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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission file number: 0-17916
JONES GROWTH PARTNERS L.P.
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(Exact name of registrant as specified in its charter)
Colorado 84-1143409
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State of Organization (IRS Employer
Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
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(Address of principal executive office and Zip Code (Registrant's telephone
no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
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DOCUMENTS INCORPORATED BY REFERENCE: None
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Certain information contained in this Form 10-K Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included in this Form 10-K Report that address activities,
events or developments that the Partnership or the Managing General Partner
expects, believes or anticipates will or may occur in the future are forward-
looking statements. These forward-looking statements are based upon certain
assumptions and are subject to a number of risks and uncertainties. Actual
events or results may differ materially from those discussed in the forward-
looking statements as a result of various factors.
PART I.
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ITEM 1. BUSINESS
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THE PARTNERSHIP. Jones Growth Partners L.P. (the "Partnership") is a
Colorado limited partnership that was formed to acquire, own and operate cable
television systems in the United States. Jones Spacelink Cable Corporation, a
Colorado corporation, is the managing general partner (the "Managing General
Partner") and Growth Partners Inc., a Delaware corporation, is the associate
general partner (the "Associate General Partner") of the Partnership. The
Managing General Partner is a wholly-owned subsidiary of Jones Intercable, Inc.
("Intercable"). Intercable is a Colorado corporation engaged in the business of
owning and operating cable television systems. The Associate General Partner is
an affiliate of Lehman Brothers Inc. The Partnership owns the cable television
systems serving the communities of Addison, Glen Ellyn, Warrenville, West
Chicago, Wheaton, St. Charles, Geneva, Winfield and certain portions of
unincorporated DuPage and Kane Counties, all in the State of Illinois (the
"Wheaton System"). See Item 2.
It is Intercable's publicly announced policy that it intends to
liquidate its managed limited partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace. In accordance with Intercable's policy, the Wheaton System, along
with other Chicago-area systems owned or managed by Intercable and its
affiliates, are being marketed for sale. There is no assurance as to the timing
or terms of any sales. The sale of the Wheaton System will be subject to the
approval of the Associate General Partner and a vote of the limited partners.
CABLE TELEVISION SERVICES. The Wheaton System offers to its
subscribers various types of programming, which include basic service, tier
service, premium service, pay-per-view programs and packages including several
of these services at combined rates.
Basic cable television service usually consists of signals of all four
national television networks, various independent and educational television
stations (both VHF and UHF) and certain signals received from satellites. Basic
service also usually includes programs originated locally by the system, which
may consist of music, news, weather reports, stock market and financial
information and live or videotaped programs of a public service or entertainment
nature. FM radio signals are also frequently distributed to subscribers as part
of the basic service.
The Wheaton System offers tier services on an optional basis to their
subscribers. A tier generally includes most of the cable networks such as
Entertainment and Sports Programming Network (ESPN), Cable News Network (CNN),
Turner Network Television (TNT), Family Channel, Discovery and others, and the
cable television operators buy tier programming from these networks. The
Wheaton System also offers a package that includes the basic service channels
and the tier services.
The Wheaton System also offers premium services to its subscribers,
which consist of feature films, sporting events and other special features that
are presented without commercial interruption. The cable television operators
buy premium programming from suppliers such as HBO, Showtime, Cinemax or others
at a cost based on the number of subscribers the cable operator serves. Premium
service programming usually is significantly more expensive than the basic
service or tier service programming, and consequently cable operators price
premium service separately when sold to subscribers.
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The Wheaton System also offers to subscribers pay-per-view
programming. Pay-per-view is a service that allows subscribers to receive single
programs, frequently consisting of motion pictures that have recently completed
their theatrical exhibitions and major sporting events, and to pay for such
service on a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Wheaton System. At December 31,
1997, the Wheaton System's monthly basic service rates ranged from $11.39 to
$11.99, monthly basic and tier ("basic plus") service rates ranged from $25.13
to $26.45 and monthly premium services ranged from $2.95 to $10.95 per premium
service. In addition, the Partnership earns revenues from the Wheaton System's
pay-per-view programs and advertising fees. Related charges may include a
nonrecurring installation fee that ranges from $2.50 to $42.46; however, from
time to time the Wheaton System has followed the common industry practice of
reducing or waiving the installation fee during promotional periods. Commercial
subscribers such as hotels, motels and hospitals are charged a nonrecurring
connection fee that usually covers the cost of installation. Except under the
terms of certain contracts with commercial subscribers and residential apartment
and condominium complexes, the subscribers are free to discontinue the service
at any time without penalty. For the year ended December 31, 1997, of the total
fees received by the Wheaton System, basic service and tier service fees
accounted for approximately 70 percent of total revenues, premium service fees
accounted for approximately 14 percent of total revenues, pay-per-view fees were
approximately 2 percent of total revenues, advertising fees were approximately 7
percent of total revenues and the remaining 7 percent of total revenues came
principally from equipment rentals, installation fees and program guide sales.
The Partnership is dependent upon the timely receipt of service fees to provide
for maintenance and replacement of plant and equipment, current operating
expenses and other costs of the Wheaton System.
FRANCHISES. The Wheaton System is constructed and operated under non-
exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. The Wheaton System's franchises require that franchise fees
generally based on gross revenues of the cable system be paid to the
governmental authority that granted the franchise, that certain channels be
dedicated to municipal use, that municipal facilities, hospitals and schools be
provided cable service free of charge and that any new cable plant be
substantially constructed within specific periods.
The Partnership holds 10 franchises for the Wheaton System. These
franchises provide for the payment of fees to the issuing authorities and
generally range from 3 percent to 5 percent of the gross revenues of a cable
television system. The 1984 Cable Act prohibits franchising authorities from
imposing annual franchise fees in excess of 5 percent of gross revenues and also
permits the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances.
The Partnership has never had a franchise revoked. The Partnership is
currently negotiating the renewal of one franchise that is operating under
extension, and the Managing General Partner has no reason to believe that such
franchise will not be renewed in due course. Intercable recently has
experienced lengthy negotiations with some franchising authorities for the
granting of franchise renewals. Some of the issues involved in recent renewal
negotiations include rate regulation, customer service standards, cable plant
upgrade or replacement and shorter terms of franchise agreements.
COMPETITION. Cable television systems currently experience
competition from several sources.
Broadcast Television. Cable television systems have traditionally
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competed with broadcast television, which consists of television signals that
the viewer is able to receive directly on his television without charge using an
"off-air" antenna. The extent of such competition is dependent in part upon the
quality and quantity of signals available by such antenna reception as compared
to the services provided by the local cable system. Accordingly, it has
generally been less difficult for cable operators to obtain higher penetration
rates in rural areas where signals available off-air are limited, than in
metropolitan areas where numerous, high quality off-air signals are often
available without the aid of cable television systems.
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Traditional Overbuild. Cable television franchises are not exclusive,
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so that more than one cable television system may be built in the same area
(known as an "overbuild"), with potential loss of revenues to the operator of
the original cable television system. Intercable has experienced overbuilds in
connection with certain systems that it has owned or managed for limited
partnerships, and currently there are overbuilds in certain of the systems owned
or managed by Intercable. Ameritech has overbuilt portions of the Wheaton
System's service area. See Telephone and Utilities below. Constructing and
developing a cable television system is a capital intensive process, and it is
often difficult for a new cable system operator to create a marketing edge over
the existing system. Generally, an overbuilder would be required to obtain
franchises from the local governmental authorities, although in some instances,
the overbuilder could be the local government itself. In any case, an
overbuilder would be required to obtain programming contracts from entertainment
programmers and, in most cases, would have to build a complete cable system,
including headends, trunk lines and drops to individual subscribers homes,
throughout the franchise areas.
DBS. High-powered direct-to-home satellites have made possible the
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wide-scale delivery of programming to individuals throughout the United States
using small roof-top or wall-mounted antennas. Several companies began offering
direct broadcast satellite ("DBS") service over the last few years. Companies
offering DBS service use video compression technology to increase channel
capacity of their systems to 100 or more channels and to provide packages of
movies, satellite network and other program services which are competitive to
those of cable television systems. DBS faces technical and legal obstacles to
offering its customers local broadcast programming, although at least one DBS
provider is now attempting to do so. In addition to emerging high-powered DBS
competition, cable television systems face competition from a major medium-
powered satellite distribution provider and several low-powered providers, whose
service requires use of much larger home satellite dishes. Not all subscribers
terminate cable television service upon acquiring a DBS system. The Managing
General Partner has observed that there are DBS subscribers that also elect to
subscribe to cable television service in order to obtain the greatest variety of
programming on multiple television sets, including local programming not
available through DBS service. The ability of DBS service providers to compete
successfully with the cable television industry will depend on, among other
factors, the ability of DBS providers to overcome certain legal and technical
hurdles and the availability of equipment at reasonable prices.
Telephone and Utilities. Federal cross-ownership restrictions
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historically limited entry by local telephone companies into the cable
television business. The 1996 Telecommunications Act (the "1996 Telecom Act")
eliminated this cross-ownership restriction, making it possible for companies
with considerable resources to overbuild existing cable operators and enter the
business. Several telephone companies have begun seeking cable television
franchises from local governmental authorities and constructing cable television
systems. Ameritech, one of the seven regional Bell Operating Companies ("BOCs"),
which provides telephone service in a multi-state region including Illinois, has
been the most active BOC in seeking local cable franchises within its service
area. It has begun cable service in competition with the Partnership in a
portion of the Wheaton System, and in competition with other partnerships
managed by Intercable in Elgin and Naperville, Illinois. This competition is
having an adverse effect on the Wheaton System's revenues, cash flow and fair
market value. The Managing General Partner expects that this competition will
have a negative impact on the price the Partnership will be able to obtain from
the sale of the Wheaton System. The Managing General Partner is taking prudent
steps necessary to meet this competition from Ameritech and, to the extent
possible, to safeguard the value of the Wheaton System until it is sold. The
entry of telephone companies as direct competitors, however, is likely to
continue over the next several years and could adversely affect the
profitability and market value of cable television systems. The entry of
electric utility companies into the cable television business, as now authorized
by the 1996 Telecom Act, could have a similar adverse effect. The local electric
utility in the Washington D.C. area recently announced plans to participate in
RCN, a planned video competitor.
Private Cable. Additional competition is provided by private cable
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television systems, known as Satellite Master Antenna Television (SMATV),
serving multi-unit dwellings such as condominiums, apartment complexes, and
private residential communities. These private cable systems may enter into
exclusive agreements with apartment owners and homeowners associations, which
may preclude operators of franchised systems from serving residents of such
private complexes. Private cable systems that do not cross public rights of way
are free
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from the federal, state and local regulatory requirements imposed on franchised
cable television operators. In some cases, the Partnership has been unable to
provide cable television service to buildings in which private operators have
secured exclusive contracts to provide video and telephony services. The
Partnership is interested in providing these same services, but expects that the
market to install and provide these services in multi-unit buildings will
continue to be highly competitive. In late 1995, Intercable launched a
competitive telephone service in selected apartments and condominium units in
its Alexandria, Virginia System, and anticipates providing such service,
commencing in the first half of 1997, in Maryland as well. Intercable faces
considerable competition in providing telephony service from incumbent local
exchange carriers and a host of alternative carriers.
MMDS. Cable television systems also compete with wireless program
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distribution services such as multichannel, multipoint distribution service
("MMDS") systems, commonly called wireless cable, which are licensed to serve
specific areas. MMDS uses low-power microwave frequencies to transmit
television programming over-the-air to paying subscribers. The MMDS industry is
less capital intensive than the cable television industry, and it is therefore
more practical to construct MMDS systems in areas of lower subscriber
penetration. Wireless cable systems are now in direct competition with cable
television systems in several areas of the country, including the system in Pima
County, Arizona owned by Intercable. Telephone companies have acquired or
invested in wireless companies, and may use MMDS systems to provide services
within their service areas in lieu of wired delivery systems. Enthusiasm for
MMDS has waned in recent months, however, as Bell Atlantic and NYNEX have
suspended their investment in two major MMDS companies. To date, the
Partnership has not lost a significant number of subscribers, nor a significant
amount of revenue, to MMDS operators competing with the Wheaton System. A
series of actions taken by the FCC, however, including reallocating certain
frequencies to the wireless services, are intended to facilitate the development
of wireless cable television systems as an alternative means of distributing
video programming. In addition, Local Multipoint Distribution Services
("LMDS"), could also pose a significant threat to the cable television industry,
if and when it becomes established. The potential impact, however, of LMDS is
difficult to assess due to the newness of the technology and the absence of any
current fully operational LMDS systems.
Cable television systems are also in competition, in various degrees
with other communications and entertainment media, including motion pictures and
home video cassette recorders.
REGULATION AND LEGISLATION
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The operation of cable television systems is extensively regulated by
the FCC, some state governments and most local governments. The new 1996 Telecom
Act alters the regulatory structure governing the nation's telecommunications
providers. It removes barriers to competition in both the cable television
market and the local telephone market. Among other things, it also reduces the
scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to undertake a host of
implementing rulemakings, the final outcome of which cannot yet be determined.
Moreover, Congress and the FCC have frequently revisited the subject of cable
regulation. Future legislative and regulatory changes could adversely affect the
Partnership's operations, and there has been a recent increase in calls to
maintain or even tighten cable regulation in the absence of widespread effective
competition. This section briefly summarizes key laws and regulations affecting
the operation of the Wheaton System and does not purport to describe all
present, proposed, or possible laws and regulations affecting the Partnership.
Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate
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regulation regime on the cable television industry. Under that regime, all
cable systems are subject to rate regulation, unless they face "effective
competition" in their local franchise area. Federal law now defines "effective
competition" on a community-specific basis as requiring either low penetration
(less than 30 percent) by the incumbent cable operator, appreciable penetration
(more than 15 percent) by competing multichannel video providers ("MVPs"), or
the presence of a competing MVP affiliated with a local telephone company.
Although the FCC rules control, local government units (commonly
referred to as local franchising authorities or "LFAs") are primarily
responsible for administering the regulation of the lowest level of cable -- the
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basic service tier ("BST"), which typically contains local broadcast stations
and public, educational, and government ("PEG") access channels. Before an LFA
begins BST rate regulation, it must certify to the FCC that it will follow
applicable federal rules, and many LFAs have voluntarily declined to exercise
this authority. LFAs also have primary responsibility for regulating cable
equipment rates. Under federal law, charges for various types of cable equipment
must be unbundled from each other and from monthly charges for programming
services. The 1996 Telecom Act allows operators to aggregate costs for broad
categories of equipment across geographic and functional lines. This change
should facilitate the introduction of new technology.
The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only
if an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or per-
program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of operators to
require purchase of any CPST before purchasing premium services offered on a
per-channel or per-program basis.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all
systems (regardless of size) on March 31, 1999. Certain critics of the cable
television industry have called for a delay in the regulatory sunset and some
have even urged more rigorous rate regulation in the interim, including a limit
on operators passing through to their customers increased programming costs. The
1996 Telecom Act also relaxes existing uniform rate requirements by specifying
that uniform rate requirements do not apply where the operator faces "effective
competition," and by exempting bulk discounts to multiple dwelling units,
although complaints about predatory pricing still may be made to the FCC.
Cable Entry Into Telecommunications. The 1996 Telecom Act provides
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that no state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles (beginning in
2001) if the operator provides telecommunications service, as well as cable
service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. In July 1997, the Eighth
Circuit Court of Appeals vacated certain aspects of the FCC's initial
interconnection order. That decision is now on appeal to the U.S. Supreme
Court.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act
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allows telephone companies to compete directly with cable operators by repealing
the historic telephone company/cable cross-ownership ban. Local exchange
carriers ("LECs"), including the BOCs, can now compete with cable operators both
inside and outside their telephone service areas. Because of their resources,
LECs could be formidable competitors to
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traditional cable operators, and certain LECs have begun offering cable service.
As described above, Intercable is now witnessing the beginning of LEC
competition in a few of its cable communities.
Under the 1996 Telecom Act, an LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities. RCN and affiliates of local power companies recently
have been certified to provide OVS service in areas encompassing Intercable's
cable systems in Maryland and Virginia. This OVS potential competition is not
yet operational.
Although LECs and cable operators can now expand their offerings
across traditional service boundaries, the general prohibition remains on LEC
buyouts (i.e., any ownership interest exceeding 10 percent) of co-located cable
systems, cable operator buyouts of co-located LEC systems, and joint ventures
between cable operators and LECs in the same market. The 1996 Telecom Act
provides a few limited exceptions to this buyout prohibition, including a
carefully circumscribed "rural exemption." The 1996 Telecom Act also provides
the FCC with the limited authority to grant waivers of the buyout prohibition
(subject to LFA approval).
Electric Utility Entry Into Telecommunications/Cable Television. The
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1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries, known as "exempt
telecommunications companies" and must apply to the FCC for operating authority.
Again, because of their resources, electric utilities could be formidable
competitors to traditional cable systems.
Additional Ownership Restrictions. The 1996 Telecom Act eliminates
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statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems. The 1996 Telecom Act also eliminates the three year holding
period required under the 1992 Cable Act's "anti-trafficking" provision. The
1996 Telecom Act leaves in place existing restrictions on cable cross-ownership
with SMATV and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. In January 1995, however, the FCC
adopted regulations which permit cable operators to own and operate SMATV
systems within their franchise area, provided that such operation is consistent
with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a
cable system from devoting more than 40 percent of its activated channel
capacity to the carriage of affiliated national program services. A companion
rule establishing a nationwide ownership cap on any cable operator equal to 30
percent of all domestic cable subscribers has been stayed pending further
judicial review, although the FCC recently expressed an interest in reviewing
and reimposing this limit.
There are no federal restrictions on non-U.S. entities having an
ownership interest in cable television systems or the FCC licenses commonly
employed by such systems. Section 310(b)(4) of the Communications Act does,
however, prohibit foreign ownership of FCC broadcast and telephone licenses,
unless the FCC concludes that such foreign ownership is consistent with the
public interest. The investment by BCI Telecom Holding Inc. ("BTH") in
Intercable could, therefore, adversely affect any plan to acquire FCC broadcast
or common carrier licenses. The Partnership, however, does not currently plan to
acquire such licenses.
Must Carry/Retransmission Consent. The 1992 Cable Act contains
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broadcast signal carriage requirements that allow local commercial television
broadcast stations to elect once every three years between requiring a cable
system to carry the station ("must carry") or negotiating for payments for
granting permission to the cable operator to carry the station ("retransmission
consent"). Less popular stations typically elect "must carry," and more popular
stations typically elect "retransmission consent." Must carry requests can
dilute the appeal of a cable system's programming offerings, and retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on the Partnership's business.
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Additionally, cable systems are required to obtain retransmission consent for
all "distant" commercial television stations (except for satellite-delivered
independent "superstations" such as WGN). The burden associated with "must
carry" may increase substantially if broadcasters proceed with planned
conversion to digital transmission and the FCC determines that cable systems
must carry all analogue and digital broadcasts in their entirety.
Access Channels. LFAs can include franchise provisions requiring
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cable operators to set aside certain channels for public, educational and
governmental access programming. Federal law also requires cable systems to
designate a portion of their channel capacity (up to 15 percent in some cases)
for commercial leased access by unaffiliated third parties. The FCC has adopted
rules regulating the terms, conditions and maximum rates a cable operator may
charge for use of the designated channel capacity, but use of commercial leased
access channels has been relatively limited. The FCC released revised rules in
February 1997 mandating a modest rate reduction. The reduction sparked some
increase in part-time use, but did not make commercial leased access
substantially more attractive to third party programmers. Certain of those
programmers have now appealed the revised rules to the D.C. Court of Appeals.
Should the courts and the FCC ultimately determine that an additional reduction
in access rates is required, cable operators could lose programming control of a
substantial number of cable channels.
Access to Programming. To spur the development of independent cable
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programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This provision
limits the ability of vertically integrated cable programmers to offer exclusive
programming arrangements to cable companies. There recently has been increased
interest in further restricting the marketing practices of cable programmers.
Other FCC Regulations. In addition to the FCC regulations noted
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above, there are other FCC regulations covering such areas as equal employment
opportunity, subscriber privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local
sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards, and consumer electronics equipment compatibility. Federal
requirements governing Emergency Alert Systems and Closed Captioning adopted in
1997 will impose additional costs on the operation of cable systems. The FCC is
currently considering whether cable customers must be allowed to purchase cable
converters from third party vendors. If the FCC concludes that such distribution
is required, and does not make appropriate allowances for signal piracy
concerns, it may become more difficult for cable operators to combat theft of
service. The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations.
Internet Access. Many cable operators have begun offering high speed
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internet service to their customers. At this time, there is no significant
federal or local regulation of this service. However, as internet services
develop, it is possible that new regulations could be imposed.
Copyright. Cable television systems are subject to federal copyright
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licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool (that varies depending on the size
of the system and the number of distant broadcast television signals carried),
cable operators can obtain blanket permission to retransmit copyrighted material
on broadcast signals. The possible modification or elimination of this
compulsory copyright license is the subject of continuing legislative review and
could adversely affect the Partnership's ability to obtain desired broadcast
programming. In addition, the cable industry pays music licensing fees to BMI
and is
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negotiating a similar arrangement with ASCAP. Copyright clearances for
nonbroadcast programming services are arranged through private negotiations.
State and Local Regulation. Cable television systems generally are
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operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way. Federal
law now prohibits franchise authorities from granting exclusive franchises or
from unreasonably refusing to award additional franchises. Cable franchises
generally are granted for fixed terms and in many cases include monetary
penalties for non-compliance and may be terminable if the franchisee fails to
comply with material provisions.
The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing cable operations, service rates, franchise fees, system construction
and maintenance obligations, system channel capacity, design and technical
performance, customer service standards, and indemnification protections. A
number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. Although LFAs have considerable
discretion in establishing franchise terms, there are certain federal
limitations. For example, LFAs cannot insist on franchise fees exceeding 5
percent of the system's gross revenues, cannot dictate the particular technology
used by the system, and cannot specify video programming other than identifying
broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises.
GENERAL. The Partnership's business consists of providing cable
television services to a large number of customers, the loss of any one of which
would have no material effect on the Partnership's business. The Wheaton System
has had some subscribers who later terminated the service. Terminations occur
primarily because people move to another home or to another city. In other
cases, people terminate on a seasonal basis or because they no longer can afford
or are dissatisfied with the service. The amount of past due accounts in the
Wheaton System is not significant. The Partnership's policy with regard to past
due accounts is basically one of disconnecting service before a past due account
becomes material.
The Partnership does not depend to any material extent on the
availability of raw materials; it carries no significant amounts of inventory
and it has no material backlog of customer orders. The Partnership does not have
any employees because all properties are managed by employees of Intercable.
Intercable has engaged in research and development activities relating to the
provision of new services but the amount of the Partnership's funds expended for
such research and development has never been material.
Compliance with federal, state and local provisions that have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
ITEM 2. PROPERTIES
-------------------
The Partnership acquired the Wheaton System in October 1989. The
following sets forth (i) the monthly basic plus service rates charged to
subscribers and (ii) the number of basic subscribers and pay units for the
Wheaton System. The monthly basic service rates set forth herein represent, with
respect to systems with multiple headends, the basic service rate charged to the
majority of the subscribers within the Wheaton System. In cable
9
<PAGE>
television systems, basic subscribers can subscribe to more than one pay TV
service. Thus, the total number of pay services subscribed to by basic
subscribers are called pay units. As of December 31, 1997, the Wheaton System
operated cable plant passing approximately 81,700 homes, with an approximate 67
percent penetration rate. Figures for numbers of subscribers, miles of cable
plant and homes passed are compiled from the Managing General Partner's records
and may be subject to adjustments.
At December 31,
-------------------------------
WHEATON SYSTEM 1997 1996 1995
- -------------- ------- ------- -------
Monthly basic plus service rate $ 26.45 $ 24.95 $ 23.61
Basic subscribers 55,087 54,693 52,457
Pay units 36,940 38,692 39,691
ITEM 3. LEGAL PROCEEDINGS
--------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
PART II.
--------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
While the Partnership's interests are publicly held, there is no
established public market for the interests, and it is not expected that such a
market will develop in the future. During 1997, limited partners of the
Partnership conducted "limited tender offers" for interests in the Partnership
at prices ranging from $300 to $325 per interest. As of February 16, 1998, the
number of equity security holders in the Partnership was 8,319.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $23,744,294 $23,163,018 $21,248,133 $19,615,180 $19,354,715
Depreciation and Amortization 11,166,245 11,702,503 11,742,487 12,583,108 12,737,314
Operating Loss (4,572,861) (5,346,233) (6,103,218) (7,334,009) (7,047,610)
Net Loss (7,095,253) (7,927,762) (8,755,438) (9,644,492) (8,926,720)
Weighted average number of Limited
Partner Units Outstanding 85,740 85,740 85,740 85,740 85,740
General Partners' Deficit (763,022) (692,069) (612,791) (525,237) (428,792)
Limited Partners' Capital (Deficit) (999,513) 6,024,787 13,873,271 22,541,155 32,089,202
Total Assets 37,571,190 43,319,887 50,472,401 58,318,155 69,055,535
Credit Facility and Other Debt 36,219,526 36,243,429 35,431,966 35,245,699 35,944,662
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------
The following discussion of the Partnership's financial condition and
results of operations contains, in addition to historical information, forward-
looking statements that are based upon certain assumptions and are subject to a
number of risks and uncertainties. The Partnership's actual results may differ
significantly from the results predicted in such forward-looking statements.
FINANCIAL CONDITION
- -------------------
It is Intercable's publicly announced policy that it intends to
liquidate its managed partnerships, including the Partnership, as opportunities
for sales of partnership cable television systems arise in the marketplace. In
accordance with this policy, the Wheaton System is being marketed for sale.
There is no assurance as to the timing or terms of any sale. The sale of the
Wheaton System will be subject to the approval of the Associate General Partner
and a vote of the limited partners.
For the year ended December 31, 1997, the Partnership generated net
cash from operating activities totaling $4,787,620, which is available to fund
capital expenditures and non-operating costs. During 1997, the Partnership
expended approximately $4,946,315 for capital expenditures for the Wheaton
System. Approximately 30 percent of these expenditures related to the extension
of cable plant to serve additional customers, and approximately 27 percent of
these expenditures related to cable, hardware and labor for new subscriber
installations. The remaining expenditures were used to maintain the value of the
Wheaton System. Such expenditures were financed by cash on hand and cash from
operations. Budgeted expenditures for 1998 are expected to be approximately
$4,242,705 and are expected to be financed from available cash balances and cash
flow from operations. Approximately 49 percent of these expenditures will relate
to the extension of cable plant associated with new homes passed, approximately
32 percent of the capital expenditures will relate to cable, hardware and labor
for additional subscriber installations and approximately 7 percent of these
expenditures will be for the replacement of converters. The remainder of the
anticipated capital expenditures is necessary to maintain the value of the
Wheaton System until it is sold.
Ameritech, which provides telephone service in a multi-state region,
including Illinois, is providing cable television service in a portion of the
Wheaton System. This competition is having an adverse effect on the Wheaton
System's revenues, cash flow and fair market value. The Managing General Partner
expects that this competition will have a negative impact on the price the
Partnership will be able to obtain from the sale of the Wheaton System. The
Managing General Partner is taking prudent steps necessary to meet this
competition from Ameritech and, to the extent possible, to safeguard the value
of the Wheaton System until it is sold.
11
<PAGE>
The Partnership has a $36,000,000 revolving credit facility with the
entire commitment available through March 31, 1999, at which time the commitment
will be reduced quarterly until December 31, 1999 when the commitment will
reduce to zero and will be payable in full. At December 31, 1997, the maximum
of $36,000,000 was outstanding under the revolving credit facility. Interest on
the outstanding principal balance is at the Partnership's option of the Prime
Rate plus 1/8 percent or the London Interbank Offered Rate plus 1 percent. The
effective interest rates on amounts outstanding as of December 31, 1997 and 1996
were 6.85 percent and 6.50 percent, respectively.
The Managing General Partner believes cash on hand, cash generated
from operations and, if necessary and in its discretion, advances from the
Managing General Partner will be sufficient to fund capital expenditures and
other liquidity needs of the Partnership for the next year.
Year 2000 Issue
- ---------------
The Year 2000 issue is the result of many computer programs being
written such that they will malfunction when reading a year of "00." This
problem could cause system failure or miscalculations causing disruptions of
business processes.
The Managing General Partner has initiated an assessment of its
computer applications to determine the extent of the problem. Based on this
assessment, the General Partner has determined that the majority of its computer
applications supporting business processes, including accounting and billing,
are designed to handle the Year 2000 appropriately.
The Managing General Partner is currently focusing its efforts on the
impact of the Year 2000 issue on service delivery. The Managing General Partner
has established an internal team to address this issue. The Managing General
Partner is identifying and testing all date-sensitive equipment involved in
delivering service to the Partnership's customers. In addition, the Managing
General Partner will assess its options regarding repair or replacement of
affected equipment during this testing. The Managing General Partner currently
has no definitive estimate of the cost or the extent of the impact, if any, this
problem will have on service delivery; however, the Managing General Partner
does not believe that the impact will be material. The Managing General Partner
anticipates completion of its testing in 1998, at which time it will determine
the financial impact on the Partnership.
RESULTS OF OPERATIONS
- ---------------------
1997 Compared to 1996 -
Revenues of the Partnership increased $581,276, or approximately 3
percent, to $23,744,294 in 1997, compared to $23,163,018 in 1996. An increase
in basic service rates accounted for approximately 66 percent of the increase in
revenues. An increase in the number of basic subscribers accounted for
approximately 32 percent of the increase in revenues. The number of basic
subscribers increased by 394 subscribers, or approximately 1 percent, to 55,087
at December 31, 1997 from 54,693 at December 31, 1996. No other individual
factor contributed significantly to the increase in revenues. This increase
would have been greater except for the Wheaton System's competition from
Ameritech.
Operating expenses consist primarily of costs associated with the
administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
maintenance expenses and marketing expenses.
Operating expenses increased $476,026, or approximately 3 percent, to
$14,414,215 in 1997 from $13,938,189 in 1996. The increase in operating expenses
was due primarily to increases in programming fees. The increase in programming
fees was primarily due to the increase in basic subscribers and higher
programming fees. No other individual factor significantly affected the
increase in operating expenses for the period. Operating expenses represented
approximately 61 percent of revenues in 1997 and 60 percent of revenues in 1996.
The cable television industry generally measures the financial
performance of a cable television system in terms of operating cash flow
(revenues less operating expenses). This measure is not intended to be a
substitute or improvement upon the items disclosed on the financial statements,
rather it is included because it is an industry standard. Operating cash
12
<PAGE>
flow increased $105,250, or approximately 1 percent, to $9,330,079 in 1997 from
$9,224,829 in 1996. This increase was due to the increase in revenues exceeding
the increase in operating expenses.
Management and supervisory fees to the Managing and Associate General
Partners and allocated administrative costs from the Managing General Partner
decreased $131,864, or approximately 5 percent, to $2,736,695 in 1997 from
$2,868,559 in 1996. This decrease was primarily the result of a decrease in
allocated administrative costs from the Managing General Partner.
Depreciation and amortization expense decreased $536,258, or
approximately 5 percent, to $11,166,245 in 1997 compared to $11,702,503 in 1996.
This decrease was the result of the maturation of a portion of the asset base.
Operating loss decreased $773,372, or approximately 14 percent, to
$4,572,861 in 1997 from $5,346,233 in 1996. This decrease was due to the
increase in operating cash flow and the decrease in management and supervisory
fees and allocated overhead and depreciation and amortization expense.
Interest expense increased $41,359, or approximately 2 percent, to
$2,542,388 in 1997 from $2,501,029 in 1996. This increase in interest expense
was primarily due to higher effective interest rates on interest bearing
obligations during 1997.
Net loss decreased $832,509, or approximately 11 percent, to
$7,095,253 in 1997 from $7,927,762 in 1996. The decrease was a result of the
factors discussed above.
1996 Compared to 1995 -
Revenues of the Partnership increased $1,914,885, or approximately 9
percent, to $23,163,018 in 1996, compared to $21,248,133 in 1995. Increases in
the number of basic subscribers accounted for approximately 39 percent of the
increase in revenues. Basic service rate increases accounted for approximately
44 percent of the increase in revenues. The number of basic subscribers
increased by 2,236 subscribers, or approximately 4 percent, to 54,693 at
December 31, 1996 from 52,457 at December 31, 1995. No other individual factor
significantly affected the increase in revenues for the period.
Operating expenses increased $1,115,983, or approximately 9 percent,
to $13,938,189 in 1996 from $12,822,206 in 1995. The increase in operating
expenses was primarily the result of increases in programming fees, which
accounted for approximately 73 percent of the increase. The increase in
programming fees was primarily due to the increase in basic subscribers and
higher programming fees. No other individual factor significantly affected the
increase in operating expense for the period. Operating expenses represented
approximately 60 percent of revenues in 1996 and 1995, respectively.
Operating cash flow increased $798,902, or approximately 9 percent, to
$9,224,829 in 1996 from $8,425,927 in 1995. This increase was due to the
increase in revenues exceeding the increase in operating expenses.
Management and supervisory fees to the Managing and Associate General
Partners and allocated administrative costs from the Managing General Partner
increased $81,901, or approximately 3 percent, to $2,868,559 in 1996 from
$2,786,658 in 1995. This increase was primarily the result of the increase in
revenues, upon which such management and supervisory fees are based.
Depreciation and amortization expense decreased $39,984, or less than
1 percent, to $11,702,503 in 1996 compared to $11,742,487 in 1995. This decrease
was the result of the maturation of a portion of the asset base.
Operating loss decreased $756,985, or approximately 12 percent, to
$5,346,233 in 1996 from $6,103,218 in 1995. This decrease was a result of the
increase in operating cash flow and decrease in depreciation and amortization
expense exceeding the increase in management and supervisory fees to the general
partners and allocated administrative costs from the Managing General Partner.
Interest expense decreased $261,506, or approximately 9 percent, to
$2,501,029 in 1996 from $2,762,535 in 1995. This increase in interest expense
was primarily due to lower effective interest rates on interest bearing
obligations during 1996.
13
<PAGE>
Net loss decreased $827,676, or approximately 9 percent, to $7,927,762
in 1996 from $8,755,438 in 1995. The decrease was a result of the factors
discussed above.
ITEM 8. FINANCIAL STATEMENTS
- -----------------------------
The audited financial statements of the Partnership for the year ended
December 31, 1997 follow.
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Jones Growth Partners L.P.:
We have audited the accompanying balance sheets of Jones Growth
Partners L.P. (a Colorado limited partnership) as of December 31, 1997 and 1996,
and the related statements of operations, partners' capital (deficit) and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Managing General Partner's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Jones Growth
Partners L.P. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 13, 1998.
15
<PAGE>
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
ASSETS
------
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
CASH $ 109,356 $ 345,480
TRADE RECEIVABLES, less allowance for doubtful
receivables of $16,173 and $28,082 at
December 31, 1997 and 1996, respectively 212,268 108,117
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 57,002,036 52,055,721
Less- accumulated depreciation (31,394,808) (27,366,242)
------------ ------------
25,607,228 24,689,479
Franchise costs and other intangible assets, net of
accumulated amortization of $66,319,098 and $59,419,903
at December 31, 1997 and 1996, respectively 10,936,713 17,782,382
------------ ------------
Total investment in cable
television properties 36,543,941 42,471,861
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 705,625 394,429
------------ ------------
Total assets $ 37,571,190 $ 43,319,887
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
16
<PAGE>
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
LIABILITIES:
Credit facility and capital lease obligations $ 36,219,526 $ 36,243,429
Trade accounts payable and accrued liabilities 2,512,156 1,418,976
Accrued interest 381,284 272,892
Subscriber prepayments 220,759 51,872
------------ ------------
Total liabilities 39,333,725 37,987,169
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 1,000 1,000
Accumulated deficit (764,022) (693,069)
------------ ------------
(763,022) (692,069)
------------ ------------
Limited Partners-
Net contributed capital (85,740 units
outstanding at December 31, 1997 and 1996) 73,790,065 73,790,065
Accumulated deficit (74,789,578) (67,765,278)
------------ ------------
(999,513) 6,024,787
------------ ------------
Total partners' capital (deficit) (1,762,535) 5,332,718
------------ ------------
Total liabilities and partners' capital (deficit) $ 37,571,190 $ 43,319,887
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
17
<PAGE>
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $23,744,294 $23,163,018 $21,248,133
COSTS AND EXPENSES:
Operating expenses 14,414,215 13,938,189 12,822,206
Management and supervisory fees to the
General Partners and allocated administrative
costs from the Managing General Partner 2,736,695 2,868,559 2,786,658
Depreciation and amortization 11,166,245 11,702,503 11,742,487
----------- ----------- -----------
OPERATING LOSS (4,572,861) (5,346,233) (6,103,218)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (2,542,388) (2,501,029) (2,762,535)
Interest income 3,557 4,581 18,010
Other, net 16,439 (85,081) 92,305
----------- ----------- -----------
Total other income (expense), net (2,522,392) (2,581,529) (2,652,220)
NET LOSS $(7,095,253) $(7,927,762) $(8,755,438)
=========== =========== ===========
ALLOCATION OF NET LOSS:
Managing General Partner $ (70,953) $ (79,278) $ (87,554)
=========== =========== ===========
Limited Partners $(7,024,300) $(7,848,484) $(8,667,884)
=========== =========== ===========
NET LOSS PER LIMITED PARTNERSHIP UNIT $(81.92) $(91.53) $(101.09)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNER UNITS OUTSTANDING 85,740 85,740 85,740
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
18
<PAGE>
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
-----------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
GENERAL PARTNERS:
Balance, beginning of year $ (692,069) $ (612,791) $ (525,237)
Net loss for the year (70,953) (79,278) (87,554)
----------- ----------- -----------
Balance, end of year $ (763,022) $ (692,069) $ (612,791)
=========== =========== ===========
LIMITED PARTNERS:
Balance, beginning of year $ 6,024,787 $13,873,271 $22,541,155
Net loss for the year (7,024,300) (7,848,484) (8,667,884)
----------- ----------- -----------
Balance, end of year $ (999,513) $ 6,024,787 $13,873,271
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
19
<PAGE>
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(7,095,253) $(7,927,762) $(8,755,438)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 11,166,245 11,702,503 11,742,487
Amortization of interest rate protection contract - - 64,664
Decrease (increase) in trade receivables (104,151) 178,774 (220,062)
Decrease (increase) in deposits, prepaid expenses
and other assets (549,680) 426,674 123,410
Increase (decrease) in trade accounts payable and
accrued liabilities, accrued interest and subscriber
prepayments 1,370,459 (36,215) 723,417
----------- ----------- -----------
Net cash provided by operating activities 4,787,620 4,343,974 3,678,478
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,946,315) (4,855,447) (3,989,903)
Franchise renewal costs (53,526) - -
----------- ----------- -----------
Net cash used in investing activities (4,999,841) (4,855,447) (3,989,903)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 79,242 938,049 598,379
Repayments of borrowings (103,145) (126,586) (412,112)
----------- ----------- -----------
Net cash provided by (used in) financing
activities (23,903) 811,463 186,267
----------- ----------- -----------
INCREASE (DECREASE) IN CASH (236,124) 299,990 (125,158)
CASH, BEGINNING OF YEAR 345,480 45,490 170,648
----------- ----------- -----------
CASH, END OF YEAR $ 109,356 $ 345,480 $ 45,490
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,433,996 $ 2,635,169 $ 2,307,619
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
20
<PAGE>
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS:
------------------------------------
Formation and Business
----------------------
Jones Growth Partners L.P. (the "Partnership"), a Colorado limited
partnership, was formed on June 14, 1989, pursuant to a public offering of
limited partnership interests sponsored by Jones Spacelink Cable Corporation.
The Partnership was formed to acquire, construct, develop and operate cable
television systems. Jones Spacelink Cable Corporation is the "Managing General
Partner" and a wholly owned subsidiary of Jones Intercable, Inc. ("Intercable"),
a Colorado corporation. The Managing General Partner and certain of its
affiliates also own and operate cable television systems for their own account
and for the account of other managed limited partnerships. Growth Partners Inc.
is the "Associate General Partner" and is an affiliate of Lehman Brothers Inc.
Contributed Capital
-------------------
The capitalization of the Partnership is set forth in the accompanying
Statements of Partners' Capital (Deficit). No limited partner is obligated to
make any additional contributions to partnership capital.
The Managing General Partner and the Associate General Partner
purchased their general partner interests in the Partnership by contributing
$500 each to partnership capital. Also, in March 1990, the Managing General
Partner purchased approximately one percent of the limited partner interests
sold.
All profits and losses of the Partnership are allocated 99 percent to
the limited partners and 1 percent to the General Partners, except for income or
gain from the sale or disposition of cable television properties, which will be
allocated to the partners based upon the formula set forth in the Partnership's
agreement and interest income earned prior to the first acquisition by the
Partnership of a cable television system, which was allocated 100 percent to the
limited partners.
Cable Television System Owned by the Partnership
------------------------------------------------
On October 4, 1989, the Partnership purchased the cable television
systems serving the municipalities of Addison, Glen Ellyn, St. Charles,
Warrenville, West Chicago, Wheaton, Winfield and Geneva, and certain portions of
unincorporated areas of DuPage and Kane counties, all in the State of Illinois
(the "Wheaton System").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Accounting Records
------------------
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles. The Partnership's tax returns are also prepared on the accrual
basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
21
<PAGE>
Property, Plant and Equipment
-----------------------------
Depreciation of property, plant and equipment is provided primarily
using the straight-line method over the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 - 7 years
Office furniture and equipment 3 - 5 years
Buildings 30 years
Vehicles 3 - 4 years
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated
depreciation are written off as certain assets become fully depreciated and are
no longer in service.
Allocation of Cost of Purchased Cable Television Systems
--------------------------------------------------------
Based on an independent appraisal, the Partnership allocated the total
purchase price of the Wheaton System acquired as follows: first, to the fair
value of net tangible assets acquired; second, to franchise costs in an amount
equal to the estimated value of franchise agreements; third, to subscriber
lists; and fourth, to costs in excess of interests in net assets purchased.
Other acquisition costs were capitalized and charged to investment in cable
television properties in the accompanying balance sheets.
Intangible Assets
-----------------
Costs assigned to intangible assets are being amortized using the
straight-line method over the following estimated useful lives:
Franchise costs 10 years
Subscriber lists 1 year
Costs in excess of interests in net assets purchased 34 years
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as
revenue when earned.
Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the
1997 presentation.
(3) TRANSACTIONS WITH THE ASSOCIATE GENERAL PARTNER, MANAGING GENERAL
-----------------------------------------------------------------
PARTNER AND CERTAIN OF ITS AFFILIATES:
-------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
The Managing General Partner manages the Partnership and receives a
fee for its services equal to 5 percent of the gross revenues of the
Partnership, excluding revenues from the sale of cable television systems or
franchises. Management fees paid to the Managing General Partner by the
Partnership for the years ended December 31, 1997, 1996 and 1995 were
$1,187,215, $1,158,151 and $1,062,407, respectively.
The Associate General Partner is entitled to participate with the
Managing General Partner in certain management decisions affecting the
Partnership and receives a supervisory fee of the lesser of one percent of the
gross revenues of the Partnership, excluding revenues from the sale of cable
television systems or franchises, or $200,000, payable annually. Supervisory
fees accrued to the Associate General Partner by the Partnership for the year
ended December 31, 1997 were
22
<PAGE>
$200,000. Such fees were paid in January 1998. Supervisory fees paid to the
Associate General Partner by the Partnership for the years ended December 31,
1996 and 1995 were $200,000 and $200,000, respectively.
Any Partnership distributions made from cash flow (defined as cash
receipts derived from operations, less debt principal and interest payments and
cash expenses) are allocated 99 percent to the limited partners and one percent
to the Managing General Partner. Distributions from cash flow have not been
made and are not anticipated. Proceeds from the sale or refinancing of a cable
television system would be distributed generally as follows: first, to the
partners until they have received an amount equal to their initial capital
contributions (as reduced by all prior distributions other than distributions
from cash flow); second, to the limited partners until they have received a
liquidation preference equal to 8 percent per annum, cumulative and
noncompounded, on an amount equal to their initial capital contributions, less
any portion of such capital contributions which has been returned to the limited
partners from prior sale or refinancing proceeds, as determined for any
particular year; provided that such cumulative return will be reduced by all
prior distributions of cash flow from operations and prior distributions of
proceeds of sales or refinancings of the cable television systems. The balance
will be allocated 75 percent to the limited partners, 15 percent to the Managing
General Partner and 10 percent to the Associate General Partner. No such
distributions have yet been made.
The Partnership reimburses the Managing General Partner and certain of
its affiliates for certain allocated general and administrative costs. These
expenses represent the salaries and related benefits paid for corporate
personnel, rent, data processing services and other corporate facilities costs.
Such personnel provide engineering, marketing, administrative, accounting,
legal, and investor relations services to the Partnership. Such services, and
their related costs, are necessary to the operation of the Partnership and would
have been incurred by the Partnership, if it was a stand alone entity.
Allocations of personnel costs are based primarily on actual time spent by
employees of the Managing General Partner and certain of its affiliates with
respect to each partnership managed. Remaining expenses are allocated based on
the pro rata relationship of the Partnership's revenues to the total revenues of
all cable television systems owned or managed by Intercable and certain of its
affiliates. Systems owned by Intercable and all other systems owned by
partnerships for which Intercable is the general partner are also allocated a
proportionate share of these expenses. The Managing General Partner believes
that the methodology used in allocating general and administrative costs is
reasonable. Reimbursements by the Partnership to the Managing General Partner
for allocated general and administrative costs for the years ended December 31,
1997, 1996 and 1995 were $1,349,480, $1,510,408 and $1,524,251, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Partnership receives or has received programming from Superaudio,
Knowledge TV, Inc., Jones Computer Network, Ltd. and Product Information
Network, all of which are affiliates of the Managing General Partner.
Payments to Superaudio by the Partnership for the years ended December
31, 1997, 1996 and 1995 totaled $35,741, $32,920 and $28,639, respectively.
Payments to Knowledge TV, Inc. for the years ended December 31, 1997, 1996 and
1995 totaled $39,752, $35,480 and $30,636, respectively. Payments to Jones
Computer Network, Ltd., whose service was discontinued in April 1997, for the
years ended December 31, 1997, 1996 and 1995 totaled $26,459, $60,769 and
$52,346, respectively. Payments to Great American Country, Inc., which
initiated service in 1997, totaled $42,260 in 1997.
The Partnership receives a commission from Product Information Network
based on a percentage of advertising revenue and number of subscribers. Product
Information Network paid commissions to the Partnership for the years ended
December 31, 1997, 1996 and 1995 totaled $87,502, $63,904 and $59,858,
respectively.
23
<PAGE>
(4) PROPERTY, PLANT AND EQUIPMENT:
-----------------------------
Property, plant and equipment as of December 31, 1997 and 1996,
consisted of the following:
December 31,
---------------------------
1997 1996
------------ ------------
Cable distribution systems $ 50,554,352 $ 46,097,654
Equipment and tools 3,192,160 2,769,930
Office furniture and equipment 2,415,167 2,382,372
Buildings 20,058 20,058
Vehicles 715,299 680,707
Land 105,000 105,000
------------ ------------
$ 57,002,036 $ 52,055,721
Less: accumulated depreciation $(31,394,808) $(27,366,242)
------------ ------------
$ 25,607,228 $ 24,689,479
============ ============
(5) DEBT:
----
The Partnership has a $36,000,000 revolving credit facility with the
entire commitment available through March 31, 1999, at which time the commitment
will be reduced quarterly until December 31, 1999 when the commitment will
reduce to zero and will be payable in full. At December 31, 1997, the maximum
of $36,000,000 was outstanding under the revolving credit facility. Interest on
the outstanding principal balance is at the Partnership's option of the Prime
Rate plus 1/8 percent or the London Interbank Offered Rate plus 1 percent. The
effective interest rates on amounts outstanding as of December 31, 1997 and 1996
were 6.85 percent and 6.50 percent, respectively.
Total Partnership debt consists of the following:
December 31,
------------------------
1997 1996
----------- -----------
Lending institutions-
Revolving credit and term loan facility $36,000,000 $36,000,000
Capital lease obligations 219,526 243,429
----------- -----------
$36,219,526 $36,243,429
=========== ===========
Installments due on all debt principal for the five years in the
period ending December 31, 2002 and thereafter, respectively, are: $65,858,
$36,065,858, $65,858, $21,952, $-0- and $-0-.
At December 31, 1997, the carrying amount of the Partnership's long-
term debt did not differ significantly from the estimated fair value of the
financial instruments. The fair value of the Partnership's long-term debt is
estimated based on the discounted amount of future debt service payments using
rates of borrowing for a liability of similar risk.
(6) INCOME TAXES:
------------
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by the Managing
General Partner.
The Partnership's tax returns, the qualification of the Partnership as
such for tax purposes, and the amount of distributable income or loss are
subject to examination by federal and state taxing authorities. If such
examinations result in changes with respect to the Partnership's qualification
as such, or in changes with respect to the Partnership's recorded income or
loss, the tax liability of the general partners and limited partners would
likely be changed accordingly.
24
<PAGE>
Taxable loss to the Partners is different from that reported in the
statements of operations due to the difference in depreciation recognized under
generally accepted accounting principles and the expense allowed for tax
purposes under the Modified Accelerated Cost Recovery System (MACRS). There are
no other significant differences between taxable loss and the net loss reported
in the statements of operations.
(7) COMMITMENTS AND CONTINGENCIES:
-----------------------------
The Partnership rents office and other facilities under various long-
term lease arrangements. Rent paid under such lease arrangements totaled
$241,241, $228,818 and $222,005 for the years ended December 31, 1997, 1996 and
1995, respectively. Future minimum lease payments, as of December 31, 1997,
under noncancelable operating leases for the five years in the period ending
December 31, 2002, and thereafter are as follows:
1998 $200,133
1999 98,175
2000 -
2001 -
2002 -
Thereafter -
--------
Total future minimum lease payments $298,308
========
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION:
-----------------------------------------
Supplementary profit and loss information for the respective periods
is presented below:
Year Ended December 31,
----------------------------------------
1997 1996 1995
---------- ---------- ----------
Maintenance and repairs $ 330,578 $ 274,968 $ 251,620
========== ========== ==========
Taxes, other than income and
payroll taxes $ 83,788 $ 69,048 $ 82,174
========== ========== ==========
Advertising $ 312,432 $ 302,772 $ 470,562
========== ========== ==========
Depreciation of property,
plant and equipment $4,173,196 $3,796,074 $3,468,654
========== ========== ==========
Amortization of intangible assets $6,993,049 $7,906,429 $8,273,833
========== ========== ==========
25
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The Partnership itself has no officers or directors. Certain
information concerning the directors and executive officers of the Managing
General Partner is set forth below. Directors of the Managing General Partner
serve until the next annual meeting of the Managing General Partner and until
their successors shall be elected and qualified.
<TABLE>
<CAPTION>
Name Age Positions with the Managing General Partner
---- --- -------------------------------------------
<S> <C> <C>
Glenn R. Jones 68 Chairman of the Board and Chief Executive Officer
James B. O'Brien 48 President
Ruth E. Warren 48 Vice President/Operations
Elizabeth M. Steele 46 Vice President and Secretary
Kevin P. Coyle 46 Vice President/Finance
Larry W. Kaschinske 38 Controller
</TABLE>
Mr. Glenn R. Jones has served as Chief Executive Officer of the
Managing General Partner since its inception in November 1988. Mr. Jones has
served as Chairman of the Board of Directors and Chief Executive Officer of
Jones Intercable, Inc. since its formation in 1970, and he was President from
June 1984 until April 1988. Mr. Jones is the sole shareholder, President and
Chairman of the Board of Directors of Jones International, Ltd. He is also
Chairman of the Board of Directors of the subsidiaries of Jones Intercable, Inc.
and of certain other affiliates of Jones Intercable, Inc.. Mr. Jones has been
involved in the cable television business in various capacities since 1961, is a
member of the Board of Directors and the Executive Committee of the National
Cable Television Association. In addition, Mr. Jones is a member of the Board of
Governors for the American Society for Training and Development, and a member of
the Board of Education Council of the National Alliance of Business. Mr. Jones
is also a founding member of the James Madison Council of the Library of
Congress. Mr. Jones has been the recipient of several awards including the
Grand Tam Award in 1989, the highest award from the Cable Television
Administration and Marketing Society; the President's Award from the Cable
Television Public Affairs Association in recognition of Jones International's
educational efforts through Mind Extension University (now Knowledge TV); the
Donald G. McGannon Award for the advancement of minorities and women in cable
from the United Church of Christ Office of Communications; the STAR Award from
American Women in Radio and Television, Inc. for exhibition of a commitment to
the issues and concerns of women in television and radio; the Cableforce 2000
Accolade awarded by Women in Cable in recognition of the General Partner's
innovative employee programs; the Most Outstanding Corporate Individual
Achievement Award from the International Distance Learning Conference for his
contributions to distance education; the Golden Plate Award from the American
Academy of Achievement for his advances in distance education; the Man of the
Year named by the Denver chapter of the Achievement Rewards for College
Scientists; and in 1994 Mr. Jones was inducted into Broadcasting and Cable's
Hall of Fame.
Mr. James B. O'Brien was appointed President of the Managing General
Partner in January 1995. Mr. O'Brien joined Jones Intercable, Inc. in January
1982. Prior to being elected President and a Director of Jones Intercable, Inc.
in December 1989, Mr. O'Brien served as a division manager, director of
operations planning/assistant to the CEO, Fund Vice President and Group Vice
President/Operations. Mr. O'Brien was appointed to Jones Intercable, Inc.'s
Executive Committee in August 1993. As President, he is responsible for the
day-to-day operations of the cable television systems managed and owned by Jones
Intercable, Inc. Mr. O'Brien
26
<PAGE>
is a board member of Cable Labs, Inc., the research arm of the U.S. cable
television industry. He also serves as Chairman of the Board of Directors of the
Cable Television Administration and Marketing Association and as a director and
a member of the Executive Committee of the Walter Kaitz Foundation, a foundation
that places people of ethnic minority groups in positions with cable television
systems, networks and vendor companies.
Ms. Ruth E. Warren, the Managing General Partner's Vice
President/Operations, joined Jones Intercable, Inc. in August 1980 and has
served in various operational capacities, including system manager and Fund Vice
President, since then. Ms. Warren was elected Group Vice President/Operations
of Jones Intercable, Inc. in September 1990.
Ms. Elizabeth M. Steele, the Managing General Partner's Vice President
and Secretary, joined Jones Intercable, Inc. in August 1987 as Vice
President/General Counsel and Secretary. From August 1980 until joining Jones
Intercable, Inc., Ms. Steele was an associate and then a partner at the Denver
law firm of Davis, Graham & Stubbs, which serves as counsel to Jones Intercable,
Inc..
Mr. Kevin P. Coyle was appointed Vice President/Finance of the
Managing General Partner in March 1995. Mr. Coyle joined The Jones Group, Ltd.
in July 1981 as Vice President/Financial Services. In September 1985, he was
appointed Senior Vice President/Financial Services. He was elected Treasurer of
Jones Intercable, Inc. in August 1987, Vice President/Treasurer in April 1988
and Group Vice President/Finance and Chief Financial Officer in October 1990.
Mr. Larry Kaschinske was appointed Controller of the Managing General
Partner in March 1995. Mr. Kaschinske joined Jones Intercable, Inc. in 1984 as
a staff accountant in Jones Intercable, Inc.'s former Wisconsin Division; was
promoted to Assistant Controller in 1990 and named Controller in August 1994.
Certain information concerning the directors and executive officers of
the Associate General Partner is set forth below.
Name Age Positions with the Associate General Partner
---- --- --------------------------------------------
Jeffrey C. Carter 52 President and Chief Financial Officer
Rocco F. Andriola 39 Director
John H. Ng 47 Vice President
Mr. Jeffrey C. Carter is a Senior Vice President of Lehman Brothers in
the Diversified Asset Group. Mr. Carter joined Lehman Brothers in September
1988. From 1972 to 1988, Mr. Carter held various positions with Helmsley-Spear
Hospitality Services, Inc. and Stephen W. Brener Associates, Inc. including
Director of Consulting Services at both firms. From 1982 through 1987, Mr.
Carter was President of Keystone Hospitality Services, an independent hotel
consulting and brokerage company.
Mr. Rocco F. Andriola serves as a Managing Director of Lehman Brothers
Inc. in its Diversified Asset Group and has held such position since October
1996. From June 1991 through September 1996, Mr. Andriola held the position of
Senior Vice President in Lehman's Diversified Asset Group. From June 1989 though
May 1991, Mr. Andriola held the position of First Vice President in Lehman's
Capital Preservation and Restructuring Group. From November 1986 through May
1989, Mr. Andriola held the position of Vice President in the Corporate
Transactions Group within the General Counsel's Office of Lehman. From
September 1982 through October 1986, Mr. Andriola was employed by the law firm
of Donovan Leisure Newton & Irvine as a corporate and securities attorney.
Mr. John H. Ng is a Vice President of Lehman Brothers Inc. and has
been employed by Lehman since November 1977. He is an asset manager in the
Diversified Asset Group and has held such position since 1985. From 1980 to
1985, Mr. Ng served as Senior Financial Analyst in the Corporate Planning and
Development Department, and from 1977 to 1980 he was an analyst in the
Controller's Department.
27
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel are
required to operate the Wheaton System. Such personnel are employed by
Intercable and, pursuant to the terms of the limited partnership agreement of
the Partnership, the cost of such employment is charged by the Managing General
Partner to the Partnership as a direct reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of February 16, 1998, no person or entity owned more than 5 percent
of the limited partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The Managing General Partner and its affiliates engage in certain
transactions with the Partnership as contemplated by the limited partnership
agreement of the Partnership. The Managing General Partner believes that the
terms of such transactions are generally as favorable as could be obtained by
the Partnership from unaffiliated parties. This determination has been made by
the Managing General Partner in good faith, but none of the terms were or will
be negotiated at arm's-length and there can be no assurance that the terms of
such transactions have been or will be as favorable as those that could have
been obtained by the Partnership from unaffiliated parties.
The Managing General Partner charges the Partnership a 5 percent
management fee, and the Associate General Partner charges the Partnership a
supervision fee in accordance with the limited partnership agreement of the
Partnership.
TRANSACTIONS WITH THE MANAGING GENERAL PARTNER
The Partnership also reimburses Intercable, the parent of the Managing
General Partner, for certain allocated overhead and administrative expenses.
These expenses represent the salaries and benefits paid to corporate personnel,
rent, data processing services and other facilities costs. Such personnel
provide engineering, marketing, administrative, accounting, legal and investor
relations services to the Partnership. Allocations of personnel costs are based
primarily on actual time spent by employees with respect to each partnership
managed. Remaining expenses are allocated based on the pro rata relationship of
the Partnership's revenues to the total revenues of all systems owned or managed
by Intercable or its affiliates. Systems owned by Intercable and all other
systems owned by partnerships for which Intercable serves as general partner are
also allocated a proportionate share of these expenses.
Intercable, the parent of the Managing General Partner, also advances
funds to the Partnership from time to time and charges interest on the balance
payable. The interest rate charged approximates Intercable's weighted average
cost of borrowing.
TRANSACTIONS WITH AFFILIATES
Knowledge TV, Inc., a company owned 67 percent by Jones Education
Group, Ltd., 7 percent by Mr. Jones and 26 percent by Intercable, operates the
television network JEC Knowledge TV. JEC Knowledge TV provides programming
related to computers and technology; business, careers and finance; health and
wellness; and global culture and languages. Knowledge TV, Inc. sells its
programming to the Wheaton System.
Jones Computer Network, Ltd., a wholly owned subsidiary of Jones
Education Group, Ltd., a company owned 64 percent by Jones International, Ltd.,
16 percent by Intercable, 12 percent by BTH and 8 percent by Mr. Jones, operated
the television network, Jones Computer Network. This network provided
programming focused
28
<PAGE>
primarily on computers and technology. Jones Computer Network sold its
programming to the Wheaton System. Jones Computer Network, Ltd. terminated its
programming in April 1997.
The Great American Country network provides country music video
programming to the Wheaton System. This network, owned and operated by Great
American Country, Inc., a susidiary of Jones International Networks, Ltd., an
affiliate of Intercable, commenced service in 1997 in the Wheaton System.
Jones Galactic Radio, Inc. is a subsidiary of Jones International
Networks, Ltd., an affiliate of Intercable. Superaudio, a joint venture between
Jones Galactic Radio, Inc. and an unaffiliated entity, provides satellite
programming to the Wheaton System.
Jones Galactic Radio, Inc. is a company now owned by Jones
International Networks, Ltd., an affiliate of International. Superaudio, a
joint venture between Jones Galactic Radio, Inc. and an unaffiliated entity,
provides satellite programming to the Wheaton System.
The Product Information Network Venture (the "PIN Venture") is a
venture among a subsidiary of Jones International Networks, Ltd., an affiliate
of International, and two unaffiliated cable system operators. The PIN Venture
operates the Product Information Network ("PIN"), which is a 24-hour network
that airs long-form advertising generally known as "infomercials." The PIN
Venture generally makes incentive payments of approximately 60 percent of its
net advertising revenue to the cable systems that carry its programming. Most
of Intercable's owned and managed systems carry PIN for all or part of each day.
Revenues received by the Partnership from the PIN Venture relating to the
Wheaton System totaled approximately $87,502 for the year ended December 31,
1997.
The charges to the Partnership for related party transactions are as
follows for the periods indicated:
For the Year Ended December 31,
-----------------------------------
1997 1996 1995
--------- ---------- ----------
Management fee, Managing General Partner 1,187,215 $1,158,151 $1,062,407
Supervisory fee, Associate General 200,000 200,000 200,000
Partner
Allocation of expenses 1,349,480 1,510,408 1,511,770
Interest expense 21,758 0 0
Programming fees:
Knowledge TV, Inc. 39,752 35,480 30,636
Jones Computer Network, Ltd. 26,459 60,769 52,346
Great American Country 42,260 0 0
Superaudio 35,741 32,920 28,639
29
<PAGE>
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a) 1. See index to financial statements for the list of financial
statements and exhibits thereto filed as part of this report.
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreement of Jones Growth Partners L.P.. (1)
10.1.1 Copy of a franchise and related documents thereto granting a
community antenna franchise for the Village of Addison, Illinois.
(1)
10.1.2 Ordinance No. 0-90-88 dated April 16, 1990 amending the franchise.
(3)
10.1.3 Copy of a franchise and related documents thereto granting a
community antenna franchise for DuPage County, Illinois.
10.1.4 Copy of a franchise and related documents thereto granting a
community antenna franchise for Kane County (Geneva), Illinois.
(3)
10.1.5 Copy of a franchise and related documents thereto granting a
community antenna franchise for Glen Ellyn, Illinois.
10.1.6 Copy of a franchise and related documents thereto granting a
community antenna franchise for St. Charles, Illinois. (1)
10.1.7 Copy of a franchise and related documents thereto granting a
community antenna franchise for Warrenville, Illinois. (5)
10.1.8 Copy of a franchise and related documents thereto granting a
community antenna franchise for Wheaton, Illinois. (1)
10.1.9 Amendment dated September 5, 1990 to the franchise agreement. (3)
10.1.10 Amendment dated August 12, 1991 to the franchise agreement. (3)
10.1.11 Copy of a franchise and related documents thereto granting a
community antenna franchise for West Chicago, Illinois.
10.1.12 Resolution 1070 dated February 1, 1993 relating to a rate
increase. (3)
10.1.13 Copy of a franchise and related documents thereto granting a
community antenna franchise for Winfield, Illinois. (1)
10.2.1 Credit Agreement dated December 30, 1994 among Jones Growth
Partners L.P. and Nationsbank of Texas, N.A., as agent for various
lenders. (4)
10.2.2 First Amendment and Waiver to Credit Agreement dated as of April
12, 1995, among Jones Growth Partners L.P. and Nationsbank of
Texas, N.A., as agent for various lenders
10.2.3 Second Amendment to Credit Agreement dated as of December 31,
1996, among Jones Growth Partners L.P. and Nationsbank of Texas,
N.A., as agent for various lenders
30
<PAGE>
27 Financial Data Schedule
_________
(1) Incorporated by reference from the Registrant's Annual Report on
Form 10-K for fiscal year ended December 31, 1989.
(2) Incorporated by reference from the Registrant's Annual Report on
Form 10-K for fiscal year ended December 31, 1991.
(3) Incorporated by reference from the Registrant's Annual Report on
Form 10-K for fiscal year ended December 31, 1992.
(4) Incorporated by reference from the Registrant's Annual Report on
Form 10-K for fiscal year ended December 31, 1994.
(5) Incorporated by reference from the Registrant's Annual Report on
Form 10-K for fiscal year ended December 31, 1996.
(b) Reports on Form 8-K
-------------------
None.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JONES GROWTH PARTNERS L.P.
a Colorado limited partnership
By: Jones Spacelink Cable Corporation
By: /s/ Glenn R. Jones
-------------------------------------
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 23, 1998 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones
-------------------------------------
Glenn R. Jones
Chairman of the Board and Chief
Executive Officer
Dated: March 23, 1998 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
-------------------------------------
Kevin P. Coyle
Vice President/Finance
Dated: March 23, 1998 (Principal Financial Officer)
By: /s/ Larry Kaschinske
-------------------------------------
Larry Kaschinske
Controller
Dated: March 23, 1998 (Principal Accounting Officer)
32
<PAGE>
Exhibit 10.1.3
0 R D I N A N C E
-----------------
OFI-005-97
RENEWAL OF CABLE COMMUNICATIONS FRANCHISE
FOR THE UNINCORPORATED AREAS OF
ADDISON, AURORA, GLEN ELLYN, NAPERVILLE,
WARRENVILLE, WEST CHICAGO, WINFIELD AND WHEATON
WHEREAS, 55 ILCS 5/5-1095 and 1096 provides that the County Board may
license, tax or franchise the business of operating a community antenna
television system; and
WHEREAS, the County Board of the County of DuPage has determined that the
best interests of the citizens of the unincorporated areas of the County will be
served by the adoption of an enabling ordinance and the franchising of one or
more cable television systems within the unincorporated areas of the County of
DuPage; and
WHEREAS, the County Board, on January 26, 1982, adopted the DuPage County
Cable Television Ordinance (EXEC-ORD-01-82, amended by EXEC-ORD-04-86, enacted
November 25, 1986, and OFI-001-97, enacted February 25, 1997)to construct,
operate and maintain cable television systems in the unincorporated areas of the
County of DuPage; to provide specifications, procedures and standards for the
construction, operation and maintenance of such systems; to provide for the
regulation of such systems; to provide for the payment to the County of DuPage
for the privilege of exercising the rights granted by such franchises; and to
promote, protect and safeguard the public health, safety and welfare; and
WHEREAS, in accordance with the provisions of the DuPage County Cable
Television Ordinance, a Franchise Agreement was granted by the County of DuPage
to CENTEL CABLE TELEVISION OF ILLINOIS for the operation of cable television
systems ("the Systems") in (a) the Unincorporated Areas of Addison, Aurora,
Warrenville, West Chicago and Winfield in DuPage County, Illinois by Ordinance
EXEC-056-82, enacted November 23, 1982, and amended by Ordinance EXEC-ORD-001-
86, enacted December 17, 1985, and amended by Ordinance OEX-002-89, enacted
August 8, 1989, transferring the Franchise Agreements to JONES INTERCABLE, INC.;
(b) the unincorporated Areas of Wheaton in DuPage County, Illinois by Ordinance
EXEC-ORD-001-84, enacted July 24, 1984, and amended by Ordinance OEX-002-89,
enacted August 8, 1989, transferring the Franchise Agreements to JONES
INTERCABLE, INC.; and (c) the Unincorporated Areas of Glen Ellyn in DuPage
County, Illinois by Ordinance EXO-006-88, enacted August 16, 1988, and amended
by Ordinance OEX-002-89, enacted August 8, 1989,
<PAGE>
b) Section 11-5-64 - Filing of Policies with the County - is modified to
require that certificates of insurance rather than insurance policies be
filed by the County;
c) Section 11-5-76 (13) - Corrective action - is modified to change the word
"order" to "recommend";
d) Section 11-5-76 (14)(a) - Agreements/Promotions - is modified to read, "'A
copy of all local, national, and cooperative promotions for subscriber
program service or installation shall be filed with the County at the same
time that they are sent to subscribers."; and
BE IT FURTHER ORDAINED that the County Clerk is hereby directed to forward
the certified copy of the Duplicate Original of this Ordinance and six (6)
copies to JONES INTERCABLE, INC., 9697 E. Mineral Avenue, Englewood, Colorado
80112; and certified copies of this Ordinance to: Auditor; Treasurer; Finance
Director; Director of the County Development Department; Division of
Transportation Director; the Highway commissioners of Wayne, Winfield, Addison,
York, Milton, Lisle, Bloomingdale, and Naperville Townships; the State's
Attorney's Office, the Director of Telecommunications; and the County Board
Office.
Enacted and approved this 28th day of October 1997, at Wheaton, Illinois.
---- -------
/s/ Gayle M. Franzen
--------------------------
Gayle R. Franzen, Chairman
DuPage County Board
ATTEST: /s/ Gary A. King
--------------------------
Gary A. King, County Clerk
Ayes: 17
Absent: 7
<PAGE>
EXHIBIT 10.1.5
VILLAGE OF GLEN ELLYN
- --------------------------------------------------------------------------------
ORDINANCE NO. 4487
AN ORDINANCE APPROVING A RENEWED CABLE TELEVISION FRANCHISE
AGREEMENT BETWEEN THE VILLAGE OF GLEN ELLYN, ILLINOIS
AND JONES GROWTH PARTNERS, L.P. (D/B/A JONES SPACELINK)
-------------------------------------------------------
- --------------------------------------------------------------------------------
ADOPTED BY THE
PRESIDENT AND THE BOARD OF TRUSTEES
OF THE
VILLAGE OF GLEN ELLYN
DUPAGE COUNTY, ILLINOIS
THIS 14TH DAY OF APRIL 1997.
---- -----
Published in pamphlet form by the authority of
the President and Board of Trustees of the
Village of Glen Ellyn, DuPage County, Illinois,
this 15TH day of APRIL, 1997.
---- ----- --
<PAGE>
ORDINANCE NO.4487
AN ORDINANCE APPROVING A RENEWED CABLE TELEVISION FRANCHISE
AGREEMENT BETWEEN THE VILLAGE OF GLEN ELLYN, ILLINOIS
AND JONES GROWTH PARTNERS- L.P. (D/B/A JONES SPACELINK)
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WHEREAS, the President and Board of Trustees of the Village of Glen Ellyn
received a request from Jones Spacelink to renew its nonexclusive franchise to
provide Cable Service in the Village; and
WHEREAS, the Village has reviewed Jones Spacelink's performance under the
prior franchise; has identified the future cable-related needs and interests of
the community; has considered the financial technical, and legal qualifications
of Jones Spacelink; and has determined whether Jones Spacelink's plans for
constructing and operating its Cable System are adequate; and
WHEREAS, based upon the outcome of such review, the President and Board of
Trustees believe a renewed Franchise Agreement with Jones Spacelink would be in
the best interest of the citizens of the Village of Glen Ellyn; and
WHEREAS, the Village has provided the public with adequate notice of the
proposed Franchise Agreement with Jones Spacelink; and
WHEREAS, the President and Board of Trustees of the Village of Glen Ellyn
have reviewed and accepted the provisions of the Franchise Agreement;
NOW, THEREFORE, BE IT ORDAINED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF GLEN ELLYN, DU PAGE COUNTY, ILLINOIS, IN EXERCISE OF ITS HOME
RULE POWERS as follows:
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SECTION ONE: The President and Village Board of Trustees of the Village of
Glen Ellyn accept the provisions of the Franchise Agreement attached hereto as
Exhibit "A" and made a part hereof.
SECTION TWO: The Village President and Village Clerk are hereby authorized
and directed to execute the Franchise Agreement attached hereto and made a part
hereof
SECTION THREE: This Ordinance shall be in full force and effect from and
after its passage, approval, and publication in the manner provided by law.
PASSED by the Village President and Board of Trustees of the Village of
Glen Ellyn, Illinois, this 14TH day of APRIL, 1997.
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AYES: RENFRO, RENNARD, FASULES, HASE, MATTHEWS, POEPPEL
NAYS: -0-
ABSENT: -0-
APPROVED by the Village President of the Village of Glen Ellyn, Illinois,
this 14TH day of APRIL, 1997.
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[SIGNATURE ILLEGIBLE]
--------------------------------
(ACTING) Village President of the
Village of Glen Ellyn, Illinois
ATTEST:
[SIGNATURE ILLEGIBLE]
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Village Clerk of the
Village of Glen Ellyn, Illinois
(Published in pamphlet form and posted this 15TH day of APRIL 1997.)
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EXHIBIT A
VILLAGE OF GLEN ELLYN
CABLE TELEVISION FRANCHISE RENEWAL AGREEMENT
Section 1.0: Purpose and Intent
-------------------------------
THIS CABLE TELEVISION FRANCHISE RENEWAL AGREEMENT (the "Agreement") is made and
entered into as of the effective date of April 15 1997, (the "Effective Date")
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by and between the Village of Glen Ellyn, a unit of local government organized
under the applicable laws of the State of Illinois (the "Franchising
Authority"), and Jones Growth Partners, L.P., (d/b/a Jones Spacelink) a Colorado
limited partnership with its principal place of business located at 1101 E.
Roosevelt Road, Wheaton, IL 60187 ("Grantee")
WHEREAS, Grantee has asked the Village of Glen Ellyn, Illinois, a municipal
corporation, ("Village") to renew the nonexclusive franchise ("Prior Franchise")
it holds to provide cable service in the Village; and
WHEREAS, the Village has reviewed Grantee's performance under the Prior
Franchise, has identified the future cable-related needs and interests of the
community; has considered the financial, technical, and legal qualifications of
Grantee; and has determined whether Grantee's plans for constructing and
operating its Cable System are adequate; and
WHEREAS, the Village has determined that, subject to the terms and conditions
set forth herein, and other applicable federal state and local law, the grant of
a new nonexclusive franchise to Grantee, to supersede the Prior Franchise, is
consistent with the public interest; and
WHEREAS, the Village and Grantee have agreed to be bound by the conditions set
forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained in this Agreement, the parties agree as follows:
Section 2.0: Definitions
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ACT or CABLE ACT: The Cable Communications Policy Act of 1984, as amended by
the Cable Television Consumer Protection and Competition Act
of 1992, and the Telecommunications Act of 1996, as now or
hereafter amended.
BOARD: The Village President and Board of Trustees of the Village
of Glen Ellyn, Illinois, which constitutes the corporate
authorities of the Village of Glen Ellyn.
CABLE OPERATOR: Any Person or Persons, including corporations, partnerships,
and joint ventures who provide Cable Service through means
of a Cable System and who own a significant interest in the
Cable System, or any Person or Persons who manage, control,
coordinate, or direct the operations of a Cable System.
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CABLE SERVICE: The one-way transmission to Subscribers of (i) video
programming or (ii) other programming service, and
Subscriber interaction, if any, which is required for the
selection or use of such video programming or other
programming service.
CABLE SYSTEM: A facility, consisting of a set of closed transmission paths
and associated signal generation, reception, and control
equipment that is designed to provide Cable Service which
includes video programming and which is provided to multiple
subscribers within a community, but such term does not
include (A) a facility that serves only to retransmit the
television signals of one or more television broadcast
stations; (B) a facility that serves subscribers. without
using any public right-of way; (C) a facility of a common
carrier which is subject, in whole or in part, to the
provisions of Title 11 of the Federal Communications Act (47
U.S.C. 201 et seq.), except that such facility shall be
considered a Cable System (other than for purposes of
Section 621(c) (47 U.S.C. 541(c)) to the extent such
facility is used in the transmission of video programming
directly to subscribers; or (D) any facilities of any
electric utility used solely for operating its electric
utility systems.
CHANNEL: A band of frequencies six (6) or less MegaHertz wide in the
electromagnetic spectrum capable of clearly and effectively
carrying an audio-data signal or an audio-visual television
signal, digital signals, or other electronic signals or some
combination thereof, and as defined by the Federal
Communications Commission Rules and Regulations.
CABLE The Village of Glen Ellyn Cable Communications Commission as
COMMUNICATIONS defined and established by Section 2-15-1 of the Village
COMMISSION: Code of Glen Ellyn.
CONVERTER: An electronic device which may be provided by a Grantee to
Subscribers for the purpose of changing the frequency of
midband, superband, or hyperband signals to a suitable
Channel or Channels which the television receiver is able to
deliver at designated dial locations.
DWELLING UNIT: Shall mean a single-family or multiple-family residential
place of occupancy, or a commercial or business place of
occupancy.
EDUCATIONAL Shall mean a Channel or Channels set aside and so designated
ACCESS CHANNEL: for the use of Schools and related educational institutions
as specified by the Franchising Authority.
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FCC: The Federal Communications Commission and any legally
constituted regulatory body, agency, or successor.
FRANCHISE: The non-exclusive rights granted pursuant to the terms and
provisions of this Agreement and, except to the extent
otherwise stated herein, the Cable Communications Chapter of
the Village Code, as further described and limited in an
ordinance granting a Franchise to the Grantee, to construct
and operate a Cable System along the Public Streets and
Public Ways in the Village of Glen Ellyn, or within
specified areas in said Village, and is not intended to
include any license or permit required for the privilege of
transacting and carrying on a business within said Village,
as may be required by other ordinances of the Village of
Glen Ellyn.
FRANCHISE AREA: The area within the corporate boundaries of the Village of
Glen Ellyn as it may exist during the Term.
FRANCHISING Shall mean the Village of Glen Ellyn.
AUTHORITY:
GOVERNMENTAL A Channel or Channels set aside and so designated for the
ACCESS CHANNEL: use of the Village of Glen Ellyn and other units of local
government serving the Franchise Area, as specified by the
Franchising Authority.
GRANTEE: Jones Growth Partners, L.P., d/b/a Jones Spacelink including
its lawful and permitted successor, transferee or assignee.
GROSS REVENUES
DERIVED FROM
THE OPERATION OF
THE CABLE SYSTEM: Shall mean all cash, credits, or other consideration derived
directly or indirectly by the Grantee, its transferees or
assignees arising from or attributable to the sale or
exchange of Cable Services by the Grantee within the Village
or in any way derived from the operation of its Cable System
to provide Cable Services in the village, including: monthly
fees charged to subscribers for basic service; monthly fees
charged to subscribers for any optional service; monthly
fees charged subscribers for any tier of service other than
basic service; installation, disconnection, and re-
connection fees; leased channel fees; fees or payments
received from programmers for carriage; equipment rental
fees; studio or studio equipment rental, if any; all fees
received from commercial production contracts arising from a
studio production of Grantee in
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or serving the Village of Glen Ellyn, if any; and the sale
or exchange of any programming developed on or for a local
origination channel or channels. This sum shall be the basis
for computing the fee imposed pursuant to Section 7.1
hereof. Gross Revenues shall also include revenues received
by a Grantee's affiliates, subsidiaries, parent or any
Person in which a Grantee has a financial interest, arising
from or attributable to the sale or exchange of Cable
Services within the Village, where such revenue was diverted
by the Grantee in such a manner as to lower Gross Revenues
and therefore avoid payment of Franchise Fees hereunder.
This sum shall not include any taxes on services furnished
by the Grantee which are levied directly upon any subscriber
or user by the Federal government, State of Illinois, DuPage
County, Illinois, the Village of Glen Ellyn, or any other
unit of government which is collected by the Grantee on
behalf of such governmental unit; revenue derived from a
similar service that is regulated exclusively at the state
or federal level when said service is a common carrier
service or utility service not subject to regulation; any
amounts documented as written off by Grantee as bad debt or
as refunds to subscribers, any copyright fees; or any
revenues from advertising or home shopping.
HEADEND: The control center of a Cable System, where incoming signals
are amplified, converted, processed, and combined into a
common cable along with any origination programming, for
transmission to Subscribers. Headend usually includes
antennas, preamplifiers, frequency Converters,
demodulators, processors, and other related equipment.
INSTALLATION: The connection between the cable distribution system to an
exterior ground block terminal and the Subscriber's terminal
located on a television set or Converter Box.
INSTITUTIONAL A network of cable frequencies (upstream) that may connect
NETWORK: Schools, government agencies, libraries, and similar
institutions to the Cable System for retransmission
downstream to a network dedicated specifically for the
private use of Institutional Network Subscribers, or to the
Subscriber network.
INTERACTIVE ON A service providing video programming to Subscribers over
DEMAND SERVICES: switched networks on an on- demand, point-to-point basis but
does not include services providing video programming pre-
scheduled by the programming provider.
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INTERCONNECT: The physical connection of two or more Cable Systems.
LEASED ACCESS
CHANNEL: A cable television Channel or Channels specifically
designated for broadcasting which is provided by means of a
lease arrangement for cablecast airtime between the Cable
Operator and the Lessee. Leased Access Channel shall include
without limitation all use pursuant to Section 612 of the
Cable Act (47 USC 532).
LOCAL ORIGINATION Any Channel providing programs that are produced by the
CHANNEL: Grantee.
MODIFICATION: Any agreement of modification and amendment to the Franchise
Agreement entered into and between the Grantee and the
Village and made a part of the Franchise Agreement.
MULTI-FAMILY A Dwelling Unit consisting of two or more attached
DWELLING UNIT: residential places of occupancy, including, but not limited
to, duplexes, triplexes, quadromains, and apartment and
condominium buildings.
ORDINANCE: Shall mean the Village of Glen Ellyn Cable Ordinance as may
be amended from time to time.
PERSON: Any individual, firm, partnership, limited partnership,
association, corporation, company, or organization of any
kind, and the lawful trustee, successor, transferee,
assignee, or personal representative thereof.
PUBLIC ACCESS A cable television Channel or Channels specifically
CHANNEL: designated as a non-commercial Public Access Channel
available to the general public for programming on a first
come, first-serve, non discriminatory, non-commercial basis.
Shall include without limitation all use pursuant to
Sections 611 and 612 of the Cable Act (47 USC 531, 47 USC
532).
PUBLIC STREET: The surface and space above and below any public street,
road, highway, lane, path, alley, court, boulevard, drive,
avenue, parkway, driveway, or bridge now or hereafter held
by the Village which shall entitle the Village and the
Grantee to the use thereof for the purpose of erecting,
owning, operating, installing, and maintaining the Grantee's
Cable System. Provided, however, that no reference herein,
or in any ordinance granting a Franchise, to a "street"
shall be deemed to be a representation or a guarantee of the
Village that the Village's title in and to any property or
easement is sufficient to permit the property's use for the
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installation of a Cable System, and the Grantee shall be
deemed to gain only such rights to use property in the
Village as said Village may have the undisputed right and
power to give.
PUBLIC WAY: The surface and space above and below any public conduit,
tunnel, park, square, waterway, communications or utility
easement or other easements or public right-of-way now or
hereafter held by the Village which shall entitle the
Village and the Grantee to the use thereof for the purpose
of erecting, owning, operating, installing, and maintaining
the Grantees Cable System. Provided, however, that no
reference herein, or in any Ordinance granting a Franchise,
to a "public way" shall be deemed to be a representation or
a guarantee of the Village that the Village's title in and
to any property or easement is sufficient to permit the
property's use for the installation of a Cable System, and
the Grantee shall be deemed to gain only such rights to use
property in the Village as said Village may have the
undisputed right and power to give.
SCHOOL: Any public elementary school, secondary school, community
college, junior college, or university which conducts
classes or provides instruction services which has been
granted a certificate of recognition by the Illinois State
Board of Education.
STANDARD Cable connections that are located up to one hundred fifty
INSTALLATION: (150) feet from the existing distribution system and shall
not mean commercial or MDU installations, inside "wall fish"
installations or buried installations, irrespective of
distance, where adverse terrain (such as excessive rocky
conditions) or other factors render extension of the system
economically or technically more expensive or difficult
than typically encountered by Grantee in its normal
operations.
SUBSCRIBER: Any Person who lawfully receives any regular or other
service from a Grantee.
SUBSCRIBER DROP: A cable which connects the tap or coupler of a feeder cable
to the Subscriber's premises.
VILLAGE: The Village of Glen Ellyn, a home rule municipal corporation
under the laws of the State of Illinois, its Village
President, Board of Trustees, officers and employees unless
otherwise specifically
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designated, and all the area within the territorial limits
of the Village, its future corporate boundaries and
including any area over which the Village exercises its
jurisdiction.
Section 3.0: Principles of Construction:
- ----------------------------------------
This Agreement shall be construed and applied in accordance with the following
principles:
A. Words in the present tense include the future.
B. Words importing the singular number may extend to and include
plural, words importing the plural number may extend to and include
the singular.
C. The headings supplied herein are for convenience only and shall not
have force of law, are not part of the Section, and are not to be
used in construing the language of the Section.
D. The words "shall" and "must" are mandatory as used herein.
E. The word "may" is permissive.
Section 4.0: Grant of Authority:
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Section 4.1 8 Term of Franchise
-------------------------------
There is hereby granted by the Franchising Authority, which represents
and warrants that it has the requisite power and authority to do so, to
the Grantee, for a period of fifteen (15) years from and after the
Effective Date of this Agreement (the "Term"), the nonexclusive right
and Franchise to construct, use, operate, own, and maintain a Cable
System for the purpose of providing Cable Services subject to applicable
local, state, and Federal law and regulation. The parties agree that the
Cable System shall not be used by Grantee for the provision of
Telecommunications Services (as that term is defined in the
Telecommunications Act of 1996) prior to Grantee having obtained the
required governmental approval(s). In the event such approval(s) are
obtained and Grantee provides such services, Grantee shall pay taxes
and/or fees on the same basis as are other providers of
Telecommunications Services in the Franchise Area.
Section 4.2: Use of Public Streets and Public Ways
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Without reducing its police powers to adopt and enforce ordinances of
general applicability necessary to the health, safety, and welfare of
the public, the Franchising Authority hereby grants to the Grantee, to
the extent of the Franchising Authority's right to do so, authority to
use the Village's Public Streets and Public Ways for the purposes of
this Agreement, and this Franchise shall be construed to authorize the
construction of a Cable System over such Public Streets and Public Ways
and through easements in
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accordance with Section 621(a)(2) of the Cable Act and to grant access
to such easements in accordance with Section 621 (a)(2) of the Cable Act
and to grant access to such easements specifically contemplated or
designated "Cable TV" and to include this grant in future easements and
Public Streets and Public Ways as they are created.
Section 5.0: Authority Not Exclusive:
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Section 5.1: Use Of Public Streets and Public Ways
--------------------------------------------------
The right to use and occupy Public Streets and Public Ways for the
purposes set forth are not exclusive. The Franchising Authority reserves
the right to permit a similar use of said Public Streets and Public Ways
to any Person, or any other entity at any time before, during, or after
the period of this Franchise. Grantee shall not take any legal position
that contests the Franchising Authority's right to authorize the use of
the Public Streets or Public Ways by another Person or other entity, and
by acceptance of this Agreement, acknowledges that the Franchising
Authority has the right to authorize and permit similar uses of its
Public Streets and Public Ways.
Section 5.2: No Waiver of Rights to Secure Consent
--------------------------------------------------
Nothing in this Agreement shall be construed as a waiver of any right by
the Franchising Authority, County of DuPage, or the State of Illinois to
require any Person utilizing the equipment, facilities, improvements,
and Public Streets and Public Ways constituting all or part of the Cable
System facilities to secure consent or other appropriate permission
authorizing such use.
Section 6.0: Amendment of Franchise Agreement
- ---------------------------------------------
Section 6.1: Conditions for Amendment or Modification
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In addition to such amendments and Modifications as are provided for in
the Cable Act and other applicable law, it is the intent of the parties
that Modifications may be made to this Agreement from time to time in
accordance with this Section to allow Grantee to implement services
provided by the Grantee's Cable System not contemplated by this
Agreement, or to agree to any terms allowed by law, and each party
agrees to bargain in good faith with the other party upon the initiation
of any such proposed Modification amendments.
Section 6.2: Process for Approval of Modification
-------------------------------------------------
If either party determines that a Modification is recommended and
consistent with the terms of this Agreement, and is economically and
technically feasible as determined following an evaluation of Grantee's
financial condition, the length of Term remaining, and the profitability
of the Cable System within the Franchise Area, and will not adversely
affect or limit the rights and privileges under this Agreement~ then the
parties
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will in good faith, review and negotiate the terms of the Modification
and any amendment to this Agreement. Based on this review, and upon
adoption of such a Modification or new requirement through such
amendment by the Village Board, the Modification will become effective.
Section 7.0: Fees:
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Section 7.1: Franchise Fee Payments
-----------------------------------
A. From and after the Effective Date of this Agreement and throughout
the Term, the Grantee shall pay to the Franchising Authority a
Franchise Fee of five percent (5%) of the Gross Revenues Derived
From The Operation Of The Cable System within the Franchise Area
for each calendar year. Such payments shall be paid on a quarterly
basis within forty-five (45) days of the end of each calendar
quarter to the Franchising Authority. If the United States
Congress, FCC, or any other governmental entity with authority over
multi channel Cable Service provides a Franchising Authority with
the right to increase the Franchise Fee above five percent (5%),
the Franchising Authority shall have the authority to unilaterally
increase the Franchise Fee to the maximum rate allowable if the
Franchising Authority has and exercises the authority to similarly
and simultaneously increase the Franchise Fee imposed upon all
Cable Operators operating within the Franchise Area and to take
effect no earlier than ninety (90) days after advance written
notice.
B. Each payment of a Franchise Fee shall be accompanied by a statement
from the Chief Financial Officer or other corporate financial
officer of the Grantee having the requisite knowledge to make such
a statement certifying that the Gross Revenues Derived From the
Operation of the Cable System upon which the payment is based. Each
such statement shall also include the number of Subscribers
utilized in calculating Gross Revenues Derived From the Operation
of the Cable System.
C. The Grantee shall file, within one hundred twenty (120) days
following the conclusion of the Grantee's fiscal year, an annual
report certified by its Chief Financial Officer, clearly showing
the yearly total Gross Revenues Derived From The Operation Of The
Cable System.
D. In consideration for Grantee making the local studio available to
public, educational and governmental access users for the period of
time the local studio is made available to public, educational, and
governmental access users as set forth in Section 16.4 of this
Agreement, Grantee shall reduce its Franchise Fee payment to the
Village to three (3%) during this period time.
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Section 7.2: Permit Fee Payments
--------------------------------
Prior to any construction, reconstruction, repair, or maintenance of the
Cable System, Grantee shall apply for said permits and make payment at
the time of application for such permits as are required by ordinances
of the Village which are necessary for Grantee in order to conduct such
construction, reconstruction, repair, or maintenance of Grantee's Cable
System. All costs customarily charged by the Village related to
application, securing, maintaining, retaining, and renewing any permits,
licenses, or other authorizations shall be the responsibility of the
Grantee.
Section 8.0: Maintenance or Construction of the Cable System:
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Section 8.1: Maintenance of Wires, Conduits, Cables and Property
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The Grantee shall maintain all wires, conduits, cables, and other real
and personal property and facilities which Grantee owns and uses in the
operation of the Cable System in good condition, order, and repair.
Grantee shall implement the preventive maintenance procedures as
described in Appendix 8.2.
Section 8.2: Ownership of Cables
--------------------------------
Unless otherwise provided by law, the Grantee shall own all cable which
it has installed within the Franchise Area.
Section 8.3: Compliance With Rules and Regulations
--------------------------------------------------
Grantee shall comply with applicable Federal, state, and local rules and
regulations governing the construction, reconstruction, operation,
maintenance, and installation of the Cable System. Such rules and
regulations shall include, without limitation, the requirements of
Section 621(a)(2)(A) of the Cable Act to ensure that:
A. The safety, function, and appearance of the property and the
convenience and safety of other persons shall not be adversely
affected by the installation and construction of facilities
necessary for the Cable System.
B. The cost of the installation, construction, operation, or removal
of such facilities be borne by the Grantee or, in the circumstances
covered by Section 8.7 below, by a combination of the Grantee and
Subscriber(s), and;
C. The Grantee shall justly compensate any property owner for any
damages caused by the installation, construction, operation, or
removal of such facilities by Grantee.
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Section 8.4: Standards for Cable Wiring
---------------------------------------
In addition to the above requirements, Grantee will insure that:
A. Its work shall comply with the then current provisions of the
National Electrical Safety Code (currently ANSI/C2-1996) of the
National Bureau of Standards, the National Electrical Code of the
National Fire Protection Association (currently ANSI/NFPA 70 1996),
and the Bell Telephone System's Code of Pole Line Construction as
such codes are in force as of the time of installation or other
work, and that such future work shall comply with subsequently
adopted editions of the aforementioned codes.
B. All cables and wires or other work shall be installed parallel with
existing telephone and electric utility wires using existing
conduits and poles wherever possible;
C. Multiple cable configurations shall be in parallel arrangement and
bundled in accordance with engineering and safety considerations;
and
D. Except where otherwise provided by applicable law, in areas where
both telephone and electric utilities' facilities are above ground
at the time of installation of the Cable System, Grantee may
install its facilities above ground. In areas where both the
telephone and electric utility companies' facilities are
underground, Grantee shall install its facilities underground. If
the Franchising Authority provides notice to telephone and electric
utility companies and any other Cable Operator requesting that
above ground portions of Grantee's equipment be moved underground,
Grantee will promptly comply with all such reasonable requests,
provided that the request is equally applicable to all other
utilities and Cable Operators. The Franchising Authority shall
coordinate among Cable Operators, telephone, and electric utility
companies and/or users of Public Streets and/or Public Ways to
insure that relocation is done in an economical and appropriate
manner.
E. This Franchise shall not relieve the Grantee of any obligation in
obtaining pole, conduit, or other wire-holding structure use
agreements from other utility companies, or others maintaining
poles, conduits, or other wire-holding structures in the Public
Streets and Public Ways of the Village, whenever the Grantee finds
it necessary to make use of said poles, conduits, or wire-holding
structures. This Franchise shall not be deemed to expressly or
impliedly authorize the Grantee to construct or install poles,
conduits, or wire-holding structures within Public Streets or
Public Ways for the purpose of placing cables, lines, wires, or
otherwise, without the prior approval of the Village. Such consent
shall be given upon such terms and conditions as the Village may
prescribe which shall include a requirement that the Grantee
perform, at its sole expense, all tree trimming required to
maintain the poles clear of obstructions. Consent shall not be
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unreasonably withheld but shall be subject to reasonable and
necessary limitations to protect public health, safety, and
welfare.
F. Throughout the life of this Agreement, Grantee shall identify its
Subscriber Drop cables, along with trunk and feeder wiring by
either color code, stamping, engraving, tagging, stickers, or other
appropriate method to be selected by the Grantee in its sole
discretion, for the purpose of distinguishing its cable wiring from
that of any other Cable System Grantee located within the Franchise
Area.
Section 8.5: Public Improvements
--------------------------------
The Franchising Authority shall give Grantee forty-five (45) days
(except in case of emergency declared by the Village President in which
event such lesser notice as shall be reasonable under the circumstances
presented) advance written notice of improvements to Public Streets or
Public Ways or other activity which could affect the Cable System,
including, but not limited to, Public Street or Public Way excavation;
construction; repair; grading; traffic conditions; installation of
sewers, drains, or water pipes; power or signal lines; tracks; or
vacation or improvement of public works.
A. All such public works shall be done insofar as possible, in such a
manner as to not obstruct, injure, or prevent the free use and
operation of the poles, wires, conduits, conductors, pipes, or
appurtenances of the Grantee's Cable System. Nothing contained in
this Agreement shall relieve any Person, company, or corporation
from liability arising out of the failure to exercise reasonable
care to avoid injuring the Grantee's facilities while performing
any work connected with the grading, regrading, or changing the
line of any Public Way or Public Street, or with the construction
of any sewer, water, gas, electric, Village lighting, or signage
system.
B. If at any time, in case of fire, disaster, or other emergency in
the Village, it shall become necessary in the reasonable judgment
of the Village to cut or move any of the wires, cables, amplifiers,
optical node equipment, appliances, or appurtenances thereto of the
Grantee, such cutting or moving may be done and any repairs
rendered necessary thereby shall be made by the Grantee, at its
sole expense, unless such damage results from willful or malicious
conduct by the Village. The Village shall use its best efforts to
notify Grantee if reasonably possible prior to such removal or
damage and, if not reasonably possible, then as soon thereafter as
is reasonably possible.
C. If any of Grantee's equipment shall interfere with the public
works, then, upon receipt of the aforementioned notice, that part
of Grantee's equipment which interferes shall be removed or
replaced by Grantee in such manner as shall be directed by the
Franchising Authority so that the same shall not interfere with the
public works as reasonably determined by the Franchising Authority,
and Grantee shall bear the reasonable expense of such removal or
replacement.
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Section 8.6: Requirement of As-Built Maps
-----------------------------------------
Grantee shall keep accurate, complete, and current as-built maps and
records of its Cable System and facilities, to be updated periodically
as warranted. Grantee shall furnish, as soon as they are available,
three (3) complete sets of as built maps and strand maps to the
Franchising Authority applicable to the Franchise Area. Such maps shall
be available for inspection by the public during normal business hours
at the Franchising Authority's office. The aforementioned as-built maps
and stand maps shall also be provided to the Franchising Authority in
the Franchising Authority's computer-readable, digital format for
incorporation into the Franchising Authority's Geographic Information
System (GIS).
Section 8.7: Extension of Service
---------------------------------
Grantee shall build or, upgrade its Cable System so that it is capable
of providing service to all residences and businesses located along
public rights-of-way located within the Franchise Area. Service will be
provided at then prevailing installation charges except as provided
below under the following circumstances:
A. Where the drop to the Subscriber is not a Standard Installation, in
addition to the prevailing installation charge, Grantee may charge
the Subscriber the difference between Grantee's cost of installing
a Standard Installation and the cost of installing the non-Standard
Installation;
B. In any areas adjacent to the Franchise Area which are annexed by
the Issuing Franchising Authority during the Term of this
Agreement:
(i) Where the residence or business of a person requesting Cable
Service is more than 500 feet from the existing Cable System
(where overhead may be used) or 250 feet of distance from
the existing system (where underground must be used),
service will be provided if the person requesting service
(or persons, on a pro rata basis) contributes the actual
cost of material and labor for the portion of construction
that is beyond the above distances; and
(ii) Where access to the property is denied by the property owner
or where a cost is imposed to cross private property,
Grantee shall have the option not to provide cable service.
In such circumstances, however, Grantee will endeavor in
good faith to reach agreement with those requesting service
in an effort to make extension of the Cable System
economically feasible by a contribution in aid of
construction by those requesting service.
In implementing this subparagraph (B), Grantee may require
that the estimated amount of the Subscribers' capital
contribution be paid in
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advance. Any excess amounts so collected will be returned to
the Subscribers upon completion of construction.
C. Those portions of the Franchise Area which do not have the
necessary density of thirty-five (35) potential Subscribers per
linear mile shall be served by Grantee if the potential Subscribers
agree to participate in the cost of construction on the following
terms and conditions:
(i) Grantee shall receive written requests from a minimum of
twenty (20) potential Subscribers per linear mile or an
equivalent pro rata number based on the actual length of the
extension.
(ii) Grantee shall calculate its then current cost per mile of
extension. This shall be divided by thirty-five (35)
locations per linear mile to arrive at the required per
location investment Grantee must make.
(iii) The potential Subscribers requesting service shall then be
multiplied by Grantee's investment per location and this
total amount shall be subtracted from Grantee's current cost
per linear mile.
(iv) The remaining amount shall then be shared pro rata by the
potential Subscribers requesting service and paid to Grantee
prior to the time the extension is made.
Section 8.8: Service to Multi-Family Dwelling Units
---------------------------------------------------
The Grantee shall be required, in accordance with this Agreement and
applicable law, to provide service to individual units of a Multi-Family
Dwelling Unit (MDU) with all services offered to other Dwelling Units
within the Franchise Area, so long as the owner of the MDU consents, in
writing, if requested by the Grantee, to the following:
A. To Grantee's providing of services to individual units of the MDU;
B. To reasonable conditions and times for Installation, maintenance,
and inspection of the Cable System on the MDU premises;
C. To reasonable conditions promulgated by Grantee to protect
Grantee's equipment and to encourage widespread use of the Cable
System; and
D. To not demand payment from Grantee for permitting Grantee to
provide service to the MDU and to not discriminate in rental
charges, or otherwise, between tenants who receive Cable Service
and those who do not.
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Section 8.9: Permission of Property Owner for Equipment Installation
--------------------------------------------------------------------
To the extent required by applicable law, no cable line, wire,
amplifier, optical node equipment, Converter, or other piece of
equipment owned by Grantee shall be installed by Grantee outside the
boundaries of a Public Street or Public Way without first securing the
written permission of the owner or lawful occupant of any property
involved.
Section 8.10: Burial of Temporary Subscriber Drops and Other Unburied
---------------------------------------------------------------------
Cables
------
Unless otherwise permitted by the Village, Grantee shall bury temporary
Subscriber Drop cables and other unburied cables within the deadlines of
the following schedule:
April 1 through November 30: Within fourteen (14) days.
December 1 through December 31: Within one hundred twenty (120) days.
January 1 through January 31: Within ninety (90) days.
February 1 through
February 28/29: Within sixty (60) days.
March 1 through March 31: Within thirty (30) days.
Section 8.11: Restoration of Property
-------------------------------------
A. Upon completion of construction, reconstruction, maintenance, or
repair of components of the Cable System, on public or private
property, Grantee shall, at its own expense, substantially restore
said property to its original condition in a workmanlike and
professional manner. In the event that said property is not
restored to its original condition, the Franchising Authority,
after reasonable notice and failure by Grantee to adequately
respond, shall have the right to restore said property and to
assess the reasonable expense of restoration to the Grantee.
Payment to the Village for such replacement or restoration shall be
immediate, upon demand, by the Grantee. All requests for
replacement or restoring of such Public Streets or Public Ways or
private property shall be in writing to the Grantee. Grantee shall
guarantee and maintain such restoration for a period of one (1)
year against defective materials or workmanship.
B. Where areas of grass have been disturbed, Grantee shall replace
said grassy areas with sod as soon as is feasible. Grantee shall be
responsible for the planting of the sod, including watering and
fertilization, and shall inform the property owner, in writing, of
the proper care of the sodding and the owner's responsibility for
ongoing maintenance of the sod.
15
<PAGE>
Section 8.12: JULIE Compliance
------------------------------
Grantee shall, at its own cost and expense, enter into a membership
agreement and maintain its membership during the duration of the
Franchise with the Joint Utility Locating Information for Excavators
Corporation (hereafter referred to as J.U.L.I.E.), an Illinois not-for-
profit corporation, if it has not already done so.
Section 8.13: Open Cutting of Public Streets and Public
-------------------------------------------------------
The Grantee shall make reasonable effort to avoid major disturbances of
street pavements, sidewalks, alleys, public and private landscaping, and
all other publicly or privately held properties or structures thereupon
during Cable System construction and maintenance of the Cable System.
The open cutting of Public Streets and Public Ways and other paved
surfaces within any public right-of-way or upon private property shall
be prohibited except when specifically agreed upon by the Franchising
Authority and subject to the following regulation. All cable passing
under any Public Street shall be installed in conduit. Directional
boring shall be the preferred method used whenever practical for
installation within any Public Street and Public Way.
Section 8.14: Installation of Cable Near Permanent and Semi-Permanent
---------------------------------------------------------------------
Structures
----------
Where a structure, such as a garage, driveway, sidewalk, or fence,
animal shelter or tool shed, lies within the desired and approved path
of any underground cable, Grantee shall use reasonable care to avoid
damaging such property.
Section 8.15: Contractor Qualifications
---------------------------------------
Any contractor performing work for Grantee with respect to construction,
upgrade, installation, maintenance, or repair of the Cable System, shall
be properly and currently licensed under laws of the State of Illinois,
and under ordinances of the Village of Glen Ellyn.
Section 8.16: Removal or Modification of Discontinued Facilities
----------------------------------------------------------------
A. Whenever Grantee intends to discontinue using any facility
(exclusive of Subscriber Drop cabling) within the Public Streets
and Public Ways, Grantee shall submit for the Franchising
Authority's approval a complete description of the facility and the
day on which Grantee intends to discontinue use of the facility.
Grantee may remove the discontinued facility or request that the
Franchising Authority allow it to remain in place. Notwithstanding
Grantee's request that any such facility remain in place, the
Franchising Authority may require that the Grantee remove any above
ground facility or modify any facility in order to protect the
public health, welfare, safety, and convenience, or otherwise serve
the public interest.
16
<PAGE>
B. The Franchising Authority may require Grantee to perform a
combination of modification or removal of such facilities. Grantee
shall complete such removal or modification in accordance with a
schedule set by the Franchising Authority following discussions
with the Grantee. Until such time as the Grantee removes or
modifies the facility, or until the rights to or the responsibility
for the facility are accepted by another Person having authority to
construct and maintain such facility, Grantee shall be responsible
for all necessary repairs and relocations of the facility, as well
as maintenance of the Public Street or Public Way, in the same
manner and degree as if the facility were in active use, and
Grantee shall retain all liability for such facility.
C. If Grantee abandons its facilities, the Village may choose to use
such facilities for any purpose whatsoever, including public,
educational, and governmental purposes.
Section 9.0: Tree Trimming and Removal of Vegetation
- ----------------------------------------------------
Section 9.1: Tree Trimming
--------------------------
Upon advance notice to the Village Forester and after reasonable
attempts to notify the owner, occupant, or property manager of the
principal building(s) adjoining a Public Street or a Public Way, the
Grantee may trim trees or other vegetation owned by the Village or
encroaching upon a Public Street or Public Way to prevent their branches
or leaves from touching or otherwise interfering with its wires, cables,
or other structures. All trimming or pruning shall be at the sole cost
of the Grantee.
Section 9.2: Contracted Services
--------------------------------
The Grantee may contract for said trimming or pruning services with any
Person approved by the Village prior to the rendering of such services.
Section 9.3: Removal of Other Vegetation
----------------------------------------
Grantee shall not remove any shrub, plant, or vegetation on public or
private property without first receiving written permission of the
property owner, occupant, or property manager. Any such work shall be
performed at Grantee's expense and on public property shall be subject
to supervision by the Village.
Section 9.4: Arborcultural Practices
------------------------------------
All trimming of trees and other vegetation shall be in accordance with
standard local arborcultural practices, and will be coordinated with the
Village Forester to ensure trimming to the least necessary extent. All
trimming debris shall be removed by Grantee from the work area on a
daily basis.
17
<PAGE>
Section 9.5: Damage Indemnification
-----------------------------------
Grantee shall be responsible for, shall indemnify, defend, and hold
harmless the Village, its officers, agents, and employees from and
against any and all damages arising out of or resulting from the
removal, trimming, mutilation, or of any injury to any tree, or trees
proximately caused by the Grantee or its officers, agents, employees,
contractors, or subcontractors.
Section 10: Educational Network
- -------------------------------
Section 10.1: Provision of Fiber for Educational Network
--------------------------------------------------------
A. Grantee shall, construct, at an identified location inside an
exterior wall of each of the public educational facilities listed
in Appendix A, two (2) fiber strands to be used as an educational
network by the educational facilities listed on Appendix A
("Educational Network"). Such construction to be complete by no
later than June 30, 1998. The Village shall pay sixty thousand
dollars ($60,000.00) towards the cost of providing the Educational
Network, such amount to be paid to Grantee within thirty (30) days
after the completion of the Educational Network.
B. Grantee shall construct, install, operate and maintain the
Educational Network in a manner consistent with all laws,
ordinances, construction standards, governmental requirements, and
FCC technical standards. In addition, construction, installation
and maintenance of the Educational Network shall be performed in an
orderly and workmanlike manner. All cables and wires shall be
installed, where possible, parallel with electric and telephone
lines. Multiple cable configurations shall be arranged in parallel
and bundled with due respect for engineering considerations In
addition, Grantee shall provide the Village construction reports in
accordance the time schedule set forth in Section 13.5 of this
Agreement, that shall clearly show the progress of construction and
conformance with applicable technical and engineering standards.
C. The Educational Network may be used for transmitting video
programming and other transmissions. In addition, while the users
of the Educational Network are authorized to utilize the
Educational Network for telephony purposes, the Educational Network
may in no event be subleased or assigned to third parties for
telephony or any other use.
18
<PAGE>
D. Any additional interior or exterior wiring or equipment necessary
to utilize the fibers will be at the cost of the user. Further,
should the Village elect to include any additional facilities (in
addition to those locations listed in Appendix A to be
interconnected at Grantee's expense), the Village may do so at its
expense with a contractor acceptable to Grantee (approval of which
shall not be unreasonably withheld) and Grantee agrees to cooperate
fully with such contractor in coordinating such additional
interconnections.
Section 10.2: New or Relocated Facilities
-----------------------------------------
In the event of relocation of any facility connected to fiber pursuant
to this Section or in the event of a newly acquired or constructed
public educational facility or additional locations, Grantee will
relocate or provide such fiber connection at the request of the Village,
provided that fiber is reasonably accessible in existing conduit to the
new location, and the Village shall reimburse the Grantee for the cost
of such relocation or provision.
Section 10.3: Interconnection With Other Educational Facilities
---------------------------------------------------------------
Notwithstanding the foregoing, if technically and economically feasible,
Grantee will interconnect the Educational Network with other dedicated
fiber, limited access educational networks provided by other cable
television operators located outside of the Village only, for the sole
purpose of providing educational programming between these educational
facilities. All costs associated with the interconnection with other
cable operators located outside of the Village shall be the sole
responsibility of the requesting party or other cable television
operator.
Section 10.4: Maintenance of Educational Network Cable
------------------------------------------------------
A. Grantee shall maintain the Educational Network to the extent where
the network is at all times, to be in good condition and repair.
Grantee shall test the Educational Network at least biannually for
video and data signal quality, and for signal leakage.
B. Grantee shall maintain the Educational Network to the extent that
signal leakage, if any, falls within the allowable parameters
established by the FCC. Upon request, Grantee shall provide a copy
of all FCC mandated test results to the Franchising Authority.
C. The Educational Network shall be configured to allow for status
monitoring equipment to identify potential system faults,
interruptions, and outages.
D. Grantee shall establish maintenance and repair standards applicable
to the Educational Network and such standards shall be provided to
the Franchising Authority. Such standards should include response
to Educational Network
19
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service inquiries, hours of operation for service representatives
during and after hours of business operation, availability of
service, response time for requests for repairs or restoration of
service during regular business hours, and during evenings and
weekends, and reporting of resolution of service inquiries to
users.
Section 11: System Design and Performance Requirements
- ------------------------------------------------------
Section 11.1: System Configuration
----------------------------------
Grantee shall maintain the Cable System to provide Channel capacity of
not less than sixty-one (61) channels.
Section 11.2: Outage Prevention
-------------------------------
Grantee shall install and maintain a standby power system to enable
continuation of service that provides a minimum of five (5) hours
duration at the Headend, and three (3) hour power supply units
throughout the distribution networks.
Section 11.3: Status Monitoring
-------------------------------
System Headends and distribution to the node, as well as standby power,
will employ remote status monitoring.
Section 11.4: FCC Technical Standards and Testing
-------------------------------------------------
A. Grantee's Cable System shall be applicable to and comply with the
FCC Rules and Regulations, Part 76, Subpart K concerning technical
standards.
B. Grantee shall perform all tests necessary to determine compliance
with the technical standards of FCC Rule Section 76.601 and with
the standards contained in this Section. Tests shall include the
following as a minimum:
1. Preconstruction or Preupgrade.
2. Initial Proof-of-Performance
3. Bi-Annual Proof-of-Performance Tests
Written records of tests results shall be maintained and shall be
made available to the Franchising Authority.
20
<PAGE>
Section 11.5: Technical Evaluations and Inspections
---------------------------------------------------
The Franchising Authority shall have the right to conduct evaluations
and inspections of Grantee's Cable System. The Franchising Authority may
utilize an independent consultant or engineering firm with experience
and knowledge of cable television systems who has no affiliation with
the Grantee, to coordinate with Grantee in conducting tests and
assessments of the Cable System. The Franchising Authority shall provide
not less than ten (10) business days notice to Grantee of its intent to
conduct an evaluation and/or test of the Cable System. The consultant or
firm shall sign all records of tests and assessments conducted upon the
Cable System, develop a report based on the findings of such tests and
assessments, and provide the Cable Television Commission with a report
of the test results and interpretations, including recommendations for
courses of actions to remedy any identified or known deficiencies
uncovered through the testing. Where testing determines that problems,
deficiencies, or violations of the Franchise exist, Franchising
Authority shall provide Grantee with notice of said problems,
deficiencies, or violations, and provide an appropriate opportunity to
cure. Where repeated and material problems, deficiencies, or violations
existed causing the need for such testing, Grantee shall assume the
costs and expenses for such testing.
Section 11.6: Lockout Mechanism
-------------------------------
A. The Grantee shall inform each Subscriber at the time of initial
subscription to Cable Service and at least annually of the
availability of a lockout mechanism enabling the Subscriber to lock
out a single Channel or multiple Channels.
B. The technical configuration of Grantee's current Cable System shall
allow for adult-oriented programming to be blocked or trapped out
from a location in the public right-of-way to prevent the
objectionable programming from entering the Subscriber residence.
Section 11.7: Emergency Override
--------------------------------
A. Grantee shall configure the Cable System to enable carriage of
audio and emergency override cablecasting from the Village Hall
over all Channels of the Cable System in accordance with FCC
regulations. Said emergency override capability shall be designed
to allow either the Village President, or the Village Administrator
or his designee to activate the emergency override upon declaration
of a public emergency.
21
<PAGE>
B. Grantee shall comply with applicable FCC Rules and Regulations
regarding Emergency Alert Systems (EAS) and testing thereof.
Grantee shall provide notification to the Franchising Authority
within thirty (30) days of receipt of notification of participation
in the EAS and shall provide its procedures for emergency broadcast
to the Village for inclusion in the Village's emergency and
disaster planning procedures.
Section 12: Subscriber Services
- -------------------------------
Section 12.1: Office Hours and Telephone Availability
-----------------------------------------------------
A. Grantee will maintain a local, toll-free, or collect call telephone
access line which will be available to its Subscribers and the
public 24 hours a day, seven (7) days a week. Trained
representatives will be available to respond during normal business
hours.
B. After normal business hours, the access line may be answered by an
answering service or an automated response system, including an
answering machine. Inquiries received after normal business hours
must be responded to by a trained representative on the next
business day.
C. Under normal operating conditions, telephone answer time by a
Subscriber representative, including wait time, shall not exceed
thirty (30) seconds when the connection is made. If the call needs
to be transferred, transfer time shall not exceed thirty (30)
seconds. These standards shall be met no less than ninety (90)
percent of the time under normal operating conditions, measured on
a quarterly basis.
D. Franchisee will not be required to acquire equipment or perform
surveys to measure compliance with the telephone answering
standards above unless an historical record of complaints indicates
a clear failure to comply.
E. Under normal operating conditions, the Subscriber will receive a
busy signal less than three (3) percent of the time.
F. Grantee shall provide bill payment locations within the Franchise
Area and provide a listing of said locations to the Franchising
Authority.
Subscriber bill payment locations will be open during
normal business hours and Grantee will use commercially reasonable
efforts to ensure they will be conveniently located.
22
<PAGE>
Section 12.2: Installations Disconnections, Outages and Service Calls
----------------------------------------------------------------------
A. Under normal operating conditions, each of the following standards
will be met no less than ninety-five (95) percent of the time
measured on a quarterly basis:
1. Standard Installations will be performed within seven (7)
business days after an order has been placed.
2. Excluding conditions beyond its control, Grantee will begin
working on service interruptions and outages promptly and in
no event later than twenty-four (24) hours after the
interruption becomes known. An outage is defined as a complete
loss of picture and sound reception on all Channels affecting
three (3) or more Subscribers. Grantee must begin actions to
correct other service problems the next business day after
notification of the service problem.
3. The appointment window alternatives for Installations, service
calls, and other Installation activities will be either a
specific time or, at maximum, a four-hour time block during
normal business hours. The Grantee may schedule service calls
and other Installation activities outside of normal business
hours for the express convenience of the Customer. The Grantee
may also participate in cable industry programs which require
a shorter time block than four (4) hours for response to
Installations or other service calls.
4. The Grantee shall not cancel an appointment with a customer
after the close of business on the business day prior to the
scheduled appointment.
5. If Grantee's representative is running late for an appointment
with a Subscriber and will not be able to keep the appointment
as scheduled, the Subscriber will be contacted. The
appointment will be rescheduled, as necessary, at a time which
is convenient for the Subscriber.
6. Grantee shall either abate pro rata or provide a benefit of
equal or better value to a Subscriber in the event that
service to that Subscriber is interrupted for more than four
(4) hours for any reason whatsoever, except interruption
caused by acts or omissions of the Subscriber.
Section 12.3: Service Guarantees
--------------------------------
The Grantee guarantees that Installations and service calls will be
performed during the time period agreed upon with the Subscriber or
Subscriber renumeration will be provided. Renumeration may include, but
not be limited to, free Installation, service credit, or promotional
items of comparable value.
23
<PAGE>
Section 12.4: Communications to Subscribers
-------------------------------------------
A. The Grantee shall provide written information on each of the
following areas at the time of Installation of Cable Service, at
least annually to all Subscribers, and at any time upon request:
1. Products and services offered;
2. Prices and options for programming services and conditions of
subscription to programming and other services;
3. Installation and service maintenance policies;
4. Instructions on how to use the cable service;
5. Channel positions of programming carried on the Cable System;
6. Billing and complaint procedures, including the address and
telephone number of the Franchising Authority's cable office;
7. That a lock out mechanism is available to Subscribers.
B. Subscribers and the Franchising Authority will be notified of any
changes in rates, programming services, or Channel positions as
soon as possible and in writing. Notice must be given to
Subscribers and the Franchising Authority a minimum of thirty (30)
days in advance of such changes if the change is within the control
of the Grantee. In addition, Grantee shall notify Subscribers and
the Franchising Authority thirty (30) days in advance of any
significant changes in the other information required by the
preceding paragraph. Notwithstanding the foregoing, Franchisee
shall not be required to provide prior notice of any rate change
that is the result of a regulatory fee, Franchise Fee, or any other
fee, tax, assessment, or charge of any kind imposed by any Federal
agency, State, or the Franchising Authority on the transaction
between Franchisee and the Subscriber.
C. Grantee shall develop a procedure for complaint resolution and
provide a copy of same to Franchising Authority.
Section 12.5: Billing Procedures
--------------------------------
A. Bills will be clear, concise, and understandable. Bills must be
fully itemized, with itemizations including, but not limited to,
basic and premium service charges and equipment charges. Bills will
also clearly delineate all activity during the billing period,
including optional charges, rebates, and credits.
24
<PAGE>
B. In case of a billing dispute, Grantee must respond to a written
complaint from a Subscriber within thirty (30) days.
Section 12.6: Refunds
---------------------
Where applicable, refund checks or credits will be issued within sixty
(60) days of:
A. Resolution of any billing inquiry by a Subscriber where a refund is
found to be due the Subscriber; or
B. Return of equipment supplied by the Grantee if service has been
disconnected; or
C. Termination of service where a refund is due.
Section 12.7: Credits
---------------------
Credits for service will be issued no later than the Subscriber's next
two billing cycles following the determination that a credit is
warranted.
Section 12.8: Definitions
-------------------------
For the purposes of this Agreement, the term "normal business hours"
shall mean those hours during which most similar businesses in the
Franchise Area are open to serve customers. In all cases, "normal
business hours" must include some evening hours at least one night per
week and/or some weekend hours. The term "normal operating conditions"
mean those service conditions which are within the control of the
Grantee.
Those conditions which are not within the control of the Grantee shall
include, but are not limited to, natural disasters, civil disturbances,
power outages, telephone network outages, and severe or unusual weather
conditions. Those conditions which are within the control of Grantee
include, but are not limited to, special promotions, pay-per-view
events, rate increases, regular, peak, or seasonal demand periods, and
maintenance or upgrade of the Cable System.
The term service interruption means loss of picture or sound on one or
more cable Channels.
Section 13: Reports
- -------------------
Section 13.1: Financial Reports
--------------------------------
A. Grantee shall maintain financial records pertaining to Subscribers
and utilized in calculating Gross Revenues Derived From The
Operation of The Cable System.
25
<PAGE>
B. On or before one hundred twenty (120) days after the end of
Grantee's fiscal year, and each successive year during the Term of
this Agreement, Grantee shall submit a written annual report to the
Franchising Authority, including the following information:
1. A summary of the previous year's (or in the case of the
initial reporting year, the initial year's) activities and
development of the Cable System, including, but not limited
to, services begun or discontinued, total number of
Subscribers, and aggregate numbers of Subscribers added or
discontinued during the reporting year;
2. A list of stockholders holding five (5) percent or more of the
voting interest in the Grantee;
3. The financial report required by Section 7.1 (c).
Section 13.2: Customer Service Reports
--------------------------------------
Grantee shall provide a quarterly report to the Franchising Authority
regarding the number of Cable System outages and requests for repairs
within the Franchise Area. Outage reports shall include the date, cause,
and duration.
Section 13.3: FCC Reports
-------------------------
Grantee shall file bi-annually with the Franchising Authority a copy of
its Proof-of Performance and Cumulative Leakage Index (FCC Form 320)
reports conducted in compliance with FCC Technical Standards for Cable
Television Systems under 47 CFR 76.600 Subpart K, et seq. Grantee shall
-- ---
file annually with the Franchising Authority a copy of FCC Form 325
entitled "Annual Report of Cable Television Systems" or its successor.
Section 13.4: Other Federal and State Reports
---------------------------------------------
Upon request by the Franchising Authority, Grantee shall provide the
Franchising Authority with a list of material filings with Federal and
State authorities. Upon request of the Franchising Authority, Grantee
shall provide the Franchising Authority with a copy of any material
petition, application, report, or filing on this list within one (1)
week of the request.
Section 13.5: Construction or Upgrade Reports
---------------------------------------------
During the upgrade of the Cable System or the initial construction of
the Educational Network, Grantee shall file with the Franchising
Authority a monthly construction report, in narrative and/or map form,
providing a summary of the upgrade or construction activity taking place
during the previous month, and a projection for the build of the Cable
26
<PAGE>
System upgrade or construction activity during the current month until
construction of the Cable System within the Franchise Area has been
completed. Said report shall contain any substantial deviation from
prior projections and the reasons therefore.
Section 13.6: Performance Bonds
-------------------------------
A. Within thirty (30) days after the Effective Date of the Franchise,
the Grantee shall file with the Franchising Authority a Performance
Bond in the amount of one hundred seventy-six thousand dollars
($176,000.00) to be maintained throughout the construction period
of the Educational Network. Within one (1) year after the
satisfactory completion of the Educational Network, the Performance
Bond shall be terminated.
B. Within thirty (30) days prior to commencing an upgrade of the Cable
System, Grantee shall file with the Franchising Authority a one
hundred thousand dollar ($ 100,000.00) Performance Bond to be
maintained throughout the upgrade period. Within one (1) year after
the satisfactory completion of the upgrade of the Cable System, the
Performance Bond shall be terminated.
Section 13.7: Programming Reports
---------------------------------
Grantee shall provide the following report pertaining to its programming
on the Cable System:
If Grantee performs playback services through which a cablecast signal
originates at the Grantee's Headend, a quarterly report containing the
number of hours of such Public, Educational, and Governmental Access
programming per month which has been cablecast on the Cable System. Such
report shall also include a log stating the times each such program was
cablecast on the Cable System if maintenance of such a log is required
by Federal law, rules or regulations or is otherwise maintained by
Grantee.
Section 14: Maintenance of Books and Records.
- ---------------------------------------------
Section 14.1: Financial Books and Records
-----------------------------------------
A. Unless excused by written resolution of the Cable Television
Commission, a Grantee shall maintain books and records of its
operation in connection with activities within the Franchise Area
in sufficient detail, consistent with generally accepted accounting
principles to permit the Franchising Authority to audit Grantee's
Gross Revenues Derived From The Operation of the Cable System.
27
<PAGE>
B. All such financial records of the Grantee shall be maintained in a
manner which permits distinguishing revenues earned within the
Village from revenues earned by the Grantee in other communities.
Any expenses or expenditures which apply to both the Cable System
within the Village and any other operations shall be reasonably
allocated between such operations, consistent with generally
accepted accounting principles.
Section 14.2: Records and Books Stored at Remote Locations
----------------------------------------------------------
Where Grantee is unable to locate such records specific to the Franchise
Area at a location which is within the Village or within one hundred
(100) miles of the Village, Grantee may locate such books and records at
a remote location which is set forth by the Grantee with the provision
that in the event that the Franchising Authority or its designee
requests to inspect such records, Franchising Authority shall be
provided such records or access to such records in the Chicago
metropolitan area within fourteen (14) days of the request therefor.
Section 14.3: Duration of Maintenance of Records
------------------------------------------------
Grantee shall maintain the following records for the amount of time as
specified by FCC rules:
A. Public files as required by the FCC.
B. Signal leakage measurement logs, complaint call logs, and telephone
activity reports.
Section 14.4: Evaluation of Books and Records
---------------------------------------------
A. The Franchising Authority shall have the right once per year to
audit and/or inspect Grantee's records of Gross Revenues Derived
From The Operation of the Cable System and supporting documentation
and other such appropriate and relevant records required to be
maintained by this Agreement. The Franchising Authority shall have
the right to audit, and/or agreed upon procedures, in order to
recompute any amounts determined to be payable under this Agreement
for the purpose of verifying the correct amount of any payment
required by this Agreement or the Franchise Ordinance. The
Franchising Authority shall provide Grantee with no less than
thirty (30) days notice of its intent to conduct an inspection or
audit of Grantee's financial records.
Grantee shall comply with the request of the Franchising Authority
and make available all such books and records as are reasonably
required at a location which the Franchising Authority has agreed
to.
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<PAGE>
B. If such an evaluation, audit, or agreed-upon procedures discloses a
deficiency in the amount paid as against the amount which should
have been paid, the Grantee forthwith shall pay the amount of such
deficiency to the Village as well as:
1. The costs of such evaluation, audit, or agreed-upon procedures
if it is properly determined by the accountant or auditor
chosen by the Franchising Authority that the Grantee's annual
payment due to the Franchising Authority for the year being
audited is increased by more than five (5) percent; otherwise
such costs shall be borne by the Franchising Authority, and;
2. Interest on the amount of such deficiency shall be required
from and after thirty (30) days from the date for which the
payment was to have been made. Such interest shall be at an
annual rate of two (2) percentage points over the prime rate
charged by the Bank of America, Chicago Main Branch in effect
on the thirty-first (31st) day following the due date.
Any additional amount due as a result of such evaluation,
audit or agreed-upon procedures shall be paid within thirty
(30) days following written notice to the Grantee by the
Franchising Authority which notice shall include a copy of the
evaluation report, audit report, or agreed-upon procedures
report.
Section 14.5: Non-Financial Books and Records
---------------------------------------------
Grantee shall make available to the Franchising Authority such other
nonfinancial information, reports, books, or records pertinent to
enforcing the terms of the Franchise in such forms and at such times as
the Franchising Authority or its representative may reasonably request.
The Franchising Authority shall provide to Grantee at least ten (10)
days advance written notice to Grantee for requests of such information,
reports, books or records.
Section 14.6: Inspection of Facilities
--------------------------------------
The Grantee shall allow the Franchising Authority or its agent to make
inspections of any of Grantee's facilities and equipment at any time
upon three (3) business day's prior notice, or in the case of emergency,
upon demand without prior notice. Where testing of Grantee's facilities
are required, the Franchising Authority shall follow the conditions set
forth in Section 11.5 hereinabove.
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<PAGE>
Section 15: Indemnification and Insurance
- -----------------------------------------
Section 15.1: Indemnification
-----------------------------
A. To the extent permitted by law, the Franchising Authority shall not
at any time be liable for any injury or damage occurring to person
or property from any cause whatsoever arising out of this Agreement
of from the use, operation, or condition of the Cable System unless
the Franchising Authority, its officers, officials, agents,
employees or contractors engage in negligent, or willful, or
reckless misconduct and are not immune from responsibility for such
acts based on statute or common law.
B. The Grantee does hereby indemnify, save and hold harmless and
agrees to defend the Franchising Authority from all liens; charges;
claims; demands; suits; actions; fines; penalties; losses; costs
(including but not limited to, legal fees and court costs);
judgments, injuries; liabilities or damages, in law or in equity;
or of every and any kind and nature whatsoever arising out of or
connected with the negligence or other wrongful acts or failures to
act in connection with installation, operation, or maintenance or
construction of the Cable System; provided, however, that the
indemnity granted hereby shall not extend to liabilities of any
type or kind whatsoever arising out of any acts of negligence or
willful misconduct on the part of the Franchising Authority, its
officers, elected or appointed officials, servants, agents,
employees, contractors or otherwise, while acting on behalf of the
Franchising Authority.
C. The Franchising Authority and the Grantee acknowledge that Section
635(A) of the Cable Act limits the liability of the Franchising
Authority to third parties in connection with the grant of the
Franchise, and that the parties are subject to the terms and
conditions of Section 635(A) of the Cable Act. Notwithstanding this
provision, Grantee agrees that in addition to its duty to indemnify
the Franchising Authority under Section 15.1(B) hereinabove,
Grantee shall indemnify and hold harmless the Franchising Authority
against all damages, losses, and expenses (including without
limitation, reasonable attorneys' fees and cost of suit or defense)
arising from third party suits which either: 1) challenge the
authority of the Franchising Authority to issue the Franchise; or
2) allege that, in issuing the Franchise, the Franchising Authority
has acted in a disparate or discriminatory manner.
D. The Franchising Authority shall give Grantee reasonably prompt
written notice of any claim, demand, action, or proceeding for
which indemnification will be sought under this provision of the
Agreement and, if such claim, demand, action or proceeding is a
third-party claim, demand, action or proceeding, Grantee will have
the right at its expense to assume the defense of such claim,
demand, action, or proceeding, using counsel selected by Grantee
and reasonably acceptable to the Franchising Authority. The
Franchising Authority shall have the right to monitor
30
<PAGE>
and participate, at its own expense, with respect to any such
third-party claim, demand, action or proceeding that Grantee so
defends. The Grantee shall provide Franchising Authority with
periodic reports concerning any such proceeding. In connection with
any such third-party claim, demand, action or proceeding, Grantee
and the Franchising Authority shall cooperate with each other and
provide each other with access to relevant books and records in
their possession. No such third party claim, demand, action or
proceeding shall be settled without the prior written consent of
the Franchising Authority, which consent the Franchising Authority
shall not unreasonably withhold or deny.
Section 15.2: Insurance
-----------------------
A. General Liability: Grantee shall maintain throughout the term of
this Agreement, adequate proof of either self-insurance or
Commercial General Liability Insurance using carriers licensed in
the State of Illinois and maintaining a rating of at least A by
Best Insurance Rating Services. Such insurance shall include
coverages for premises and operations, underground, collapse, and
explosion, and products and completed operations, and shall name as
Additional Insureds the Franchising Authority, and its officers,
boards, commissions, elected and appointed officials, agents and
employees.
Such insurance shall be in the amount of Five Million Dollars
($5,000,000) per occurrence and in the aggregate covering bodily
injury, including death, and property damage. If the Grantee
employs independent contractors, Grantee shall insure that these
contractors maintain appropriate levels of insurance and that the
Franchising Authority is named as an additional insured under each
policy.
B. Automobile Liability: Grantee shall maintain during the term of
this Agreement, Comprehensive Automotive Liability insurance with a
limit of three million dollars ($3,000,000) per occurrence combined
single limit for bodily injury, including death, and property
damage covering owned, non-owned and hired automobiles used in
conjunction with its operations under this Agreement. Such
insurance shall name the Franchising Authority as an additional
insured.
C. Workers' Compensation: Grantee shall maintain, during the course of
this Agreement, Workers' Compensation coverage as prescribed by the
laws of the State of Illinois and Employer's Liability coverage in
an amount of not less than one million dollars ($1,000,000).
D. Evidence of Insurance: On or prior to the effective date of this
Agreement, Grantee shall furnish to the Village Administrator of
the Franchising Authority Certificates of insurance upon each
policy renewal evidencing all of the aforementioned types and
limits of insurance to be in effect.
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<PAGE>
E. Self-Insurance: Grantee maintains the option, at the Effective Date
of this Agreement and at any time throughout the term of this
Agreement, to self-insure any of the aforementioned types and or
limits of insurance coverage and shall provide the Grantee with a
statement certifying such self-insurance.
F. Maintenance of Insurance Policies: The liability insurance policies
required under this Section shall be maintained by Grantee
throughout the term of this Agreement. Each policy of insurance
shall provide that it not be canceled or materially changed without
sixty (60) days written notice to the Village Administrator of the
Franchising Authority.
G. Alteration of Minimum Limits: The Franchising Authority may,
following the Effective Date, increase the minimum limit(s) of the
self-insurance or insurance policy(ies) required under this Section
by a percentage not to exceed the percentage increase in the
Consumer Price Index for the Chicago Metropolitan Statistical Area
as of the Effective Date.
H. Should Grantee elect to maintain policies of umbrella insurance
pertaining to the construction, maintenance', and operation of its
Cable System, the Franchising Authority shall be named as an
additional insured under those policies.
I. No Limit of Liability: The legal liability of the Grantee to the
Franchising Authority and any Person for any of the matters that
are the subject of the insurance policy(ies) required by this
Section shall not be limited by said insurance policy(ies) or by
the recovery of the amounts thereunder.
J. Under no circumstances shall the Franchising Authority be deemed to
have waived any of the insurance requirements of this Agreement by
any action or omission including, but not limited to (a) allowing
any work to commence by or on behalf of the Grantee before the
Franchising Authority is in receipt of certificates of insurance,
(b) failing to review any certificates of insurance received or (c)
failing to advise Grantee that any certificate of insurance fails
to contain all the required insurance provisions or may be
deficient in any manner. Grantee agrees that the obligation to
provide the insurance required under this Agreement is solely its
responsibility and that it is a requirement which cannot be waived
by any action, inaction or omission by the Franchising Authority.
Section 15.3: Security Fund
---------------------------
Security Fund: Grantee shall provide the Franchising Authority within
thirty (30) days of the date of this Agreement a Security Fund in the
form of either a cash escrow or irrevocable letter of credit. The choice
of form shall be at the sole discretion of Grantee provided further that
the form of letter of credit or cash escrow shall be approved by the
Franchising Authority's attorney, which approval shall not be
unreasonably withheld. The amount of the irrevocable letter of credit
32
<PAGE>
or cash escrow shall be forty thousand dollars ($40,000) and the
requirement to provide such shall, except to the extent otherwise
provided herein, be a continuing obligation of Grantee which shall
terminate at the expiration or termination of this Agreement, provided
Grantee shall not be in default under the terms of the Franchise
Agreement.
1. The Security Fund shall guarantee the compliance with all order,
permits, and directions of any agency of the Franchising Authority
having jurisdiction over its act or defaults of the contract, and
payment by Grantee of any defaults of the contract, and the payment
by Grantee of any claims, liens, and taxes due the Franchising
Authority which arise by reason of the construction, operation, or
maintenance of the Cable System.
2. Within ten (10) days after notice to it that any amount has been
withdrawn by the Franchising Authority from the Security Fund
pursuant to this Section, Grantee shall restore such Security Fund
to the original amount. If Grantee fails to restore such fund after
twenty (20) days, such failure shall constitute a material breach
of the Franchise.
3. If Grantee fails, after thirty (30) days notice to pay the
Franchising Authority any Franchise Fees or taxes due and unpaid,
or fails to repay to the Franchising Authority within such thirty
(30) days, any damages, costs, or expenses including reasonable
attorneys' fees which the Franchising Authority shall be compelled
to pay by any act or default of Grantee in connection with this
Franchise; or fails after thirty (30) days notice of such failure
by the Franchising Authority, to comply with any provision of the
Franchise which the Franchising Authority reasonably determines can
be remedied by an expenditure of the security, the Franchising
Authority may immediately withdraw or call on the amount thereof,
with interest, from the fund. Upon such withdrawal, the Franchising
Authority shall notify Grantee of the amount and date thereof.
4. The Security Fund provided pursuant to this Section shall become
the property of the Franchising Authority in the event that the
Franchise is canceled by reason of the default of the Grantee or
revoked for cause. Grantee, however, shall be entitled to the
return of the Security Fund, or portion thereof, as remains on
deposit at the expiration of the Term of the Franchise, or upon
termination of the Franchise at an earlier date, provided that
there is then no outstanding default on the part of the Grantee.
5. The rights reserved to the Franchising Authority with respect to
the Security Fund are in addition to all other rights of the
Franchising Authority whether reserved by this Agreement or
authorized by law, and no action, proceeding, or exercise of a
right with respect to such Security Fund shall affect any other
right the Franchising Authority may have.
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<PAGE>
6. If the amount of the Security Fund should be insufficient to
provide the total payment due the Franchising Authority under any
provisions of this Agreement, the balance of such payment shall
continue as an obligation of grantee to the Franchising Authority,
and shall accrue until paid, at the rate of two (2) percent over
the prime interest rate calculated monthly as established by the
Bank of America, Chicago Main Branch, or its successor, for the
time during which the delinquency existed.
Section 16: Programming
- -----------------------
Section 16.1: Categories of Service to be Provided
--------------------------------------------------
Grantee shall provide on the Cable System all over-the-air broadcast
stations required to be carried by Federal law or FCC regulations.
Grantee shall provide a wide range and diversity of programming for
Subscribers. Such categories shall include, but not be limited to,
general entertainment programming, community, educational, religious,
cultural, and children's programming, and local, regional and national
news, sports, weather and public affairs programming.
Section 16.2: Local Origination Programming
-------------------------------------------
Grantee shall provide the community with such local origination
programming of interest to Persons in the Village of Glen Ellyn.
Section 16.3: Public, Educational, and Governmental Channels
------------------------------------------------------------
A. Grantee shall provide three (3) Channels to be allocated among
public, educational, and governmental (PEG) usage as determined by
the Village.
B. The Governmental Access Channel shall be reserved for the use of
the Village of Glen Ellyn, DuPage County, and any other unit of
local government which provides services to all or any portion of
the Village of Glen Ellyn.
C. The Educational Access Channel shall be made available to
educational institutions serving the Village of Glen Ellyn. Local
educational institutions may develop rules and regulations for the
use of Educational Access Channel space. Upon the request of an
educational institution user of such Channel, Grantee may agree to
provide educational programming available through Cable Operators
or their consortia, such as Cable in The Classroom.
D. Public Access Channel space shall be made available to the Glen
Ellyn Cable Communications Foundation, and the residents,
organizations, and institutions of Glen Ellyn.
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<PAGE>
E. In the event of an upgrade of the Cable System that increases
Channel capacity, within sixty (60) days after receipt of the
Village's request, Grantee shall provide an additional Channel for
noncommercial public, educational, or governmental programming in
the event that the three PEG channels are then currently fully
utilized.
1. As used herein, "fully utilized" shall mean utilized for
original, non duplicative, locally produced PEG programming
not less than six (6) hours per day, five (5) days per week,
for a period of eight (8) consecutive weeks.
2. The additional Channel provided pursuant to this Section shall
be reviewed annually by joint review of the Grantee and the
Village thereafter; and upon such annual review, the
additional Channel shall continue to be made available to the
extent that the PEG Channels, (including the original PEG
Channels), were at least eighty (80) percent fully utilized
throughout the preceding year. If such usage requirement is
not met, usage of the additional PEG Channel shall terminate
subject to reactivation at the request of the Village upon
demonstration that the three original PEG channels are fully
utilized, and to the annual review provided herein. In no
event shall non-PEG programming be included in determining
whether the Channels are fully utilized. Non PEG programming
shall include that programming which is defined as commercial
in nature under the conditions of Sections 611 and 612 of the
Cable Communications Policy Act of 1984, as amended.
Section 16.4: Support for PEG Programming
-----------------------------------------
Grantee will donate the equipment listed on Appendix B to the Village,
in "as is" condition, to be used by PEG access users for production of
PEG programming. Grantee will retain this equipment, and continue access
production at Grantee's facilities until October 1, 1997, or until the
Franchising Authority has secured another location for PEG production,
whichever date should first occur.
Grantee shall pay to the Village, quarterly within forty-five (45) days
of the last day of each quarter, an amount equal to one percent (1.0%)
of Gross Revenues Derived From the Operation of The Cable System as
defined in this Agreement. In consideration, however, for Grantee making
the studio available to PEG users until October 1, 1997, or until the
Franchising Authority has secured another location for PEG production,
whichever date should first occur, Grantee shall not pay the one percent
(1.0%) of Gross Revenues Derived From the Operation of The Cable
System, during this period of time.
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<PAGE>
Section 16.5: Leased Access Channel Space
-----------------------------------------
Grantee shall make available Channel space for leased access
programming. The Grantee shall adhere to all applicable FCC regulations
with respect to the rates for such Channel space.
Section 17: Grantee Default and Remedies
- ----------------------------------------
Section 17.1: Liquidated Damages For Failure to Meet Construction or
--------------------------------------------------------------------
Upgrade Schedule
----------------
If the Grantee fails to meet the construction completion date set forth
in the construction schedule for the Educational Network or upgrade of
the Cable System (unless extended by the Franchising Authority) and
then fails to do so in a timely manner after written notice and a
reasonable opportunity to cure, the Franchising Authority may, as its
sole and exclusive remedy, assess against the Grantee liquidated damages
in the amount of $500 per day or part thereof until the construction or
upgrade is completed; provided, however, that Grantee shall first have a
reasonable opportunity to cure any such default. Franchising Authority's
right to assess the aforesaid liquidated damages cannot be applied if
Grantee commences to cure said default within a reasonable time
provided, however, Grantee continues diligently in pursuit of such cure.
The amount of such liquidated damages as determined by the Franchising
Authority shall, without proof, be deemed to represent damages actually
sustained by the Franchising Authority by reason of said failure to
complete the construction, and shall not be considered as a penalty.
Prior to the Grantee's payment of the $500 per day liability, Grantee
shall have the right, at its request, to a hearing in which it may
participate and seek to demonstrate its compliance. Payment of any such
liquidated damages shall be made within twenty-one (21) days of its
final assessment.
Such liquidated damages shall not exceed, in the aggregate, twenty
thousand dollars ($20,000) and shall constitute Franchising Authority's
sole and exclusive remedy until the maximum liquidated damages are
reached for such failure(s).
Section 17.2: Continuous Operation of the Cable System
------------------------------------------------------
In the event of any dispute between the Grantee and the Franchising
Authority regarding compliance with or any other aspect of this
Agreement, both parties agree to cooperate with one another in good
faith to assure as much as possible the smooth, continuous operation of
the Cable System and the provision of service of the highest possible
quality to Subscribers.
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<PAGE>
Section 17.3: Causes for Revocation
-----------------------------------
In addition to all other rights, powers, or remedies pertaining to the
Franchising Authority in connection with this Agreement or otherwise,
the Franchising Authority reserves the right to revoke the Franchise and
all rights and privileges of Grantee under this Agreement if any of the
following events shall occur and be continuing:
A. Substantial failure on more than one occasion to comply with any
material provision of the Agreement or any other local, state, or
Federal law or regulation of a nature such as to prevent Grantee
from carrying out the terms of this Agreement for a period of more
than one (1) month. In addition and without an exclusion of other
causes for revoking the Franchise, the Franchising Authority may
revoke this Franchise in the event the Grantee shall make a sale,
agreement, delegation, assignment, or the transfer of its corporate
stock or its rights under this Franchise Agreement contrary to the
provisions of Section 21 (Transfers) hereinbelow or shall fail in
its obligations under Section 15.3 C (Security Fund) or Section 7.2
(Permit Fee Payments) herein.
B. Grantee does not pay any portion of the fees, payments, or
contributions required under this Agreement when due and payable.
C. Any material representation or warranty made by Grantee in
connection with the Franchise shall be false in any material
respect when made.
D. Grantee shall repeatedly violate any other material covenant,
agreement, or condition of the Franchise and such violation shall
not have been corrected, within such reasonable period of time to
cure as granted to Grantee by the Franchising Authority pursuant to
the provisions of this Section.
E. Grantee shall apply to any tribunal for the appointment of a
trustee or receiver of any substantial part of the assets of
Grantee or commences any bankruptcy, reorganization arrangement,
insolvency, readjustment of debt, dissolution, or other liquidation
law of any jurisdiction, or any such application shall be filed, or
any such proceedings shall be commenced, against Grantee, and
Grantee indicates its approval, consent, or acquiescence, or an
order shall be entered appointing such trustee or receiver or
adjudicating Grantee bankrupt or insolvent, or approving the
petition in any such proceeding, and such order remains in effect
for thirty (30) days.
F. Any order is entered in any proceeding against Grantee decreeing
the dissolution or split-up of Grantee and such order remains in
effect for sixty (60) days.
G. A failure by Grantee to provide or maintain in full force and
effect the liability and indemnification coverage or the Security
Fund as required herein.
37
<PAGE>
H. Frequent and material violations by Grantee of any orders or
rulings of any regulatory body having jurisdiction over Grantee
relative to this Franchise.
I. Grantee attempts to evade any of the provisions of this Agreement
or practices any fraud or deceit upon the Franchising Authority.
J. Any breach of Section 32 of this Agreement.
Section 17.4: Procedures for Revocation
--------------------------------------
If it appears to the Franchising Authority that, by reason of one or
more causes specified in Section 17.3 above, grounds exist for revoking
Grantee's Franchise, the following procedures shall then be followed:
A. The Franchising Authority shall state in writing the nature of such
grounds for revocation, and that Grantee comply with the
requirement, limitation, term, condition, rule, or regulations
which the Franchising Authority deems to be applicable. The
Franchising Authority shall provide Grantee with a copy of each
such written demand.
B. If the failure, refusal, or neglect of Grantee continues for a
period of thirty (30) days following such written demand, the
Franchising Authority may place a request for revocation of the
Franchise upon the next regular meeting agenda, or called special
meeting of the Cable Television Commission. In such event, the
Franchising Authority shall cause to be served upon Grantee, a
notice in writing of its intent to request a revocation of
Grantee's Franchise. Such notice shall state the time and place of
the meeting of the Cable Television Commission and shall be served
on Grantee at least fourteen (14) days prior to said meeting. In
addition to the foregoing, notice of such request shall be
published by the Franchising Authority Clerk at least once during
the seven (7) day period preceding the meeting of the Cable
Television Commission in a newspaper of general circulation within
the Franchise Area.
C. The hearing on revocation shall be conducted as an administrative
hearing with the Village having the obligation to prove the grounds
of revocation by a preponderance of the evidence.
D. Within thirty (30) days after the conclusion of the hearing, the
Commission shall submit its written findings of fact, and
conclusions of fact and law to the Village Board, together with its
recommendation as to whether or not in its opinion the Franchise
should or should not be revoked. The Commission's recommendation
shall not be binding upon the Village Board and the Board may
receive additional evidence.
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<PAGE>
E. If the Village Board should determine that the Grantee's Franchise
should be revoked, the Franchising Authority may, by resolution or
ordinance, order a final revocation of the Franchise and the
forfeiture of the Security Fund, or order a revocation to take
place unless there is compliance by the Grantee within such period
as the Franchising Authority shall designate. Grantee may appeal
the decision of the Franchising Authority to a court of competent
jurisdiction for de novo review.
-- ----
F. The termination of Grantee's rights under this Franchise shall in
no way affect any other rights the Franchising Authority may have
under the Franchise or under any provision of law or ordinance.
Section 17.5: Effective Date of Revocation
------------------------------------------
Revocation of Franchise shall be effective no earlier than six (6)
months after the effective date of the resolution or ordinance providing
for such revocation. During such period of time, Grantee, if directed to
do so by the Franchising Authority, shall remove the visible portion of
the Cable System from the corporate limits of the Franchising Authority,
under the supervision of the Franchising Authority and in conformance
with all ordinances, rules, regulations, policies, and procedures of the
Franchising Authority. At its sole option, the Franchising Authority may
allow Grantee to transfer or assign the Franchise or the Cable System
according to the provision of this Agreement rather than requiring the
Grantee to remove the Cable System as described herein. Nothing herein
shall relieve Grantee from complying with all terms and conditions of
this Agreement upon or after the Franchising Authority passes a
resolution or ordinance or revocation.
During such interim period in which Grantee continues to provide service
Franchising Authority shall be entitled to all Franchise Fees generated.
Section 17.6: Liquidated Damages and Lesser Sanctions
-----------------------------------------------------
A. In the event any of the events listed in Section 17.3 hereof shall
occur and be continuing, the Franchising Authority as an
alternative to revocation and without the procedural requirements
contained within Sections 17.4 and 17.5, may require Grantee to pay
as liquidated damages and as Franchising Authority's exclusive
remedy for such lesser breaches of the Agreement as are set out
below, the sums of money according to the following schedule,
provided, however, that no such damages shall be imposed until
Grantee has been given notice and reasonable opportunity to cure.
If, following such notice and opportunity to cure, it is determined
that the payment of any liquidated damages is appropriate, the
Franchising Authority may withdraw from the Security Fund.
1. Failure to file required documents, applications, or reports
within the Grantee's control with the Franchising Authority:
..... $100.00 per day or part thereof.
39
<PAGE>
2. Failure to produce all required records, within fourteen (14)
days of said notice, for Franchising Authority's inspection:
..... $100.00 per day or part thereof.
3. Failure to conform to any material term or condition of this
Agreement:
..... $300.00 per day or part thereof.
B. The sanction of liquidated damages shall not preclude the
Franchising Authority from revoking the Franchise based upon
repeated violations for which liquidated damages have been imposed.
C. Such liquidated damages for such failures described in this Section
shall not exceed in the aggregate, twenty thousand dollars
($20,000).
Section 18: Surrender Privilege
- -------------------------------
Grantee may surrender the Franchise upon written approval by the
Franchising Authority by filing with the Village Clerk a written notice
of its intention to do so at least six (6) months prior to the surrender
date. On the surrender date specified in the notice, all of the Cable
System facilities located within the Franchise area, shall be
transferred to the Franchising Authority. In the event of the surrender
of the Franchise, the principal amounts of the construction guarantees
and Security Fund, if same are in effect, shall be surrendered to the
Franchising Authority. Further, the surrender of the Franchise shall not
excuse Grantee from any unfulfilled obligations or duties which accrued
prior to the date of surrender.
Section 19: Compliance With Laws: Severability
- ----------------------------------------------
Section 19.1: Compliance With All Applicable Laws
-------------------------------------------------
Notwithstanding any other provisions of this Agreement to the contrary,
Grantee shall at all times comply with all applicable laws of general
applicability, and regulations of the Federal, state, county, and
municipal governments and all administrative agencies of those
governments, including, but not limited to, judicial orders; provided,
however, that if any such Federal, state, county, or municipal law or
other applicable regulation shall require the Grantee to perform any
service, or shall prohibit the Grantee from performing any service, in
conflict with the terms of this Agreement or of any law or regulation of
the Franchising Authority existing as of the date of this Agreement,
then Grantee shall be excused from performance under this Agreement;
provided that it acts in good faith reliance on such Federal, state,
county, or municipal law or regulation, pending resolution of such
conflict; provided, further, that from the date of this Agreement
through and until the expiration of the term of the Franchise granted
under this Agreement, no change made by the Franchising Authority in its
ordinances or regulations shall amend the Franchise or this Agreement
without the Grantee's written consent.
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<PAGE>
Section 19.7: Primacy of Franchise Agreement
--------------------------------------------
In the event of a conflict between this Agreement and any local law,
rule, or regulation, including, without limitation, any ordinance
authorizing the grant of a cable television franchise, the terms of this
Agreement shall prevail. Further, existing Sections 3-34-11(B) and (D),
3-34-12, 3-34-13, 3-34-14, 3-34-18, 3-34-29(G) and (J), 3-34-36, 3-34-
37(B), 3-34-41, 3-34-43(C), 3-34-45(A) and 3-34-46(B) and (C) shall not
be applicable to Grantee.
Section 19.3: Severability
--------------------------
If any provision of this Agreement or any related agreement is held by
any court or by any Federal, state, or county agency of competent
jurisdiction to be invalid as conflicting with any Federal, state, or
county law, rule, or regulation now or hereafter in effect, or is held
by such court or agency to be modified in any way in order to conform to
the requirements of any such law, rule, or regulation, said provision
shall be considered as a separate, distinct, and independent part of
this or such other Agreement, and such holding shall not affect the
validity and enforceability of all other provisions hereof or thereof in
the event that such law, rule, or regulation is subsequently repealed,
rescinded, amended, or otherwise changed, so that the provision hereof
or thereof which had been held invalid, or modified is no longer in
conflict with the law, rules, and regulations then in effect, said
provision shall thereupon return to full force and effect and shall
thereafter be binding on the parties hereto, provided that the
Franchising Authority shall give the Grantee sixty (60) days written
notice of such change before requiring compliance with such provision.
Section 19.4: Modification Rights
---------------------------------
If the Franchising Authority determines that a material provision of
this Agreement or any related agreement is affected by such action of a
court or of the Federal, state, or county government, the Franchising
Authority and Grantee shall have the right to modify any of the
provisions hereof or in such related agreements to such reasonable
extent as may be necessary to carry out the full intent and purpose of
this Agreement and all related agreements.
Section 19.5: Periodic Franchise Revisitations
----------------------------------------------
Within ninety (90) days of the third, sixth, ninth, and twelfth
anniversaries of this Agreement, Grantee and Franchising Authority shall
jointly meet, if requested by either party, to discuss revisiting
certain provisions of the Franchise Agreement and discuss potential
changes to the Franchise Agreement due to changes in technology
(including signal trapping technology), an upgrade of the Cable System,
law or regulation, and the changing cable-related needs and interests of
the community. Based on the outcome of such meeting(s) and
discussion(s), the parties may amend this Agreement to incorporate
changes which have been mutually agreed upon by the Franchising
Authority and the
41
<PAGE>
Grantee. The Franchising Authority and the Grantee may, at their
discretion, jointly agree to meet at more frequent intervals than those
indicated above if so warranted.
Section 20: Taxes
- -----------------
Nothing contained in this Agreement shall be construed to exempt the
Grantee from any tax, levy, or assessment which is or may later be
authorized by law; provided any tax, levy, or assessment on Cable
Service is equally applicable to all other providers of Cable Service in
the Franchise Area.
Section 21: Sale or Transfer of Franchise
- -----------------------------------------
Section 21.1: Procedure
-----------------------
This Franchise or the Cable System hereunder shall be sold, assigned,
delegated, or transferred only in accordance with this Section.
A. In the event of a change of control of the Grantee ("change of
control shall mean a change in ownership of a majority interest in
voting stocks), the parties to the sale or transfer shall make a
written request to the Franchising Authority for its approval of
sale or transfer ("Transfer Requiring Approval"). The written
request shall be accompanied by information required by FCC rules
and shall be presented on FCC Form 394, or its successor.
B. In accordance with the Cable Act, the Franchising Authority shall
have one hundred twenty (120) days from receipt of the information
referred to in Subsection (A) above to act upon the request for
approval. If the Franchising Authority fails to render a final
decision on the request within that time, the request shall be
deemed granted unless the Grantee and the Franchising Authority
agree to an extension of time.
C. During the review period described in Subsection (b) hereinabove,
the Franchising Authority may advise the Grantee that a public
hearing is deemed necessary to evaluate any potential adverse
effect of the sale or transfer upon the Grantee's Subscribers. In
such event, the Grantee shall have written notice of the hearing,
and of the opportunity to participate fully in it, as far in
advance as possible, and in no event less than fourteen (14) days
before the start of the hearing.
D. A decision of the Franchising Authority upon a request pursuant to
this Section shall be in writing and subject to review and appeal
as provided in the Cable Act.
E. The Grantee shall promptly file with the Franchising Authority a
copy of the deed, agreement, mortgage, lease, or other written
instrument evidencing that the Transfer Requiring Approval was
effectuated.
42
<PAGE>
Section 21.2: Financial, Legal, and Technical Qualifications of Buyer
---------------------------------------------------------------------
In reviewing a request for a sale, transfer, or delegation pursuant to
Section 21.1, the Franchising Authority may inquire into the technical,
legal, and financial qualifications of the prospective controlling
party, and the Grantee shall assist the Franchising Authority in so
inquiring. The Franchising Authority shall not unreasonably withhold its
approval. In no event shall a transfer, delegation, or assignment of
ownership or control be approved without the transferee, delegate, or
assignee becoming a signatory to the Franchise.
Section 21.3: Common Control
----------------------------
Notwithstanding anything to the contrary, no consent or approval by the
Franchising Authority shall be required for a transfer or assignment to
any person or entity controlling, controlled by, or under the same
common control as the Grantee, or for any sale, transfer, or assignment
other than a Transfer Requiring Approval.
Section 21.4: Unauthorized Transfer
-----------------------------------
Any unauthorized transfer shall be deemed a material breach of the
Franchise.
Section 22: Subscriber Privacy
- ------------------------------
Section 22.1: Cable Act Compliance
----------------------------------
The Grantee shall comply with the terms and conditions of Section 631 of
the Cable Act (47 CFR 551) as now or hereafter amended.
Section 22.2: Tapping Prohibited Without Consent
------------------------------------------------
Grantee shall not, nor shall Grantee knowingly permit any Person,
agency, or entity, without the Subscriber's consent, to tap, or arrange
for the tapping, of any cable, line, signal input device, or Subscriber
outlet or receiver for any purpose except routine maintenance of the
Cable System, polling with audience participation, judicial order, or
audience viewing surveys to support advertising research regarding
viewers where individual viewer behavior cannot be identified.
Section 22.3: Grantee to Prevent Invasions of Privacy
-----------------------------------------------------
In the conduct of providing its services or pursuit of any collateral
commercial enterprise resulting therefrom, Grantee shall take any and
all necessary action to prevent an invasion of a Subscriber's right to
privacy or other personal rights as such rights are defined by
applicable law. Grantee shall not without lawful court order utilize the
Cable System's interactive two-way equipment or capability for
unauthorized personal surveillance of any Subscriber.
43
<PAGE>
Section 22.4: No Exchange of Personalized Data Without Subscriber
-----------------------------------------------------------------
Consent
-------
Except to the extent permitted by law, the Grantee shall not sell or
otherwise make available to any third parties, lists of the names and
addresses of Subscribers, which identifies Subscriber viewing habits, or
personalized data pertaining to a Subscriber's use of any of Grantee's
services without the express written consent of the Subscriber to which
the personalized data pertains. For the purposes of this Section,
"personalized data" shall mean the name and address of an individual
Subscriber directly associated with data obtained on his or her use of
specific services provided by or through the Grantee. Nothing herein
shall be construed to prevent, as a normal incident of commercial
enterprise, the sale or availability of "non-personalized" or
"aggregated data" which is not personalized data as defined herein.
Section 23: Cable Service to Public Facilities
- ----------------------------------------------
Grantee shall provide one (1) free Standard Installation drop, including
free Basic Service, exclusive of premium or pay-per-view services, to
each of the public facilities listed in Appendix C. The cost for
Installation of any internal wiring shall be at the cost of the public
facility user. In addition, where the public facility is more than 250
feet from the existing Cable System, the public facility user will be
required to contribute the actual cost of material and labor for the
portion of construction that is beyond the 250 feet described herein;
this 250 feet rule shall also govern installations to any public
facilities that are eligible to receive a free Standard Installation and
free Basic Service, that are located in areas adjacent to the Franchise
Area which are annexed by the Franchising Authority during the Term of
this Agreement.
Section 24: Statute of Limitations
- ----------------------------------
Any claim or legal action arising from or in connection with any
failures in the operation or the performance or non-performance of any
obligation hereunder including payment of any amounts due must be
brought within five (5) years after the party entitled to the cause of
action knew or with the exercise of reasonable diligence should have
known of the cause of action.
Section 25: Service of Notice
- -----------------------------
Section 25.1: Form of Service
-----------------------------
All notices required or permitted to be given to either party by
the other party under any provisions of this Agreement shall be in
writing and shall be deemed served:
A. When delivered by hand, or by Federal Express or similar service to
that party's address set forth below during normal business hours;
or
44
<PAGE>
B. When mailed to any other Person designated by that party in writing
in this Agreement to receive such notice, via certified United
States Mail, return receipt requested.
Section 25.2: Contacts for Notice
---------------------------------
Notice shall be given to the following:
A. If to Franchising Authority:
Village of Glen Ellyn
Office of the Village Administrator
535 Duane Street
Glen Ellyn, Illinois 60137
with a copy to:
Ancel, Glink, Diamond, Cope & Bush
140 South Dearborn Street
Chicago, Illinois 60603
Attn: Stewart Diamond
B. If to Grantee:
Jones Growth Partners, L.P.
1101 E. Roosevelt Road
Wheaton, IL 60187
Attn: General Manager
with a copy to:
Jones Intercable, Inc.,
9697 East Mineral Avenue
Englewood, Colorado 80155-3309
Attn: Legal Department
Section 26: Force Majeure
- -------------------------
Any delay, preemption, or other failure to perform, caused by factors
beyond the parties' reasonable control, such as an act of God, labor
dispute, non-delivery by suppliers, war, riot, technical breakdown of
the Cable System or government, administrative, or judicial order or
regulation, shall not result in a default of the Agreement. Each party
shall exercise its reasonable efforts to cure any such delays and the
cause of such delays, and performance under the terms of this Agreement
shall be excused for the period of time during which such factor
continues. For the purpose of this Section, the term "Technical
45
<PAGE>
breakdown of the Cable System" shall mean a failure of the Cable System
which has been caused by accident, sabotage, forces of nature, or other
origins beyond the control of the Grantee which have prevented any of
the Cable System's Subscribers from receiving cable service for a period
of more than twelve (12) consecutive hours; provided, however, that this
provision shall apply only to those customers not receiving Cable
Services as a result of the technical breakdown of the Cable System.
Section 27: Renewal of Franchise
- --------------------------------
Section 27.1: Renewal in Accordance with Cable Act
--------------------------------------------------
This Franchise may be renewed in accordance with the terms and
conditions set forth in Section 626 of the Cable Act (47 CFR 546), as
now or hereafter amended.
Section 27.2: Renewal a Factor for Grantee's Obligations
--------------------------------------------------------
The Franchising Authority acknowledges that the Grantee will make a
substantial investment in providing facilities and services pursuant to
this Franchise Agreement and that renewal of the Franchise, provided it
meets the criteria specified in applicable law, is a significant factor
in the Grantee's willingness to assume its obligations hereunder.
Section 28: Oral Modification
- -----------------------------
This Franchise Agreement shall not be changed, modified, or amended in
whole or in part except in writing and signed by all of the parties.
Section 29: Entire Agreement
- ----------------------------
This Agreement and the documents and Appendices that are referred to in
this Agreement constitute the entire Agreement among the parties
pertaining to the subject matter of this Agreement, and supersede all
prior and contemporaneous agreements, understandings, negotiations, and
discussions of the parties, whether oral or written, and there are no
representations or other agreements among the parties in connection with
the subject matter of this Agreement, except as specifically set forth
under this Agreement.
Section 30: Obligations to Continue Throughout Term
- ---------------------------------------------------
Unless otherwise specifically stated, all obligations under this
Franchise Agreement shall continue throughout the entire term or
extension of this Agreement.
46
<PAGE>
Section 31: Acceptance
- ----------------------
Section 31.1: Franchise Not Arbitrary or Unreasonable
-----------------------------------------------------
Grantee expressly acknowledges that upon accepting the Franchise it did
so relying on its own investigation and understanding of the power and
authority of the Franchising Authority in connection with the Cable
System and this Agreement. By the acceptance of the Franchise, Grantee
acknowledges that it will not at any time in any court or other
proceedings allege in any claim or proceeding by Grantee against the
Franchising Authority that any provision, condition, or term of this
Agreement (and those portions of Chapter 34 of the Village Code that
remain applicable by virtue of this Agreement) are unreasonable or
arbitrary, or that at the time of acceptance of this Agreement by
Grantee, any such provision, condition, or term was void, or that the
Franchising Authority had no power or authority to make or enforce any
such provision, condition, or term, except as to those matters preempted
by state or Federal law and not waived herein.
Section 31.2: Grantee Not Induced to Accept Franchise
-----------------------------------------------------
Grantee, by acceptance of the Franchise, acknowledges that it has not
been induced to enter into the Franchise by any understanding, or
promise, or other statement not expressed herein, whether oral or
written, concerning any term or condition of the Franchise regardless of
whether such statement was made by or on behalf of the Franchising
Authority.
Section 31.3: Grantee Accepts Reasonable Risks of Franchise
-----------------------------------------------------------
Grantee further acknowledges by acceptance of the Franchise that it has
carefully read the terms and conditions of this Agreement and is willing
to and does accept the reasonable risks related to the possible
interpretations of the provisions, terms, and conditions herein.
Section 32: No Most Favored Nations Clause
- ------------------------------------------
Grantee agrees not to include a most favored nations clause in any
franchise agreement within the State of Illinois after the effective
date of this Agreement. A most favored nations clause is one that
provides for the automatic amendment or right to amendment of any terms
or conditions of the Franchise Agreement to include the terms and
conditions more favorable to a Franchising Authority, in another
franchise agreement. Grantee shall provide the Franchising Authority
annually with a statement certifying that Grantee has not, within the
State of Illinois, entered into any franchise agreement containing a
most favored nations clause. In the event that Grantee does enter into a
most favored nations clause with a Franchising Authority located within
the State of Illinois by means of a franchise agreement, or amendment
thereto, after the effective date of this Agreement, said clause will
become applicable to this Franchise Agreement.
47
<PAGE>
Section 33: No Waiver
- ---------------------
Failure to enforce any term or provision of this Agreement shall not
constitute a waiver of the parties rights to enforce any provision of
this Agreement in the future.
Section 34: Village's Rights Not Waived
- ---------------------------------------
Except as otherwise specifically and expressly provided in this
Agreement, neither the granting of this Franchise nor any provision
governing this Franchise shall constitute a waiver or bar to the
exercise of any governmental right or power of the Village provided such
exercise does not materially and adversely affect the rights provided
Grantee in this Agreement.
Section 35: Choice of Forum
- ---------------------------
Any proceeding brought under this Agreement shall be brought in either
the County of DuPage or the United States District Court for the
Northern District of Illinois.
IN WITNESS THEREOF, the parties have signed below effective as of the
Effective Date, by their duly authorized representatives.
VILLAGE OF GLEN ELLYN, ILLINOIS JONES GROWTH PARTNERS, L.P.
By: JONES SPACELINK CABLE CORPORATION
its General Partner, a Colorado Corporation,
By: [SIGNITURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
---------------------------- ----------------------------------
Title: Acting Village President Title: Vice President/Operation
------------------------- ------------------------------
ATTEST: ATTEST:
[SIGNATURE ILLEGIBLE] /s/ Katherine A. LeVoy
- ------------------------------- -------------------------------------
Village Clerk Ass't Secretary
48
<PAGE>
Appendix A
Connections Sites for Educational Network
-----------------------------------------
School District No. 41
- ----------------------
Benjamin Franklin Elementary School - 350 Bryant
Churchill Elementary School - 240 Geneva
Abraham Lincoln Elementary School - 380 Greenfield
Forest Glen Elementary School - 591 Elm
Hadley Jr. High - 240 Hawthorne
School District No. 87
- ----------------------
Glenbard West High School - 670 Crescent Blvd.
School District 89
- ------------------
Glen Crest Middle School - 725 Sheehan Avenue
Park View Elementary School - 250 South Park Blvd.
College of DuPage - 22nd & Lambert Road
- -----------------
<PAGE>
APPENDIX B
EQUIPMENT TO BE DONATED TO GLEN ELLYN PUBLIC ACCESS
Equipment Model Description Serial #
Panasonic AG-6300 VHS Record Deck A8TA00145
Sony VO-5800 3/4" Record Deck 12800
Sony VO-5800 3/4" Record Deck 16858
Sony VO-5850 3/4" Record Deck 10254
Sony RM-440 Edit Control Unit 11989
Sony RM-440 Edit Control Unit 13526
Videotek RM-12RA Trinitron Color Monitor 182448B
Videotek RM-12RA Trinitron Color Monitor 182463B
Videotek RM-12RA Trinitron Color Monitor 182449B
Videotek RM-12RA Trinitron Color Monitor 282024B
Panasonic WV-5350 Black & White Monitor 21Z01652
Panasonic WV-5350 Black & White Monitor 21Z02024
Panasonic WV-5350 Black & White Monitor 21Z01742
Panasonic WV-5350 Black & White Monitor 1ZZ01242
Panasonic WV-5350 Black & White Monitor 1ZZ01114
Panasonic WV-5350 Black & White Monitor 1ZZ01113
Technics SL-1200MK2 Direct Drive Turntable MJ6214F293
Akai CS-F12 Cassette Deck 71020 35074
Shure M67 Audio Mixer N/A
Realistic 42-2110 Audio Input Selector N/A
1
<PAGE>
APPENDIX B
EQUIPMENT TO BE DONATED TO GLEN ELLYN PUBLIC ACCESS
Equipment Model Description Serial #
Sony MX-670 6 Channel Audio Mixer 402474
Quanta QCG/300/DD Character Generator Q300-11
Hitachi OP-221 Camera Operation Panel 2080693
Hitachi OP-221 Camera Operation Panel 2060563
Hitachi OP-10 Camera Operation Panel 2050299
Tektronic 528A Waveform Monitor B014846
Tektronic 1420 NTSC Vectorscope B059866
Tektronic 1470 Sync Generator B052725
Fortel CCDHP Time Base Corrector 89617402
Microtime T-120 Time Base Corrector TYP 8500 N
Scientific Atlanta 6350 Modulator 34941
Di-Tech 103 DA N/A
Laird Telemedia 2525 Slide Chain Remote Control N/A
Sony RM-500 Remote Control Unit N/A
Telex CS-83 1 Cup Headset w/ 1/2" Splitter 63300-002
Telex CS-83 1 Cup Headset w/ 1/2" Splitter 63300-002
Setcom 5-TV12 2 Cup Headset N/A
Setcom 5-TV12 2 Cup Headset N/A
Setcom 5-TV12 2 Cup Headset N/A
Hitachi AT-21 Viewfinder Adaptor N/A
2
<PAGE>
APPENDIX B
EQUIPMENT TO BE DONATED TO GLEN ELLYN PUBLIC ACCESS
Equipment Model Description Serial #
Hitachi AT-21 Viewfinder Adaptor N/A
Hitachi GM-5N Monitor Viewfinder *002064
Hitachi GM-5N Monitor Viewfinder *002003
Hitachi GM-3BU Eyepiece Viewfinder 200309
Hitachi FP-21U Camera 2021184
Hitachi FP-21U Camera 2061452
Hitachi FP-10 Camera 2040801
Hitachi TA-20 Tripod Adaptor 2051388
Hitachi TA-20 Tripod Adaptor N/A
Hitachi TA-10 Tripod Adaptor N/A
Fujinon RM-37 Camera Lens N/A
Fujinon RM-7 Camera Lens N/A
Fujinon FMN-6A Focus Adaptor N/A
Fujinon SRD-92 Zoom Control N/A
Fujinon Focus Control N/A
Tamron 665H Camera Lens N/A
Tamron 27K Focus Adaptor N/A
Tamron 27K Focus Adaptor N/A
Tamron 125KB Zoom Control 82290
ITE H7A Tripod Head 565
3
<PAGE>
APPENDIX B
EQUIPMENT TO BE DONATED TO GLEN ELLYN PUBLIC ACCESS
Equipment Model Description Serial #
ITE H7A Tripod Head 552
ITE H7A Tripod Head 5777
ITE T6 Tripod 2921
ITE T6 Tripod 3284
ITE T6 Tripod 2691
ITE D6 Dolly 2380
ITE D6 Dolly 2383
ITE D6 Dolly 2655
Hitachi 50' Cable Multi-pin N/A
Hitachi 50' Cable Multi-pin N/A
Berkey Colortran Light Kit w/ 3 Lights & Stands N/A
Berkey Colortran Light Kit w/ 3 Lights & Stands N/A
Berkey Colortran Light Kit w/ 2 Lights & Stands N/A
Berkey Colortran Fresnel Spot Light N/A
Berkey Colortran Fresnel Spot Light N/A
Berkey Colortran Fresnel Spot Light N/A
Berkey Colortran Fresnel Spot Light N/A
Berkey Colortran Fresnel Spot Light N/A
Berkey Colortran Fresnel Spot Light N/A
Berkey Colortran Scoop Flood Light N/A
4
<PAGE>
APPENDIX B
EQUIPMENT TO BE DONATED TO GLEN ELLYN PUBLIC ACCESS
Equipment Model Description Serial #
Berkey Colortran Scoop Flood Light N/A
Berkey Colortran Scoop Flood Light N/A
Berkey Colortran Broad Flood Light N/A
Berkey Colortran Broad Flood Light N/A
Berkey Colortran Broad Flood Light N/A
5
<PAGE>
EXHIBIT 10.1.11
CITY OF WEST CHICAGO
- --------------------------------------------------------------------------------
ORDINANCE NO. 4025
AMENDS CODE OF ORDINANCES
EXTENDING THE FRANCHISE FOR JONES SPACELINK
TO NOVEMBER 30, 2000
- --------------------------------------------------------------------------------
ADOPTED BY THE
CITY COUNCIL
OF THE
CITY OF WEST CHICAGO
SEPTEMBER 2, 1997
- --------------------------------------------------------------------------------
Published in pamphlet form by the authority of the City Council of the City of
West Chicago, DuPage County, Illinois, this 10th day of September, 1997
<PAGE>
KRM:SS 8-28-97 WC-ORD.CAB
ORDINANCE NO. 4025
----
AN ORDINANCE AMENDING THE CODE OF ORDINANCES OF THE CITY OF
WEST CHICAGO - APPENDIX I, CITY OF WEST CHICAGO CABLE
TELEVISION FRANCHISE ORDINANCE - EXTENDING THE FRANCHISE
GRANTED PURSUANT THERETO TO NOVEMBER 30, 2000
AND AMENDING VARIOUS PROVISIONS THEREOF - JONES
GROWTH PARTNERS, L.P. D/B/A JONES SPACELINK
WHEREAS, the City Council of the City of West Chicago has heretofore
enacted Ordinance No. 1591, entitled "AN ORDINANCE GRANTING A FRANCHISE
CONCERNING THE ESTABLISHMENT, CONSTRUCTION, OPERATION, AND MAINTENANCE OF A
CABLE TELEVISION SYSTEM IN THE CITY OF WEST CHICAGO", said Ordinance having been
passed and approved on or about July 6, 1982 and becoming effective on or about
August 1, 1982; and,
WHEREAS, said Ordinance, as amended from time to time, is codified at
Appendix I of the City's Code of Ordinances as the City of West Chicago Cable
Television Franchise Ordinance (said Ordinance, as amended, being hereinafter
referred to as the "Cable Ordinance"); and,
WHEREAS, the Cable Ordinance granted a fifteen (15) year nonexclusive
franchise (the "Franchise") for the establishment, construction, operation and
maintenance of a cable television system within the City; and,
WHEREAS, Jones Growth Partners, L.P., a Colorado limited partnership d/b/a
Jones Spacelink ("Jones"), is the current holder of the Franchise; and,
WHEREAS, the City and Jones have engaged in the process of negotiating an
extension and/or renewal of the Franchise, pursuant to the Cable Communications
Policy Act of 1984, as amended, 47 U.S.C. Section 601 et seq.; and,
WHEREAS, Jones has requested that the term of the Franchise be extended to
November 30, 2000; and,
WHEREAS, the City has reviewed Jones' performance under the Franchise, has
identified the future cable-related needs and interests of the community, has
considered the financial, legal and technical qualifications of Jones to provide
cable television service in the City, and has considered plans for operating and
maintaining the cable system during the term of a renewed franchise; and,
WHEREAS, after affording the public adequate notice and an opportunity for
comment, the corporate authorities of the City have determined that it is in the
public interest to extend the term of the Franchise as requested by Jones, and
to amend various
<PAGE>
ORDINANCE NO. 4025
----
PAGE 2
- ------------------
provisions of the Cable Ordinance with respect to the Franchise.
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of West
Chicago, Illinois, in regular session assembled, as follows:
Section 1. That the term of the Franchise be and hereby is extended to
---------
November 30, 2000, subject to the amendments to the Cable Ordinance set forth in
Section 2 of this Ordinance.
Section 2. That the Cable Ordinance, Appendix I of the Code of Ordinances
---------
of the City of West Chicago, be and the same is hereby amended as follows:
A. By deleting Article I, Sections 1(c) and (e) in their entirety.
B. By deleting Article I, Section 2(a) in its entirety and in lieu
thereof, the following language shall be substituted:
"(a) Basic cable means any service tier which includes the
retransmission of local television broadcast signals and the
public, educational and governmental access channels."
C. By deleting Article I, Section 2(d) in its entirety and in lieu
thereof, the following language shall be substituted:
"(d) Company means Jones Growth Partners, L.P., a Colorado limited
partnership d/b/a Jones Spacelink, with its principal place of
business at 9697 East Mineral Avenue, Englewood, Colorado, 80112
and its local business office at 1101 E. Roosevelt Road, Wheaton,
Illinois, 60187."
D. By deleting Article I, Section 2(1)(10) in its entirety.
E. By deleting Article I, Section 4(b) in its entirety and in lieu
thereof, the following language shall be substituted:
"(b) The grant and/or any extension or renewal thereof shall be in
full force and effect from and after acceptance by the company as
provided in Section 37 of this Article, and the same shall continue
in full force and effect to and including November 30, 2000, at
which time the grant shall become null and void unless extended or
renewed."
<PAGE>
ORDINANCE NO. 4025
----
PAGE 3
- ------------------
F. By adding the following additional language to Article I, Section
4(c):
. . .", upon terms and conditions which are not more favorable
or less burdensome than this grant and subject to all applicable
federal and state laws relating to the grant of additional cable
television franchises."
G. By deleting Article I, Section 8 in its entirety and in lieu
thereof, the following language shall be substituted:
"Section 8. Rates.
(a) The company shall establish rates for its services in
accordance with all applicable federal, state and/or local
statutes, codes, rules, regulations and/or ordinances. Such rates
shall be nondiscriminatory and shall be applied fairly and
uniformly to all subscribers, provided, however, that nothing
contained herein shall be deemed to prohibit reasonable promotional
rates which may, from time to time, be less than the standard rates
established by the company.
(b) The company shall maintain, and file with the City, a complete
schedule of subscriber rates including all fees and charges for
services. Such rates may be changed only in accordance with the
limitations and procedures provided under applicable federal, state
and/or local statutes, codes, rules, regulations and/or ordinances,
and in any event, the company shall notify the city not less than
sixty (60) days prior to any change in rates.
(c) The company shall furnish, without installation charge or
monthly service fee, one line connection and outlet, and all
services in the basic service tier and cable programming service
tiers offered by the company, to the city hall and to each public
works building, other municipal building, fire station, library
building, park district building, township building and school
building within the city. The company shall provide additional line
connections and/or outlets to such buildings at the request of the
unit of local government, and may charge the requesting unit of
local government for the actual material and labor costs of such
additional line connections and/or outlets.
(d) Charges shall abate pro rata in the event that service to a
subscriber is interrupted for more than twenty-four (24) hours for
any reason whatsoever."
<PAGE>
ORDINANCE NO. 4025
----
PAGE 4
- ------------------
H. By deleting Article I, Section 10(a) in its entirety and in lieu
thereof, the following language shall be substituted:
"(a) The company shall pay to the city for the right, privilege and
franchise in connection with the grant, an amount equal to five (5)
percent of the gross revenues per annum. Payment shall be quarterly
within thirty (30) days following the 31st of December, 31st of
March, the 30th of June and 30th of September. Each payment shall
be accompanied by a statement under oath from an official or
representative of the company having the requisite knowledge to
make such a statement certifying the gross revenues upon which the
payment is based. The city reserves the right at any time to
increase or decrease the franchise fee not to exceed the maximum
allowable percentage or amount under applicable law."
I. By deleting Article I, Section 10(e) in its entirety and in lieu
thereof, the following language shall be substituted:
"(e) Within ninety (90) days of the end of each fiscal year of the
company, the company shall file with the corporate authorities its
annual report prepared, certified and audited by the company's
auditors, showing the financial status of the company. In addition,
with each quarter-yearly payment of the franchise fee, the company
shall file with the city a financial statement showing the total
gross revenues generated by the system facilities for the reporting
period, which shall be certified by the company's certified public
accountant. The city reserves the right to make its own independent
audit of the gross revenues generated by the system facilities for
any reporting period. If such audit reveals the underpayment of the
franchise fee by more than five (5) percent of the amount due to
the city, the company shall reimburse the city for the costs of
such audit."
J. By deleting Article I, Sections 10(h) and (i) in their entirety.
K. By deleting Article I, Section 11 in its entirety.
L. By deleting Article I, Sections 12(h)(1), (2), (3), (4) and (5) in
their entirety and in lieu thereof, the following language shall be
substituted:
"(1) A copy of the company's annual report to the FCC
<PAGE>
ORDINANCE NO. 4025
----
PAGE 5
- ------------------
relating to the system.
(2) A report detailing any changes during said fiscal year with
respect to persons who at any time during the preceding year
controlled or benefitted from an interest in the company of
five (5) percent or more, creditors secured by pledges or other
forms of security interest in the system, and/or unsecured
creditors whose claims in respect to the operation of the system in
the city exceed fifty thousand dollars ($50,000.00).
(3) A summary list of all complaints received and system "down
time" experienced during the year.
(4) Copies of the most current surety bonds for the company and
certificates of insurance regarding the system."
M. By deleting Article I, Sections 12(k), (l) and (m) in their
entirety.
N. By deleting the first sentence of Article I, Section 13 in its
entirety and in lieu thereof, the following language shall be
substituted:
. . ."The city and company shall hold scheduled performance
evaluation sessions on or before November 15 of each year.". . .
O. By adding the following additional language to the first sentence
of Article I, Section 14:
. . .", except as otherwise provided by applicable federal or state
law, in which case renewal shall be governed by such applicable
federal or state law:"
P. By deleting Article I, Section 14(h) in its entirety.
Q. By deleting all references to the language "coinsured" and "two
hundred fifty thousand dollars ($250,000.00)" contained in
Article I, Section 16(c) in their entirety, and in lieu thereof,
the following language shall be respectively substituted:
. . ."Additional insureds" ... and ... "five hundred thousand
dollars ($500,000.00)". . .
R. By deleting Article I, Section 18(f) in its entirety and in lieu
thereof, the following language shall be substituted:
<PAGE>
ORDINANCE NO. 4025
----
PAGE 6
- ------------------
"(f) No consent or approval of the city required pursuant to this
section shall be effective unless and until the company, or its
successor or assign, has reimbursed the city for the costs and
expenses incurred by the city in connection with the city's review
and grant thereof, including but not limited to consultant and
attorney fees, as follows:
(1) For the full amount of such costs and expenses up to five
thousand dollars ($5,000.00); and,
(2) For one half of the amount of such costs and expenses in
excess of five thousand dollars ($5,000.00)."
S. By deleting Article I, Sections 19(h) and (j) in their entirety.
T. By deleting Article I, Section 21(a) in its entirety and in lieu
thereof, the following language shall be substituted:
"(a) The system shall have a subscriber network with fifty-four
(54) downstream television channel capacity, as a minimum; and an
institutional network, consisting of two (2) dark fiber optic
strands and two (2) fiber optic terminations at each site, capable
of carrying voice, full motion video, audio and data
communications, which shall interconnect the West Chicago headend
and the following public buildings on or before November 30, 1997:
(1) City Hall;
(2) City Museum;
(3) Police Station;
(4) Sewer Treatment Plant;
(5) Street Department Building;
(6) Water Works Building;
(7) West Chicago Fire Protection District Administration
Building;
(8) West Chicago Public Library District Library Building;
(9) West Chicago Park District Administration Building;
(10) West Chicago High School;
(11) West Chicago Jr. High School; and,
(12) West Chicago Elementary School District No. 33
Administration Building.
The company shall maintain and replace, as necessary,
<PAGE>
ORDINANCE NO. 4025
----
PAGE 7
- ------------------
said dark fiber optic strands. The city shall provide all equipment
and materials necessary to activate and use said fiber optic
strands. In the event that the city grants a competing franchise
for the provision of cable television services within the city and
the grantee of such competing franchise commences the provision of
such services within the city prior to November 30, 2000, the
company shall be entitled to a credit against the payment of
franchise fees in the amount of twelve thousand five hundred
dollars ($12,500.00).
The Company shall extend the institutional network so as to
interconnect with specified additional public buildings and/or
facilities of the city or other units of local government lying
wholly or partly within the city, at the request of the city or
such other unit of local government, provided, however, that the
company may charge the requesting unit of local government for the
actual material and labor costs of such extensions."
U. By deleting the last sentence of Article I, Section 21(c) in its
entirety.
V. By deleting Article I, Section 21(d) in its entirety and in lieu
thereof, the following language shall be substituted:
"(d) The system shall carry available local television stations in
accordance with all applicable federal and state laws."
W. By deleting Article I, Section 21(e)(4) in its entirety.
X. By deleting the last sentence of Article I, Section 21(e) in its
entirety and in lieu thereof, the following language shall be
substituted:
. . . "The company shall provide the city with the capability to
broadcast live, on a twenty four (24) hour per day basis, on the
municipal access channel and the public access channel, from the
city council chambers located in city hall and the local
origination and access studio. In addition, the company shall
broadcast, at the city's request, up to four (4) meetings per year
of the governing body or specified committees or commissions of one
or more units of local government lying wholly or partly within the
city, provided, however, that the city shall make such requests to
the company in writing not less than three (3) weeks prior to each
such meeting, that such meetings shall not be conducted on a
Saturday
<PAGE>
ORDINANCE NO. 4025
----
PAGE 8
- ------------------
or Sunday, that such meetings shall commence not later than nine
o'clock (9:00) P.M., and that each day of any multiday meetings
shall be considered a separate meeting. The company shall not be
responsible for the content of such meetings, or for technical
problems encountered during such broadcasts."
Y. By deleting Article I, Sections 21(f), (g), (h), (i) and (j) in
their entirety and in lieu thereof, the following language shall be
substituted:
"(f) In addition to the local television stations and access
channels required pursuant to this section, the system shall
provide cable programming services, premium services and/or
pay-per-view services, in the following broad categories:
(1) Children;
(2) Family oriented;
(3) Educational programming;
(4) News & Information;
(5) Weather;
(6) Sports;
(7) Ethnic/Minority programming;
(8) Arts, culture and performing arts; and,
(9) General Entertainment.
(g) The company shall provide leased access on the system in
accordance with all applicable federal and state laws."
Z. By deleting Article I, Section 22(b) in its entirety and in lieu
thereof, the following language shall be substituted:
"(b) The company shall establish and maintain at 150 E. Roosevelt
Road, West Chicago, Illinois, a local origination and access studio
for the production of local programming by the city, units of local
government lying wholly or partly within the city and public
service organizations serving the city."
AA. By adding the following additional language to Article I, Section
22(c):
. . . "upon request of the city made not less than two (2) business
days prior to the event to be taped or broadcast."
BB. By deleting the second sentence of Article I, Section 23,
<PAGE>
ORDINANCE NO. 4025
----
PAGE 9
- ------------------
in its entirety and in lieu thereof, the following language shall
be substituted:
. . ."The foregoing notwithstanding, the company shall be allowed
to perform monitoring which is necessary to the normal delivery of
system services; provided however, that such monitoring shall be
done in a manner that does not infringe upon the rights of
subscribers." . . .
CC. By deleting the last sentence of Article I, Section 24(a) in its
entirety and in lieu thereof, the following language shall be
substituted:
. . ."If, subsequently, such telephone and electric utility
facilities are placed underground, the company's facilities in such
area shall be placed underground."
DD. By deleting Article I, Section 24(g) in its entirety.
EE. By adding the following additional language to Article I, Section
26(b)(1):
. . ."and an additional cash grant of twenty-five thousand dollars
($25,000.00) on or before September 30, 1997;"
FF. By deleting Article I, Section 26(b)(2) through (9) in their
entirety and in lieu thereof, the following language shall be
substituted:
"(2) Conveyance, by appropriate bill(s) of sale, of all furnishings
and equipment installed on or before September 30, 1997, in the
local origination and access studio and/or city hall by the company
and/or its predecessors in interest, including, but not limited to
video and audio equipment, control equipment, teleprompters, racks,
drapes, lights and cabinets, and the following additional items of
equipment:
A. A three-quarter inch (3/4") video recorder;
B. A three-quarter inch (3/4") video player; and,
C. A three-quarter inch (3/4") video editor-controller.
Upon the request of the foundation, the company shall so convey the
following playback equipment located at company's Wheaton
facilities: A GVG 10x1 video-audio line switcher, two (2) three-
quarter inch (3/4") video players, three (3) black and white
monitors, a character generator, a time based corrector and a rack
to house
<PAGE>
ORDINANCE NO. 4025
----
PAGE 10
- ------------------
same. The company shall promptly move said playback equipment to
the local origination and access studio and thereafter, the
foundation shall be responsible for programming playback on the
access channels.
(3) Local origination and access staff support over the life of the
franchise, specifically including labor for installation, set up,
maintenance and minor repair of all of the foundation's local
origination and access equipment and provision of one (1)
programming director to assist in local origination and access
programming and training.
(4) Five (5) one-thousand-dollar-scholarships per year during the
life of the franchise to students residing within the West Chicago
School District 94 boundaries, with the award of the scholarships
to be made by the foundation with the cooperation of the school
district administration or equivalent.
(5) The company's intern program (CIP) to train local students in
television technology and production in cooperation with area
schools and institutions."
GG. By deleting Article I, Sections 26(c) and (d) in their entirety and
in lieu thereof, the following language shall be substituted:
"(c) The company shall not require a charge to be paid by users of
the public, educational, and municipal access channels. Usage of
those channels will be governed by the foundation."
HH. By deleting all reference to the language "two hundred fifty
thousand dollars ($250,000.00)" contained in Article I, Section
27(a) in its entirety and in lieu thereof, the following language
shall be substituted:
. . ."five hundred thousand dollars ($500,000.00)" . . .
II. By deleting Article I, Section 33 in its entirety and in lieu
thereof, the following language shall be substituted:
"Section 33. Notices.
All notices herein provided for shall be sent prepaid by registered
or certified mail addressed to the parties, as follows:
<PAGE>
ORDINANCE NO. 4025
----
PAGE 11
- ------------------
To the city: City of West Chicago
c/o City Administrator
475 Main Street
West Chicago, Illinois 60185
With copy to: Gerald M. Gorski
GORSKI & GOOD
211 S. Wheaton Avenue
Suite 305
Wheaton, Illinois 60187
To the company: Jones Spacelink
c/o General Manager
1101 E. Roosevelt Road
Wheaton, Illinois 60187
With copy to: Jones Intercable
ATTN: Legal Department
9697 East Mineral Drive
Englewood, Colorado 80112"
JJ. By deleting Article I, Section 34 in its entirety.
KK. By deleting Article I, Section 37 in its entirety and in lieu
thereof, the following language shall be substituted:
"Section 37. Acceptance of franchise.
(a) The provisions, terms and conditions of the grant of the
franchise or any amendment, extension or renewal thereof shall be
accepted by the company by written instrument filed with the city
clerk within thirty (30) days after the passage and approval of the
ordinance providing for such grant, amendment, extension or
renewal, unless said time period is extended by the city at its
sole discretion.
(b) The company expressly acknowledges that upon accepting the
right, privilege and franchise granted by this ordinance, it did so
relying upon its own investigation and understanding of the power
and authority of the city in connection with the system and the
grant, or any amendment, extension or renewal thereof.
(c) The company by acceptance of the right, privilege and franchise
under the grant, or any amendment, extension or renewal thereof,
acknowledges that it has not been induced to act by any
understanding or proviso
<PAGE>
ORDINANCE NO. 4025
----
PAGE 12
- ------------------
or other statement whether verbal or written by or on behalf of the
city concerning any term or condition of the franchise not
expressed herein.
(d) The company further acknowledges by such acceptance that it has
carefully read the terms and conditions of this ordinance and is
willing and does accept all reasonable risks of the meaning of the
provisions, terms and conditions herein.
(e) In the event the company shall accept the grant of the
franchise, or any amendment, extension or renewal thereof, in
accordance with and pursuant to the provisions, terms and
conditions of this ordinance, the company shall execute an
acceptance in substantially the form as follows:
ACCEPTANCE OF CITY OF WEST CHICAGO CABLE
TELEVISION FRANCHISE
Jones Growth Partners, L.P., a Colorado limited partnership d/b/a
Jones Spacelink (the "Company"), hereby makes the following express
representations to the City of West Chicago, DuPage County,
Illinois (the "City"):
A. The Company has carefully read the terms and conditions of the
City of West Chicago Cable Television Franchise Ordinance, as
amended, extended and/or renewed by the City's Ordinance No.
4025 (the "Ordinance"), and accepts all of such terms and
----
conditions and agrees to abide by the same with respect to its
franchise (the "Franchise") to establish, construct, operate
and maintain a cable television system within the City.
B. The company acknowledges that it has carefully read the terms
and conditions of the Ordinance and expressly waives any
claims that any provisions thereof are unreasonable or
arbitrary or void, except as to those provisions which are
preempted now or hereafter by superseding provisions of
federal or state law.
C. The Company acknowledges that is has not been induced to
accept the Franchise as amended, extended and/or renewed by
the Ordinance by any promise, oral or written, or any other
consideration, by or on behalf of the City or by any third
person, regarding any term or condition of the Ordinance or
the Franchise which is not
<PAGE>
ORDINANCE NO. 4025
----
PAGE 13
- ------------------
expressed therein.
D. The Company represents that no promise or inducement, oral or
written, has been made to any City employee, agent or
official regarding the Ordinance of the Franchise.
Dated this 24th day of September , 1997.
---- --------- ----
Jones Growth Partners, L.P., a
Colorado limited partnership d/b/a
Jones Spacelink,
By: [SIGNATURE ILLEGIBLE]
--------------------------
Title: Group VP/Operations
-------------------
STATE OF COLORADO )
-------- ) SS.
COUNTY OF ARAPAHOE )
--------
The undersigned, a notary public in and for the County and State
aforesaid, does hereby certify that Ruth E. Warren, personally known to me to
--------------
be the same person whose name is subscribed to the above and foregoing
instrument, acknowledged before me this 4th day of September, 1997, that s/he
--- --------- ----
signed the said instrument as the duly authorized Group VP/Operations of Jones
-------------------
Growth Partners, L.P. for the uses and purposes set herein set forth.
[SEAL OF TERRIE R. THOMPSON] /s/ Terrie R. Thompson
----------------------
LL. By deleting Articles II, III, IV and V in their entirety.
Section 3. That all other ordinances and resolutions, or parts thereof, in
---------
conflict with the provisions of this Ordinance are, to the extent of such
conflict, expressly repealed.
<PAGE>
ORDINANCE NO. 4025
----
PAGE 14
- ------------------
Section 4. That this Ordinance shall be in full force and effect from and
---------
after its passage, approval and publication in pamphlet form as provided by law,
provided, however, that the extension of the Franchise shall not be effective
until Jones has filed its unconditional acceptance thereof with the City Clerk,
in substantially the form attached hereto as Exhibit "A" and incorporated
herein by reference.
PASSED this, 2nd day of September, 1997.
--- ---------
Alderman D. Santiago AYE Alderman J. Smith ABSENT
--- ------
Alderman M. Fortner AYE Alderman T. Merrion AYE
--- ---
Alderman R. Berendson AYE Alderman E. Wind AYE
--- ---
Alderman D. Sabathne AYE Alderman W. Woodward AYE
--- ---
Alderman J. Handel ABSENT Alderman B. Douglass AYE
------ ---
APPROVED as to form: [SIGNATURE ILLEGIBLE]
---------------------------------
City Attorney
APPROVED this 2nd day of September , 1997.
--- ---------
[SIGNATURE ILLEGIBLE]
--------------------------------
Mayor
ATTEST:
/s/ Nancy M. Smith
- ------------------
City Clerk
PUBLISHED: 9-10-97
<PAGE>
ORDINANCE NO. 4025
EXHIBIT "A"
-----------
ACCEPTANCE OF CITY OF WEST CHICAGO CABLE
TELEVISION FRANCHISE
Jones Growth Partners, L.P., a Colorado limited partnership d/b/a Jones
Spacelink (the "Company") hereby makes the following express representations to
the City of West Chicago, DuPage County, Illinois (the "City"):
A. The Company has carefully read the terms and conditions of the City of West
Chicago Cable Television Franchise Ordinance, as amended, extended and/or
renewed by the City's Ordinance No. ___________ (the "Ordinance"), and
accepts all of such terms and conditions and agrees to abide by the same
with respect to its franchise (the "Franchise") to establish, construct,
operate and maintain a cable television system within the City.
B. The Company acknowledges that it has carefully read the terms and
conditions of the Ordinance and expressly waives any claims that any
provisions thereof are unreasonable or arbitrary or void, except as to
those provisions which are preempted now or hereafter by superseding
provisions of federal or state law.
C. The Company acknowledges that is has not been induced to accept the
Franchise as amended, extended and/or renewed by the Ordinance by any
promise, oral or written, or any other consideration, by or on behalf of
the City or by any third person, regarding any term or condition of the
Ordinance or the Franchise which is not expressed therein.
D. The Company represents that no promise or inducement, oral or written, has
been made to any City employee, agent or official regarding the Ordinance
of the Franchise.
Dated this 24th day of September, 1997.
Jones Growth Partners, L.P., a
Colorado limited partnership d/b/a
Jones Spacelink,
By: /s/ Ruth Warren
-----------------------------
Title: Group VP/Operations
STATE OF COLORADO ) -----------------------
COUNTY ARAPAHOE )
The undersigned, a notary public in and for the County and State
aforesaid, does hereby certify that Ruth E. Warren, personally known to me to be
the same person whose name is subscribed to the above and foregoing instrument,
acknowledged before me this 24th day of September, 1997, that s/he signed the
said instrument as the duly authorized Group VP/Operations of Jones Growth
Partners, L.P. for the uses and purposes herein set forth.
[SEAL OF TERRIE R. THOMPSON] /s/ Terrie R. Thompson
-----------------------
<PAGE>
EXHIBIT 10.2.2
FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT
THIS FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this "First
-----
Amendment") dated as of April 12, 1995, is entered into by and among Jones
- --------- --
Growth Partners L.P., a Colorado limited partnership ("Borrower"), the lenders
--------
named on the signature pages of this First Amendment (herein referred to
individually as a "Lender" and collectively as "Lenders") and NationsBank of
------ -------
Texas, N.A., as a Lender and as Agent for itself and the other Lenders (in such
capacity, "Agent").
-----
RECITALS:
A. Borrower, Lenders and Agent are parties to a certain Credit Agreement
dated as of December 30, 1994 (the "Credit Agreement"). Capitalized terms used
----------------
in this First Amendment which are not otherwise defined in this First Amendment
shall have the meaning ascribed thereto in the Credit Agreement. All references
to "Sections" herein are references to Sections of the Credit Agreement.
--------
B. Borrower has requested that the Lenders waive certain Defaults under the
Credit Agreement and in connection therewith make certain modifications to the
Credit Agreement.
C. Lenders have agreed to waive certain Defaults limited by and subject to
the terms hereof as set forth below.
NOW, THEREFORE, in consideration of the premises, and subject to the
terms and conditions herein set forth, the parties hereto agree as follows:
1. Borrower is currently in Default under Section 7.27(b) of the
---------------
Credit Agreement. Lenders hereby waive the Default of Borrower under Section
-------
7.27(b) of the Credit Agreement caused by Borrower's failure to comply with the
- -------
ratio required thereunder for the fiscal quarter ending December 31, 1994;
provided, that the ratio of Net Operating Cash Flow to Interest Expense of the
Borrower as of the last day of such fiscal quarter was 1.91 to 1.00. Borrower
hereby represents and warrants to Lenders that the ratio of Net Operating Cash
Flow to Interest Expense as of the last day of the fiscal quarter ended December
31, 1994 was 1.91 to 1.00. The waiver set forth hereinabove does not extend to
any other Default or Potential Default and will not operate to waive any other
Default or Potential Default.
-1-
<PAGE>
2. Section 7.27(b) of the Credit Agreement is hereby amended by
---------------
adding the following phrase to the end of such Section:
"; provided, however, that notwithstanding the foregoing, the ratio of
Borrower's Net Operating Cash Flow to its Interest Expense as of the
last day of the fiscal quarter ending March 31, 1995 shall not be less
than 1.75 to 1.00,"
3. In the event that any representation or warranty set forth in this
First Amendment is incorrect or false when made or becomes incorrect or false at
any time, then the waiver set forth in paragraph 1 hereinabove shall immediately
terminate without notice to Borrower or any other party and Lenders reserve all
rights to exercise any or all remedies against Borrower or any other party.
4. Borrower shall execute and deliver such further agreements,
documents, instruments, and certificates, including without limitation financial
statements, in form and substance satisfactory to Lenders, as Agent may deem
necessary or appropriate in connection with this First Amendment.
5. This First Amendment shall become effective as of the date on which
(the "First Amendment Effective Date") the Agent, on behalf of the Lenders,
------------------------------
shall have received executed counterparts of this First Amendment from the
Borrower and Lenders (or copies of such executed counterparts by facsimile).
6. Borrower represents and warrants to Lenders that (a) this First
Amendment constitutes a legal, valid, and binding obligation of Borrower,
enforceable in accordance with the terms hereof, (b) there exists no Potential
Default or Default under the Credit Agreement (except as described in paragraph
1 above), (c) the representations and warranties of the Borrower and its
Subsidiaries set forth in the Credit Agreement and other Loan Papers are true
and correct as of the date hereof as though made on and as of the date hereof,
(d) the Borrower and its Subsidiaries have complied with all agreements and
conditions to be complied with by each of them under the Credit Agreement and
Loan Papers by the date hereof and (e) the Credit Agreement, as amended hereby,
the Loan Papers and the financing statements filed in connection therewith,
remain in full force and effect, and are sufficient to grant a perfected
security interest and lien in all collateral described therein, securing payment
and performance of the Obligations of Borrower and its Subsidiaries under the
Loan Papers, as amended hereby.
7. As a material inducement to Agent and Lenders to execute and
deliver this First Amendment, Borrower hereby represents, warrants and agrees
that as of the First Amendment Effective Date all of the representations and
warranties set forth or referred to in the Credit Agreement and the other Loan
Papers shall be true and correct on the date thereof in all respects, as though
made on the date thereof and (b) except as set forth herein, no Default or
Potential Default exists on the date hereof or will exist on the First Amendment
Effective Date.
-2-
<PAGE>
8. Except as specifically provided herein, no other waiver of, or
change in any of the terms, provisions or conditions of the Loan Papers is
intended or implied and all terms, provisions and conditions of the Credit
Agreement, the other Loan Papers and all documents executed in connection
therewith shall continue in full force and effect and shall remain enforceable
and binding in accordance with their respective terms. Except to the extent set
forth in paragraph 1 of this First Amendment, this First Amendment shall not
constitute a waiver of any other existing Defaults under the Loan Papers
(whether or not the Lenders have knowledge thereof) and shall not constitute a
waiver of any other Defaults whatsoever. On and after the First Amendment
Effective Date, any reference to the Credit Agreement shall be deemed to be a
reference to the Credit Agreement as amended by this First Amendment.
9. This First Amendment may be executed in any number of identical
counterparts and by different parties hereto in separate counterparts, each of
which counterparts when so executed and delivered shall for all purposes be
deemed an original and all of which constitute, collectively, one agreement, but
in making proof of this First Amendment, it shall not be necessary to produce or
account for more than one such counterpart.
10. THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN
PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
11. This First Amendment is one of the "Loan Papers" referred to in
the Credit Agreement, and the provisions relating to Loan Papers set forth in
the Credit Agreement are incorporated herein by reference the same as if set
forth herein verbatim. Any failure by Borrower to fully perform and comply with
the provisions of this First Amendment shall constitute a Default under the
Credit Agreement.
12. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS
THEREOF) OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK. SIGNATURE PAGES FOLLOW.]
-3-
<PAGE>
EXECUTED to be effective as of the First Amendment Effective Date.
JONES GROWTH PARTNERS L.P.,
as Borrower
By: Jones Spacelink Cable Corporation,
its Managing General Partner
By: /s/ J. Roy Pottle
-----------------------------
Name: J. Roy Pottle
---------------------------
Title: Treasurer
--------------------------
NATIONSBANK OF TEXAS, N.A.,
as Agent and a Lender
By: [SIGNATURE ILLEGIBLE]
-----------------------------
Name:
---------------------------
Title: Vice President
--------------------------
PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By: /s/ Thomas P. Carden
-----------------------------
Name: Thomas P. Carden
---------------------------
Title: Vice President
--------------------------
-4-
<PAGE>
EXHIBIT 10.2.3
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment" is
---------
executed to be effective as of the 31st day of December, 1996, among Jones
Growth Partners L.P. (the "Borrower"), Nationsbank of Texas, N.A.
--------
("NationsBank"), individually as a Lender and as the Agent and the other Lenders
-----------
party hereto.
WITNESSETH:
----------
A. On December 30, 1994, the Borrower, NationsBank, individually as a
Lender and as the Agent, and the other Lenders party thereto (together with
NationsBank, the "Lenders"), entered into that certain Credit Agreement (the
-------
"Credit Agreement") providing for a $36,000,000 credit facility, which was
----------------
amended by that certain First Amendment and Waiver to Credit Agreement dated as
of April 12, 1995, among the Borrower, NationsBank and the other Lenders (as so
amended, the "Credit Agreement").
----------------
B. The Borrower has requested certain amendments to the Credit
Agreement.
C. The Lenders have agreed to make certain amendments to the Credit
Agreement, subject to the Borrower's compliance with the representations,
warranties, covenants and other terms and conditions set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree hereby as
follows:
1. Certain Definitions and Terms. All capitalized terms used herein and
-----------------------------
not otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
2. Amendment of Certain Definitions.
--------------------------------
(a) The definition of "NOTES" set forth in Section 1.1 of the Credit
-----------
Agreement is hereby deleted in its entirety and is replaced with the following
in lieu thereof:
"Notes": means the promissory notes in substantially the form
-----
of Exhibit A, executed by the Borrower in favor of each of the Lenders,
---------
and all renewals, extensions, amendments, restatements and
consolidations of all or any part thereof, and "Notes" means any one of
-----
them."
(b) The definition of "PRO FORMA TOTAL DEBT SERVICE" set forth in
Section 1.1 of the Credit Agreement is hereby deleted in its entirety and is
- -----------
replaced with the following in lieu thereof:
<PAGE>
"Pro Forma Total Debt Service": means, without duplication,
----------------------------
for the succeeding twelve-month period from the end of any fiscal
quarter or, with respect to any calculation made as of a date other than
the end of a fiscal quarter, as of the end of the most recently ended
fiscal quarter for which Borrower is required to deliver quarterly or
annual Financial Statements and the related Compliance Certificate
pursuant to Sections 7.3(a) and 7.3(b), Total Debt Service (excluding
--------------- ------
however Total Debt Service relating to the final principal payment due
on the Termination Date) during such period; provided that, for purposes
--------
of this definition, the rates of interest payable during any period on
Total Debt (x) bearing interest at a variable rate or at different fixed
rates or (y) on which interest does not become payable until a specified
date after the end of such quarter shall, in each case, be the interest
rates per annum payable on such Total Debt as of the date for which
such calculation is made."
(c) The definition of "TERMINATION DATE" set forth in Section 1.1 of the
-----------
Credit Agreement is hereby deleted in its entirety and is replaced with the
following in lieu thereof:
"Termination Date": means the earlier of (a) December 31,
----------------
1999, and (b) the effective date that the Lenders' commitments to lend
under this Agreement are otherwise cancelled or terminated in accordance
with this Agreement."
3. Section 3.2(b) of the Credit Agreement is hereby deleted in its
--------------
entirety and is replaced with the following in lieu thereof:
"(b) On the last Business Day of each March, June, September
and December, commencing March 31, 1999, through the Termination Date,
the Total Commitment shall automatically and permanently be reduced by
2.5% of the original Total Commitment (each, a "Quarterly Percentage
--------------------
Reduction"). Notwithstanding anything contained in this Agreement to the
---------
contrary, on the Termination Date the Total Commitment shall
automatically reduce to zero and all principal and other amounts
outstanding hereunder shall be due and payable in full."
-2-
<PAGE>
4. Section 3.2(d) of the Credit Agreement is hereby deleted in its entirety
--------------
and is replaced with the following in lieu thereof:
"(d) On each date that Borrower disposes of any asset or
investment and (i) the proceeds of such sale exceed $250,000 or (ii) the
proceeds of such sale when aggregated with all other proceeds from
dispositions during the same fiscal year exceed $250,000, Borrower shall
on the date of such disposition, prepay outstanding Principal Debt in
the full amount of the net cash proceeds so received and, concurrent
with any such payment, the Total Commitment shall be permanently reduced
in like amount, and each such reduction shall reduce the Committed Sums
of each Lender in accordance with each Lender's Commitment Percentage.
Any such reduction in the Total Commitment under this Section 3.2(d)
--------------
shall not affect the amount of the Quarterly Percentage Reductions
required under Section 3.2(b) of this Agreement. Borrower shall pay, on
--------------
the date of such prepayment, all accrued and unpaid interest on the
principal amount so prepaid and any Consequential Loss arising as a
result thereof."
5. Amendment Fee. Borrower agrees hereby to pay to the Agent on the date of
-------------
this Amendment, for the account of each Lender, a non-refundable fee equal to
.25% of the Total Commitment as of the date hereof (the "Fee"). Upon the
---
Agent's receipt of the Fee, the Agent shall pay to each Lender its Pro Rata
share of the Fee based on such Lender's Pro Rata share of the Total Commitment.
The Borrower further acknowledges and agrees that the Fee (i) shall be fully
earned and non-refundable when paid and (ii) is separate from, and in addition
to, the fees payable as set forth in Section 4 of the Credit Agreement.
---------
6. Section 3.2(f) of the Credit Agreement is hereby amended to delete the
--------------
last sentence of such section in its entirety.
7. The following new Section 3.2(g) is hereby added to the Agreement:
--------------
"(g) The Borrower shall have the right, upon not less than
three Business Days' notice to the Agent (which will promptly notify
the Lenders thereof), to terminate the Total Commitment or, from time
to time, to reduce the amount of the Total Commitment; provided that no
--------
such termination or reduction of the Total Commitment shall be
permitted if, after giving effect thereto and to any prepayments of the
Loans made on the effective date thereof, the Principal Debt would
exceed the Total Commitment then in effect. Any such reduction shall be
in a minimum amount of $1,000,000 or a whole multiple of $250,000 in
excess thereof and shall permanently reduce the amount of the Total
Commitment then in effect.
-3-
<PAGE>
8. Section 7.27(a) of the Credit Agreement is hereby deleted in its
---------------
entirety and is replaced with the following in lieu thereof:
"(a) The Borrower shall never permit the ratio of its Total
Debt to its Annualized Operating Cash Flow as of the last day of any
fiscal quarter ending (i) on or before December 31, 1998 to be greater
than 4.00 to 1.00 and (ii) after December 31, 1998 to be greater than
3.75 to 1.00."
9. Section 7.2(d) of the Credit Agreement is hereby deleted in its
--------------
entirety and is replaced with the following in lieu thereof:
"(d) The Borrower shall never permit the aggregate amount of
its Capital Expenditures in any fiscal year to be greater than the
amount set forth below opposite such period; provided, however, if, for
any given fiscal year, actual Capital Expenditures are less than the
annual amounts set forth below, the difference may be carried over to
the immediately following fiscal year, but not to subsequent years.
Period
------
Closing Date to and including December 31, 1997 $4,500,000
Thereafter $5,250,000"
10. Exhibit A-1 to the Credit Agreement is hereby deleted in its entirety.
-----------
11. Conditions Precedent. This Amendment shall not be effective until the
--------------------
following matters have been satisfied to the reasonable satisfaction of Agent:
(a) This Amendment shall have been duly executed and delivered to the
Agent by the Borrower and the Lenders.
(b) The Borrower shall have paid the Fee to the Agent, for distribution
to the Lenders.
12. Representations and Warranties. The Borrower represents and warrants to
------------------------------
the Agent and the Lenders that (a) this Amendment has been duly authorized,
executed and delivered by the Borrower and constitutes a legal, valid, and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally or general principles of equity, (b)
both before and after giving effect to the transactions and modifications
contemplated herein, there exists no Default or Event of Default under the
Credit Agreement, (c) the representations and warranties of the Borrower set
forth in the
-4-
<PAGE>
Credit Agreement and the other Loan Papers are true and correct in all material
respects as of the date of this Amendment as though made on and as of such date,
except to the extent that the representations and warranties speak to a specific
date, (d) the Borrower has complied with all agreements and conditions to be
complied with by it on or before the date of this Amendment under the Credit
Agreement, the other Loan Papers and this Amendment, and (e) the Credit
Agreement, as amended hereby, the other Loan Papers, as amended, remain in full
force and effect, and are sufficient to grant a perfected security interest and
lien in all Collateral described therein, securing payment and performance of
the Obligations of the Borrower under the Loan Papers, as amended hereby.
13. Further Assurances. The Borrower shall execute and deliver such
------------------
further consents, acknowledgments, agreements, documents, instruments, and
certificates, in form and substance satisfactory to Lenders, as Lenders may
reasonably deem necessary or appropriate in connection with this Amendment.
14. Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument. In making proof hereof, it shall not be necessary to produce or
account for any counterpart other than one signed by the party against which
enforcement is sought.
15. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND THE RIGHTS,
-------------
OBLIGATIONS AND LIABILITIES OF THE PARTIES HERETO SHALL BE DETERMINED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
AND JUDICIAL DECISIONS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
16. ENTIRE AGREEMENT. THIS AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER
----------------
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. EXCEPT AS HEREIN EXPRESSLY MODIFIED, THE CREDIT AGREEMENT, THE LOAN
DOCUMENTS AND ALL OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN CONNECTION
THEREWITH SHALL CONTINUE IN FULL FORCE AND EFFECT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGES FOLLOW.]
-5-
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed as of the date first
set forth above.
JONES GROWTH PARTNERS L.P., a
Colorado limited partnership
By: JONES SPACELINK CABLE
CORPORATION, a Colorado
corporation, as managing general partner
By: /s/ J. Roy Pottle
-------------------------------------
Name: J. Roy Pottle
-----------------------------------
Title: Treasurer
----------------------------------
NATIONSBANK OF TEXAS, N.A.,
as Agent and a Lender
By:
------------------------------------------
Name: David G. James
----------------------------------------
Title: Vice President
---------------------------------------
PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By:
------------------------------------------
Name: Cynthia L. Rogers
----------------------------------------
Title: Banking Officer
---------------------------------------
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 109,356
<SECURITIES> 0
<RECEIVABLES> 212,268
<ALLOWANCES> (16,173)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 57,002,036
<DEPRECIATION> (31,394,808)
<TOTAL-ASSETS> 37,571,190
<CURRENT-LIABILITIES> 3,114,199
<BONDS> 36,219,526
0
0
<COMMON> 0
<OTHER-SE> (1,762,535)
<TOTAL-LIABILITY-AND-EQUITY> 37,571,190
<SALES> 0
<TOTAL-REVENUES> 23,744,294
<CGS> 0
<TOTAL-COSTS> 28,317,155
<OTHER-EXPENSES> (19,996)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,542,388
<INCOME-PRETAX> (7,095,253)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,095,253)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,095,253)
<EPS-PRIMARY> (81.92)
<EPS-DILUTED> (81.92)
</TABLE>
