requested by Buyer, a request for consent
from the applicable Governmental Authority with respect to the merger of AT&T
Corp. and Buyer's parent corporation, Tele-Communications, Inc. (the "TCI/AT&T
Transaction"). In the alternative, Buyer may file a request for consent and FCC
Form 394 for the TCI/AT&T Transaction with applicable Governmental Authorities
subsequent to such filing with respect to the transactions contemplated by this
Agreement but prior to the Closing with the consent of Seller, which consent
will not be unreasonably withheld.
7.5.2 Seller will use commercially reasonable efforts to obtain
for each lease that has not been recorded in the public records, execution of a
document suitable for recording in the public records and sufficient after
recording to constitute a memorandum of lease.
7.6 Renewal or Extension of Franchises.
----------------------------------
7.6.1 Promptly after the execution of this Agreement, Seller
shall use commercially reasonable efforts, and Buyer shall cooperate with and
assist Seller in all reasonable respects (including attendance at meetings and
hearings before local franchising authorities and filing and signing any and all
applications, statements or documents required and reasonably satisfactory to
Buyer), to have cable television franchises covering at least 85% of the EBSs of
the Systems (determined based on the number of EBSs served by each franchise as
set forth on SCHEDULE 5.16)
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extended or renewed so that they expire no earlier than March 31, 2001, on terms
and conditions reasonably satisfactory to Buyer and Seller, which terms and
conditions shall be evaluated by Buyer and Seller in the context of extensions
or renewals of similarly situated franchises in the greater Chicago metropolitan
area that have been extended or renewed (or granted) for a comparable period of
time or duration. Seller will bear all costs required to remedy any item of
noncompliance with the terms of any franchise or to meet any current obligation
under the terms of any franchise in connection with obtaining any such extension
or renewal. Buyer will bear all costs associated with commitments made for
capital expenditures to be made after the Closing Date related to obtaining any
such extension or renewal. All other costs and expenses associated with
obtaining any such extension or renewal will be paid one-half by Seller and one-
half by Buyer.
7.6.2 Seller shall keep Buyer informed of all meetings and
hearings with local franchising authorities relating to the extensions and/or
renewals of franchises, and Seller acknowledges and agrees that Buyer shall have
the right to participate in any such meetings or hearings and Buyer agrees that
its representatives will attend any such meetings or hearings upon the request
with reasonable advance notice of the relevant local franchising authority or
Seller.
7.7 Title Commitments and Surveys.
-----------------------------
7.7.1 After the execution of this Agreement, Buyer will order at
Seller's expense (a) commitments for owner's title insurance policies on all
Real Property owned by Seller and (b) an ALTA survey (including such items on
Table A of the Minimum Standard Detail Requirements and Classifications thereto
that Buyer in its reasonable judgment determines are desirable or necessary) on
each parcel of Real Property for which a title insurance policy is to be
obtained. The title commitments will evidence a commitment to issue an ALTA
title insurance policy insuring good, marketable and indefeasible fee simple
title to each parcel of such Real Property, subject only to Permitted
Encumbrances, for such amount as Buyer directs and will contain no exceptions
except for items which in Buyer's reasonable opinion do not adversely affect
(other than in an immaterial way as to any individual parcel) the good,
marketable and indefeasible title to or Buyer's access or quiet use or enjoyment
of such Real Property in the manner the Real Property is presently used or in
the normal conduct of the Business. At the Closing, Seller will cause Buyer to
receive, at Seller's expense, title commitments redated to the date and time of
Closing. In the event Seller has not eliminated or caused to be eliminated all
unacceptable exceptions from such policies or commitments prior to Closing, and
Buyer elects to proceed with the Closing, Buyer will be entitled to
indemnification with respect to such exceptions as provided in SECTION 11.2.
7.7.2 Title insurance policies on all Real Property owned by
Seller in such amounts as Buyer directs will be delivered to Buyer at Seller's
expense within 30 days after the Closing Date evidencing title to the Real
Property vested in Buyer consistent with the commitments delivered at the
Closing pursuant to SECTION 7.7.1.
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7.8 HSR Notification. As soon as practicable after the execution of
----------------
this Agreement, but in any event no later than 30 days after such execution,
Seller and Buyer will each complete and file, or cause to be completed and
filed, any notification and report required to be filed under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); and each
such filing will request early termination of the waiting period imposed by the
HSR Act. The parties will use their reasonable best efforts to respond as
promptly as reasonably practicable to any inquiries received from the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") for additional information or documentation
and to respond as promptly as reasonably practicable to all inquiries and
requests received from any other Governmental Authority in connection with
antitrust matters. The parties will use their respective reasonable best
efforts to overcome any objections which may be raised by the FTC, the Antitrust
Division or any other Governmental Authority having jurisdiction over antitrust
matters. Notwithstanding the foregoing, Buyer will not be required to make any
significant change in the operations or activities of the business (or any
material assets employed therein) of Buyer or any of its Affiliates, if Buyer
determines in good faith that such change would be materially adverse to the
operations or activities of the business (or any material assets employed
therein) of Buyer or any of its Affiliates having significant assets, net worth,
or revenue. Notwithstanding anything to the contrary in this Agreement, if
Buyer or Seller, in its sole opinion, considers a request from a governmental
agency for additional data and information in connection with the HSR Act to be
unduly burdensome, such party may terminate this Agreement by giving written
notice to the other. Within 10 days after receipt of a statement therefor,
Seller will reimburse Buyer for one-half of the filing fees payable by Buyer in
connection with Buyer's filing under the HSR Act.
7.9 No Shopping. None of Seller, its partners or any agent or
-----------
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any portion of the Assets.
7.10 Lien and Judgment Searches. Not more than 20 nor fewer than 10
--------------------------
days prior to the expected Closing Date, Seller, at its expense, will provide
Buyer with (a) the results of a lien search conducted by a professional search
company of records in the offices of the secretaries of state in each state and
county clerks in each county where there exist tangible Assets, and in the state
and county where Seller's principal offices are located, including copies of all
financing statements or similar notices or filings (and any continuation
statements) discovered by such search company and (b) the results of a search of
the dockets of the clerk of each federal and state court sitting in the city,
county or other applicable political subdivision where the principal office or
any material assets of Seller may be located, with respect to judgments, orders,
writs or decrees against or affecting Seller or any of the Assets.
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7.11 Transfer Taxes. Any state sales Taxes imposed by any
--------------
Governmental Authority arising from or payable by reason of the transfer of any
of the Assets pursuant to this Agreement will be paid by Seller. Any Taxes
(other than state sales Taxes) or any fees or other charge (including filing
fees) imposed by any Governmental Authority arising from or payable by reason of
the transfer of any of the Assets pursuant to this Agreement will be paid one-
half by Buyer (but in no event will Buyer's share exceed $250,000), with the
balance to be paid by Seller.
7.12 Distant Broadcast Signals. Unless otherwise restricted or
-------------------------
prohibited by any Governmental Authority or applicable Legal Requirement, if
requested by Buyer, Seller will delete prior to the Closing Date any distant
broadcast signals which Buyer determines will result in unacceptable liability
on the part of Buyer for copyright payments with respect to continued carriage
of such signals after the Closing.
7.13 Guaranty. At the Closing, Seller will cause Intercable to sign
--------
and deliver to Buyer, a Guaranty in the form of EXHIBIT D.
7.14 Letter to Programmers. On or before the Closing Date, Seller
---------------------
will transmit a letter in the form of EXHIBIT E to all programmers from which
Seller purchases programming for the Systems and provide Buyer with a copy of
each such letter.
7.15 Updated Schedules. Not later than ten Business Days prior to the
-----------------
expected Closing Date, Seller will deliver to Buyer revised copies of all
Schedules to this Agreement which will have been updated and marked to show any
changes occurring between the date of this Agreement and the date of delivery;
provided, however, that for purposes of Seller's representations and warranties
and covenants in this Agreement, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing,
except to the extent that the Schedules have been revised to reflect actions
permitted or required to be taken under this Agreement between the date hereof
and the Closing Date, and provided further that if the effect of any such
updates to Schedules is to disclose any one or more additional properties,
privileges, rights, interests or claims as Assets, Buyer, at or before Closing,
will have the right (to be exercised by written notice to Seller) to cause any
one or more of such items to be designated as and deemed to constitute Excluded
Assets for all purposes under this Agreement, except to the extent that the
addition of such item by Seller was in compliance with SECTION 7.2.3(D) or (E)
or SECTION 7.6.
7.16 Use of Names and Logos. For a period of 90 days after the
----------------------
Closing Date, Buyer will be entitled to use all trademarks, trade names, service
marks, service names, logos and similar proprietary rights of Seller and all
derivations and abbreviations of such name and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
Notwithstanding the foregoing, Buyer will not be required to remove or
discontinue using any such trade name or mark that is affixed to converters or
other items in or to be used in subscriber homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable for
Buyer.
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7.17 Subscriber Billing Services. Seller will provide to Buyer
---------------------------
on terms and conditions reasonably satisfactory to each party, access to and the
right to use its billing system computers, software and related fixed assets in
connection with the Systems acquired by Buyer for a period of up to 120 days
following the later of the Closing or termination of the Services Agreement to
allow for conversion of existing billing arrangements; provided however that
Buyer will not be required to pay Seller more than Seller's actual cost of
providing such service.
7.18 Satisfaction of Conditions. Each party will use its best efforts
--------------------------
to satisfy, or to cause to be satisfied, the conditions to the obligations of
the other party to consummate the transactions contemplated by this Agreement,
as set forth in SECTION 8, provided that Buyer will not be required to agree to
any increase in the amount payable with respect to, or any modification that
makes more burdensome in any material respect, any of the Assumed Liabilities.
In connection with satisfying the condition set forth in SECTION 8.1.3, as soon
as practicable after the execution of this Agreement, but in any event no later
than 60 days after such execution or such later date as Buyer may agree upon
request of Seller, Seller will prepare and file with the Securities and Exchange
Commission all forms and documents required with respect to obtaining the
necessary approval of the limited partners of Seller to the transactions
contemplated by this Agreement.
7.19 Confidentiality and Publicity. Neither party will issue any
-----------------------------
press release or make any other public announcement or any oral or written
statements to Seller's employees concerning this Agreement or the transactions
contemplated hereby except as required by applicable Legal Requirements, without
the prior written consent of the other party. Each party will hold, and will
cause its employees, consultants, advisors and agents to hold the terms of this
Agreement in confidence; provided that (a) such party may use and disclose such
information once it has become publicly disclosed (other than by such party in
breach of its obligations under this Section) or which rightfully has come into
the possession of such party (other than from the other party) and (b) to the
extent that such party may be compelled by Legal Requirements to disclose any of
such information, but the party proposing to disclose such information will
first notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may disclose
such information to employees, consultants, advisors, agents and actual or
potential lenders whose knowledge is necessary to facilitate the consummation of
the transactions contemplated by this Agreement. The obligation by either party
to hold information in confidence pursuant to this Section will be satisfied if
such party exercises the same care with respect to such information as it would
exercise to preserve the confidentiality of its own similar information.
7.20 Bulk Transfers. Buyer waives compliance by Seller with Legal
--------------
Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.21 Environmental Reports. Within 60 days after the execution of
---------------------
this Agreement, Seller will, at its expense, obtain and deliver to Buyer for
each parcel of Real Property owned by Seller, and if reasonably requested by
Buyer within 30 days after the execution of this Agreement for any specific
parcel of Real Property leased by Seller, a current Phase I Environmental Site
Assessment
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("Environmental Report") prepared by a nationally known environmental
engineering firm reasonably satisfactory to Buyer in accordance with ASTM
Standard E 1527-93 and certified to Buyer. If the Environmental Reports show
that soil and/or groundwater sampling is merited, the engineering firm will
conduct such soil and groundwater sampling and other testing as will enable the
environmental engineers to determine if Hazardous Substances are detected and to
provide an estimate of the cost to remove and dispose of the Hazardous
Substances or otherwise remediate the property in accordance with all applicable
Environmental Laws.
7.22 Section 1031. The parties shall cooperate with each other in
------------
order that the transactions contemplated under this Agreement may be
accomplished as part of a deferred exchange (the "1031 Transaction") pursuant to
Section 1031 of the Code and applicable Treasury Regulations and to execute such
agreements and other documents as may be necessary to complete and otherwise
effectuate a tax-deferred exchange; provided, however, that Seller shall not be
obligated to incur any costs, expenses or other liabilities in cooperating with
Buyer hereunder. Buyer shall be permitted to assign any or all of its rights
and obligations under this Agreement to a qualified intermediary without
Seller's consent for purposes of qualifying the transactions hereunder as a tax-
deferred exchange; provided, however, that the fees of such qualified
intermediary shall be paid by Buyer; and provided further, however, that nothing
in this Section shall be deemed to relieve Buyer of any of its obligations under
this Agreement, including its obligations to close the transactions contemplated
by this Agreement if the exchange described herein has not occurred within nine
months after the date of this Agreement and the conditions to Closing described
in SECTIONS 8.1 and 8.2 have been met or waived, subject to the rights of either
party to terminate the Agreement pursuant to SECTION 10.1.3.
7.23 MDU Agreements. If requested by Buyer within 120 days after the
--------------
execution of this Agreement or within 90 days after Seller notifies Buyer in
writing that Seller has begun to provide service to an MDU (as defined below)
pursuant to an oral agreement between the date of execution of this Agreement
and the Closing Date, Seller will use its reasonable efforts to obtain prior to
Closing a fully executed written agreement in a form reasonably satisfactory to
Buyer authorizing Buyer to provide service to any multiple dwelling complex or
trailer park ("MDU") with more than 250 units if Seller provides service to such
MDU on the date of this Agreement, or begins to provide service to such MDU
between the date of this Agreement and the Closing, pursuant to an oral
agreement.
7.24 Services Agreement. If the consummation of any one or more of
------------------
the Related Transactions does not occur simultaneously with the consummation of
the transactions contemplated by this Agreement, at or prior to Closing Buyer
and Seller will enter into a Services Agreement (the "Services Agreement")
containing terms and conditions reasonably satisfactory to Buyer and Seller
pursuant to which (a) Seller will continue to provide services to Buyer, at
Seller's cost (including reasonable overhead), which will enable Buyer to
operate the Systems as they had been operated prior to the Closing, and (b)
Buyer will provide services to Seller, at Buyer's cost (including reasonable
overhead), which will enable Seller to operate the cable television systems to
be sold in the Related Transactions as they had been operated prior to the
Closing. Such services will be provided until the
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earlier of (i) the consummation of all of the Related Transactions or (ii) the
receipt by the party providing such services of notice from the other party that
it no longer desires to have such services provided. Buyer and Seller agree to
negotiate in good faith to finalize the Services Agreement.
7.25 Year 2000 Matters.
-----------------
7.25.1 Certain Defined Terms. For purposes of this Section
---------------------
7.25, the following terms shall have the following meanings:
(a) "Computer and Other Systems" means any level of
hardware or software, equipment and cable plant, or building and other
facilities used in connection with the Assets or the Business which are date
dependent or which process date data, including any microcode, firmware,
application programs, user interfaces, files and databases, and which might be
adversely affected by the advent or changeover to the Year 2000 or to the advent
or changeover to any leap year.
(b) "Year 2000 Ready" or "Year 2000 Readiness" means
that the referenced component, system, software, equipment or other item (for
purposes of this definition, the "Computer System") is designed to be used prior
to, during and after the calendar year 2000 A.D., and that such Computer System
will operate at all levels, including microcode, firmware, application programs,
user interfaces, files and databases, during each such time period without error
or interruption relating to, or the product of, date data which represents or
references different centuries or more than one century or leap year.
(c) "Year 2000 Remediation Program" means an enterprise
wide program to make Year 2000 Ready all material components, systems, software,
equipment, facilities and other items related to the subject entity's business.
Such Year 2000 Remediation Program must be conducted by persons deemed by
Intercable to have experience relevant to issues related to Year 2000 Readiness
and such persons must have organized an enterprise wide program which reports to
executive level management of Intercable.
7.25.2 Year 2000 Readiness Efforts. Prior to the Closing Date,
---------------------------
Intercable shall establish and maintain a Year 2000 Remediation Program.
Pursuant to such Year 2000 Remediation Program, all material Computer and Other
Systems will be evaluated, remediated and tested on the same general basis, and
on the same general work plan and timetable, as the other material computer
systems, facilities and equipment of Intercable and its affiliated entities.
After the Closing Date through June 30, 2000, Intercable will use commercially
reasonable efforts to provide Buyer with any non-confidential information
possessed by Intercable and reasonably requested by Buyer regarding the Year
2000 Readiness of any material component of the Computer and Other Systems. The
parties acknowledge that nothing contained in this Section 7.25 shall constitute
any representation, guarantee or warranty that the Computer and Other Systems
will be Year 2000 Ready at the Closing Date or thereafter.
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SECTION 8. CONDITIONS PRECEDENT.
8.1 Conditions to the Obligations of Buyer and Seller. The
-------------------------------------------------
obligations of each party to consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or before the Closing, of the
following, which may be waived by the parties to the extent permitted by
applicable Legal Requirements:
8.1.1 HSR Act Filings. All filings required under the HSR
---------------
Act have been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or threat of
any litigation by a Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or proceeding
---------------------
is pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of any
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement (excluding the ability to acquire
the Systems pursuant to a like-kind exchange under Section 1031 of the Code) or
have a material adverse effect on the right of Buyer to exercise full rights of
ownership of the Systems or (d) prevent or make illegal the consummation of any
transactions contemplated by this Agreement.
8.1.3 Limited Partners' Approval. The approval of the
--------------------------
limited partners of Seller of the consummation of the transactions contemplated
by this Agreement shall have been received.
8.2 Conditions to the Obligations of Buyer. The obligations of
--------------------------------------
Buyer to consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or before the Closing, of the following conditions,
which may be waived by Buyer to the extent permitted by applicable Legal
Requirements:
8.2.1 Representations and Warranties. All representations
------------------------------
and warranties of Seller in this Agreement and any Transaction Document are, if
specifically qualified by materiality, true and correct in all respects and, if
not so qualified, are true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
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8.2.2 Performance of Agreements. Seller has performed in
-------------------------
all material respects all obligations and agreements and complied in all
material respects with all covenants and conditions in this Agreement and any
Transaction Document to be performed or complied with by Seller at or before the
Closing.
8.2.3 Deliveries. Seller has delivered the items and
----------
documents required to be delivered by it pursuant to this Agreement, including
those required under SECTION 9.2.
8.2.4 Consents. Seller has delivered to Buyer evidence, in
--------
form and substance satisfactory to Buyer, that all of the Required Consents
marked with an asterisk on SCHEDULE 5.3 have been obtained or given (or deemed
to have been given) and are in full force and effect.
8.2.5 Environmental Matters. The Environmental Reports
---------------------
delivered to Buyer pursuant to SECTION 7.21 and any other environmental audits
or assessments conducted with respect to the Assets do not indicate the
existence of any conditions that could reasonably be expected to give rise to a
material risk of liability, and Buyer is satisfied in its reasonable judgment,
by appropriate indemnification or otherwise, that Buyer will have no liability
with respect to any environmental matters related to the property located at
1101 West Roosevelt Road, Wheaton, Illinois.
8.2.6 No Material Adverse Change. There has not been any
--------------------------
material adverse change in the Business, the Assets or the Systems since the
date of this Agreement other than any material adverse change caused by or
arising from other multiple channel distribution services or any material
adverse change affecting the United States cable television industry as a whole,
including any change arising from (a) legislation, litigation, rulemaking or
regulation or (b) competition.
8.2.7 EBS. As of the Closing Date, the Business has no
---
fewer than 53,500 EBSs (the "EBS Condition").
8.2.8 Franchises. Cable television franchises covering at
----------
least 85% of the EBSs of the Systems, determined based on the number of EBSs for
each franchise as set forth on SCHEDULE 5.16, shall have a term expiring no
earlier than March 31, 2001. To the extent that Seller must obtain an extension
or renewal of any cable television franchise to meet the condition described in
this SECTION 8.2.8, any such extensions or renewals shall be on terms and
conditions reasonably satisfactory to Buyer and Seller evaluated in the context
of extensions or renewals of similarly situated franchises in the greater
Chicago metropolitan area that have been extended or renewed (or granted) for a
comparable period of time or duration, and Seller and Buyer will allocate the
costs associated with obtaining such extensions or renewals between Seller and
Buyer as described in SECTION 7.6.1.
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8.2.9 1031 Exchange. The closing of Buyer's sale of certain
-------------
systems in a separate transaction to permit Buyer to accomplish the 1031
Transaction shall have occurred (the "1031 Condition"); provided, however, if
the 1031 Condition shall not have occurred on or before the date that is nine
months after the date of this Agreement (the "1031 Closing Date"), the 1031
Condition shall no longer be a condition to the obligations of Buyer to
consummate the transactions hereunder.
8.3 Conditions to Obligations of Seller. The obligations of
-----------------------------------
Seller to consummate the transactions contemplated by this Agreement are subject
to the satisfaction by Seller at or before the Closing, of the following, which
may be waived by Seller, to the extent permitted by applicable Legal
Requirements:
8.3.1 Representations and Warranties. All representations
------------------------------
and warranties of Buyer contained in this Agreement and any Transaction Document
are, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, are true and correct in all material respects, in each
case on and as of the Closing Date with the same effect as if made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
8.3.2 Performance of Agreements. Buyer has performed in all
-------------------------
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Buyer at or before the Closing.
8.3.3 Deliveries. Buyer has delivered the items and
----------
documents required to be delivered by it pursuant to this Agreement, including
those required under SECTION 9.3.
8.3.4 EBS. As of the Closing Date, either (a) the Business
---
has no fewer than 53,500 EBSs or (b) Buyer has waived its right to an adjustment
pursuant to SECTION 3.2.1 except to the extent of the adjustment applicable if
the number of EBSs were 53,500.
8.4 Waiver of Conditions. Any party may waive in writing any or
--------------------
all of the conditions to its obligations under this Agreement.
SECTION 9. CLOSING.
9.1 The Closing; Time and Place. The Closing will be held on a
---------------------------
date specified by Buyer (upon three Business Days prior notice to Seller) that
is within 15 days after all conditions to the Closing contained in this
Agreement (other than those based on acts to be performed at the Closing) have
been satisfied or waived; provided, however, that if the 1031 Condition is
eliminated as provided in SECTION 8.2.9, the Closing will be held on a date
specified by Buyer (upon three Business Days prior notice to Seller) after all
conditions to Closing contained in this Agreement (other than those based on
acts to be performed at the Closing) have been satisfied or waived and
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within three months after the date of elimination of the 1031 Condition as
provided in SECTION 8.2.9, and provided further that if all conditions to
Buyer's obligations to Closing (other than the 1031 Condition) have been
satisfied or waived by Buyer on or before the 1031 Closing Date, but Buyer
elects to specify a date after the 1031 Closing Date as the Closing Date as
provided in the preceding provisions of this SECTION 9.1, then for purposes of
determining the satisfaction of the EBS Condition and calculating the EBS
Shortfall Adjustment, the number of EBSs of the Systems shall be determined as
of the 1031 Closing Date regardless of the actual date of Closing. The Closing
will be held at 10:00 a.m. local time at Buyer's counsel's office located at 633
Seventeenth Street, Suite 3000, Denver, Colorado 80202, or at such place and
time as Buyer and Seller may agree.
9.2 Seller's Delivery Obligations. At the Closing, Seller will
-----------------------------
deliver (or cause to be delivered) to Buyer the following:
(a) a Bill of Sale in the form attached as EXHIBIT A;
(b) a special warranty deed in a form reasonably acceptable to
Buyer (and complying with applicable state laws) with respect to each parcel of
owned Real Property, duly executed and acknowledged and in recordable form,
warranting to defend title to such Real Property against all persons claiming
by, through or under Seller, subject only to Permitted Encumbrances, and in form
sufficient to permit the title company to issue the title policy described in
SECTION 7.7.1 to Buyer with respect to such Real Property;
(c) an Assignment and Assumption of Contracts in the form
attached as EXHIBIT B;
(d) one or more Assignments of Leases in the form attached as
EXHIBIT C and, if requested by Buyer, short forms or memoranda of such
Assignments in recordable form;
(e) any memorandum of lease obtained by Seller pursuant to
SECTION 7.5.2;
(f) a Guaranty signed by Intercable in the form attached as
EXHIBIT D;
(g) an affidavit of Seller, under penalty of perjury, that Seller
is not a "foreign person" (as defined in the Foreign Investment in Real Property
Tax Act and applicable regulations) and that Buyer is not required to withhold
any portion of the consideration payable under this Agreement under the
provisions of such Act in the form attached as EXHIBIT F;
(h) motor vehicle title certificates and such other transfer
instruments as Buyer may deem necessary or advisable to transfer the Assets to
Buyer and to perfect Buyer's rights in the Assets;
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(i) the opinion of Elizabeth Steele, Esq., counsel for Seller,
dated the Closing Date, in the form set forth in EXHIBIT G;
(j) evidence satisfactory to Buyer that all Encumbrances
affecting any of the Assets (other than Permitted Encumbrances) have been
terminated and released;
(k) the title insurance commitments described in SECTION 7.7.1;
(l) a certificate, dated the Closing Date, signed by the
President or any Vice President of JSCC, stating that to his or her knowledge,
the conditions set forth in SECTIONS 8.2.1, 8.2.2 and 8.2.7 are satisfied;
(m) the Escrow Agreement in the form attached as EXHIBIT I;
(n) if required pursuant to SECTION 7.24, the Services Agreement;
and
(o) such other documents as Buyer may reasonably request in
connection with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations. At the Closing, Buyer will deliver
----------------------------
(or cause to be delivered) to Seller the following:
(a) the portion of the Base Purchase Price required to be paid to
Seller at the Closing as provided in SECTION 3.1.1, as adjusted in accordance
with this Agreement, and the portion of the Base Purchase Price required to be
delivered to the Escrow Agent at the Closing as provided in SECTION 3.1.2;
(b) a Bill of Sale in the form attached as EXHIBIT A;
(c) an Assignment and Assumption of Contracts in the form
attached as EXHIBIT B;
(d) a certificate, dated the Closing Date, signed by an executive
officer of Buyer, stating that to his or her knowledge, the conditions set forth
in SECTIONS 8.3.1 and 8.3.2, are satisfied;
(e) an opinion of Mary S. Willis, Esq., counsel to Buyer, dated
the Closing Date, in the form set forth in EXHIBIT H;
(f) the Escrow Agreement in the form attached as EXHIBIT I;
(g) if required pursuant to SECTION 7.24, the Services Agreement;
and
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(h) such other documents as Seller may reasonably request in
connection with the transactions contemplated by this Agreement.
SECTION 10. TERMINATION.
10.1 Termination Events. This Agreement may be terminated and
------------------
the transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of Buyer
and Seller;
10.1.2 By either party at any time, if the other is in
material breach or default of any of its covenants, agreements or other
obligations in this Agreement or in any Transaction Document, or if any of its
representations in this Agreement or in any Transaction Document is not true in
all material respects when made or when otherwise required by this Agreement or
any Transaction Document to be true and such breach or default or failure to be
true is not cured or waived prior to Closing;
10.1.3 By either party upon written notice to the other, if
Closing has not occurred on or before one year from the date of this Agreement
for any reason other than a material breach or default by such party of its
respective covenants, agreements or other obligations under this Agreement, or
any of its representations in this Agreement not being true and accurate in all
material respects when made or when otherwise required by this Agreement to be
true and accurate in all material respects;
10.1.4 By Seller, within 45 days after the date hereof (the
"Approval Deadline"), if the approval of Growth Partners, Inc., the Associate
General Partner of Seller, has not been obtained (for any reason) on or before
such date; or
10.1.5 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to SECTION 10.1, all obligations of the parties under this Agreement
will terminate, except for the obligations set forth in SECTIONS 7.19 and 12.16.
Termination of this Agreement pursuant to SECTIONS 10.1.2 OR 10.1.3 will not
limit or impair any remedies that any party may have with respect to a breach or
default by the other of its covenants, agreements or obligations under this
Agreement. Seller will have no liability in any event upon exercise of its right
to terminate this Agreement pursuant to SECTION 10.1.4.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
11.1 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the parties in this Agreement and in the
Transaction Documents will survive until
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November 15, 1999 if the Closing occurs on or before February 15, 1999, or until
the first anniversary of the Closing Date if the Closing occurs after February
15, 1999, except that (a) all such representations and warranties of Seller with
respect to any federal, state or local Taxes, rates, Environmental Law, ERISA,
employment matters or copyright matters will survive until 60 days after the
expiration of the applicable statute of limitations (including any extensions)
for such federal, state or local Taxes, rates, Environmental Law, ERISA,
employment matters or copyright matters, respectively and (b) the
representations and warranties of Seller as to ownership of the Assets in
SECTION 5.4, SECTION 5.7.1 and in the deed or deeds delivered with respect to
Real Property will survive the Closing and the delivery of such deeds and will
continue in full force and effect without limitation. The periods of survival of
the representations and warranties prescribed by this SECTION 11.1 are referred
to as the "Survival Period." The liabilities of the parties under their
respective representations and warranties will expire as of the expiration of
the applicable Survival Period; provided, however, that such expiration will not
include, extend or apply to any representation or warranty, the breach of which
has been asserted by a party in a written notice to the other party before such
expiration or about which such party has given the other party written notice
before such expiration indicating that facts or conditions exist that, with the
passage of time or otherwise, can reasonably be expected to result in a breach
(and describing such potential breach in reasonable detail). The covenants and
agreements of the parties in this Agreement (that are by their terms intended to
be performed after Closing) and in the Transaction Documents to be delivered by
Seller or Buyer pursuant to this Agreement, will survive the Closing and will
continue in full force and effect without limitation.
11.2 Indemnification by Seller. Seller will indemnify and hold
-------------------------
harmless Buyer and its shareholders and its and their respective Affiliates, and
their shareholders, directors, officers, employees, agents, successors and
assigns and any Person claiming by or through any of them, as the case may be,
from and against:
(a) all Losses resulting from or arising out of (i) any breach
of any representation or warranty made by Seller in this Agreement or in the
Transactions Documents delivered by Seller, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or in the
Transaction Documents delivered by Seller, (iii) any act or omission of Seller
with respect to, or any event or circumstance related to, the ownership or
operation of the Assets or the conduct of the Business, which act, omission,
event or circumstance occurred or existed prior to or at the Closing Date,
without regard to whether a claim with respect to such matter is asserted before
or after the Closing Date, including any matter described on SCHEDULE 5.13, (iv)
any liability or obligation not included in the Assumed Liabilities, (v) any
title defect Seller fails to eliminate as an exception from a title insurance
commitment referred to in SECTION 7.7.1, (vi) any claim that the transactions
contemplated by this Agreement violates WARN, or any similar state or local law
or any bulk transfer or fraudulent conveyance laws of any jurisdiction, (vii)
the presence, generation, removal or transportation of a Hazardous Substance on
or from any of the Real Property prior to the Closing Date, including the costs
of removal or clean-up of such Hazardous Substance and other compliance
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with the provisions of any Environmental Laws (whether before or after Closing),
or (viii) any rate refund ordered by any Governmental Authority for periods
prior to the Closing Date; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) through (a)(viii) of this SECTION 11.2, Buyer's
rights to pursue its claim under clauses (a)(ii) through (a)(viii), as
applicable, will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (a)(i).
11.3 Indemnification by Buyer. Buyer will indemnify and hold harmless
------------------------
Seller and Seller's partners and its and their respective Affiliates, and their
shareholders, directors, officers, employees, agents, successors and assigns and
any Person claiming by or through any of them, as the case may be, from and
against:
(a) all Losses resulting from or arising out of (i) any breach of
any representation or warranty made by Buyer in this Agreement or in the
Transaction Documents delivered by Buyer, (ii) any breach of any covenant,
agreement or obligation of Buyer contained in this Agreement or in the
Transaction Documents delivered by Buyer or (iii) the failure by Buyer to
perform any of its obligations in respect of the Assumed Liabilities; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) or (a)(iii) of this SECTION 11.3, Seller's rights
to pursue its claim under clauses (a)(ii) or (a)(iii), as applicable, will exist
notwithstanding the expiration of the Survival Period applicable to such claim
under clause (a)(i).
11.4 Third Party Claims. Promptly after the receipt by any party of
------------------
notice of any claim, action, suit or proceeding by any Person who is not a party
to this Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified Party") will
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying
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Party's liability to the Indemnified Party for such Action under the terms of
this SECTION 11, (b) notifies the Indemnified Party in writing of the
Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be liable
as a result of such Action and (d) retains legal counsel reasonably satisfactory
to the Indemnified Party to conduct the defense of such Action. The other party
will cooperate with the party assuming the defense, compromise or settlement of
any such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Action, but the fees and expenses of such counsel will be at
the expense of the Indemnified Party unless (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) any relief other than the payment of
money damages is sought against the Indemnified Party or (iii) the Indemnified
Party will have been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnity provided in this SECTION 11 will be paid by the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this SECTION 11.4. No Indemnifying Party will settle
or compromise any such Action (A) in which any relief other than the payment of
money damages is sought against any Indemnified Party or (B) in the case of any
Action relating to the Indemnified Party's liability for any Tax, if the effect
of such settlement would be an increase in the liability of the Indemnified
Party for the payment of any Tax for any period beginning after the Closing
Date, unless the Indemnified Party consents in writing to such compromise or
settlement.
11.5 Limitations on Indemnification - Seller. Seller will not be
---------------------------------------
liable for indemnification arising solely under SECTION 11.2(A)(I) for (a) any
Losses of or to Buyer or any other person entitled to indemnification from
Seller or (b) any claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incidental or relating to or resulting from any of the
foregoing (the items described in clauses (a) and (b) collectively being
referred to for purposes of this SECTION 11.5 as "Buyer Damages") unless the
amount of Buyer Damages for which Seller would, but for the provisions of this
SECTION 11.5, be liable exceeds, on an aggregate basis, $250,000, in which case
Seller will be liable for all such Buyer Damages, which will be due and payable
within 15 days after Seller's receipt of a statement therefor.
11.6 Limitations on Indemnification - Buyer. Buyer will not be liable
--------------------------------------
for indemnification arising solely under SECTION 11.3(A)(I) for (a) any Losses
of or to Seller or any other person entitled to indemnification from Buyer or
(b) any claims, actions, suits, proceedings, demands, judgments, assessments,
fines, interest, penalties, costs and expenses (including settlement costs and
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reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing the items
described in clauses (a) and (b) collectively being referred to for purposes of
this SECTION 11.6 as "Seller Damages") unless the amount of Seller Damages for
which Buyer would, but for the provisions of this SECTION 11.6, be liable
exceeds, on an aggregate basis, $250,000, in which case Buyer will be liable for
all such Seller Damages, which will be due and payable within 15 days after
Buyer's receipt of a statement therefor.
SECTION 12. MISCELLANEOUS.
12.1 Parties Obligated and Benefited. Subject to the limitations
-------------------------------
set forth below, this Agreement will be binding upon the parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Without the prior written consent of the other party, neither party
may assign any of its rights under this Agreement or delegate any of its duties
under this Agreement, except as described in the following sentence. Seller
agrees (a) that Buyer will have the right to assign its rights and obligations
under this Agreement to any Affiliate of Buyer, provided, however, that any
assignment by Buyer to any Affiliate of Buyer must be made within five months
after the date of this Agreement and if made after filing of the Forms 394 with
the relevant Governmental Authorities, Buyer will be responsible for all costs
and expenses associated with filing any additional Forms 394 required to be
filed as a result of any such assignment by Buyer to an Affiliate of Buyer, and
(b) that either Buyer or any Affiliate of Buyer to which Buyer has assigned its
rights and obligations under this Agreement as provided in the preceding clause
(a) of this SECTION 12.1 may further assign its right to purchase the Assets
under this Agreement to Norwest Bank Colorado, National Association, acting as a
Qualified Intermediary (as such term is used in Treas. Reg. Section 1.1031(k)-
1(g)(4)), and that this Agreement constitutes notice to Seller of such
assignment, which assignment Buyer will make effective immediately prior to
Closing (provided no assignment by Buyer under this SECTION 12.1 will relieve
Buyer of any obligations under this Agreement).
12.2 Notices. Any notice, request, demand, waiver or other
-------
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier,
overnight delivery service or, if receipt is confirmed, by telecopier:
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To Buyer at:
c/o Tele-Communications, Inc.
5619 DTC Parkway
Englewood Colorado 80111
Attention: William R. Fitzgerald
Telecopy: (303) 267-6672
With a copy similarly addressed to the attention of Legal
Department, and
With a copy to:
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Attention: Peggy B. Knight, Esq.
Telecopy: (303) 298-0940
To Seller at:
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
Englewood, Colorado 80112
Attention: President
Telecopy: (303) 799-1644
With a copy similarly addressed to the attention of Legal
Department.
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this SECTION 12.2. All
notices will be deemed to have been given only upon actual receipt.
12.3 Attorneys' Fees. In the event of any action or suit based
---------------
upon or arising out of any alleged breach by any party of any representation,
warranty, covenant or agreement contained in this Agreement, the prevailing
party will be entitled to recover reasonable attorneys' fees and other costs of
such action or suit from the other party.
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12.4 Waiver. This Agreement or any of its provisions may not be
------
waived except in writing. The failure of any party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
12.5 Captions. The captions of this Agreement are for convenience
--------
only and do not constitute a part of this Agreement.
12.6 CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES
-------------
UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH
THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES
OF COLORADO.
12.7 Terms. Terms used with initial capital letters will have the
-----
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense.
12.8 Rights Cumulative. All rights and remedies of each of the
-----------------
parties under this Agreement will be cumulative, and the exercise of one or more
rights or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.9 Further Actions. Seller and Buyer will execute and deliver to
---------------
the other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
12.10 Time. Time is of the essence under this Agreement. If the last
----
day permitted for the giving of any notice or the performance of any act
required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding Business Day.
12.11 Late Payments. If either party fails to pay the other any
-------------
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the date of payment at the annual rate publicly announced from
time to time by The Bank of New York as its prime rate (the "Prime Rate") plus
2%, adjusted as and when changes in the Prime Rate are made.
12.12 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be deemed an original.
12.13 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) and
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the Transaction Documents contain the entire agreement of the parties and
supersedes all prior oral or written agreements and understandings with respect
to the subject matter. This Agreement may not be amended or modified except by a
writing signed by the parties.
12.14 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer and
------------
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.16 Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
12.17 Risk of Loss; Condemnation.
--------------------------
12.17.1 Seller will bear the risk of any loss or damage to the
Assets resulting from fire, theft or other casualty (except reasonable wear and
tear) at all times prior to the Closing. If any such loss or damage is
sufficiently substantial so as to preclude or prevent resumption of normal
operations of any material portion of a System or the replacement or restoration
of the lost or damaged property within 30 days from the occurrence of the event
resulting in such loss or damage, Seller will immediately notify Buyer in
writing of that fact and Buyer, at any time within 10 days after receipt of such
notice, may elect by written notice to Seller either (a) to waive such defect
and proceed toward consummation of the transaction in accordance with terms of
this Agreement or (b) terminate this Agreement. If Buyer elects to so terminate
this Agreement, Buyer and Seller will stand fully released and discharged of any
and all obligations under this Agreement. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, there will be no adjustment in the consideration payable to Seller
on account of such loss or damage but all insurance proceeds payable as a result
of the occurrence of the event resulting in such loss or damage (to the extent
not used to replace or restore such lost or damaged property) will be delivered
by Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller.
12.17.2 If, prior to the Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller or Buyer
that it intends to condemn all or any part of or interest in the Assets (such
event being called, in either case, a "Taking"), and such Taking involves
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a material part of or interest in the Assets, then Buyer may terminate this
Agreement. If Buyer does not elect or have the right to terminate this
Agreement, then (a) Buyer will have the sole right, in the name of Seller, if
Buyer so elects, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller will be relieved of its obligation to convey
to Buyer the Assets or interests that are the subject of the Taking, (c) at the
Closing Seller will assign to Buyer all of Seller's rights to all damages
payable with respect to such Taking and will pay to Buyer all damages previously
paid to Seller with respect to the Taking and (d) following the Closing, Seller
will give Buyer such further assurances of such rights and assignment with
respect to the taking as Buyer may from time to time reasonably request.
[Remainder of page intentionally left blank]
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The parties have executed this Agreement as of the day and year first above
written.
SELLER:
JONES GROWTH PARTNERS L.P.
By: Jones Spacelink Cable Corporation, as its
Managing General Partner
By: /s/ KEVIN P. COYLE
--------------------------------------
Name: Kevin P. Coyle
--------------------------------------
Title: VP/Finance
--------------------------------------
BUYER:
TCI COMMUNICATIONS, INC.
By: /s/ WILLIAM R. FITZGERALD
-------------------------------------
Name: William R. Fitzgerald
-------------------------------------
Title: Executive Vice President
-------------------------------------
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