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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
IDS/JONES GROWTH PARTNERS II, L.P.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Limited
Partnership Interests
(2) Aggregate number of securities to which transaction applies: 174,343
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Pursuant to
Rule 0-11(c)(2), the transaction valuation is based upon the
Registrant's 65.6 percent interest in the $108,500,000 sales price that
is to be paid to IDS/Jones Joint Venture Partners in connection with the
transaction that is the subject of the proxy solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$71,176,000
(5) Total fee paid: $14,235
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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[LOGO OF JONES INTERCABLE, INC.]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS OF IDS/JONES GROWTH PARTNERS II, L.P.
To the Limited Partners of IDS/Jones Growth Partners II, L.P.:
A special vote of the limited partners of IDS/Jones Growth Partners II, L.P.
(the "Partnership") is being conducted through the mails on behalf of the
Partnership by Jones Cable Corporation, the managing general partner of the
Partnership, for the purpose of obtaining limited partner approval of the
sale, to TCI Communications, Inc. or one of its affiliates, of the cable
television system serving the cities of Aurora, Plano and Sandwich, the
villages of Montgomery, North Aurora, Oswego and Yorkville and certain
unincorporated areas of the counties of Kane and Kendall, all in the State of
Illinois (the "Aurora System") owned by IDS/Jones Joint Venture Partners (the
"Venture"), a joint venture in which the Partnership has a 65.6 percent
ownership interest, for $108,500,000 in cash, subject to customary working
capital closing adjustments that may have the effect of increasing or
decreasing the sales price by a non-material amount. Information relating to
this matter is set forth in the accompanying Proxy Statement.
If the limited partners approve the proposed sale of the Aurora System and
if the transaction is closed, the Venture will repay all of its indebtedness
(including $47,000,000 borrowed under its credit facility, related parties'
notes totaling $1,600,000, the subordinated advance of $1,406,647 to Jones
Intercable, Inc. and capital lease obligations of $79,949), settle working
capital adjustments, deposit $3,283,500 into an indemnity escrow account and
then distribute the approximate $52,200,000 of net sale proceeds to the
Venture's four partners: the Partnership, IDS/Jones Growth Partners 89-B,
Ltd., IDS Management Corporation and Jones Intercable, Inc. The Partnership
will receive approximately $34,300,000, or 65.6 percent, of the $52,200,000
distribution, which the Partnership will distribute to its limited partners of
record as of the closing date of the sale of the Aurora System. Because the
distribution to be made on the sale of the Aurora System will not exceed 100
percent of the amounts originally contributed to the Partnership by the
limited partners plus the six percent liquidation preference, the general
partners will not receive general partner distributions on the sale of the
Aurora System. The $34,300,000 distribution to the limited partners will give
the Partnership's limited partners an approximate return of $197 for each $250
limited partnership interest, or $788 for each $1,000 invested in the
Partnership. Distribution checks will be issued to limited partners' account
registration or payment instruction of record.
There have been no prior distributions to the limited partners and it is
anticipated that there will be no further distributions to the limited
partners other than from the Partnership's portion of any amounts remaining
after November 15, 1999 in the indemnity escrow account. Once the Partnership
has completed the distribution of its portion of the net proceeds from the
sale of the Aurora System, the limited partners of the Partnership will have
received a total of only $197 for each $250 limited partnership interest, or
$788 for each $1,000 invested in the Partnership (excluding escrowed
proceeds). After the closing of the sale of the Aurora System and the
distribution of the Partnership's portion of the net sale proceeds therefrom,
including the Partnership's portion of the amounts, if any, remaining after
November 15, 1999 in an indemnity escrow account, the Partnership will be
liquidated and dissolved, most likely in the fourth quarter of 1999.
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Only limited partners of record at the close of business on August 31, 1998
are entitled to notice of, and to participate in, this vote of limited
partners. It is very important that all limited partners participate in the
voting. The Venture's ability to complete the transaction discussed in the
Proxy Statement and the Partnership's ability to make a distribution to its
limited partners of its portion of the net proceeds of the sale of the Aurora
System are dependent upon the approval of the transaction by the holders of a
majority of the Partnership's limited partnership interests.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement") requires that the proposal to sell the
Aurora System be approved by the holders of a majority of the limited
partnership interests, abstentions and non-votes will be treated as votes
against the proposal. A properly executed consent returned to the managing
general partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Aurora System. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Aurora System, if the holders of a majority of the
limited partnership interests approve the proposal, all limited partners will
receive a distribution of the net sale proceeds in accordance with the
procedures prescribed by the Partnership Agreement regardless of how or
whether they vote on the proposal.
Jones Cable Corporation, as managing general partner of the Partnership,
urges you to sign and return the enclosed proxy as promptly as possible. The
proxy should be returned in the enclosed envelope.
JONES CABLE CORPORATION
Managing General Partner
/s/ELIZABETH M. STEELE
Elizabeth M. Steele
Secretary
Dated: September 15, 1998
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[LOGO OF JONES INTERCABLE, INC.]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS
OF IDS/JONES GROWTH PARTNERS II, L.P.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of IDS/Jones Growth Partners
II, L.P. (the "Partnership") by Jones Cable Corporation, the managing general
partner of the Partnership (the "Managing General Partner"), on behalf of the
Partnership, for the purpose of obtaining limited partner approval of the sale
of the cable television system serving the cities of Aurora, Plano and
Sandwich, the villages of Montgomery, North Aurora, Oswego and Yorkville and
certain unincorporated areas of the counties of Kane and Kendall, all in the
State of Illinois (the "Aurora System") owned by IDS/Jones Joint Venture
Partners (the "Venture"), a joint venture in which the Partnership has a 65.6
percent ownership interest, for $108,500,000 in cash, subject to normal
working capital closing adjustments, to TCI Communications, Inc. or one of its
affiliates ("TCI"). The Partnership's supervising general partner is IDS Cable
II Corporation (the "Supervising General Partner") and the Managing General
Partner and the Supervising General Partner are referred to in this Proxy
Statement collectively as the "General Partners." TCI is not an affiliate of
the Partnership or of either of the General Partners.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Limited partners are urged
to sign and return the enclosed proxy as promptly as possible. Proxies cannot
be revoked except by delivery of a proxy dated as of a later date. Officers
and other employees of the Managing General Partner may solicit proxies by
mail, by fax, by telephone or by personal interview. The deadline for the
receipt of proxy votes is October 30, 1998, unless extended, but the vote of
the Partnership's limited partners will be deemed to be concluded on the date,
at least 20 business days from the date the proxy materials are sent to
limited partners, that the Managing General Partner, on behalf of the
Partnership, is in receipt of proxies executed by the holders of a majority of
the limited partnership interests either consenting to or disapproving of the
proposed transaction. The Managing General Partner may extend the deadline for
receipt of proxy votes if a majority of the limited partners fail to express
an opinion on the transaction by October 30, 1998. If the Managing General
Partner extends the deadline for receipt of proxy votes, the limited partners
will be informed by mail of the reason for the extension and the new deadline.
The cost of the proxy solicitation will be paid by the Partnership.
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest for
each $250 of capital contributed to the Partnership.
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As of July 31, 1998, the Partnership had 174,343 limited partnership
interests outstanding, held by approximately 6,676 persons. There is no
established trading market for such interests. To the best of the Managing
General Partner's knowledge, no person or group of persons beneficially own
more than five percent of the limited partnership interests. During the past
several years, Smithtown Bay, LLC and Madison Partnership Liquidity Investors
XIII, LLC, two firms unaffiliated with the Partnership, the General Partners
and each other, have conducted tender offers for interests in the Partnership.
As of July 31, 1998, Smithtown Bay, LLC and its affiliates owned 2,672 limited
partnership interests, or 1.5 percent of the limited partnership interests. As
of such date, Madison Partnership Liquidity Investors XIII, LLC and its
affiliates owned 3,040 limited partnership interests, or 1.7 percent of the
limited partnership interests. Pursuant to the terms of agreements between the
Partnership and the Managing General Partner and such firms, all of the
limited partnership interests held by these firms will be voted in the same
manner as the majority of all limited partners who vote on the sale of the
Aurora System. Thus, for example, if the limited partnership interests voted
in favor of the transaction constitute a majority of all limited partnership
interests voted but not a majority of all limited partnership interests, these
firms will be required to vote their limited partnership interests in favor of
the transaction, and in such event the votes of these firms could be
sufficient to cause the transaction to be approved by a majority of all
limited partnership interests, which is the vote necessary to cause the
transaction to be approved. Neither the General Partners nor the officers and
directors of the General Partners own any limited partnership interests. Only
limited partners of record at the close of business on August 31, 1998 will be
entitled to notice of, and to participate in, the vote.
Upon the consummation of the proposed sale of the Aurora System, the Venture
will repay all of its indebtedness (including $47,000,000 borrowed under its
credit facility, related parties' notes totaling $1,600,000, the subordinated
advance of $1,406,647 to Jones Intercable, Inc. ("Intercable") and capital
lease obligations of $79,949), settle working capital adjustments, deposit
$3,283,500 into an indemnity escrow account and then distribute the
approximate $52,200,000 of net sale proceeds to the Venture's four partners:
the Partnership, IDS/Jones Growth Partners 89-B, Ltd. ("Growth Partners 89-
B"), IDS Management Corporation and Intercable. The Partnership will receive
approximately $34,300,000, or 65.6 percent, of the $52,200,000 distribution,
which the Partnership will distribute to its limited partners of record as of
the closing date of the sale of the Aurora System. Because the distribution to
be made to the limited partners on the sale of the Aurora System will not
exceed 100 percent of the amounts originally contributed to the Partnership by
the limited partners plus the six percent liquidation preference, the General
Partners will not receive general partner distributions on the sale of the
Aurora System. As a result of the Aurora System's sale, the limited partners
of the Partnership will receive a $34,300,000 distribution, or $197 for each
$250 limited partnership interest, or $788 for each $1,000 invested in the
Partnership. Distribution checks will be issued to limited partners' account
registration or payment instruction of record. Once the Partnership has
completed the distribution of its portion of the net proceeds from the sale of
the Aurora System, the limited partners of the Partnership will have received
a total of only $197 for each $250 limited partnership interest, or $788 for
each $1,000 invested in the Partnership (excluding escrowed proceeds). There
have been no prior distributions and it is anticipated that there will be no
further distributions to the limited partners other than from the
Partnership's portion of any amounts remaining after November 15, 1999 in the
indemnity escrow account. Limited partners should note that there are certain
federal income tax consequences of the proposed transaction. See "Federal
Income Tax Consequences."
The Partnership's only asset is its 65.6 percent ownership interest in the
Venture. Growth Partners 89-B has a 24.4 percent ownership interest in the
Venture, IDS Management Corporation has a 5 percent ownership interest in the
Venture, and Intercable has a 5 percent ownership in the Venture. The
Venture's only asset is the Aurora System. After the sale of the Aurora System
and after the termination of the indemnity escrow period on November 15, 1999,
both the Venture and the Partnership will be liquidated and dissolved. The
Partnership will cease to be a public entity subject to the informational
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), when the Partnership is liquidated and dissolved, most likely
before the end of 1999.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one
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vote on the proposal. Because the Partnership's limited partnership agreement
(the "Partnership Agreement") requires that the proposal to sell the Aurora
System be approved by the holders of a majority of the limited partnership
interests, abstentions and non-votes will be treated as votes against the
proposal. A properly executed consent returned to the Managing General Partner
on which a limited partner does not mark a vote will be counted as a vote for
the proposed sale of the Aurora System. Because limited partners do not have
dissenters' or appraisal rights in connection with the proposed sale of the
Aurora System, if the holders of a majority of the limited partnership
interests approve the proposal, all limited partners will receive a
distribution of the net sale proceeds in accordance with the procedures
prescribed by the Partnership Agreement regardless of how or whether they vote
on the proposal.
The Board of Directors of the Managing General Partner approved the proposed
sale of the Aurora System and the Supervising General Partner has given its
consent to the proposed sale of the Aurora System. The General Partners
therefore recommend approval of the transaction by the holders of the
Partnership's limited partnership interests.
The Managing General Partner has also prepared a proxy statement that is
being delivered to the limited partners of Growth Partners 89-B in connection
with their vote to approve the sale of the Aurora System by the Venture. The
closing of the sale of the Aurora System will occur only if the transaction is
approved by the holders of a majority of the limited partnership interests of
each of the Partnership and Growth Partners 89-B. The proxy statement intended
to be delivered to the limited partners of Growth Partners 89-B is on file
with the Securities and Exchange Commission (the "Commission") and can be
obtained either from the Commission, or from the Managing General Partner upon
written request to Elizabeth M. Steele, Secretary, Jones Cable Corporation,
9697 East Mineral Avenue, Englewood, Colorado 80112, (303) 792-3111.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is September 15, 1998.
PARTNERSHIP INFORMATION
THE PARTNERSHIP'S INVESTMENT OBJECTIVES
The Partnership was formed to acquire, develop, operate and, ultimately,
sell cable television systems. The primary objectives of the Partnership have
been to obtain capital appreciation in the value of the Partnership's cable
television properties; to obtain equity build-up through debt reduction; and
to generate tax losses that could be utilized to offset passive income. It was
contemplated from the outset of the Partnership's existence that capital
appreciation in Partnership cable television properties would be converted to
cash by a sale of such properties at such time as the General Partners
determined that the Partnership's investment objectives had substantially been
achieved and after a holding period of five to seven years.
The Partnership was formed in November 1989 as a Colorado limited
partnership in connection with a public offering of its limited partnership
interests. Sales of limited partnership interests in the Partnership commenced
on November 9, 1989 and closed on September 30, 1991. The Partnership raised
gross offering proceeds of $43,585,750. The Partnership invested all of its
$37,592,709 of net offering proceeds in the Venture. The Venture was formed on
May 30, 1990 to pool the financial resources of the Partnership and Growth
Partners 89-B, two public partnerships sponsored by the General Partners with
identical investment objectives and to enable them to acquire a greater number
of and/or larger cable television systems than either of the partnerships
could acquire on their own. The Venture acquired the Aurora System on May 31,
1990.
Based upon the track record of prior public partnerships sponsored by
Intercable that had liquidated or were in the process of liquidating their
assets during the period that limited partnership interests in the Partnership
were being sold, and based upon disclosures made to prospective investors
about the Partnership's investment objectives in the IDS/Jones Growth Partners
II, L.P. Prospectus and in the accompanying sales brochure, investors in the
Partnership reasonably could have anticipated that the Partnership's
investment objectives would be achieved and its assets liquidated after a
holding period of approximately five to seven years. Due to the
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uncertain and then adverse regulatory environment that developed in the mid
1990s for the cable television industry, the resulting decline in the prices
for cable television systems and the subsequent inactivity in the cable
television system marketplace, the Managing General Partner determined that it
would be prudent to delay the sale of the Aurora System until market
conditions improved and, as a result, the Aurora System has been held by the
Venture for over eight years.
The purpose of the sale of the Aurora System, from the Partnership's
perspective, is to convert the Partnership's illiquid investment in the Aurora
System to cash. The sale proceeds will be used to repay all outstanding
indebtedness of the Venture, pay certain fees and expenses of the transaction,
settle working capital adjustments and deposit funds into an indemnity escrow
account, and then the remaining sale proceeds will be distributed to the four
constituent partners of the Venture. The Partnership in turn will distribute
its 65.6 percent portion of the net sale proceeds to the limited partners of
the Partnership of record as of the closing date of the sale of the Aurora
System in accordance with the distribution procedures established by the
Partnership Agreement. The sale of the Aurora System is thus the necessary
final step in the Partnership's accomplishment of its investment objectives
with respect to the Aurora System.
All distributions of the Partnership from the proceeds of the sales of cable
television systems are to be distributed 100 percent to the limited partners
until the limited partners receive amounts equal to 100 percent of their
initial capital contributions plus an amount equal to six percent per annum,
cumulative and noncompounded, on an amount equal to their initial capital
contributions (the "six percent liquidation preference"), and thereafter all
such distributions are to be shared 75 percent to the limited partners and 25
percent to the General Partners. The limited partners of the Partnership will
not receive distributions in an amount equal to 100 percent of their initial
capital contributions plus the six percent liquidation preference and thus the
sharing arrangement between the limited partners and the General Partners will
never be triggered. The limited partners, as a group, will receive $34,300,000
of the Aurora System's net sale proceeds. This distribution will provide the
Partnership's limited partners with an approximate return of $197 for each
$250 limited partnership interest, or $788 for each $1,000 invested in the
Partnership.
VOTING PROVISION OF THE PARTNERSHIP AGREEMENT
Section 2.2(k) of the Partnership Agreement provides that the sale of all or
substantially all of the Partnership's assets is subject to the approval of
the holders of a majority of the Partnership's limited partnership interests.
Because its investment in the Venture is the Partnership's sole asset and
because the Aurora System is the Venture's sole asset, the proposed sale of
the Aurora System to TCI is being submitted for limited partner approval.
PROPOSED SALE OF ASSETS
GENERAL
Pursuant to the terms and conditions of an asset purchase agreement dated as
of July 10, 1998 (the "Asset Purchase Agreement") by and between the Venture
and TCI, the Venture has agreed to sell the Aurora System to TCI for a sales
price of $108,500,000, subject to customary working capital closing
adjustments. TCI is a Delaware corporation headquartered at 5619 DTC Parkway,
Englewood, Colorado 80111. TCI is not an affiliate of the Partnership or of
either of the General Partners. The Venture has been informed that TCI intends
to finance its acquisition of the Aurora System through cash on hand and
borrowings.
THE CLOSING
The closing of the sale of the Aurora System is scheduled to occur during
the fourth quarter of 1998. Because the closing is conditioned upon, among
other things, the approvals of the limited partners of the Partnership and
Growth Partners 89-B, and the receipt of material third party consents
necessary for the transfer of the Aurora System to TCI, there can be no
assurance that the proposed sale will occur. See "Proposed Sale of Assets,
Conditions to Closing" for a description of the material consents necessary
for the transfer of the Aurora System to TCI.
THE AURORA SYSTEM
The assets to be acquired by TCI consist primarily of the tangible and
intangible assets of the Aurora System. The Aurora System was purchased by the
Venture in May 1990 for an aggregate purchase price of
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$89,000,000, consisting of the Venture's reimbursement of Intercable for the
$81,100,000 purchase price that Intercable paid an unaffiliated third party to
acquire the Aurora System for the Venture's account and a $7,900,000
reimbursement of Intercable for the costs incurred by Intercable for capital
expenditures during the period that it held the Aurora System for Venture's
account and the amount of operating and interest expenses in excess of
operating receipts incurred by Intercable from the date of its acquisition of
the Aurora System (October 4, 1989) through May 31, 1990, the date the Aurora
System was transferred to the Venture. The Venture also paid acquisition fees
to affiliates of the General Partners totalling $3,244,000 as compensation to
such affiliates for acting as brokers and financial advisors in connection
with the transaction.
At acquisition in May 1990, the Aurora System served approximately 30,690
basic subscribers, 33,220 basic equivalent subscribers and 28,830 premium
units using 533 miles of cable plant passing approximately 54,730 homes. At
acquisition in May 1990, the Aurora System's basic penetration rate was 56
percent. The Aurora System currently is operated from two headends, with
approximately 90 percent of the system at 450 MHz and the remaining 10 percent
of the system at 550 MHz. The Aurora System now has a total of 752 miles of
cable plant (with 324 miles underground and 428 miles aerial) passing
approximately 79,000 homes. At closing, the Aurora System is expected to serve
approximately 52,000 basic subscribers and 52,600 basic equivalent subscribers
and have approximately 26,000 premium units. The Aurora System's basic
penetration rate at closing is expected to be 65 percent. The Aurora System
had annual revenues in 1997 of $19,714,000 and annual cash flow of $8,879,000.
The Aurora System is projected to have annual revenues in 1998 of $21,792,000
and annual cash flow of $9,797,000. The $108,500,000 sales price therefore
represents 12.2 times 1997 cash flow and 11.1 times the projected 1998 cash
flow, and it also represents a sales price of $2,057 per subscriber. The most
recent independent appraisal of the Aurora System's fair market value, which
was completed at the direction of the Managing General Partner in July 1997,
valued the Aurora System at $86,135,000. The proposed sales price of
$108,500,000 therefore represents a significant premium over this most recent
independent fair market value appraisal.
TCI will purchase all of the tangible assets of the Aurora System that are
leased or owned by the Venture and used in the operation of the system,
including the system's real estate, vehicles, headend equipment, underground
and aboveground cable distribution systems, towers, earth satellite receive
stations and furniture and fixtures. TCI also will acquire certain of the
intangible assets of the system, including all of the franchises, leases,
agreements, permits, licenses and other contracts and contract rights
necessary for the operation of the system. Also included in the sale are the
subscriber accounts receivable of the system and all of the system's records,
files, schematics, maps, reports, promotional graphics, marketing materials
and reports filed with federal, state and local regulatory agencies. The
foregoing notwithstanding, certain of the Aurora System's assets will be
retained by the Venture, including cash or cash equivalents on hand and in
banks, insurance policies, and any federal, state or local income or other tax
refunds to which the Venture may be entitled.
SALES PRICE
Subject to the closing adjustments described below, the sales price for the
Aurora System is $108,500,000. The Asset Purchase Agreement provides for
closing adjustments that may increase or reduce the sales price by a non-
material amount.
Adjustments on a pro rata basis as of the closing date will be made for all
prepaid expenses (to the extent the full benefit thereof will be realized by
TCI within twelve months after the closing date), accrued expenses (including
real and personal property taxes and the economic value of all accrued
vacation time permitted by TCI's policies to be taken after the closing date
by the employees of the Aurora System hired by TCI), prepaid income,
subscriber prepayments and accounts receivable related to the Aurora System,
all as determined in accordance with GAAP consistently applied and to reflect
the principle that all expenses and income attributable to the Aurora System
for the period prior to the closing date are for the account of the Venture
and all expenses and income attributable to the Aurora System for the period
on and after the closing date are for the account of TCI.
The Venture will receive no credit for any accounts receivable resulting
from (a) cable service sales any portion of which is 60 days or more past due
as of the closing date if the past due amount is greater than $5.00, (b)
subscribers whose accounts are inactive or whose services are pending
disconnection for any reason as of the
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closing date or (c) advertising sales any portion of which is 120 days or more
past due as of the closing date. TCI's account will be credited for the amount
of all advance payments to, or funds of third parties on deposit with, the
Venture as of the closing date, relating to the Aurora System, including
advance payments and deposits by subscribers served by the Aurora System for
converters, encoders, decoders, cable television service and related sales,
and the liability therefore will be assumed by TCI.
If the number of basic equivalent subscribers delivered to TCI at closing is
less than 52,750, the sales price will be reduced by an amount equal to $2,056
multiplied by the number by which the number of basic equivalent subscribers
is less than 52,750. The Venture will not have an obligation to close the sale
if the sales price would be reduced pursuant to this adjustment by an amount
greater than $5,654,000. TCI will not have an obligation to close if the
number of basic equivalent subscribers at closing is less than 50,000.
The Managing General Partner believes that these closing adjustments will
neither increase nor decrease the sales price by a material amount. Please see
the Notes to Unaudited Pro Forma Consolidated Financial Statements for a
detailed accounting of the Managing General Partner's current best estimate of
the anticipated closing adjustments.
CONDITIONS TO THE CLOSING
The obligations of both the Venture and TCI to consummate the closing are
subject to the satisfaction or waiver of the following conditions: (a) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") relating to the transactions contemplated by the
Asset Purchase Agreement shall have expired or been terminated; (b) no action,
suit or proceeding is pending or threatened by or before any governmental
authority and no legal requirement has been enacted, promulgated or issued or
become or deemed applicable to any of the transactions contemplated by the
Asset Purchase Agreement by any governmental authority that would (i) prohibit
TCI's ownership or operation of all or a material portion of the Aurora
System, its business or its assets, (ii) compel TCI to dispose of or hold
separate all or a material portion of the Aurora System, its business or its
assets as a result of any of the transactions contemplated by the Asset
Purchase Agreement, (iii) if determined adversely to TCI's interest,
materially impair the ability of TCI to realize the benefits of the
transactions contemplated by the Asset Purchase Agreement or have a material
adverse effect on the right of TCI to exercise full rights of ownership of the
Aurora System or (iv) prevent or make illegal the consummation of any of the
transactions contemplated by the Asset Purchase Agreement; and (c) the holders
of a majority of the limited partnership interests of both the Partnership and
Growth Partners 89-B shall have voted to approve the Venture's sale of the
Aurora System to TCI.
The obligation of TCI to consummate the closing is further subject to the
satisfaction or waiver of other customary conditions, including the following
conditions: (a) all of the representations and warranties of the Venture in
the Asset Purchase Agreement and any related document are, if specifically
qualified by materiality, true and correct in all respects and, if not so
qualified, are true and correct in all material respects, in each case on and
as of the closing date with the same effect as if made at and as of the
closing date, except for changes permitted or contemplated by the Asset
Purchase Agreement; (b) the Venture has performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants and conditions in the Asset Purchase Agreement and any related
document to be performed or complied with by the Venture at or before the
closing; (c) the Venture has delivered to TCI a bill of sale, a special
warranty deed related to the Aurora System's real estate, an assignment and
assumption of contracts, assignments of leases, a guarantee signed by
Intercable, motor vehicle title certificates and such other transfer
instruments as TCI may deem necessary or advisable to transfer the assets of
the Aurora System to TCI and to perfect TCI's rights in such assets, a legal
opinion of the Managing General Partner's general counsel, evidence
satisfactory to TCI that all encumbrances affecting any of the Aurora System's
assets have been terminated and released, title insurance commitments, the
indemnity escrow agreement and such other closing agreements as TCI may
reasonably request in connection with the transactions contemplated by the
Asset Purchase Agreement; (d) the Venture has delivered to TCI evidence, in
form and substance satisfactory to TCI, that all of the required consents to
the transaction, including without limitation, all consents of franchising
authorities, have been obtained or given (or deemed to have been given) and
are in full force and effect; (e) the environmental reports prepared by the
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Venture and delivered to TCI and any other environmental audits or assessments
conducted with respect to the Aurora System's assets do not indicate the
existence of any conditions that could reasonably be expected to give rise to
any material risk of liability; (f) there has not been any material adverse
change in the business or the assets of the Aurora System since the date of
the Asset Purchase Agreement other than any material adverse change caused by
or arising from other multiple channel distribution services or any material
adverse change affecting the United States cable television industry as a
whole, including any change arising from legislation, litigation, rulemaking,
regulation or competition; (g) as of the closing date the Aurora System has no
fewer than 50,000 basic equivalent subscribers; (h) cable television
franchises covering at least 85 percent of the basic equivalent subscribers of
the Aurora System have a term expiring no earlier than March 31, 2001; and (i)
the closing of TCI's sale of certain systems in a separate transaction to
permit TCI to accomplish a like-kind exchange under Section 1031 of the
Internal Revenue Code shall have occurred; provided, however, if this last
condition shall not have occurred on or before the day that is nine months
after the date of the Asset Purchase Agreement, this condition shall no longer
be a condition to the obligations of TCI to consummate the transactions
contemplated by the Asset Purchase Agreement. To the extent that the Venture
must obtain an extension or renewal of any cable television franchise to meet
the condition that cable television franchises covering at least 85 percent of
the basic equivalent subscribers of the Aurora System have a term expiring no
earlier than March 31, 2001, any such extension or renewal shall be on terms
and conditions reasonably satisfactory to TCI and the Venture evaluated in the
context of extensions or renewals of similarly situated franchises in the
greater Chicago metropolitan area that have been extended or renewed (or
granted) for a comparable period of time or duration, and the Venture and TCI
will allocate the costs associated with obtaining such extensions or renewals
between them.
The obligation of the Venture to consummate the closing is further subject
to the satisfaction or waiver of other customary conditions, including the
following conditions: (a) all of the representations and warranties of TCI
contained in the Asset Purchase Agreement and any related document are, if
specifically qualified by materiality, true and correct in all respects and,
if not so qualified, are true and correct in all material respects, in each
case on and as of the closing date with the same effect as if made on and as
of the closing date, except for changes permitted or contemplated by the Asset
Purchase Agreement; (b) TCI has performed in all material respects all
obligations and agreements and has complied in all material respects with all
covenants and conditions in the Asset Purchase Agreement and any related
document to be performed or complied with by TCI at or before the closing; (c)
TCI has delivered to the Venture the purchase price for the Aurora System, a
bill of sale, an assignment and assumption of contracts, a legal opinion of
TCI's counsel, the indemnity escrow agreement and such other documents as the
Venture may reasonably request in connection with the transactions
contemplated by the Asset Purchase Agreement; and (d) as of the closing date,
either the Aurora System shall have no fewer than 50,000 basic equivalent
subscribers or TCI shall agree to limit the sales price reduction due to a
basic equivalent subscriber shortfall to $5,654,000.
GUARANTEE AND COVENANTS TO TCI
In order to induce TCI to enter into the Asset Purchase Agreement,
Intercable will execute and deliver to TCI a guarantee by which Intercable
will guarantee all of the liabilities and obligations of the Venture to TCI
under the Asset Purchase Agreement. TCI informed Intercable that it would be
unwilling to enter into the Asset Purchase Agreement without having received
Intercable's guarantee. Intercable received no payment from either the Venture
or the Partnership in return for giving this guarantee.
The parties have agreed that none of the Venture, the Partnership, the
General Partners or Intercable, nor any of their respective affiliates, nor
any of their respective representatives or agents shall, directly or
indirectly, solicit or initiate discussions or negotiations with or provide
any information to, any entity concerning the sale of the Aurora System so
long as the Asset Purchase Agreement is in effect. The Managing General
Partner agreed with TCI that the Managing General Partner would prepare and,
as soon as practicable, and in any event within 30 days after the date of the
Asset Purchase Agreement, file with the Securities and Exchange Commission
preliminary proxy statements comprising preliminary proxy materials of the
Partnership and Growth
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Partners 89-B under the Exchange Act with respect to the transactions
contemplated by the Asset Purchase Agreement.
In addition, the Venture has agreed with TCI that the Venture will perform
certain customary covenants, including the following covenants: (a) the
Venture has agreed to give TCI and its counsel, accountants and other
representatives full access during normal business hours upon reasonable
notice to all of the premises and books and records of the business and assets
of the Aurora System and to the Aurora System's personnel and the Venture has
agreed to furnish to TCI and its representatives all documents, financial
information and other information regarding the business and assets of the
Aurora System as TCI may reasonably request; (b) the Venture has agreed to
conduct the business and operations of the Aurora System in the usual, regular
and ordinary course consistent with past practices and in material compliance
with the system's 1998 operating and capital budgets; (c) the Venture has
agreed to maintain the assets of the Aurora System in good repair, order and
condition and to maintain equipment and inventory at historical levels
consistent with past practices (and will have at least a 30-day supply of
inventory on hand for the Aurora System at closing) and to maintain in full
force and effect insurance policies with respect to the Aurora System in such
amounts and with respect to such risks as is customarily maintained by
operators of cable television systems of the size and geographic location as
the Aurora System and to continue to implement its procedures for
disconnection and discontinuance of service to subscribers whose accounts are
delinquent in accordance with those procedures in effect on the date of the
Asset Purchase Agreement; (d) the Venture has agreed that without the prior
approval of TCI, the Venture will not (i) change the rates charged for its
cable television services or add, delete, re-tier or repackage any programming
services except to the extent required by law, (ii) make any cost of service
elections with respect to the Aurora System, (iii) sell, transfer or assign
any portion of the assets other than sales in the ordinary course of business
or permit the creation of any encumbrance on any asset of the system other
than an encumbrance that will be released at or prior to closing, (iv) modify
in any material respect, terminate, suspend or abrogate any governmental
permits or any other contract or agreement with respect to the Aurora System,
(v) enter into any contract or commitment or incur any indebtedness or other
liability or obligation of any kind relating to the Aurora System involving an
expenditure in excess of $50,000 under a single contract or commitment, or
$100,000 in the aggregate under all such contracts and commitments, other than
contracts or commitments that are cancelable on 30 days' notice or less
without penalty, (vi) take or omit to take any action that would result in any
of its representations or warranties in the Asset Purchase Agreement or in any
related document not being true and correct when made or as of the closing
date, (vii) engage in any marketing, subscriber installation or collection
practices that are inconsistent with past practices other than marketing
and/or installation practices that are reasonably necessary to match offers
being made by any competitor of the Aurora System or (viii) enter into any
agreement with or commitment to any competitive access providers with respect
to the Aurora System; (e) the Venture has agreed with TCI that it will duly
and timely file a valid notice of renewal with the appropriate governmental
authorities with respect to all cable television franchises of the Aurora
System that will expire within 36 months after any date between the date of
the Asset Purchase Agreement and the closing date; (f) the Venture has agreed
to pay the remaining balances on any leases for vehicles or capital leases on
equipment to be included in the equipment to be delivered at closing and the
Venture has agreed to deliver title to such vehicles and equipment free and
clear of all encumbrances to TCI at the closing; (g) the Venture has agreed
that it will use commercially reasonable efforts to obtain in writing as
promptly as possible and at its expense, all consents, authorizations and
approvals required to be obtained by the Venture in connection with the sale
of the Aurora System to TCI, in form and substance reasonably satisfactory to
TCI, and the Venture has agreed to deliver to TCI copies of such consents,
authorizations and approvals promptly after they are obtained by the Venture;
(h) the Venture has agreed to work with TCI to deliver, no later than 30 days
after the date of the Asset Purchase Agreement, to the appropriate
governmental authority requests for the necessary consents to transfer the
Aurora System's governmental permits to operate the cable television system;
(i) the Venture has agreed that it will use commercially reasonable efforts
and TCI has agreed that it will cooperate with and assist the Venture in all
reasonable respects (including attendance at meetings and hearings before
local franchising authorities) to have cable television franchises covering at
least 85 percent of the basic equivalent subscribers of the Aurora System
extended or renewed so that they expire no earlier than March 31, 2001, on
terms and conditions reasonably satisfactory to TCI and the Venture, which
terms and conditions shall be evaluated by TCI and the Venture in
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the context of extensions and renewals of similarly situated franchises in the
greater Chicago metropolitan area that have been extended or renewed (or
granted) for a comparable period of time or duration and the Venture has
agreed to bear all costs required to remedy any item of noncompliance with the
terms of any franchise or to meet current obligations under the terms of any
franchise in connection with obtaining such extension or renewal and TCI has
agreed to bear all costs associated with commitments made for capital
expenditures to be made after the closing date related to obtaining an
extension or renewal; (j) the Venture has agreed that, within 60 days after
the date of the Asset Purchase Agreement, it will, at its expense, obtain and
deliver to TCI for each parcel of real property owned by the Venture, an
environmental site assessment report prepared by a nationally known
environmental engineering firm reasonably satisfactory to TCI; (k) the Venture
and TCI have agreed that they will cooperate with each other in order that the
transactions contemplated by the Asset Purchase Agreement may be accomplished
as part of a deferred exchange pursuant to Section 1031 of the Internal
Revenue Code and applicable Treasury Regulations; and (l) the Venture has
agreed that prior to closing it will either construct and activate the
institutional network required by the Aurora franchise, or reach an agreement
with the City of Aurora and TCI satisfactory to TCI with respect to the
construction and activation of the institutional network required by the
Aurora franchise, or reach an agreement with the City of Aurora to remove such
requirement from the Aurora franchise and pay all costs associated with such
franchise modification.
INDEMNITY ESCROW
From the closing date until November 15, 1999, $3,283,500 of the sale
proceeds will remain in escrow as security for the Venture's agreement to
indemnify TCI under the Asset Purchase Agreement. Pursuant to the terms of the
Asset Purchase Agreement, the Venture has agreed to indemnify and hold TCI
harmless from all losses resulting from or arising out of (i) any breach of
any representation or warranty made by the Venture in the Asset Purchase
Agreement or in the related documents delivered by the Venture to TCI in
connection with the closing of the sale of the Aurora System, (ii) any breach
of any covenant, agreement or obligation of the Venture contained in the Asset
Purchase Agreement or in any of the related documents delivered by the Venture
to TCI in connection with the closing of the sale of the Aurora System, (iii)
any act or omission of the Venture with respect to, or any event or
circumstance related to, the ownership or operation of the Aurora System or
the conduct of its business, which act, omission, event or circumstance
occurred or existed prior to or at the closing date, without regard to whether
a claim with respect to such matter is asserted before or after the closing
date, (iv) any liability or obligation relating to the Aurora System not
specifically assumed by TCI, (v) any title defect that the Venture fails to
eliminate as an exception from the title insurance commitment required to be
provided to TCI at closing, (vi) any claim that the transactions contemplated
by the Asset Purchase Agreement violate the Workers Adjustment Retraining and
Notification Act or any similar state or local law or any bulk transfer or
fraudulent conveyance laws of any jurisdiction, (vii) the presence,
generation, removal or transportation of a hazardous substance on or from any
of the real property relating to the Aurora System, including the costs of
removal or cleanup of such hazardous substance and other compliance with the
provisions of any environmental laws (whether before or after closing) or
(viii) any rate refund ordered to be made by the Aurora System by any
governmental authority for periods prior to the closing date. In addition, the
Venture has agreed to indemnify TCI from and against all claims, actions,
suits, proceedings, demands, judgments, assessments, fines, interest,
penalties, costs and expenses (including settlement costs and reasonable
legal, accounting, experts and other fees, costs and expenses) incident or
relating to or resulting from any of the foregoing matters.
The Venture's primary exposure, if any, will arise from the representations
and warranties made about the Aurora System in the Asset Purchase Agreement.
The Venture will not be liable for any claim for a breach of a representation
or warranty unless and until the aggregate amount of all claims is at least
$250,000. TCI will have the right to make claims against the indemnity escrow
account and TCI must notify the Venture of such claims. If the Venture objects
to the payment of any claims by the escrow agent, and if TCI and the Venture
are unable to agree on how the escrowed funds should be distributed, the
escrow agent will be authorized to submit the dispute to arbitration.
Any amounts remaining from this indemnity escrow account at the end of the
escrow period and not subject to a claim by TCI will be returned to the
Venture and distributed to the partners of the Venture. If the entire
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$3,283,500 escrow amount ultimately is distributed to Venture's partners, of
which there can be no assurance, the Partnership would receive $2,153,976, or
65.6 percent, of this amount, all of which would be distributed to the limited
partners in the fourth quarter of 1999. The limited partners thus would
receive $12.50 for each $250 limited partnership interest, or $50 for each
$1,000 invested in the Partnership, from this portion of the sale proceeds.
The Partnership will continue in existence at least until any amounts
remaining from the indemnity escrow account have been distributed. If any
disputes with respect to indemnification arise, the Partnership would not be
dissolved until such disputes were resolved, which could result in the
Partnership continuing in existence beyond 1999.
REASONS FOR THE TIMING OF THE SALE
The Managing General Partner, through The Jones Group, Ltd., an affiliate of
the Managing General Partner, first marketed the Aurora System for sale in
1996. The Jones Group, Ltd. prepared information books on the Aurora System in
June 1996 and delivered them to six unaffiliated cable television system
operators that the Managing General Partner and The Jones Group, Ltd. deemed
to be the most likely potential buyers of the Aurora System. One of the
prospective purchasers was TCI. The Jones Group, Ltd. communicated to each of
the recipients of the information books that due diligence visits could be
scheduled in August or September 1996 and that bids for the Aurora System
would be accepted and were due by October 15, 1996. Of the prospective
purchasers, only TCI made a due diligence visit to the Aurora System, which
visit occurred in August 1996. The October 15, 1996 deadline passed, however,
without a bid from any of the parties, including TCI.
During 1996, Ameritech, the regional telephone service provider in Illinois
and neighboring states, began construction of cable television systems in
certain communities in the vicinity of the Aurora System, including in certain
communities with cable television systems managed by affiliates of the
Managing General Partner. The threat of competition from Ameritech in the
communities served by the Aurora System was a major factor in the lack of
interest in the Aurora System by other cable television system operators.
During the remainder of 1996 and throughout 1997, The Jones Group, Ltd.
continued to attempt to stimulate potential buyers' interest in the Aurora
System. During most of this period, however, the cable television industry was
facing developing competition from direct broadcast satellite providers, and
Wall Street investors generally were bearish on the industry. The continuing
threat of competition from Ameritech made the market for cable television
properties in the Chicago metropolitan area very soft. Throughout this period,
Ameritech continued to acquire cable franchises in suburban Chicago
communities and it began constructing 750 MHz cable systems in certain of
those communities.
In November 1997, The Jones Group, Ltd. began a second serious dialogue with
TCI about the Aurora System. Through the end of 1997 and the first quarter of
1998, The Jones Group, Ltd. provided TCI with additional information about the
Aurora System, including information specifically requested by TCI to enable
it to evaluate the Aurora System. By that time, TCI had agreed in principle to
acquire the other major cable television systems in the Chicago area that it
did not already own, making the Chicago area a more attractive potential
acquisition market for TCI and diminishing the onus of the potential Ameritech
competition. In February 1998, The Jones Group, Ltd. provided information
about the Aurora System to three other potential purchasers of the system.
While these three companies indicated an interest in an investment in the
suburban Chicago cable system market, they expressed serious reservations
about acquiring the Aurora System due to the potential Ameritech competition.
One of these three potential purchasers made a verbal offer to Intercable to
purchase all of the Chicago-area systems operated by Intercable for
$400,000,000. Because this bidder did not make an offer for such Chicago-area
systems individually, the Managing General Partner does not know what this
potential purchaser would have offered for the Aurora System itself. Because
this offer was lower than the cumulative offer being negotiated with TCI, The
Jones Group, Ltd. did not pursue it.
TCI made its initial formal bid for all of the Chicago-area systems managed
by Intercable on March 3, 1998. TCI offered to purchase the Aurora System for
$100,000,000 conditioned upon the Aurora System having 52,000 basic equivalent
subscribers at closing. This offer equated to a sales price of $1,923 per
subscriber and represented 11.3 times 1997 cash flow and 10.2 times 1998
budgeted cash flow. The Jones Group, Ltd. presented this offer to the Managing
General Partner on March 11, 1998. While the Managing General Partner
concluded
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that this offer was not unreasonable, it instructed The Jones Group, Ltd. to
attempt to negotiate a better price for the Aurora System. After a series of
further negotiations, TCI made a revised offer for the Aurora System on April
8, 1998, increasing its bid to $108,500,000 conditioned on the Aurora System
having 52,750 basic equivalent subscribers at closing. The revised offer for
the Aurora System represented a sales price of $2,057 per subscriber and
represented 12.2 times 1997 cash flow and 11.1 times 1998 budgeted cash flow.
The Managing General Partner deemed this revised offer sufficient and fair,
particularly in light of the fact that the most recent independent fair market
value appraisal of the Aurora System undertaken in July 1997 valued the Aurora
System at only $86,135,000. The Managing General Partner accepted the revised
offer on the Venture's behalf on April 10, 1998.
The Partnership has a finite legal existence of 17 years, almost nine of
which have passed. It was not intended or expected, however, that the
Partnership would hold its cable systems for as long as 17 years. Although it
was not possible at the outset of the Partnership to determine precisely how
quickly the investment objectives with respect to any particular system would
be achieved, investors were informed that past experience with prior
partnerships had shown that five to seven years was the average length of time
from the acquisition of a cable system to its sale. Investors in the
Partnership also were able to examine the track record of prior partnerships
because such track record was set forth in the prospectus delivered in
connection with the Partnership's initial public offering. At the time of the
formation of the Partnership, the track record showed that prior partnerships
had rarely held their cable systems for any longer than six years.
When investing in the Partnership, by virtue of the provisions of the
Partnership Agreement, the limited partners vested in the Managing General
Partner the right and the responsibility to determine when the Partnership's
investment objectives had been achieved. The Aurora System was acquired by the
Venture because, in the opinion of the General Partners at the time of the
Aurora System's acquisition, it had the potential for capital appreciation
within a reasonable period of time. Due to the developing threat of
competition from Ameritech in the suburban Chicago area, the rate re-
regulation of the cable television industry during the early 1990s and the
general decline in the values of cable television systems since the Aurora
System was acquired in May 1990, the Aurora System has not significantly
appreciated in value during the holding period. The Managing General Partner
determined nevertheless that now rather than later was the appropriate time
for the Venture to sell the Aurora System. The Managing General Partner used
no specific benchmarks or measurement tools in determining that now was the
time for the Venture to sell the Aurora System. The Managing General Partner
conducted a subjective evaluation of a variety of factors including the length
of the holding period and the prospects for future growth as compared to the
potential risks of a decline in the size and/or value of the system.
The Managing General Partner generally considered the benefits to the
limited partners that might be derived by holding the Aurora System for an
additional period of time. On the one hand, the Managing General Partner
assumed that the Aurora System probably would continue to appreciate in value
and that as a result the Aurora System might be able to be sold for a greater
sales price in the future. The Managing General Partner weighed these
assumptions against the potential risks to investors from a longer holding
period, i.e., the risk that regulatory, technology and/or competitive
developments could cause the Aurora System to decline in value, which would
result in a lesser sales price in the future, and the risk that, if the offer
from TCI were not accepted, no other potential buyer of the Aurora System
could be found or no other offer would be at such a fair price. A longer
holding period would expose investors to the risk that competition from direct
broadcast satellite companies, telephone companies, especially Ameritech,
and/or neighboring cable companies could diminish the number of subscribers to
the Aurora System's basic and premium services, thereby decreasing the value
of the Aurora System. A longer holding period also would expose investors to
the risk that changes in the regulations promulgated by the governmental
agencies that oversee cable operations could make cable systems a less
desirable investment, thereby decreasing the value of the Aurora System.
Weighing all of these factors, the Managing General Partner concluded that now
rather than later was the time to sell the Aurora System.
RECOMMENDATION OF THE MANAGING GENERAL PARTNER AND FAIRNESS OF THE PROPOSED
SALE OF ASSETS
The Managing General Partner believes that the proposed sale of the Aurora
System and the distribution of the net proceeds therefrom are fair to all
partners of the Partnership, and it recommends that the limited partners
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approve the transaction. In determining the fairness of the proposed
transaction, the Managing General Partner considered each of the following
factors, all of which had a positive effect on its fairness determination:
(i) The limited partnership interests are at present illiquid and the
cash to be distributed to limited partners as a result of the proposed sale
of the Aurora System will provide limited partners with liquidity and with
the means to realize the appreciation in the value of the Aurora System;
(ii) The sales price represents the fair market value of the Aurora
System because the sales price was determined in an arm's-length
negotiation between the Managing General Partner, representing the Venture,
and TCI;
(iii) The Venture has held the Aurora System for eight years, a holding
period beyond that originally anticipated;
(iv) The conditions and prospects of the cable television industry in
which the Venture is engaged, including the developing threat of
competition from DBS services and telephone companies, especially
Ameritech, and the working capital and other financial needs of the Venture
if it were to continue to operate and upgrade the Aurora System, portions
of which may need to be rebuilt as a condition to the renewal of certain of
the system's cable franchises; and
(v) The terms and conditions of the Asset Purchase Agreement by and
between the Venture and TCI, including the fact that the sales price will
be paid in cash and the fact that TCI's obligation to close is not
contingent upon its ability to obtain financing.
The Managing General Partner negotiated the terms of the Asset Purchase
Agreement and the sales price and, based on its general knowledge of cable
television system transactions undertaken by cable television companies, the
Managing General Partner has concluded that the sales price and other
transaction terms were fair and were within industry norms for comparable
transactions.
CONSENT OF THE SUPERVISING GENERAL PARTNER
Pursuant to Section 2.3(c)(ii) of the Partnership Agreement, the Venture
could not proceed with the sale of the Aurora System unless the Supervising
General Partner consents to the transaction. After an independent review of
all of the terms and conditions of the proposed sale of the Aurora System to
TCI, the Supervising General Partner consented to the transaction in July
1998.
CERTAIN EFFECTS OF THE SALE
Upon the consummation of the proposed sale of the Aurora System, the
proceeds of the sale will be used to repay all indebtedness of the Venture
(including $47,000,000 borrowed under its credit facility, related parties'
notes totaling $1,600,000, the subordinated advance of $1,406,647 to
Intercable and capital lease obligations of $79,949), settle working capital
adjustments and deposit $3,283,500 into an indemnity escrow account, and then
the Venture will distribute the approximate $52,200,000 net sale proceeds to
the Venture's four partners: the Partnership, Growth Partners 89-B, IDS
Management Corporation and Intercable. The Partnership will receive
approximately $34,300,000, or 65.6 percent, of the $52,200,000 distribution,
which the Partnership will distribute to its limited partners of record as of
the closing date of the sale of the Aurora System. Because the distribution to
be made to the limited partners on the sale of the Aurora System will not
exceed 100 percent of the amounts originally contributed to the Partnership by
the limited partners plus the six percent liquidation preference, the General
Partners will not receive general partner distributions on the sale of the
Aurora System. As a result of this distribution, the limited partners of the
Partnership will receive $34,300,000 of the net proceeds from the sale of the
Aurora System. The limited partners will be subject to federal income tax on
the income resulting from the sale of the Aurora System. See the detailed
information below under the caption "Federal Income Tax Consequences."
After the sale of the Aurora System and the distribution of the net proceeds
therefrom and after the termination of the indemnity escrow period on November
15, 1999, the Partnership will be liquidated and
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dissolved, most likely in 1999. Neither Colorado law nor the Partnership
Agreement afford dissenters' or appraisal rights to limited partners in
connection with the proposed sale of the Aurora System. If the proposed
transaction is approved by the holders of a majority of limited partnership
interests, all limited partners will receive a distribution in accordance with
the procedures prescribed by the Partnership Agreement regardless of how or
whether they vote on the proposal. It is anticipated that if the proposed
transaction is not consummated, the Managing General Partner's current
management team will continue to manage the Aurora System on behalf of the
Venture until such time as the Aurora System can be sold.
All distributions of the Partnership from the proceeds of the sale of the
Aurora System will be made to the Partnership's limited partners of record as
of the closing date of the sale of the Aurora System. This includes the
distribution of the Partnership's portion of the net sale proceeds to be made
shortly following the closing of the sale and the distribution of the amounts
remaining, if any, from the indemnity escrow account to be made late in 1999.
Because transferees of limited partnership interests following the closing
date of the sale of the Aurora System would not be entitled to any
distributions from the Partnership, a transfer of limited partnership
interests following the closing date of the sale of the Aurora System would
have no economic value. The Managing General Partner therefore has determined
that, pursuant to the authority granted to it by Section 3.5 of the
Partnership Agreement, it will not approve any transfers of limited
partnership interests following the closing of the sale of the Aurora System.
Sales of limited partnership interests pursuant to limited tender offers, in
the secondary market or otherwise will not be possible following the closing
of the sale of the Aurora System.
FEDERAL INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transaction is to inform the limited partners of the Partnership
of the federal income tax consequences to the Partnership and to its partners
arising from the sale of the Aurora System. The tax information included
herein was prepared by the tax department of the Managing General Partner. The
tax information is taken from tax data compiled by the Managing General
Partner in its role as the Partnership's tax administrator and is not based
upon the advice or formal opinion of counsel. The tax discussion that follows
is merely intended to inform the limited partners of factual information and
should not be considered tax advice.
PROJECTED 1998 TAX RESULTS
By the expected date of the Aurora System's sale, the limited partners will
have been allocated ordinary taxable losses of approximately $52,052,199
($1,194 per $1,000 invested). Except for 1990, when a 10 percent deduction of
current allocated losses was allowed, application of the passive activity loss
rules has fully limited the deduction of Partnership losses except against
passive income from other investments. Assuming that limited partners have not
utilized their previously limited Partnership passive losses, the Managing
General Partner estimates that passive loss carryforwards of $51,551,471
($1,183 per $1,000 invested) will be available to fully offset the current
year allocated income from the sale of the Aurora System.
The sale of the Aurora System will result in a gain for federal income tax
purposes. The amount of this gain allocated to limited partners is
approximately $51,311,640 ($1,177 per $1,000 invested). The Managing General
Partner estimates that all of this gain will be treated as ordinary income.
This ordinary income characterization results from the recapture of
depreciation on personal property under Internal Revenue Code ("IRC") Section
1245. The Managing General Partner does not estimate that any of the gain will
be treated as long term capital gain under IRC Section 1231. The reported gain
should be completely offset by the deduction of passive loss carryforwards of
the limited partners. If prior year passive losses were deducted by limited
partners, their tax results will vary accordingly.
Assuming the 31 percent tax rate applies to ordinary income and the limited
partners have the maximum amount of passive loss carryforwards, a limited
partner will not be subject to federal income taxes as a result of the sale of
the Aurora System. The taxable income will be reported in the year of the
closing of the sale, which is expected to be 1998.
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<PAGE>
FEDERAL TAX WITHHOLDING ON FOREIGN LIMITED PARTNERS
Limited partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a withholding tax on their share of the
Partnership's income from the sale of the Aurora System without consideration
of loss carryforwards. The withholding rates are 39.6 percent for individual
partners and 35 percent for corporate partners. The tax withheld will be
remitted to the Internal Revenue Service and the foreign person will receive a
credit on their U.S. tax return for the amount of the tax withheld by the
Partnership. The tax withheld will be treated as a distribution to the limited
partner.
SECONDARY MARKET PURCHASERS
Limited partners that have recently acquired their partnership interests in
the limited partnership secondary market or through tender offers will have
allocable income from the Aurora System sale in the amounts reported above.
Because the Partnership does not have an IRC Section 754 election in effect,
the purchase of a limited partnership interest in the Partnership places the
new investor in the same position as the limited partner from whom the
interest was purchased.
Newer investors in the Partnership will not have their net tax basis in
their partnership interests reflected on their annual Schedule K-1. Such
limited partners must track their tax basis by adjusting their original cost
by allocable income or loss and partnership distributions. Their adjusted tax
basis will be deductible as a long term capital loss under IRC Section 731 in
a manner similar to the Partnership syndication costs discussed below.
FEDERAL REPORTING BY TAX EXEMPT ENTITIES
The 1998 Aurora System sale will generate Unrelated Business Taxable Income
(UBTI) to tax exempt entities, which will require the filing of Form 990-T.
Although many trust administrators complete the required tax returns,
responsibility for completion of the Form 990-T ultimately rests with the
beneficiaries of trusts, IRAs and other tax exempt entities. Because this is
an area in which there is a variance of policy among trust administrators,
each limited partner who is a beneficiary is advised to confirm with his or
her trust administrator how this filing requirement will be fulfilled.
The Managing General Partner has learned that some trust administrators will
file a Form 990-T without consideration of prior year loss carryforwards. If
your plan administrator employs this methodology, your tax exempt plan will be
subject to significant tax liabilities that would not be incurred if prior
year losses were reported. Each limited partner who is a beneficiary of a tax
exempt entity is advised to inquire about the reporting methodology employed
by his or her trust administrator if the trust administrator is filing the
Form 990-T for 1998.
PROJECTED 1999 TAX CONSEQUENCES
As previously reported, a portion of the proceeds from the sale of the
Aurora System will remain in an indemnity escrow account from the closing date
until November 15, 1999. At that time, the Partnership's portion of the escrow
account will be distributed to the limited partners in liquidation of the
Partnership. The final capital account balance reported on the 1999 Schedule
K-1 of each limited partner is anticipated to reflect a positive amount
approximating $195 per $1,000 invested. This balance represents partnership
syndication costs that may be deducted on the limited partners' tax return as
a long term capital loss under IRC Section 731. The deduction of long term
capital losses may be limited depending on each partners' specific income tax
situation.
14
<PAGE>
CERTAIN INFORMATION ABOUT THE PARTNERSHIP, THE GENERAL
PARTNERS AND THE PURCHASER OF THE SYSTEM
The principal executive offices of the Partnership and the Managing General
Partner are located at 9697 East Mineral Avenue, Englewood, Colorado 80112,
and their telephone number is (303) 792-3111. The principal executive offices
of the Supervising General Partner are located at IDS Tower 10, 733 Marquette
Avenue, Minneapolis, Minnesota 55402, and its telephone number is (612) 671-
2927. The principal executive offices of TCI are located at 5619 DTC Parkway,
Englewood, Colorado 80111.
The limited partnership interests of the Partnership are registered pursuant
to Section 12(g) of the Exchange Act. As such, the Partnership currently is
subject to the informational reporting requirements of the Exchange Act and,
in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Securities and Exchange Commission
relating to its business, financial condition and other matters. Reports and
other information filed by the Partnership can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the following regional offices
of the Commission: 7 World Trade Center, Suite 1300, New York, New York 10048
and Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The SEC also maintains a World Wide Web site on the Internet
that contains reports, proxy statements and other information of registrants
(including the Partnership) that file electronically with the SEC at
http://www.sec.gov. After the net proceeds from the sale of the Aurora System,
including amounts to be held in an indemnity escrow account until November 15,
1999, finally are distributed to the Partnership's limited partners of record
as of the closing date of the sale of the Aurora System, the Partnership will
be liquidated and dissolved. The Partnership's registration and reporting
requirements under the Exchange Act will be terminated upon the dissolution of
the Partnership, most likely before the end of 1999.
15
<PAGE>
USE OF PROCEEDS FROM THE AURORA SYSTEM'S SALE
The following is a brief summary of the Venture's estimated use of the
proceeds and of the Partnership's estimated use of its portion of the proceeds
from the sale of the Aurora System. All of the following selected financial
information is based upon amounts as of March 31, 1998 and certain estimates
of liabilities at closing. Final results may differ from these estimates. A
more detailed discussion of the financial consequences of the sale of the
system is set forth below under the caption "Unaudited Pro Forma Consolidated
Financial Information." All limited partners are encouraged to review
carefully the unaudited pro forma financial statements and notes thereto.
If the holders of a majority of limited partnership interests of the
Partnership and Growth Partners 89-B approve the proposed sale of the Aurora
System and the transaction is closed, the Venture will pay all of its
indebtedness, pay certain fees and expenses of the transaction, settle working
capital adjustments, deposit funds into an indemnity escrow account and then
the remaining sale proceeds will be distributed to the four partners of the
Venture. The Partnership will receive 65.6 percent of the net sale proceeds
and the Partnership will distribute its portion of the net sale proceeds to
its limited partners of record as of the closing date pursuant to the terms of
the Partnership Agreement. The estimated uses of the sale proceeds are as
follows:
<TABLE>
<S> <C>
Contract Sales Price of the Aurora System...................... $108,500,000
Add: Cash on Hand............................................. 141,188
Less: Estimated Net Closing Adjustments........................ (2,740,471)
Repayment of Debt........................................ (50,417,217)
Indemnity Escrow......................................... (3,283,500)
------------
Cash Available for Distribution to Joint Venturers..... 52,200,000
Cash Distributed to Growth Partners 89-B, IDS
Management Corporation and Intercable................ 17,900,000
------------
Cash Available for Distribution by the Partnership........ $ 34,300,000
============
</TABLE>
Based on financial information available at March 31, 1998, the following
table presents the estimated results of the Partnership when the Venture has
completed the sale of the Aurora System:
<TABLE>
<S> <C>
Dollar Amount Raised....................................... $ 43,585,750
Number of Cable Television Systems Purchased............... One
Date of Closing of Offering................................ September 1991
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations...................................... $ (1,194)
--from recapture....................................... $ 1,177
Capital Gain (Loss).................................... $ (195)
Cash Distributions to Investors
Source (on GAAP basis)
--investment income.................................... $ 0
--return of capital.................................... $ 788
Source (on cash basis)
--sales................................................ $ 788
</TABLE>
16
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
OF IDS/JONES GROWTH PARTNERS II, L.P.
The following unaudited pro forma consolidated balance sheet assumes that as
of March 31, 1998, the Venture had sold the Aurora System for $108,500,000.
The funds available to the Venture, adjusting for the estimated net closing
adjustments of the Aurora System, are expected to total approximately
$105,820,119. Such funds will be used to repay all indebtedness of the
Venture, pay certain fees and expenses of the transaction, settle working
capital adjustments and deposit funds into an indemnity escrow account, and
then the balance remaining will be distributed to the four partners of the
Venture. The Partnership will receive $34,300,000, or 65.6 percent, of the
$52,200,000 of net sale proceeds, and the Partnership will distribute this
amount to its limited partners of record as of the closing date of the sale of
the Aurora System. Because the distribution to be made to the limited partners
on the sale of the Aurora System will not exceed 100 percent of the amounts
originally contributed to the Partnership by the limited partners plus the six
percent liquidation preference, the General Partners will not receive general
partner distributions on the sale of the Aurora System.
The unaudited pro forma consolidated balance sheet should be read in
conjunction with the appropriate notes to the unaudited pro forma consolidated
balance sheet.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
IS BASED UPON AMOUNTS AS OF MARCH 31, 1998 AND CERTAIN ESTIMATES OF
LIABILITIES AT CLOSING. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
17
<PAGE>
IDS/JONES GROWTH PARTNERS II, L.P.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents............... $ 141,188 $ 52,058,812 $52,200,000
Trade Receivables, net.................. 391,698 (391,698) --
Investment in Cable Television
Properties:
Property, plant and equipment, net.... 23,382,724 (23,382,724) --
Franchise costs and other intangibles,
net.................................. 16,783,442 (16,783,442) --
----------- ------------ -----------
Total investment in cable television
properties......................... 40,166,166 (40,166,166) --
Deposits, Prepaid Expenses and Deferred
Charges................................ 408,361 2,875,139 3,283,500
----------- ------------ -----------
Total Assets............................ $41,107,413 $ 14,376,087 $55,483,500
=========== ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt.................................. $50,086,596 $(50,086,596) $ --
Advances from Managing General
Partner.............................. 330,621 (330,621) --
Trade accounts payable and accrued
liabilities.......................... 3,405,433 (3,405,433) --
Subscriber prepayments................ 74,507 (74,507) --
Accrued distribution to limited
partners............................. -- 34,300,000 34,300,000
Accrued distribution to joint
venturers............................ -- 17,900,000 17,900,000
----------- ------------ -----------
Total Liabilities................... 53,897,157 (1,697,157) 52,200,000
----------- ------------ -----------
Minority Interest in Joint Venture...... (4,487,599) 5,288,799 801,200
----------- ------------ -----------
Partners' Capital:
Managing General Partner.............. (229,226) 386,821 157,595
Supervising General Partner........... (229,227) 386,821 157,595
Limited Partners...................... (7,843,692) 10,010,802 2,167,110
----------- ------------ -----------
Total Partners' Capital............. (8,302,145) 10,784,444 2,482,299
----------- ------------ -----------
Total Liabilities and Partners'
Capital.............................. $41,107,413 $ 14,376,087 $55,483,500
=========== ============ ===========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated balance sheet.
18
<PAGE>
IDS/JONES GROWTH PARTNERS II, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
------------ ------------ ----------
<S> <C> <C> <C>
REVENUES................................ $ 19,713,788 $(19,713,788) $ --
COSTS AND EXPENSES:
Operating expenses.................... 10,837,726 (10,837,726) --
Management fees and allocated overhead
from
the Managing General Partner......... 2,183,367 (2,183,367) --
Depreciation and Amortization......... 9,071,373 (9,071,373) --
------------ ------------ ----------
OPERATING LOSS.......................... (2,378,678) 2,378,678 --
------------ ------------ ----------
OTHER INCOME (EXPENSE):
Interest expense...................... (3,759,271) 3,759,271 --
Other, net............................ 8,371 (8,371) --
------------ ------------ ----------
Total other income (expense), net... (3,750,900) 3,750,900 --
------------ ------------ ----------
CONSOLIDATED LOSS....................... (6,129,578) 6,129,578 --
MINORITY INTEREST IN CONSOLIDATED LOSS.. 2,108,575 (2,108,575) --
------------ ------------ ----------
NET LOSS................................ $ (4,021,003) $ 4,021,003 $ --
============ ============ ==========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST............................... $ (22.83) $ --
============ ==========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated statement.
19
<PAGE>
IDS/JONES GROWTH PARTNERS II, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ---------
<S> <C> <C> <C>
REVENUES.................................... $5,137,941 $(5,137,941) $ --
COSTS AND EXPENSES:
Operating expenses........................ 2,779,999 (2,779,999) --
Management fees and allocated overhead
from the Managing General Partner........ 577,439 (577,439) --
Depreciation and amortization............. 1,945,088 (1,945,088) --
---------- ----------- ---------
OPERATING LOSS.............................. (164,585) 164,585 --
---------- ----------- ---------
OTHER INCOME (EXPENSE):
Interest expense.......................... (945,163) 945,163 --
Other, net................................ (2,756) 2,756 --
---------- ----------- ---------
Total other income (expense), net....... (947,919) 947,919 --
---------- ----------- ---------
CONSOLIDATED LOSS........................... (1,112,504) 1,112,504 --
MINORITY INTEREST IN CONSOLIDATED LOSS...... 382,701 (382,701) --
---------- ----------- ---------
NET LOSS.................................... $ (729,803) $ 729,803 $ --
========== =========== =========
NET LOSS PER LIMITED PARTNERSHIP INTEREST... $ (4.14) $ --
========== =========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited pro forma consolidated statement.
20
<PAGE>
IDS/JONES GROWTH PARTNERS II, L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1) The Partnership has a 65.6 percent ownership interest in the Venture
through capital contributions made totalling $37,592,709. The following
calculations present the sale of the Aurora System and the resulting estimated
proceeds expected to be received by the Partnership.
2) The unaudited pro forma consolidated balance sheet of the Partnership
assumes that the Venture had sold the Aurora System for $108,500,000 as of
March 31, 1998. The unaudited pro forma consolidated statements of operations
of the Partnership assume that the Venture had sold the Aurora System for
$108,500,000 as of January 1, 1997.
3) The Partnership will receive $34,300,000 from the Venture, all of which
will be distributed to the limited partners of the Partnership. The limited
partners' distribution of $34,300,000 represents $197 for each $250 limited
partnership interest, or $788 for each $1,000 invested in the Partnership.
4) The estimated gain recognized from the sale of the Aurora System and
corresponding estimated distribution to limited partners as of March 31, 1998
has been computed as follows:
GAIN ON SALE OF ASSETS:
<TABLE>
<S> <C>
Contract sales price............................................. $108,500,000
Less: Net book value of investment in cable television properties
at March 31, 1998.......................................... (40,166,166)
------------
Gain on sale of assets........................................... $ 68,333,834
============
DISTRIBUTION TO PARTNERS:
Contract sales price............................................. $108,500,000
Working Capital Adjustment:
Add:Trade receivables, net....................................... 391,698
Prepaid expenses................................................. 408,361
Less:Accrued liabilities......................................... (3,405,433)
Subscriber prepayments........................................... (74,507)
------------
Adjusted cash received........................................... 105,820,119
Less:Outstanding debt to third parties........................... (47,079,949)
Outstanding advances from the Managing General Partner........... (330,621)
Outstanding note from the Managing General Partner............... (600,000)
Outstanding subordinated advance from Intercable................. (1,406,647)
Outstanding note from IDS Management Corporation................. (1,000,000)
Cash retained for working capital purposes....................... (60,590)
Add:Cash on hand................................................. 141,188
------------
Cash available from sale proceeds................................ $ 55,483,500
------------
Portion of sale proceeds to be held in indemnity escrow.......... (3,283,500)
------------
Cash available for distribution to joint venturers............... 52,200,000
Cash distributed to Growth Partners II, IDS Management
Corporation and Intercable.................................. 17,900,000
------------
Cash available for distribution by the Partnership in 1998....... $ 34,300,000
============
</TABLE>
21
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1998 are being mailed to the limited partners
of the Partnership together with this Proxy Statement.
INCORPORATION BY REFERENCE
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1998 are incorporated by reference in their
entirety in this proxy statement.
22
<PAGE>
[LOGO OF JONES INTERCABLE, INC.]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE MANAGING GENERAL
PARTNER
The undersigned Limited Partner of IDS/Jones Growth Partners II, L.P., a
Colorado limited partnership, hereby votes on the sale of the Venture's Aurora,
Illinois cable television system to TCI Communications, Inc. or one of its
affiliates for a sales price of $108,500,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of July 10, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
All owners must sign exactly as
name(s) appear on label.
When limited partnership inter-
ests are held by more than one
person, all owners must sign.
When signing as attorney, as ex-
ecutor, administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporation name by
authorized officer. If a partner-
ship, please sign in partnership
name by authorized person.
DATED: _____________________, 1998
__________________________________
Signature--Investor 1
__________________________________
Signature--Investor 2
__________________________________
Signature--Investor 3
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
[LOGO OF JONES INTERCABLE, INC.]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE MANAGING GENERAL
PARTNER
The undersigned Limited Partner of IDS/Jones Growth Partners II, L.P., a
Colorado limited partnership, hereby votes on the sale of the Venture's Aurora,
Illinois cable television system to TCI Communications, Inc. or one of its
affiliates for a sales price of $108,500,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of July 10, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
PLEASE SIGN EXACTLY AS NAME
APPEARS.
DATED: _____________________, 1998
__________________________________
Beneficial Owner Signature
(Investor)
__________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
Exhibit 99.1
===============================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TCI COMMUNICATIONS, INC.
AND
IDS/JONES JOINT VENTURE PARTNERS
DATED AS OF
JULY 10, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
Page
----
Section 1. Definitions............................................................ 1
1.1 Affiliate......................................................... 1
---------
1.2 Assets............................................................ 1
------
1.3 Basic Service..................................................... 2
-------------
1.4 Business.......................................................... 2
--------
1.5 Business Day...................................................... 2
------------
1.6 Closing........................................................... 2
-------
1.7 Encumbrance....................................................... 2
-----------
1.8 Environmental Law................................................. 2
-----------------
1.9 Equipment......................................................... 2
---------
1.10 Equivalent Basic Subscribers (or EBSs)............................ 3
--------------------------------------
1.11 Expanded Basic Service............................................ 3
----------------------
1.12 FCC............................................................... 3
---
1.13 GAAP.............................................................. 3
----
1.14 Governmental Authority............................................ 3
----------------------
1.15 Governmental Permits.............................................. 3
--------------------
1.16 Hazardous Substances.............................................. 4
--------------------
1.17 Intangibles....................................................... 4
-----------
1.18 Intercable........................................................ 4
----------
1.19 JCC............................................................... 4
---
1.20 Knowledge......................................................... 4
---------
1.21 Legal Requirement................................................. 4
-----------------
1.22 Losses............................................................ 4
------
1.23 Pay TV............................................................ 5
------
1.24 Permitted Encumbrances............................................ 5
----------------------
1.25 Person............................................................ 5
------
1.26 Real Property..................................................... 5
-------------
1.27 Related Transactions.............................................. 5
--------------------
1.28 Required Consents................................................. 5
-----------------
1.29 Seller Contracts.................................................. 5
----------------
1.30 Service Area...................................................... 6
------------
1.31 System............................................................ 6
------
1.32 Taxes............................................................. 6
-----
1.33 Other Definitions................................................. 6
-----------------
Section 2. Sale of Assets.......................................................... 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Page
----
Section 3. Consideration........................................................ 7
3.1 Base Purchase Price............................................. 7
-------------------
3.2 Adjustments to Base Purchase Price.............................. 8
----------------------------------
3.3 Determination of Adjustments.................................... 8
----------------------------
3.4 Allocation of Consideration..................................... 9
---------------------------
Section 4. Assumed Liabilities and Excluded Assets.............................. 10
4.1 Assignment and Assumption....................................... 10
-------------------------
4.2 Excluded Assets................................................. 10
---------------
Section 5. Representations and Warranties of Seller............................. 10
5.1 Organization and Qualification.................................. 10
------------------------------
5.2 Authority and Validity.......................................... 11
----------------------
5.3 No Conflict; Required Consents.................................. 11
------------------------------
5.4 Assets.......................................................... 11
------
5.5 Governmental Permits............................................ 12
--------------------
5.6 Seller Contracts................................................ 12
----------------
5.7 Real Property................................................... 12
-------------
5.8 Environmental Matters........................................... 13
---------------------
5.9 Compliance with Legal Requirements.............................. 14
----------------------------------
5.10 Patents, Trademarks and Copyrights............................. 15
----------------------------------
5.11 Financial Statements........................................... 16
--------------------
5.12 Absence of Certain Changes..................................... 16
--------------------------
5.13 Legal Proceedings.............................................. 16
-----------------
5.14 Tax Returns; Other Reports..................................... 16
--------------------------
5.15 Employment Matters............................................. 17
------------------
5.16 Systems Information............................................ 17
-------------------
5.17 Bonds.......................................................... 18
-----
5.18 Finders and Brokers............................................ 18
-------------------
Section 6. Representations and Warranties of Buyer.............................. 18
6.1 Organization and Qualification.................................. 18
------------------------------
6.2 Authority and Validity.......................................... 19
----------------------
6.3 No Conflicts; Required Consents................................. 19
-------------------------------
6.4 Finders and Brokers............................................. 19
-------------------
6.5 Legal Proceedings............................................... 19
-----------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Page
----
Section 7. Additional Covenants................................................. 20
7.1 Access to Premises and Records.................................. 20
------------------------------
7.2 Continuity and Maintenance of Operations; Financial Statements.. 20
--------------------------------------------------------------
7.3 Employee Matters................................................ 22
----------------
7.4 Leased Vehicles; Other Capital Leases........................... 23
-------------------------------------
7.5 Required Consents; Estoppel Certificates........................ 23
----------------------------------------
7.6 Renewal or Extension of Franchises.............................. 24
----------------------------------
7.7 Title Commitments and Surveys................................... 24
-----------------------------
7.8 HSR Notification................................................ 25
----------------
7.9 No Shopping..................................................... 25
-----------
7.10 Lien and Judgment Searches...................................... 25
--------------------------
7.11 Transfer Taxes.................................................. 26
--------------
7.12 Distant Broadcast Signals....................................... 26
-------------------------
7.13 Guaranty........................................................ 26
--------
7.14 Letter to Programmers........................................... 26
---------------------
7.15 Updated Schedules............................................... 26
-----------------
7.16 Use of Names and Logos.......................................... 27
----------------------
7.17 Subscriber Billing Services..................................... 27
---------------------------
7.18 Satisfaction of Conditions...................................... 27
--------------------------
7.19 Confidentiality and Publicity................................... 27
-----------------------------
7.20 Bulk Transfers.................................................. 28
--------------
7.21 Environmental Reports........................................... 28
---------------------
7.22 Section 1031.................................................... 28
------------
7.23 MDU Agreements.................................................. 28
--------------
7.24 Services Agreement.............................................. 29
------------------
7.25 Year 2000 Matters............................................... 29
-----------------
7.26 Aurora I-NET.................................................... 30
------------
Section 8. Conditions Precedent................................................. 30
8.1 Conditions to the Obligations of Buyer and Seller............... 30
-------------------------------------------------
8.2 Conditions to the Obligations of Buyer.......................... 31
--------------------------------------
8.3 Conditions to Obligations of Seller............................. 32
-----------------------------------
8.4 Waiver of Conditions............................................ 33
--------------------
Section 9. Closing.............................................................. 33
9.1 The Closing; Time and Place..................................... 33
---------------------------
9.2 Seller's Delivery Obligations................................... 33
-----------------------------
9.3 Buyer's Delivery Obligations.................................... 34
----------------------------
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Page
----
Section 10. Termination........................................................... 35
10.1 Termination Events.............................................. 35
------------------
10.2 Effect of Termination........................................... 36
---------------------
Section 11. Survival of Representations and Warranties; Indemnification........... 36
11.1 Survival of Representations and Warranties...................... 36
------------------------------------------
11.2 Indemnification by Seller....................................... 37
-------------------------
11.3 Indemnification by Buyer........................................ 37
------------------------
11.4 Third Party Claims.............................................. 38
------------------
11.5 Limitations on Indemnification - Seller......................... 39
---------------------------------------
11.6 Limitations on Indemnification - Buyer.......................... 39
--------------------------------------
Section 12. Miscellaneous......................................................... 39
12.1 Parties Obligated and Benefited................................. 39
-------------------------------
12.2 Notices......................................................... 40
-------
12.3 Attorneys' Fees................................................. 41
---------------
12.4 Waiver.......................................................... 41
------
12.5 Captions........................................................ 41
--------
12.6 Choice of Law................................................... 41
-------------
12.7 Terms........................................................... 41
-----
12.8 Rights Cumulative............................................... 41
-----------------
12.9 Further Actions................................................. 41
---------------
12.10 Time............................................................ 41
----
12.11 Late Payments................................................... 42
-------------
12.12 Counterparts.................................................... 42
------------
12.13 Entire Agreement................................................ 42
----------------
12.14 Severability.................................................... 42
------------
12.15 Construction.................................................... 42
------------
12.16 Expenses........................................................ 42
--------
12.17 Risk of Loss; Condemnation...................................... 42
--------------------------
</TABLE>
-iv-
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
A - Bill of Sale
B - Assignment and Assumption of Contracts
C - Assignment of Leases
D - Guaranty
E - Letter to Programmers
F - FIRPTA Affidavit
G - Opinion of Seller's Counsel
H - Opinion of Buyer's Counsel
I - Escrow Agreement
SCHEDULES
- ---------
1.9 - Owned Equipment and Vehicles
4.2 - Excluded Assets
5.3 - Required Consents
5.4-I - Encumbrances to Be Discharged Prior to Closing and Rights of
First Refusal
5.4-II - Conduct of Business
5.5 - Governmental Permits
5.6 - Seller Contracts
5.7 - Real Property
5.8 - Environmental Matters
5.9.1 - Compliance with Legal Requirements
5.9.4 - Cost of Service Filings/Customer Service Standards
5.13 - Proceedings and Judgments
5.14 - Tax Matters
5.15 - Employee Matters
5.16 - The Business/Systems Information (including Rate Schedule)
5.17 - Bonds
-v-
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is made as of July 10,
1998, by and between TCI Communications, Inc., a Delaware corporation ("Buyer"),
and IDS/Jones Joint Venture Partners, a Colorado general partnership ("Seller").
RECITALS
--------
A. Seller is engaged in the business of providing cable television
service to subscribers in and around the Service Area. Buyer desires to
purchase and Seller desires to sell substantially all the assets of Seller used
or useful in connection with that business.
B. Buyer intends to complete the transfer of the Assets in a
transaction to which Section 1031 of the Internal Revenue Code of 1986, as
amended (the "Code"), applies, and Seller is willing to take such steps as are
reasonably necessary on its part to enable the transactions contemplated hereby
to so qualify, including permitting the assignment of this Agreement by Buyer to
one or more Affiliates of Buyer and by such Affiliates of Buyer to a qualified
intermediary in order that Buyer's acquisition of the Assets may be accomplished
as part of a deferred exchange pursuant to applicable Treasury Regulations;
provided that if such exchange is not accomplished, Buyer desires to purchase
the Assets directly, subject to the terms and conditions described herein.
AGREEMENT
---------
In consideration of the above recitals and the mutual agreements
stated in this Agreement, the parties agree as follows:
SECTION 1.DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have the meanings
set forth below:
1.1 Affiliate. With respect to any Person, any other Person
---------
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
1.2 Assets. All properties, privileges, rights, interests and
------
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, held, used or useful in the Business,
including advertising sales related to the Business, in which Seller has any
right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing
<PAGE>
Date, or in which Intercable has, or acquires prior to the Closing Date, any
right, title or interest if such property, privilege, right or interest is used
or useful primarily in connection with the Business and/or the businesses that
are the subject of the Related Transactions, including advertising sales related
thereto, including Governmental Permits, Intangibles, Seller Contracts,
Equipment, Real Property, partnership interests in The Greater Chicago Cable
Interconnect and deposits relating to the Business that are held by third
parties for the account of Seller or for security for Seller's performance of
its obligations, but excluding any Excluded Assets.
1.3 Basic Service. The lowest tier of service offered to subscribers
-------------
of a System.
1.4 Business. The cable television business conducted by Seller on
--------
the date of this Agreement through one or more Systems, as described on SCHEDULE
5.16.
1.5 Business Day. Any day other than Saturday, Sunday or a day on
------------
which banking institutions in Denver, Colorado are required or authorized to be
closed.
1.6 Closing. The consummation of the transactions contemplated by
-------
this Agreement, as described in SECTION 9, the date of which is referred to as
the Closing Date.
1.7 Encumbrance. Any security interest, security agreement,
-----------
financing statement filed with any Governmental Authority, conditional sale or
other title retention agreement, any lease, consignment or bailment given for
purposes of security, any mortgage, lien, indenture, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment, exception to or defect in title or other ownership interest
(including reservations, rights of entry, possibilities of reverter,
encroachments, easements, rights-of-way, restrictive covenants, leases and
licenses) of any kind, which constitutes an interest in or claim against
property, whether arising pursuant to any Legal Requirement, Governmental
Permit, Seller Contract or otherwise.
1.8 Environmental Law. Any Legal Requirement relating to pollution
-----------------
or protection of public health, safety or welfare or the environment, including
those relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
1.9 Equipment. All electronic devices, trunk and distribution
---------
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Business, the principal items of which are
described on SCHEDULE 1.9 (and with respect to leased Equipment, on SCHEDULE
5.6).
-2-
<PAGE>
1.10 Equivalent Basic Subscribers (or EBSs). The number determined
--------------------------------------
by dividing (i) the total monthly revenues billed for sales of Basic Service and
Expanded Basic Service by the System during the most recent month ended prior to
the date of calculation to active customers, including residential customers in
single-family households, commercial establishments and multiple dwelling units,
whether on a discounted or undiscounted basis and whether billed individually or
on a bulk basis, but excluding billings in excess of a single month's charges
for any account, by (ii) the product of (A) the sum of the standard monthly
rates (without discount of any kind) charged by Seller during such month to
single-family households for Basic Service and Expanded Basic Service sold by
the System (such rates not to be less than the rates for such System set forth
on SCHEDULE 5.16) multiplied by (B) 95.13%. For purposes of this definition,
there will be excluded all revenues from (i) any subscriber who is more than 60
days past due in the payment of any amount in excess of $5 payable to Seller,
(ii) any subscriber who has not paid at least one full month's payment for
services ordered by such subscriber, (iii) that portion of the billings
representing an installation or other non-recurring charge, a charge for
equipment or for any outlet or connection other than the first outlet or first
connection in any residential unit (e.g., an individual apartment or rental
----
unit), a charge for any a la carte or premium service or a pass-through charge
for sales taxes, line-itemized franchise fees, fees charged by the FCC and the
like, (iv) any subscriber who was solicited within the six-month period prior to
the date of calculation by marketing techniques not permitted by SECTION
7.2.3(G) hereof, and (v) any subscriber pending disconnection for any reason.
For purposes of this definition, the number of days past due of a customer
account will be determined from the first day of the period for which the
applicable billing relates.
1.11 Expanded Basic Service. Any video programming provided over
----------------------
the System, regardless of service tier other than (a) Basic Service, (b) any new
product tier and (c) video programming offered on a per channel or per program
basis.
1.12 FCC. The Federal Communications Commission.
---
1.13 GAAP. Generally accepted accounting principles as in effect
----
from time to time in the United States of America.
1.14 Governmental Authority. The United States of America, any
----------------------
state, commonwealth, territory or possession of the United States of America and
any political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
county, municipality, province, parish or other instrumentality of any of the
foregoing.
1.15 Governmental Permits. All franchises, approvals,
--------------------
authorizations, permits, licenses, easements, registrations, qualifications,
leases, variances and similar rights obtained with respect to the Business or
Assets from any Governmental Authority, including those set forth on SCHEDULE
5.5.
-3-
<PAGE>
1.16 Hazardous Substances. Any pollutant, contaminant, chemical,
--------------------
industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a hazard or potential hazard to the
Real Property or to Persons in or about the Real Property or cause the Real
Property to be in violation of any laws, regulations or ordinances of federal,
state or applicable local governments, (b) asbestos or any asbestos-containing
material of any kind or character, (c) polychlorinated biphenyls ("PCBs"), as
regulated by the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., (d)
-- ----
any materials or substances designated as "hazardous substances" pursuant to the
Clean Water Act, 33 U.S.C. (S) 1251 et seq., (e) "economic poison," as defined
-- ----
in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 135 et
--
seq., (f) "chemical substance," "new chemical substance" or "hazardous chemical
- ---
substance or mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
(S) 2601 et seq., (g) "hazardous substances" pursuant to the Comprehensive
-- ----
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
--
seq. and (h) "hazardous waste" pursuant to the Resource Conservation and
- ----
Recovery Act, 42 U.S.C. (S) 6901 et seq.
-- ----
1.17 Intangibles. All intangible assets, including subscriber lists,
-----------
accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Business.
1.18 Intercable. Jones Intercable, Inc.
----------
1.19 JCC. Jones Cable Corporation, a wholly owned subsidiary of Jones
---
Intercable, Inc.
1.20 Knowledge. The actual knowledge of a particular matter of one or
---------
more of the executive officers of a Person or the general manager or one or more
of the managers of such Person's Systems.
1.21 Legal Requirement. Applicable common law and any statute,
-----------------
ordinance, code, or other law, rule, regulation, order, technical or other
written standard or procedure enacted, adopted or applied by any Governmental
Authority, including judicial decisions applying common law or interpreting any
other Legal Requirement.
1.22 Losses. Any claims, losses, liabilities, damages, penalties,
------
costs and expenses, including interest that may be imposed in connection
therewith, expenses of investigation, reasonable fees and disbursements of
counsel and other experts, and the cost to any Person making a claim or seeking
indemnification under this Agreement with respect to funds expended by such
Person by reason of the occurrence of any event with respect to which
indemnification is sought.
-4-
<PAGE>
1.23 Pay TV. Premium programming services selected by and sold to
------
subscribers on a per channel or per program basis.
1.24 Permitted Encumbrances. The following Encumbrances: (a) liens
----------------------
securing Taxes, assessments and governmental charges not yet due and payable,
(b) any zoning law or ordinance or any similar Legal Requirement, (c) any right
reserved to any Governmental Authority to regulate the affected property and (d)
as to Real Property interests, any Encumbrance reflected in the public records
and that does not individually or in the aggregate interfere with the right or
ability to own, use or operate the Real Property or to convey good, marketable
and indefeasible fee simple title to such Real Property, provided that
"Permitted Encumbrances" will not include any Encumbrance which could prevent or
inhibit in any way the conduct of the business of the affected System and
provided further that classification of any Encumbrance as a "Permitted
Encumbrance" will not affect any liability Seller may have for such Encumbrance,
including pursuant to any indemnity obligation under this Agreement.
1.25 Person. Any natural person, corporation, partnership, trust,
------
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.26 Real Property. All assets held by Seller related to the Business
-------------
consisting of realty, including appurtenances, improvements and fixtures located
on such realty, and any other interests in real property, including fee
interests, leasehold interests and easements, wire crossing permits, rights of
entry (except agreements related to multiple dwelling units) described on
SCHEDULE 5.7.
1.27 Related Transactions. The transactions contemplated by the Asset
--------------------
Purchase Agreements by and between Buyer and entities affiliated with Seller
executed simultaneously with the execution of this Agreement, or, if requested
by Buyer to facilitate the 1031 Transaction, to be executed after the date of
this Agreement, pursuant to which Buyer has agreed or will agree to acquire the
assets of the cable television systems located in and around (a) Lake County and
Orland Park, (b) Lake Zurich and South Suburban, (c) Naperville, and (d)
Wheaton, all in the State of Illinois.
1.28 Required Consents. All franchises, licenses, authorizations,
-----------------
approvals and consents required under Governmental Permits, Seller Contracts or
otherwise for (a) Seller to transfer the Assets and the Business to Buyer, (b)
Buyer to conduct the Business and to own, lease, use and operate the Assets at
the places and in the manner in which the Business is conducted as of the date
of this Agreement and on the Closing Date and (c) Buyer to assume and perform
the Governmental Permits, Seller Contracts and the other Assumed Liabilities.
1.29 Seller Contracts. All contracts and agreements, other than
----------------
Governmental Permits and those relating to Real Property, pertaining to the
ownership, operation and maintenance
-5-
<PAGE>
of the Assets or the Business or used or held for use in the Business, as
described on SCHEDULE 5.6 or, in the case of contracts and agreements relating
to Real Property, on SCHEDULE 5.7.
1.30 Service Area. The area in which Seller operates the Business,
------------
specifically in and around the Cities of Aurora, Plano and Sandwich, the
Villages of Montgomery, North Aurora, Oswego and Yorkville, and the Counties of
Kane and Kendall, all in the State of Illinois.
1.31 System. A complete cable television reception and distribution
------
system operated in the conduct of the Business, consisting of one or more
headends, subscriber drops and associated electronic and other equipment, and
which is, or is capable of being without modification, operated as an
independent system without interconnections to other systems. Any systems which
are interconnected or which are served in total or in part by a common headend
will be considered a single System.
1.32 Taxes. All levies and assessments of any kind or nature imposed
-----
by any Governmental Authority, including all income, sales, use, ad valorem,
value added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto.
1.33 Other Definitions. The following terms are defined in the
-----------------
Sections indicated:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Action 11.4
Antitrust Division 7.8
Approval Deadline 10.1.4
Assumed Liabilities 4.1
Base Purchase Price 3.1
Buyer Damages 11.5
Closing Date 1.6
Code Recital B
Cost of Service Election 5.9.4
EBS Condition 8.2.7
EBS Shortfall Adjustment 3.2.1
Employee Benefit Plans 5.15.2
Environmental Report 7.21
ERISA 5.15.1
Escrow Agent 3.1.2
Excluded Assets 4.2
Final Adjustments Report 3.3.2
Financial Statements 5.11
</TABLE>
-6-
<PAGE>
FTC 7.8
HSR Act 7.8
IDS Consents 10.1.5
Indemnified Party 11.4
Indemnifying Party 11.4
I-NET 7.26
MDU 7.23
1992 Cable Act 5.9.4
Preliminary Adjustments Report 3.3.1
Prime Rate 12.11
Rate Regulation Documents 5.9.4
Seller Damages 11.6
Services Agreement 7.24
Survival Period 11.1
Taking 12.17.2
TCI/AT&T Transaction 7.5.1
1031 Closing Date 8.2.9
1031 Condition 8.2.9
1031 Transaction 7.22
Transaction Documents 5.2
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this Agreement, at
the Closing, Seller will sell to Buyer, and Buyer will purchase from Seller, all
of Seller's rights, titles and interests in, to and under the Assets. Except as
otherwise specifically provided in this Agreement, all the Assets are intended
to be transferred to Buyer, whether or not described in the Schedules.
SECTION 3. CONSIDERATION.
3.1 Base Purchase Price. Buyer will pay to Seller total cash
-------------------
consideration of $108,500,000 (the "Base Purchase Price"), subject to adjustment
as provided in SECTIONS 3.2 and 3.3. Such consideration will be paid as follows:
3.1.1 The sum of $105,216,500 will be paid at Closing by wire
transfer of immediately available funds pursuant to wire instructions delivered
by Seller to Buyer no later than two Business Days prior to the Closing Date;
and
3.1.2 The sum of $3,283,500 will be delivered to an escrow
agent reasonably satisfactory to Seller and Buyer (the "Escrow Agent") to be
held in escrow until November 15, 1999, to provide a fund for the payment of any
post-closing indemnification claims and unpaid working
-7-
<PAGE>
capital adjustments in accordance with the terms of the Escrow Agreement to be
entered into at Closing in the form of EXHIBIT I.
3.2 Adjustments to Base Purchase Price. The Base Purchase Price will
----------------------------------
be adjusted as follows:
3.2.1 Reduced by an amount equal to $2,056 multiplied by the
positive difference, if any, between (a) 52,750 and (b) the number of EBSs as of
the Closing Date (the "EBS Shortfall Adjustment");
3.2.2 Adjustments on a pro rata basis as of the Closing Date will
be made for all prepaid expenses (but only to the extent the full benefit
thereof will be realizable by Buyer within 12 months after the Closing Date),
accrued expenses (including real and personal property Taxes and the economic
value of all accrued vacation time permitted by Buyer's policies to be taken
after the Closing Time by Seller's System employees hired by Buyer), prepaid
income, subscriber prepayments and accounts receivable related to the Business,
all as determined in accordance with GAAP consistently applied, and to reflect
the principle that all expenses and income attributable to the Business for the
period prior to the Closing Date are for the account of Seller, and all expenses
and income attributable to the Business for the period on and after the Closing
Date are for the account of Buyer. Seller will receive no credit for any
accounts receivable (a) resulting from cable service sales any portion of which
is 60 days or more past due as of the Closing Date, (b) from subscribers whose
accounts are inactive or whose service is pending disconnection for any reason
as of the Closing Date or (c) resulting from advertising sales any portion of
which is 120 days or more past due as of the Closing Date.
3.2.3 Buyer's account will be credited for the amount of all
advance payments to, or funds of third parties on deposit with, Seller as of the
Closing Date, relating to the Business, including advance payments and deposits
by subscribers served by the Business for converters, encoders, decoders, cable
television service and related sales, and the liability therefor will be assumed
by Buyer.
3.3 Determination of Adjustments. Preliminary and final adjustments
----------------------------
to the Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at least
10 Business Days prior to the expected Closing Date, Seller will deliver to
Buyer a report (the "Preliminary Adjustments Report"), certified as to
completeness and accuracy by Seller, showing in detail the preliminary
determination of the adjustments referred to in SECTION 3.2, which are
calculated as of the Closing Date (or as of any other date agreed by the
parties) and any documents substantiating the adjustments proposed in the
Preliminary Adjustments Report. The Preliminary Adjustments Report will include
a complete list of subscribers, a detailed calculation of the number of
Equivalent Basic Subscribers and a schedule setting forth advance payments made
to or by Seller and deposits made
-8-
<PAGE>
by Seller, as well as accounts receivable information relating to the Business
(showing sums due and their respective aging as of the Closing Date). Seller
also will furnish to Buyer its billing report for the most current period as of
the Closing Date. Following receipt of such Preliminary Adjustments Report and
supporting information, Buyer will have five Business Days to review such
Preliminary Adjustments Report and supporting information and to notify Seller
of any disagreements with Seller's estimates. If Buyer provides a notice of
disagreement with Seller's estimates of the adjustments referred to in SECTION
3.2 within such five Business Day period, Buyer and Seller will negotiate in
good faith to resolve any such dispute and to reach an agreement prior to the
Closing Date on such estimated adjustments as of the Closing Date. The basis for
determining the Base Purchase Price to be paid at Closing will be (a) the
estimate so agreed upon by Buyer and Seller or (b) if no notice of disagreement
is provided, or if such notice is provided but the parties do not reach such an
agreement prior to the Closing Date, the estimate of such adjustments set forth
in the Preliminary Adjustments Report.
3.3.2 Within 90 days after the Closing, Seller will deliver to
Buyer a report (the "Final Adjustments Report"), similarly certified by Seller,
showing in detail the final determination of all adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together with any documents substantiating the
adjustments proposed in the Final Adjustments Report. Buyer will provide Seller
with reasonable access to all records which Buyer has in its possession and
which are necessary for Seller to prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments
Report, Buyer will give Seller written notice of Buyer's objections, if any, to
the Final Adjustments Report. If Buyer makes any such objection, the parties
will agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Any disputed amounts will be determined within 120 days after the
Closing Date by the accounting firm of Price Waterhouse, whose determination
will be conclusive. Seller and Buyer will bear equally the fees and expenses
payable to such firm in connection with such determination. The payment
required after such determination will be made by the responsible party by wire
transfer of immediately available funds to the other party within three Business
Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by Buyer
---------------------------
under this Agreement will be allocated among the Assets as set forth in a
schedule to be prepared not later than 180 days after the Closing Date (or April
1 of the year following the Closing Date if earlier) by an independent appraiser
with significant experience in the cable television industry. Such appraiser
will be selected by the mutual agreement of Buyer and Seller within 30 days
after the date of this Agreement, and the fees of such appraiser will be shared
equally by Buyer and Seller. Buyer and Seller agree to be bound by the
allocation and will not take any position inconsistent with such allocation and
will file all returns and reports with respect to the transactions contemplated
by this Agreement, including all federal, state and local Tax returns, on the
basis of such allocation.
-9-
<PAGE>
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. Seller will assign, and Buyer will
-------------------------
assume and after the Closing will pay, discharge and perform the following (the
"Assumed Liabilities"): (a) Seller's obligations to subscribers of the Business
for (i) subscriber deposits held by Seller as of the Closing Date and which are
refundable, in the amount for which Buyer received credit under SECTION 3.2,
(ii) subscriber advance payments held by Seller as of the Closing Date for
services to be rendered by a System after the Closing Date, in the amount for
which Buyer received credit under SECTION 3.2 and (iii) the delivery of cable
television service to subscribers of the Business after the Closing Date; and
(b) obligations accruing and relating to periods after the Closing Date under
Governmental Permits listed on SCHEDULE 5.5 (to the extent that such
Governmental Permits are transferrable) and Seller Contracts. Buyer will not
assume or have any responsibility for any liabilities or obligations of Seller
other than the Assumed Liabilities. In no event will Buyer assume or have any
responsibility for any liabilities or obligations associated with the Excluded
Assets.
4.2 Excluded Assets. The Excluded Assets, which will be retained
---------------
by Seller, will consist of the following: (a) programming contracts (including
programming guide contracts), retransmission consent agreements and pole
attachment agreements (except for those set forth on SCHEDULE 5.6); (b) Employee
Benefit Plans; (c) insurance policies and rights and claims thereunder (except
as otherwise provided in SECTION 12.17); (d) bonds, letters of credit, surety
instruments and other similar items; (e) cash and cash equivalents and notes
receivable; (f) Seller's trademarks, trade names, service marks, service names,
logos and similar proprietary rights (subject to Buyer's rights under SECTION
7.16); (g) Seller's rights under any agreement governing or evidencing an
obligation of Seller for borrowed money; (h) Seller Contracts for subscriber
billing and equipment; (i) Seller's rights under any contract, license,
authorization, agreement or commitment other than those creating or evidencing
Assumed Liabilities; (j) any claims, rights and interests in and to any refunds
of federal, state or local franchise, income or other taxes or fees for periods
prior to the Closing Date; and (k) the assets described on SCHEDULE 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of the Closing, as follows:
5.1 Organization and Qualification. Seller is a general
------------------------------
partnership duly organized, validly existing and in good standing under the laws
of the State of Colorado and has all requisite partnership power and authority
to own, lease and use the Assets owned, leased or used by it and to conduct the
Business as it is currently conducted. Seller is duly qualified to do business
and is in good standing under the laws of each jurisdiction in which the
ownership, leasing or use of the Assets owned, leased or used by it or the
nature of Seller's activities makes such qualification necessary, except in any
such jurisdiction where the failure to be so qualified and in good standing
would not have a material adverse effect on the Business, the Assets or the
Systems or on the ability of Seller
-10-
<PAGE>
to perform its obligations under this Agreement. The
general partners of Seller are IDS/Jones Growth Partners 89-B, Ltd., IDS/Jones
Growth Partners II, L.P., IDS Management Corporation and Intercable.
5.2 Authority and Validity. Seller has all requisite partnership
----------------------
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and all other
documents and instruments to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") to which Seller is a party. The execution and delivery by Seller
of, the performance by Seller of its obligations under, and the consummation by
Seller of the transactions contemplated by, this Agreement and the Transaction
Documents to which Seller is a party have been duly and validly authorized by
all necessary action by or on behalf of Seller. This Agreement has been, and
when executed and delivered by Seller the Transaction Documents will be, duly
and validly executed and delivered by Seller and the valid and binding
obligations of Seller, enforceable against Seller in accordance with their
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to the enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
5.3 No Conflict; Required Consents. Except for the Required
------------------------------
Consents, all of which are listed on SCHEDULE 5.3, the execution and delivery by
Seller, the performance of Seller under, and the consummation of the
transactions contemplated by, this Agreement and the Transaction Documents to
which Seller is a party do not and will not: (a) violate any provision of the
Partnership Agreement of Seller; (b) violate any Legal Requirement; (c) require
any consent, approval or authorization of, or filing of any certificate, notice,
application, report or other document with any Governmental Authority or other
Person; or (d) (i) violate or result in a breach of or default under (without
regard to requirements of notice, lapse of time, or elections of any Person, or
any combination thereof), (ii) permit or result in the termination, suspension
or modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under any Seller Contract or any other
instrument evidencing any of the Assets or by which Seller or any of its assets
is bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications, and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on any System, the Business or Seller, the validity, binding
effect or enforceability of this Agreement or on the ability of Seller to
perform its obligations under this Agreement or the Transaction Documents to
which Seller is a party.
5.4 Assets. Seller has exclusive, good and marketable title to (or,
------
in the case of Assets that are leased, valid leasehold interests in) the Assets
(other than Real Property, as to which the representations and warranties in
SECTION 5.7 apply). The Assets are free and clear of all Encumbrances, except
(a) Permitted Encumbrances and (b) Encumbrances described on SCHEDULE 5.4-I, all
of which will be terminated, released or, in the case of rights of refusal
listed on
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<PAGE>
SCHEDULE 5.4-I, waived, as appropriate, at or prior to the Closing. Except as
described on SCHEDULE 5.6, none of the Equipment is leased by Seller from any
other Person. All the Equipment is in good operating condition and repair
(ordinary wear and tear excepted). Except for items included in the Excluded
Assets, and the items described in SCHEDULE 5.4-II, the Assets constitute all
the assets necessary to permit Buyer to (i) conduct the Business and to operate
the Systems substantially as they are being conducted and operated on the date
of this Agreement and in compliance in all material respects with all Legal
Requirements, Governmental Permits and Seller Contracts and (ii) perform all the
Assumed Liabilities.
5.5 Governmental Permits. All Governmental Permits are listed on
--------------------
SCHEDULE 5.5. Complete and correct copies of all Governmental Permits have been
delivered by Seller to Buyer. Each Governmental Permit is in full force and
effect and is valid under all applicable Legal Requirements according to its
terms, and Seller is not, except as described on SCHEDULE 5.5, and, to Seller's
Knowledge, the other party thereto is not, in breach or default of any material
terms or conditions thereunder. There is no legal action, governmental
proceeding or investigation, pending or, to Seller's Knowledge threatened, to
terminate, suspend or modify any Governmental Permit and Seller is in compliance
with the material terms and conditions of all the Governmental Permits and with
other material applicable requirements of all Governmental Authorities
(including the FCC and the Register of Copyrights) relating to the Governmental
Permits, including all requirements for notification, filing, reporting, posting
and maintenance of logs and records. Except as described on SCHEDULE 5.5, as of
the date of this Agreement, to Seller's Knowledge, no third party has been
granted or has applied for a cable television franchise or is providing or
intending to provide cable television services in any of the communities or
unincorporated areas currently served by the Business.
5.6 Seller Contracts. All Seller Contracts (other than those
----------------
constituting Excluded Assets) are described on SCHEDULE 5.6 or 5.7. Complete
and correct copies of all Seller Contracts have been delivered by Seller to
Buyer. Each Seller Contract is in full force and effect and constitutes the
valid, legal, binding and enforceable obligation of Seller and Seller is not and
to Seller's Knowledge each other party thereto is not, in breach or default of
any material terms or conditions thereunder.
5.7 Real Property.
-------------
5.7.1 All the Assets consisting of Real Property interests are
described on SCHEDULE 5.7. Except as otherwise disclosed on SCHEDULE 5.7,
Seller holds good, marketable and indefeasible fee simple title to the Real
Property shown as being owned by Seller on SCHEDULE 5.7 and the valid and
enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Seller has valid and enforceable leasehold interests in
Real Property shown as being leased by Seller on SCHEDULE 5.7 and, with respect
to other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 5.7, subject only
to
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<PAGE>
Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in good condition and repair and are suitable for the purposes used. The current
use and occupancy of the Real Property do not constitute nonconforming uses
under any applicable zoning Legal Requirements.
5.7.2 The documents delivered by Seller to Buyer as evidence of
each Seller Contract that is a lease of Real Property constitute the entire
agreement with the landlord in question. There are no leases or other
agreements, oral or written, granting to any Person other than Seller the right
to occupy or use any Real Property, except as described on SCHEDULE 5.7. All
easements, rights-of-way and other rights appurtenant to, or which are necessary
for Seller's current use of, any Real Property are valid and in full force and
effect, and Seller has not received any notice with respect to the termination,
breach or impairment of any of those rights. Each parcel of Real Property, any
improvements constructed thereon and their current use (a) has access to and
over all public streets, or private streets for which Seller has a valid right
of ingress and egress, (b) conforms in its current use and occupancy to all
zoning requirements without reliance upon a variance issued by a Governmental
Authority or a classification of the parcel in question as a nonconforming use,
and (c) conforms in all material respects in its use to all restrictive
covenants, if any, or other Encumbrances affecting all or part of such parcel.
5.8 Environmental Matters.
---------------------
5.8.1 The Real Property currently complies in all material
respects with and, to Seller's Knowledge, has previously been operated in
compliance in all material respects with, all Environmental Laws. Seller has not
directly or indirectly (a) generated, released, stored, used, treated, handled,
discharged or disposed of any Hazardous Substances at, on, under, in or about,
or in any other manner affecting, any Real Property, (b) transported any
Hazardous Substances to or from any Real Property or (c) undertaken or caused to
be undertaken any other activities relating to the Real Property which could
reasonably give rise to any liability under any Environmental Law, and, to
Seller's Knowledge, no other present or previous owner, tenant, occupant or user
of any Real Property or any other Person has committed or suffered any of the
foregoing. To Seller's Knowledge, (i) no release of Hazardous Substances outside
the Real Property has entered or threatens to enter any Real Property, nor (ii)
is there any pending or threatened claim based on Environmental Laws which
arises from any condition of the land surrounding any Real Property. No
litigation based on Environmental Laws which relates to any Real Property or any
operations on conditions on it (A) has been asserted or conducted in the past or
is currently pending against or with respect to Seller or, to Seller's
Knowledge, any other Person, or (B) to Seller's Knowledge is threatened or
contemplated.
5.8.2 To Seller's Knowledge, other than as described on SCHEDULE
5.8, (a) no aboveground or underground storage tanks are currently or have been
located on any Real Property, (b) no Real Property has been used at any time as
a gasoline service station or any other facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products or wastes and
(c) no building or other structure on any Real Property contains asbestos-
containing material.
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<PAGE>
5.8.3 Seller has provided Buyer with complete and correct copies
of (a) all studies, reports, surveys or other materials in Seller's possession
or, to Seller's Knowledge to which it has access, relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(b) all notices or other materials in Seller's possession or, to Seller's
Knowledge to which it has access, that were received from any Governmental
Authority having the power to administer or enforce any Environmental Laws
relating to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (c) all materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to any litigation or
allegation by any Person concerning any Environmental Law.
5.9 Compliance with Legal Requirements.
----------------------------------
5.9.1 The ownership, leasing and use of the Assets as they are
currently owned, leased and used and the conduct of the Business and the
operation of the Systems as they are currently conducted and operated do not
violate or infringe, in any material respect, any Legal Requirements currently
in effect (other than the Legal Requirements described in SECTION 5.9.4, as to
which the provisions of SECTION 5.9.4 will apply) other than as described on
SCHEDULE 5.9.1. Seller has received no notice of any violation by Seller or the
Business of any Legal Requirement applicable to the Business or the Systems as
currently conducted, and to Seller's Knowledge, there is no basis for the
allegation of any such a violation other than as described on SCHEDULE 5.9.1.
5.9.2 A valid request for renewal has been duly and timely filed
under Section 626 of the Cable Communications Policy Act of 1984 with the proper
Governmental Authority with respect to applicable Governmental Permits with
franchising authorities that have expired prior to, or will expire within 36
months after, the date of this Agreement.
5.9.3 Seller has complied, and the Business is in compliance, in
all material respects, with the specifications set forth in Part 76, Subpart K
of the rules and regulations of the FCC, Section 111 of the U.S. Copyright Act
of 1976 and the applicable rules and regulations thereunder and the applicable
rules and regulations of the U.S. Copyright Office, the Register of Copyrights,
the Copyright Royalty Tribunal and the Communications Act of 1934, including
provisions of any thereof pertaining to signal leakage, to utility pole make
ready and to grounding and bonding of cable television systems (in each case as
the same is currently in effect), and all other applicable Legal Requirements
relating to the construction, maintenance, ownership and operation of the
Assets, the Systems and the Business.
5.9.4 Notwithstanding the foregoing, to Seller's Knowledge, each
System is in compliance in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the FCC
rules and regulations promulgated thereunder (the "1992 Cable Act") as such
Legal Requirements relate to the operation of the Business; provided, however,
that Seller does not hereby make any representation about rates charged to
subscribers, other than the representation regarding the rates charged to
subscribers set forth below. Seller has
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<PAGE>
complied in all material respects with the must carry and retransmission consent
provisions of the 1992 Cable Act. Seller has used reasonable good faith efforts
to establish rates charged to subscribers, effective since September 1, 1993,
that are or were allowable under the 1992 Cable Act and any authoritative
interpretation thereof now or then in effect, whether or not such rates are or
were subject to regulation at that date by any Governmental Authority, including
any local franchising authority and/or the FCC, unless such rates were not
subject to regulation pursuant to a specific exemption from rate regulation
contained in the 1992 Cable Act other than the failure of any franchising
authority to have been certified to regulate rates. Notwithstanding the
foregoing, Seller makes no representation or warranty that the rates charged to
subscribers (a) are allowable under any rules and regulations of the FCC or any
authoritative interpretation thereof, or (b) would be allowable under any rules
and regulations of the FCC or any authoritative interpretation thereof
promulgated after the date of the Closing. Seller has delivered to Buyer
complete and correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215, 1220,
1225, 1235 and 1240 filed with respect to the Systems and copies of all other
FCC Forms filed by Seller and of all correspondence with any Governmental
Authority relating to rate regulation generally or specific rates charged to
subscribers with respect to the Systems, including copies of any complaints
filed with the FCC with respect to any rates charged to subscribers of the
Systems, and any other documentation supporting an exemption from the rate
regulation provisions of the 1992 Cable Act claimed by Seller with respect to
any of the Systems (collectively, "Rate Regulation Documents"). Except as
described in SCHEDULE 5.9.4, as of the date of this Agreement, Seller has
received no notice from any Governmental Authority with respect to an intention
to enforce customer service standards pursuant to the 1992 Cable Act and Seller
has not agreed with any Governmental Authority to establish customer service
standards that exceed the customer service standards promulgated pursuant to the
1992 Cable Act. In addition, Seller has also delivered to Buyer documentation
for each of the Systems in which the franchising authority has not certified to
regulate rates as of the date of this Agreement showing a determination of
allowable rates using a benchmark methodology. Except as described in SCHEDULE
5.9.4, Seller has not made any election with respect to any cost of service
proceeding conducted in accordance with Part 76.922 of Title 47 of the Code of
Federal Regulations or any similar proceeding (a "Cost of Service Election")
with respect to any of the Systems.
5.10 Patents, Trademarks and Copyrights. Seller has timely and
----------------------------------
accurately made all requisite filings and payments with the Register of
Copyrights with respect to the Business. Seller has delivered to Buyer complete
and correct copies of all current reports and filings, and all reports and
filings for the past three years, made or filed pursuant to copyright rules and
regulations with respect to the Business. Seller does not possess any patent,
patent right, trademark or copyright material to the operation of the Business
and Seller is not a party to any license or royalty agreement with respect to
any patent, trademark or copyright except for licenses respecting program
material and obligations under the Copyright Act of 1976 applicable to cable
television systems generally. The Business and the System have been operated in
such a manner so as not to violate or infringe upon the rights of, or give rise
to any rightful claim of any Person for copyright, trademark, service mark,
patent, license, trade secret infringement or the like.
-15-
<PAGE>
5.11 Financial Statements. Seller has delivered to Buyer a correct
--------------------
copy of the audited financial statements for the Systems as of December 31,
1997, including an audited income statement and balance sheet which fairly
present the financial condition of the Systems (collectively, the "Financial
Statements"). At the date of the Financial Statements, Seller had no liability
or obligation, whether accrued, absolute, fixed or contingent (including
liabilities for Taxes or unusual forward or long-term commitments), required by
GAAP to be reflected or reserved against therein that were not fully reflected
or reserved against on the balance sheet included in the Financial Statements,
other than liabilities included in current liabilities, and none of which was or
would be material to the Business.
5.12 Absence of Certain Changes. Since December 31, 1997, (a) Seller
--------------------------
has not incurred any obligation or liability (contingent or otherwise), except
normal trade or business obligations incurred in the ordinary course of
business, the performance of which would be reasonably likely, individually or
in the aggregate, to have a material adverse effect on the financial condition
or results of operations of the Business, (b) there has been no material adverse
change (except any material adverse change caused by or arising from other
multiple channel distribution services or any material adverse change affecting
the United States cable industry as a whole, including any change arising from
(i) legislation, litigation, rulemaking or regulation or (ii) competition) in
the business, condition (financial or otherwise) or liabilities of the Business,
and (c) the Business has been conducted only in the ordinary course of business.
5.13 Legal Proceedings. Except as set forth in SCHEDULE 5.13: (a)
-----------------
there is no claim, investigation or litigation pending or, to Seller's
Knowledge, threatened, by or before any Governmental Authority or private
arbitration tribunal against Seller which, if adversely determined, would
materially adversely affect the financial condition or operations of the
Business, the Systems, the Assets or the ability of Seller to perform its
obligations under this Agreement, or which, if adversely determined, would
result in the modification, revocation, termination, suspension or other
limitation of any of the Governmental Permits, Seller Contracts or leases or
other documents evidencing the Real Property; and (b) there is not in existence
any judgment requiring Seller to take any action of any kind with respect to the
Assets or the operation of the Systems, or to which Seller (with respect to the
Systems), the Systems or the Assets are subject or by which they are bound or
affected.
5.14 Tax Returns; Other Reports. Seller has duly and timely filed in
--------------------------
correct form all federal, state and local Tax returns and all other Tax reports
required to be filed by Seller and has timely paid all Taxes which have become
due and payable, whether or not shown on any such report or return, the failure
of which to be filed or paid could adversely affect the Assets or result in the
imposition of an Encumbrance upon the Assets, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as specifically identified on SCHEDULE 5.14, Seller has received no
notice of, nor does Seller have any Knowledge of, any deficiency, assessment or
audit, or proposed deficiency, assessment or audit from any taxing Governmental
Authority which could affect or result in the imposition of an Encumbrance upon
the Assets.
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<PAGE>
5.1 Employment Matters.
------------------
5.15.1 SCHEDULE 5.15 contains a complete and correct list of
names and positions of all employees of Seller engaged in the Business as of the
date set forth in such SCHEDULE. Seller has no employment agreements, either
written or oral, with any employee of the Business. Seller has complied in all
material respects with applicable Legal Requirements relating to the employment
of labor, including WARN, the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), continuation coverage requirements with respect to group
health plans, and those relating to wages, hours, collective bargaining,
unemployment insurance, worker's compensation, equal employment opportunity, age
and disability discrimination, immigration control and the payment and
withholding of Taxes.
5.15.2 Each "employee benefit plan" or "multiemployer plan" (as
those terms are defined in ERISA) with respect to which Seller or any ERISA
Affiliate (as defined in ERISA) of Seller has any liability is set forth on
SCHEDULE 5.15 (the "Employee Benefit Plans"). Neither Seller nor its ERISA
Affiliates nor any Employee Benefit Plan is in material violation of any
provision of ERISA. No "reportable event," as defined in Section 4043 of ERISA,
has occurred and is continuing with respect to any Employee Benefit Plan. No
"prohibited transaction," within the meaning of Section 406 of ERISA, has
occurred with respect to any such Employee Benefit Plan, and no "accumulated
funding deficiency" or "withdrawal liability" (both as defined in Section 302 of
ERISA) exists with respect to any such Employee Benefit Plan. After the
Closing, Buyer will not be required, under ERISA, the Code or any collective
bargaining agreement, to establish, maintain or continue any Employee Benefit
Plan currently maintained by Seller or any of its ERISA Affiliates, other than
those required by the collective bargaining agreement described on SCHEDULE
5.15.
5.15.3 Other than as described on SCHEDULE 5.15, Seller is not a
party to any collective bargaining agreements and Seller has not recognized or
agreed to recognize and has no duty to bargain with any labor organization or
collective bargaining unit. Other than as described on SCHEDULE 5.15, as of the
date of this Agreement, there are not pending any unfair labor practice charges
against Seller, any demand for recognition or any other request or demand from a
labor organization for representative status with respect to any Person employed
by Seller; provided, however, that if any of the matters described in this
sentence occur between the date of this Agreement and the Closing Date, they
will not be considered Assumed Liabilities and Seller will indemnify Buyer with
respect thereto in accordance with SECTION 11.2(A)(IV) of this Agreement. Other
than as described on SCHEDULE 5.15, to Seller's Knowledge, its employees are not
engaged in organizing activity with respect to any labor organization. Seller
has no employment agreement, either written or oral, express or implied, that
would require Buyer to employ any Person after the Closing Date.
5.16 Systems Information. SCHEDULE 5.16 sets forth a materially
-------------------
true and accurate description of the following information relating to the
Business as of the most recent monthly report generated by Seller in the
ordinary course of business containing the information required to prepare
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<PAGE>
such SCHEDULE (provided that such date is no earlier than two months prior to
the date of this Agreement):
(a) the approximate number of miles of plant included in the
Assets;
(b) the number of EBSs served by the Systems for each
franchise;
(c) the approximate number of single family homes and
residential dwelling units passed by the Systems;
(d) a description of basic and optional or tier services
available from the Systems, the rates charged by Seller for each and the number
of subscribers and subscriber equivalents receiving each optional or tier
service;
(e) the stations and signals carried by the Systems and the
channel position of each such signal and station; and
(f) the cities, towns, villages, townships, boroughs and
counties served by the Systems.
5.17 Bonds. Except as set forth on SCHEDULE 5.17, as of the date
-----
of this Agreement, there are no franchise, construction, fidelity, performance,
or other bonds or letters of credit posted by Seller in connection with its
operation or ownership of any of the Systems or Assets.
5.18 Finders and Brokers. Seller has not employed any financial
-------------------
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer could be liable.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller, as of the date of this Agreement and as of the Closing, as
follows:
6.1 Organization and Qualification. Buyer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
use the assets owned, leased or used by it and to conduct its business as it is
currently conducted. Buyer is duly qualified to do business and is in good
standing under the laws of the State of Illinois, and of each jurisdiction in
which the ownership, leasing or use of the assets owned, leased or used by it or
the nature of Buyer's activities makes such qualification necessary, except in
any such jurisdiction where the failure to be so qualified and in good standing
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<PAGE>
would not have a material adverse effect on Buyer or on the ability of Buyer to
perform its obligations under this Agreement.
6.2 Authority and Validity. Buyer has all requisite corporate power
----------------------
and authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party. The execution and delivery by Buyer of,
the performance by Buyer of its obligations under, and the consummation by Buyer
of the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party have been duly and validly authorized by all
necessary action by or on behalf of Buyer. This Agreement has been, and when
executed and delivered by Buyer the Transaction Documents will be, duly and
validly executed and delivered by Buyer and the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to the
enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
6.3 No Conflicts; Required Consents. Except for the Required
-------------------------------
Consents, the execution and delivery by Buyer, the performance of Buyer under,
and the consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party do not and will not (a) violate
any provision of the charter or bylaws of Buyer, (b) violate any Legal
Requirement, (c) require any consent, approval or authorization of, or filing of
any certificate, notice, application, report or other document with any
Governmental Authority or other Person or (d) (i) violate or result in a breach
of or constitute a default under (without regard to requirements of notice,
lapse of time or elections of any Person or any combination thereof), (ii)
permit or result in the termination, suspension, modification of, (iii) result
in the acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of any
Encumbrance under, any instrument or other agreement to which Buyer is a party
or by which Buyer or any of its assets is bound or affected, except for purposes
of this clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have a material adverse effect on the validity, binding effect or
enforceability of this Agreement or on the ability of Buyer to perform its
obligations under this Agreement or the Transaction Documents to which it is a
party.
6.4 Finders and Brokers. Buyer has not employed any financial
-------------------
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller could be liable.
6.5 Legal Proceedings. There are no claims, actions, suits,
-----------------
proceedings or investigations pending or, to Buyer's Knowledge, threatened, by
or before any Governmental Authority, or any arbitrator, by or against or
affecting or relating to Buyer which, if adversely determined, would restrain or
enjoin the consummation of the transactions contemplated by this
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<PAGE>
Agreement or declare unlawful the transactions or events contemplated by this
Agreement or cause any of such transactions to be rescinded.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this
------------------------------
Agreement and the Closing Date, Seller will give Buyer and its counsel,
accountants and other representatives full access during normal business hours
upon reasonable notice to all the premises and books and records of the Business
and to all the Assets and to the System personnel and will furnish to Buyer and
such representatives all such documents, financial information, and other
information regarding the Business and the Assets as Buyer from time to time
reasonably may request; provided that no such investigation will affect or limit
the scope of any of Seller's representations, warranties, covenants and
indemnities in this Agreement or any Transaction Document or limit liability for
any breach of any of the foregoing.
7.2 Continuity and Maintenance of Operations; Financial Statements.
--------------------------------------------------------------
Except as Buyer may otherwise consent in writing, between the date of this
Agreement and the Closing (including between the 1031 Closing Date and the
Closing Date, if applicable):
7.2.1 Seller will conduct the Business and operate the Systems
only in the usual, regular and ordinary course consistent with past practices
and in material compliance with the 1998 operating and capital budgets for the
Systems, true and complete copies of which have been provided by Seller to Buyer
(including making budgeted capital expenditures, completing line extensions
consistent with prudent business practices, and fulfilling installation
requests), and will use commercially reasonable efforts to (a) preserve its
current business intact, including preserving existing relationships with
franchising authorities, suppliers, customers and others having business
dealings with Seller relating to the Business unless Buyer requests otherwise,
(b) keep available the services of its employees and agents providing services
in connection with the Business and (c) continue making marketing, advertising
and promotional expenditures with respect to the Business consistent with past
practices.
7.2.2 Seller will maintain the Assets in good repair, order
and condition (ordinary wear and tear excepted), will maintain equipment and
inventory at historical levels consistent with past practices (and will have at
least a 30-day supply of inventory on hand for each System at Closing), will
maintain in full force and effect policies of insurance with respect to the
Business in such amounts and with respect to such risks as customarily
maintained by operators of cable television systems of the size and geographic
location as the Systems and will maintain its books, records and accounts in the
usual, regular and ordinary manner on a basis consistent with past practices.
Seller will not itself, and will not permit any of its partners, officers,
directors, shareholders, agents or employees to, pay any of Seller's subscriber
accounts receivable (other than for their own residences) prior to the Closing
Date. Seller will continue to implement its procedures
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for disconnection and discontinuance of service to subscribers whose accounts
are delinquent in accordance with those in effect on the date of this Agreement.
7.2.3 Without the prior approval of Buyer, Seller will not (a)
change the rate charged for Basic Service, Expanded Basic Service or Pay TV or
add, delete, retier or repackage any programming services except to the extent
required under the 1992 Cable Act or any other Legal Requirement, provided
however if Seller changes such rates in order to so comply, Seller will provide
Buyer with copies of any FCC forms (even if not filed with any Governmental
Authority) that Seller used to determine that the new rates were allowable, (b)
make any Cost of Service Election with respect to any of the Systems other than
those Cost of Service Elections described on SCHEDULE 5.9.4, (c) sell, transfer
or assign any portion of the Assets other than sales in the ordinary course of
business or permit the creation of any Encumbrance on any Asset other than a
Permitted Encumbrance or any Encumbrance which will be released at or prior to
Closing, (d) modify in any material respect, terminate, suspend or abrogate any
Governmental Permits, Seller Contracts or any other contract or agreement (other
than those constituting Excluded Assets), (e) enter into any contract or
commitment or incur any indebtedness or other liability or obligation of any
kind relating to any System or the Business involving an expenditure in excess
of $50,000 under any single contract or commitment, or $100,000 in the aggregate
under all such contracts and commitments (other than any leases for real
property which shall not be entered into without Buyer's consent regardless of
the monetary commitment involved), other than contracts or commitments which are
cancellable on 30 days' notice or less without penalty, (f) take or omit to take
any action that would result in any of its representations or warranties in this
Agreement or in any Transaction Document not being true and correct when made or
as of the Closing, (g) engage in any marketing, subscriber installation or
collection practices that are inconsistent with past practices other than
marketing and/or installation practices which are reasonably necessary to match
offers being made by any competitor of the Systems, or (h) enter into any
agreement with or commitment to any competitive access providers with respect to
the Systems.
7.2.4 Seller promptly will deliver to Buyer true and complete
copies of monthly and quarterly financial statements and operating reports and
any reports with respect to the operations of the Business prepared by or for
Seller at any time between the date of this Agreement and the Closing Date. All
financial statements so delivered will be prepared in accordance with GAAP on a
basis consistent with the Financial Statements.
7.2.5 Seller will give or cause to be given to Buyer as soon as
reasonably possible but in any event no later than 5 Business Days prior to the
date of submission to the appropriate Governmental Authority, copies of all Rate
Regulation Documents prepared with respect to any of the Systems, and Seller
will make a good faith effort to address any specific concerns raised by Buyer
with respect to such documents.
7.2.6 Seller will duly and timely file a valid notice of renewal
under Section 626 of the Cable Communications Policy Act of 1984 with the
appropriate Governmental
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Authority with respect to all cable television franchises of the Business that
will expire within 36 months after any date between the date of this Agreement
and the Closing Date.
7.2.7 Seller will promptly notify Buyer of any fact,
circumstance, event or action by it or otherwise (a) which, if known at the date
of this Agreement, would have been required to be disclosed in or pursuant to
this Agreement or (b) the existence, occurrence or taking of which would result
in any of Seller's representations and warranties in this Agreement or any
Transaction Document not being true, complete and correct when made or at the
Closing, and, with respect to clause (b) use its best efforts to remedy the
same.
7.3 Employee Matters.
----------------
7.3.1 Buyer will have no obligation to employ or offer
employment to any of the employees of Seller. As of the Closing Date, Seller
will terminate the employment of all its employees who were employed incidental
to the conduct of the Business whose employment will not continue with Seller
after the Closing and will promptly pay to all such employees all compensation,
including salaries, commissions, bonuses, deferred compensation, severance,
insurance, pensions, profit sharing, vacation (except for accrued vacation
included in the adjustments pursuant to SECTION 3.2), sick pay and other
compensation or benefits to which they are entitled for periods prior to the
Closing, including all amounts, if any, payable on account of the termination of
their employment. Seller agrees to cooperate in all reasonable respects with
Buyer to allow Buyer to evaluate and interview employees of the Business to make
hiring decisions. Such cooperation will include allowing Buyer to contact
employees during work time and, with the consent of the employee, making
personnel records available. Buyer will give Seller written notice on or before
60 days after the date of this Agreement of the names of all employees of the
System to whom Buyer desires to offer employment on and after the Closing Date
(subject to satisfaction of Buyer's conditions for employment). Seller will not,
without the prior written consent of Buyer, change the compensation or benefits
of any employees of the Business except in accordance with past practice.
7.3.2 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other employee
benefit plans of Seller or arising under any Legal Requirement affecting
employees of Seller incurred on or before the Closing Date or resulting or
arising from events or occurrences occurring or commencing on or before the
Closing Date will remain the responsibility of Seller, whether or not such
employees are hired by Buyer after the Closing.
7.3.3 Seller will remain solely responsible for, and will
indemnify and hold harmless Buyer from and against all Losses arising from or
with respect to, all salaries and all severance, vacation (except for accrued
vacation included in the adjustments pursuant to SECTION 3.2), medical, sick,
holiday, continuation coverage and other compensation or benefits to which
Seller's employees (whether or not hired by Buyer) may be entitled as a result
of their employment by Seller prior to the Closing, the termination of their
employment prior to the Closing, the
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consummation of the transactions contemplated hereby or pursuant to any
applicable Legal Requirement (including WARN) or otherwise relating to their
employment prior to the Closing.
7.3.4 Nothing in this Agreement will require Buyer to assume any
collective bargaining agreement between Seller and any labor organization other
than the collective bargaining agreements described on SCHEDULE 5.15.
7.4 Leased Vehicles; Other Capital Leases. Seller will pay the
-------------------------------------
remaining balances on any leases for vehicles or capital leases included in the
Equipment and will deliver title to such vehicles and other Equipment free and
clear of all Encumbrances (other than Permitted Encumbrances) to Buyer at the
Closing.
7.5 Required Consents; Estoppel Certificates.
----------------------------------------
7.5.1 Seller will use commercially reasonable efforts to obtain
in writing, as promptly as possible and at its expense, all the Required
Consents and any other consent, authorization or approval required to be
obtained by Seller in connection with the transactions contemplated by this
Agreement, in form and substance reasonably satisfactory to Buyer and deliver to
Buyer copies of such Required Consents and such other consents, authorizations
or approvals promptly after they are obtained by Seller. Such Required Consents
will be proposed in a form that provides confirmation from the third party of
the continued existence of and the absence of defaults under the applicable
Seller Contract or Governmental Permit. Buyer will cooperate with Seller to
obtain all Required Consents, but Buyer will not be required to accept or agree
or accede to any modifications or amendments to, or changes in, or the
imposition of any condition to the transfer to Buyer of (in each case other than
inconsequential matters with no adverse effect on Buyer), any Seller Contract or
Governmental Permit that are not acceptable to Buyer in its sole discretion. As
soon as practicable after the execution of this Agreement, but in any event no
later than 30 days after such execution, the parties will deliver to the
appropriate Governmental Authority requests for the necessary consents to
transfer the Governmental Permits, and will complete, execute and deliver to the
appropriate Governmental Authority, the FCC Forms 394 prepared by Buyer with
respect to each Governmental Permit. Seller acknowledges that such requests for
consent and FCC Forms 394 may contain, if necessary under the terms of the
applicable Governmental Permit and if requested by Buyer, a request for consent
from the applicable Governmental Authority with respect to the merger of AT&T
Corp. and Buyer's parent corporation, Tele-Communications, Inc. (the "TCI/AT&T
Transaction"). In the alternative, Seller acknowledges that Buyer may file a
request for consent and FCC Form 394 for the TCI/AT&T Transaction with
applicable Governmental Authorities subsequent to such filings with respect to
the transactions contemplated by this Agreement but prior to the Closing.
7.5.2 Seller will use commercially reasonable efforts to obtain
for each lease that has not been recorded in the public records, execution of a
document suitable for recording in the public records and sufficient after
recording to constitute a memorandum of lease.
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7.6 Renewal or Extension of Franchises.
----------------------------------
7.6.1 Promptly after the execution of this Agreement, Seller
shall use commercially reasonable efforts, and Buyer shall cooperate with and
assist Seller in all reasonable respects (including attendance at meetings and
hearings before local franchising authorities and filing and signing any and all
applications, statements or documents required and reasonably satisfactory to
Buyer), to have cable television franchises covering at least 85% of the EBSs of
the Systems (determined based on the number of EBSs served by the Systems for
each franchise as set forth on SCHEDULE 5.16) extended or renewed so that they
expire no earlier than March 31, 2001, on terms and conditions reasonably
satisfactory to Buyer and Seller, which terms and conditions shall be evaluated
by Buyer and Seller in the context of extensions or renewals of similarly
situated franchises in the greater Chicago metropolitan area that have been
extended or renewed (or granted) for a comparable period of time or duration.
Seller will bear all costs required to remedy any item of noncompliance with the
terms of any franchise or to meet any current obligation under the terms of any
franchise in connection with obtaining any such extension or renewal. Buyer will
bear all costs associated with commitments made for capital expenditures to be
made after the Closing Date related to obtaining any such extension or renewal.
All other costs and expenses associated with obtaining any such extension or
renewal will be paid one-half by Seller and one-half by Buyer.
7.6.2 Seller shall keep Buyer informed of all meetings and
hearings with local franchising authorities relating to the extensions and/or
renewals of franchises, and Seller acknowledges and agrees that Buyer shall have
the right to participate in any such meetings or hearings and Buyer agrees that
its representatives will attend any such meetings or hearings upon the request
with reasonable advance notice of the relevant local franchising authority or
Seller.
7.7 Title Commitments and Surveys.
-----------------------------
7.7.1 After the execution of this Agreement, Buyer will order at
Seller's expense (a) commitments for owner's title insurance policies on all
Real Property owned by Seller and (b) an ALTA survey (including such items on
Table A of the Minimum Standard Detail Requirements and Classifications thereto
that Buyer in its reasonable judgment determines are desirable or necessary) on
each parcel of Real Property for which a title insurance policy is to be
obtained. The title commitments will evidence a commitment to issue an ALTA
title insurance policy insuring good, marketable and indefeasible fee simple
title to each parcel of such Real Property, subject only to Permitted
Encumbrances, for such amount as Buyer directs and will contain no exceptions
except for items which in Buyer's reasonable opinion do not adversely affect
(other than in an immaterial way as to any individual parcel) the good,
marketable and indefeasible title to or Buyer's access or quiet use or enjoyment
of such Real Property in the manner the Real Property is presently used or in
the normal conduct of the Business. At the Closing, Seller will cause Buyer to
receive, at Seller's expense, title commitments redated to the date and time of
Closing. In the event Seller has not eliminated or caused to be eliminated all
unacceptable exceptions from such policies or commitments
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prior to Closing, and Buyer elects to proceed with the Closing, Buyer will be
entitled to indemnification with respect to such exceptions as provided in
SECTION 11.2.
7.7.2. Title insurance policies on all Real Property owned by
Seller in such amounts as Buyer directs will be delivered to Buyer at Seller's
expense within 30 days after the Closing Date evidencing title to the Real
Property vested in Buyer consistent with the commitments delivered at the
Closing pursuant to SECTION 7.7.1.
7.8 HSR Notification. As soon as practicable after the
----------------
execution of this Agreement, but in any event no later than 30 days after such
execution, Seller and Buyer will each complete and file, or cause to be
completed and filed, any notification and report required to be filed under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); and each such filing will request early termination of the waiting period
imposed by the HSR Act. The parties will use their reasonable best efforts to
respond as promptly as reasonably practicable to any inquiries received from the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") for additional information or
documentation and to respond as promptly as reasonably practicable to all
inquiries and requests received from any other Governmental Authority in
connection with antitrust matters. The parties will use their respective
reasonable best efforts to overcome any objections which may be raised by the
FTC, the Antitrust Division or any other Governmental Authority having
jurisdiction over antitrust matters. Notwithstanding the foregoing, Buyer will
not be required to make any significant change in the operations or activities
of the business (or any material assets employed therein) of Buyer or any of its
Affiliates, if Buyer determines in good faith that such change would be
materially adverse to the operations or activities of the business (or any
material assets employed therein) of Buyer or any of its Affiliates having
significant assets, net worth, or revenue. Notwithstanding anything to the
contrary in this Agreement, if Buyer or Seller, in its sole opinion, considers a
request from a governmental agency for additional data and information in
connection with the HSR Act to be unduly burdensome, such party may terminate
this Agreement by giving written notice to the other. Within 10 days after
receipt of a statement therefor, Seller will reimburse Buyer for one-half of the
filing fees payable by Buyer in connection with Buyer's filing under the HSR
Act.
7.9 No Shopping. None of Seller, its partners or any agent or
-----------
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any portion of the Assets.
7.10 Lien and Judgment Searches. Not more than 20 nor fewer than
--------------------------
10 days prior to the expected Closing Date, Seller, at its expense, will provide
Buyer with (a) the results of a lien search conducted by a professional search
company of records in the offices of the secretaries of state in each state and
county clerks in each county where there exist tangible Assets, and in the state
and
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<PAGE>
county where Seller's principal offices are located, including copies of all
financing statements or similar notices or filings (and any continuation
statements) discovered by such search company and (b) the results of a search of
the dockets of the clerk of each federal and state court sitting in the city,
county or other applicable political subdivision where the principal office or
any material assets of Seller may be located, with respect to judgments, orders,
writs or decrees against or affecting Seller or any of the Assets.
7.11 Transfer Taxes. Any state sales Taxes imposed by any
--------------
Governmental Authority arising from or payable by reason of the transfer of any
of the Assets pursuant to this Agreement will be paid by Seller. Any Taxes
(other than state sales Taxes) or any fees or other charge (including filing
fees) imposed by any Governmental Authority arising from or payable by reason of
the transfer of any of the Assets pursuant to this Agreement will be paid one-
half by Buyer (but in no event will Buyer's share exceed $250,000), with the
balance to be paid by Seller.
7.12 Distant Broadcast Signals. Unless otherwise restricted or
-------------------------
prohibited by any Governmental Authority or applicable Legal Requirement, if
requested by Buyer, Seller will delete prior to the Closing Date any distant
broadcast signals which Buyer determines will result in unacceptable liability
on the part of Buyer for copyright payments with respect to continued carriage
of such signals after the Closing.
7.13 Guaranty. At the Closing, Seller will cause Intercable to
--------
sign and deliver to Buyer, a Guaranty in the form of EXHIBIT D.
7.14 Letter to Programmers. On or before the Closing Date, Seller
---------------------
will transmit a letter in the form of EXHIBIT E to all programmers from which
Seller purchases programming for the Systems and provide Buyer with a copy of
each such letter.
7.15 Updated Schedules. Not later than ten Business Days prior
-----------------
to the expected Closing Date, Seller will deliver to Buyer revised copies of all
Schedules to this Agreement which will have been updated and marked to show any
changes occurring between the date of this Agreement and the date of delivery;
provided, however, that for purposes of Seller's representations and warranties
and covenants in this Agreement, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing,
except to the extent that the Schedules have been revised to reflect actions
permitted or required to be taken under this Agreement between the date hereof
and the Closing Date, and provided further that if the effect of any such
updates to Schedules is to disclose any one or more additional properties,
privileges, rights, interests or claims as Assets, Buyer, at or before Closing,
will have the right (to be exercised by written notice to Seller) to cause any
one or more of such items to be designated as and deemed to constitute Excluded
Assets for all purposes under this Agreement, except to the extent that the
addition of such item by Seller was in compliance with SECTION 7.2.3(D) or (E)
or SECTION 7.6.
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<PAGE>
7.16 Use of Names and Logos. For a period of 90 days after the
----------------------
Closing Date, Buyer will be entitled to use all trademarks, trade names, service
marks, service names, logos and similar proprietary rights of Seller and all
derivations and abbreviations of such name and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
Notwithstanding the foregoing, Buyer will not be required to remove or
discontinue using any such trade name or mark that is affixed to converters or
other items in or to be used in subscriber homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable for
Buyer.
7.17 Subscriber Billing Services. Seller will provide to Buyer
---------------------------
on terms and conditions reasonably satisfactory to each party, access to and the
right to use its billing system computers, software and related fixed assets in
connection with the Systems acquired by Buyer for a period of up to 120 days
following the later of the Closing or termination of the Services Agreement to
allow for conversion of existing billing arrangements; provided however that
Buyer will not be required to pay Seller more than Seller's actual cost of
providing such service.
7.18 Satisfaction of Conditions. Each party will use its best
--------------------------
efforts to satisfy, or to cause to be satisfied, the conditions to the
obligations of the other party to consummate the transactions contemplated by
this Agreement, as set forth in SECTION 8, provided that Buyer will not be
required to agree to any increase in the amount payable with respect to, or any
modification that makes more burdensome in any material respect, any of the
Assumed Liabilities. In connection with satisfying the condition set forth in
SECTION 8.1.3, as soon as practicable after the execution of this Agreement,
Seller will prepare and file with the Securities and Exchange Commission all
forms and documents required with respect to obtaining the necessary approval of
the limited partners of each general partner of Seller to the transactions
contemplated by this Agreement; provided, that Seller will make such filing
within 30 days after the date of this Agreement if Seller has received the IDS
Consents (as defined in SECTION 10.1.5 below) by such date, or within 45 days
after the date of this Agreement if Seller has not received the IDS Consents
within 30 days after the date hereof.
7.19 Confidentiality and Publicity. Neither party will issue any
-----------------------------
press release or make any other public announcement or any oral or written
statements to Seller's employees concerning this Agreement or the transactions
contemplated hereby except as required by applicable Legal Requirements, without
the prior written consent of the other party. Each party will hold, and will
cause its employees, consultants, advisors and agents to hold the terms of this
Agreement in confidence; provided that (a) such party may use and disclose such
information once it has become publicly disclosed (other than by such party in
breach of its obligations under this Section) or which rightfully has come into
the possession of such party (other than from the other party) and (b) to the
extent that such party may be compelled by Legal Requirements to disclose any of
such information, but the party proposing to disclose such information will
first notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may disclose
such information to employees, consultants, advisors, agents and actual or
potential lenders whose knowledge is necessary to facilitate the consummation of
the transactions contemplated by this Agreement. The obligation by either party
to hold information in confidence pursuant to this Section
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will be satisfied if such party exercises the same care with respect to such
information as it would exercise to preserve the confidentiality of its own
similar information.
7.20 Bulk Transfers. Buyer waives compliance by Seller with Legal
--------------
Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.21 Environmental Reports. Within 60 days after the execution of
---------------------
this Agreement, Seller will, at its expense, obtain and deliver to Buyer for
each parcel of Real Property owned by Seller, and if reasonably requested by
Buyer within 30 days after the execution of this Agreement for any specific
parcel of Real Property leased by Seller, a current Phase I Environmental Site
Assessment ("Environmental Report") prepared by a nationally known environmental
engineering firm reasonably satisfactory to Buyer in accordance with ASTM
Standard E 1527-93 and certified to Buyer. If the Environmental Reports show
that soil and/or groundwater sampling is merited, the engineering firm will
conduct such soil and groundwater sampling and other testing as will enable the
environmental engineers to determine if Hazardous Substances are detected and to
provide an estimate of the cost to remove and dispose of the Hazardous
Substances or otherwise remediate the property in accordance with all applicable
Environmental Laws.
7.22 Section 1031. The parties shall cooperate with each other in
------------
order that the transactions contemplated under this Agreement may be
accomplished as part of a deferred exchange (the "1031 Transaction") pursuant to
Section 1031 of the Code and applicable Treasury Regulations and to execute such
agreements and other documents as may be necessary to complete and otherwise
effectuate a tax-deferred exchange; provided, however, that Seller shall not be
obligated to incur any costs, expenses or other liabilities in cooperating with
Buyer hereunder. Buyer shall be permitted to assign any or all of its rights
and obligations under this Agreement to a qualified intermediary without
Seller's consent for purposes of qualifying the transactions hereunder as a tax-
deferred exchange; provided, however, that the fees of such qualified
intermediary shall be paid by Buyer; and provided further, however, that nothing
in this Section shall be deemed to relieve Buyer of any of its obligations under
this Agreement, including its obligations to close the transactions contemplated
by this Agreement if the exchange described herein has not occurred within nine
months after the date of this Agreement and the conditions to Closing described
in SECTIONS 8.1 and 8.2 have been met or waived, subject to the rights of either
party to terminate the Agreement pursuant to SECTION 10.1.3.
7.23 MDU Agreements. If requested by Buyer within 120 days after
--------------
the execution of this Agreement or within 90 days after Seller notifies Buyer in
writing that Seller has begun to provide service to an MDU (as defined below)
pursuant to an oral agreement between the date of execution of this Agreement
and the Closing Date, Seller will use its reasonable efforts to obtain prior to
Closing a fully executed written agreement in a form reasonably satisfactory to
Buyer authorizing Buyer to provide service to any multiple dwelling complex or
trailer park ("MDU") with more than 250 units if Seller provides service to such
MDU on the date of this Agreement, or begins to provide service to such MDU
between the date of this Agreement and the Closing, pursuant to an oral
agreement.
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7.24 Services Agreement. If the consummation of any one or more of
------------------
the Related Transactions does not occur simultaneously with the consummation of
the transactions contemplated by this Agreement, at or prior to Closing Buyer
and Seller will enter into a Services Agreement (the "Services Agreement")
containing terms and conditions reasonably satisfactory to Buyer and Seller
pursuant to which (a) Seller will continue to provide services to Buyer, at
Seller's cost (including reasonable overhead), which will enable Buyer to
operate the Systems as they had been operated prior to the Closing, and (b)
Buyer will provide services to Seller, at Buyer's cost (including reasonable
overhead), which will enable Seller to operate the cable television systems to
be sold in the Related Transactions as they had been operated prior to the
Closing. Such services will be provided until the earlier of (i) the
consummation of all of the Related Transactions or (ii) the receipt by the party
providing such services of notice from the other party that it no longer desires
to have such services provided. Buyer and Seller agree to negotiate in good
faith to finalize the Services Agreement.
7.25 Year 2000 Matters.
-----------------
7.25.1 Certain Defined Terms. For purposes of this SECTION
---------------------
7.25, the following terms shall have the following meanings:
(a) "Computer and Other Systems" means any level of
hardware or software, equipment and cable plant, or building and other
facilities used in connection with the Assets or the Business which are date
dependent or which process date data, including any microcode, firmware,
application programs, user interfaces, files and databases, and which might be
adversely affected by the advent or changeover to the Year 2000 or to the advent
or changeover to any leap year.
(b) "Year 2000 Ready" or "Year 2000 Readiness" means
that the referenced component, system, software, equipment or other item (for
purposes of this definition, the "Computer System") is designed to be used prior
to, during and after the calendar year 2000 A.D., and that such Computer System
will operate at all levels, including microcode, firmware, application programs,
user interfaces, files and databases, during each such time period without error
or interruption relating to, or the product of, date data which represents or
references different centuries or more than one century or leap year.
(c) "Year 2000 Remediation Program" means an
enterprise wide program to make Year 2000 Ready all material components,
systems, software, equipment, facilities and other items related to the subject
entity's business. Such Year 2000 Remediation Program must be conducted by
persons deemed by Intercable to have experience relevant to issues related to
Year 2000 Readiness and such persons must have organized an enterprise wide
program which reports to executive level management of Intercable.
7.25.2 Year 2000 Readiness Efforts. Prior to the Closing
---------------------------
Date, Intercable shall establish and maintain a Year 2000 Remediation Program.
Pursuant to such Year 2000
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Remediation Program, all material Computer and Other Systems will be evaluated,
remediated and tested on the same general basis, and on the same general work
plan and timetable, as the other material computer systems, facilities and
equipment of Intercable and its affiliated entities. After the Closing Date
through June 30, 2000, Intercable will use commercially reasonable efforts to
provide Buyer with any non-confidential information possessed by Intercable and
reasonably requested by Buyer regarding the Year 2000 Readiness of any material
component of the Computer and Other Systems. The parties acknowledge that
nothing contained in this SECTION 7.25 shall constitute any representation,
guarantee or warranty that the Computer and Other Systems will be Year 2000
Ready at the Closing Date or thereafter.
7.26 Aurora I-NET. Seller shall, prior to Closing, (a)
------------
construct and activate the institutional network (the "I-NET") required by the
Aurora franchise, (b) reach an agreement with the City of Aurora and Buyer
satisfactory to Buyer with respect to the construction and activation of the I-
NET, or (c) reach an agreement with the City of Aurora to remove such
requirement from the franchise and pay all costs associated with such franchise
modification.
SECTION 8. CONDITIONS PRECEDENT.
8.1 Conditions to the Obligations of Buyer and Seller. The
-------------------------------------------------
obligations of each party to consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or before the Closing, of the
following, which may be waived by the parties to the extent permitted by
applicable Legal Requirements:
8.1.1 HSR Act Filings. All filings required under the HSR Act
---------------
have been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or threat of
any litigation by a Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or proceeding is
---------------------
pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of any
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement (excluding the ability to acquire
the Systems pursuant to a like-kind exchange under Section 1031 of the Code) or
have a material adverse effect on the right of Buyer to exercise full rights of
ownership of the Systems or (d) prevent or make illegal the consummation of any
transactions contemplated by this Agreement.
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8.1.3 Limited Partners' Approval. The approval of the limited
--------------------------
partners of each general partner of Seller of the consummation of the
transactions contemplated by this Agreement shall have been received.
8.2 Conditions to the Obligations of Buyer. The obligations
--------------------------------------
of Buyer to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or before the Closing, of the following
conditions, which may be waived by Buyer to the extent permitted by applicable
Legal Requirements:
8.2.1 Representations and Warranties. All representations and
------------------------------
warranties of Seller in this Agreement and any Transaction Document are, if
specifically qualified by materiality, true and correct in all respects and, if
not so qualified, are true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
8.2.2 Performance of Agreements. Seller has performed in all
-------------------------
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Seller at or before the Closing.
8.2.3 Deliveries. Seller has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.2.
8.2.4 Consents. Seller has delivered to Buyer evidence, in form
--------
and substance satisfactory to Buyer, that all of the Required Consents marked
with an asterisk on SCHEDULE 5.3 have been obtained or given (or deemed to have
been given) and are in full force and effect.
8.2.5 Environmental Matters. The Environmental Reports delivered
---------------------
to Buyer pursuant to SECTION 7.21 and any other environmental audits or
assessments conducted with respect to the Assets do not indicate the existence
of any conditions that could reasonably be expected to give rise to a material
risk of liability.
8.2.6 No Material Adverse Change. There has not been any material
--------------------------
adverse change in the Business, the Assets or the Systems since the date of this
Agreement other than any material adverse change caused by or arising from other
multiple channel distribution services or any material adverse change affecting
the United States cable television industry as a whole, including any change
arising from (a) legislation, litigation, rulemaking or regulation or (b)
competition.
8.2.7 EBS. As of the Closing Date, the Business has no fewer than
---
50,000 EBSs (the "EBS Condition").
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8.2.8 Franchises. Cable television franchises covering at least
----------
85% of the EBSs of the Systems, determined based on the number of EBSs served by
the Systems for each franchise as set forth on SCHEDULE 5.16, have a term
expiring no earlier than March 31, 2001. To the extent that Seller must obtain
an extension or renewal of any cable television franchise to meet the condition
described in this SECTION 8.2.8, any such extensions or renewals shall be on
terms and conditions reasonably satisfactory to Buyer and Seller evaluated in
the context of extensions or renewals of similarly situated franchises in the
greater Chicago metropolitan area that have been extended or renewed (or
granted) for a comparable period of time or duration, and Seller and Buyer will
allocate the costs associated with obtaining such extensions or renewals between
Seller and Buyer as described in SECTION 7.6.1.
8.2.9 1031 Exchange. The closing of Buyer's sale of certain
-------------
systems in a separate transaction to permit Buyer to accomplish the 1031
Transaction shall have occurred (the "1031 Condition"); provided, however, if
the 1031 Condition shall not have occurred on or before the date that is nine
months after the date of this Agreement (the "1031 Closing Date"), the 1031
Condition shall no longer be a condition to the obligations of Buyer to
consummate the transactions hereunder.
8.3 Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction by Seller at or before the Closing, of the following, which may be
waived by Seller, to the extent permitted by applicable Legal Requirements:
8.3.1 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement and any Transaction Document
are, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, are true and correct in all material respects, in each
case on and as of the Closing Date with the same effect as if made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
8.3.2 Performance of Agreements. Buyer has performed in all
-------------------------
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Buyer at or before the Closing.
8.3.3 Deliveries. Buyer has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.3.
8.3.4 EBS. As of the Closing Date, either (a) the Business has no
---
fewer than 50,000 EBSs or (b) Buyer has waived its right to an adjustment
pursuant to SECTION 3.2.1 except to the extent of the adjustment applicable if
the number of EBSs were 50,000.
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8.4 Waiver of Conditions. Any party may waive in writing any
--------------------
or all of the conditions to its obligations under this Agreement.
SECTION 9. CLOSING.
9.1 The Closing; Time and Place. The Closing will be held on
---------------------------
a date specified by Buyer (upon three Business Days prior notice to Seller) that
is within 15 days after all conditions to the Closing contained in this
Agreement (other than those based on acts to be performed at the Closing) have
been satisfied or waived; provided, however, that if the 1031 Condition is
eliminated as provided in SECTION 8.2.9, the Closing will be held on a date
specified by Buyer (upon three Business Days prior notice to Seller) after all
conditions to Closing contained in this Agreement (other than those based on
acts to be performed at the Closing) have been satisfied or waived and within
three months after the date of elimination of the 1031 Condition as provided in
SECTION 8.2.9, and provided further that if all conditions to Buyer's
obligations to Closing (other than the 1031 Condition) have been satisfied or
waived by Buyer on or before the 1031 Closing Date, but Buyer elects to specify
a date after the 1031 Closing Date as the Closing Date as provided in the
preceding provisions of this SECTION 9.1, then for purposes of determining the
satisfaction of the EBS Condition and calculating the EBS Shortfall Adjustment,
the number of EBSs of the Systems shall be determined as of the 1031 Closing
Date regardless of the actual date of Closing. The Closing will be held at 10:00
a.m. local time at Buyer's counsel's office located at 633 Seventeenth Street,
Suite 3000, Denver, Colorado 80202, or at such place and time as Buyer and
Seller may agree.
9.2 Seller's Delivery Obligations. At the Closing, Seller will
-----------------------------
deliver (or cause to be delivered) to Buyer the following:
(a) a Bill of Sale in the form attached as EXHIBIT A;
(b) a special warranty deed in a form reasonably acceptable
to Buyer (and complying with applicable state laws) with respect to each parcel
of owned Real Property, duly executed and acknowledged and in recordable form,
warranting to defend title to such Real Property against all persons claiming
by, through or under Seller, subject only to Permitted Encumbrances, and in form
sufficient to permit the title company to issue the title policy described in
SECTION 7.7.1 to Buyer with respect to such Real Property;
(c) an Assignment and Assumption of Contracts in the form
attached as EXHIBIT B;
(d) one or more Assignments of Leases in the form attached
as EXHIBIT C and, if requested by Buyer, short forms or memoranda of such
Assignments in recordable form;
(e) any memorandum of lease obtained by Seller pursuant to
SECTION 7.5.2;
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(f) a Guaranty signed by Intercable in the form attached as
EXHIBIT D;
(g) an affidavit of Seller, under penalty of perjury, that
Seller is not a "foreign person" (as defined in the Foreign Investment in Real
Property Tax Act and applicable regulations) and that Buyer is not required to
withhold any portion of the consideration payable under this Agreement under the
provisions of such Act in the form attached as EXHIBIT F;
(h) motor vehicle title certificates and such other transfer
instruments as Buyer may deem necessary or advisable to transfer the Assets to
Buyer and to perfect Buyer's rights in the Assets;
(i) the opinion of Elizabeth Steele, Esq., counsel for Seller,
dated the Closing Date, in the form set forth in EXHIBIT G;
(j) evidence satisfactory to Buyer that all Encumbrances
affecting any of the Assets (other than Permitted Encumbrances) have been
terminated and released;
(k) the title insurance commitments described in SECTION
7.7.1;
(l) a certificate, dated the Closing Date, signed by the
President or any Vice President of JCC, stating that to his or her knowledge,
the conditions set forth in SECTIONS 8.2.1, 8.2.2 and 8.2.7 are satisfied;
(m) the Escrow Agreement in the form attached as EXHIBIT I;
(n) if required pursuant to SECTION 7.24, the Services
Agreement; and
(o) such other documents as Buyer may reasonably request in
connection with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations. At the Closing, Buyer will deliver
----------------------------
(or cause to be delivered) to Seller the following:
(a) the portion of the Base Purchase Price required to be paid
to Seller at the Closing as provided in SECTION 3.1.1, as adjusted in accordance
with this Agreement, and the portion of the Base Purchase Price required to be
delivered to the Escrow Agent at the Closing as provided in SECTION 3.1.2;
(b) a Bill of Sale in the form attached as EXHIBIT A;
(c) an Assignment and Assumption of Contracts in the form
attached as EXHIBIT B;
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(d) a certificate, dated the Closing Date, signed by an
executive officer of Buyer, stating that to his or her knowledge, the conditions
set forth in SECTIONS 8.3.1 and 8.3.2, are satisfied;
(e) an opinion of Mary S. Willis, Esq., counsel to Buyer,
dated the Closing Date, in the form set forth in EXHIBIT H;
(f) the Escrow Agreement in the form attached as EXHIBIT I;
(g) if required pursuant to SECTION 7.24, the Services
Agreement; and
(h) such other documents as Seller may reasonably request in
connection with the transactions contemplated by this Agreement.
SECTION 10. TERMINATION.
10.1 Termination Events. This Agreement may be terminated and
------------------
the transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of Buyer
and Seller;
10.1.2 By either party at any time, if the other is in
material breach or default of any of its covenants, agreements or other
obligations in this Agreement or in any Transaction Document, or if any of its
representations in this Agreement or in any Transaction Document is not true in
all material respects when made or when otherwise required by this Agreement or
any Transaction Document to be true and such breach or default or failure to be
true is not cured or waived prior to Closing;
10.1.3 By either party upon written notice to the other, if
Closing has not occurred on or before one year from the date of this Agreement
for any reason other than a material breach or default by such party of its
respective covenants, agreements or other obligations under this Agreement, or
any of its representations in this Agreement not being true and accurate in all
material respects when made or when otherwise required by this Agreement to be
true and accurate in all material respects;
10.1.4 By Buyer, within 45 days after the date hereof (the
"Approval Deadline"), if the board of directors of Buyer has not approved the
transactions contemplated by this Agreement (for any reason) on or before the
Approval Deadline;
10.1.5 By Seller, on or before the Approval Deadline, (a) if
the boards of directors of JCC and Intercable have not approved the transactions
contemplated by this Agreement (for any reason) on or before such date, or (b)
if the approval of (i) IDS Cable Corporation, the
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Supervising General Partner of IDS/Jones Growth Partners 89-B, Ltd., and (ii)
IDS II Cable Corporation, the Supervising General Partner of IDS/Jones Growth
Partners II, L.P., of the consummation of the transactions contemplated by this
Agreement (together, the "IDS Consents") have not been obtained (for any reason)
on or before such date; or
10.1.6 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to SECTION 10.1, all obligations of the parties under this Agreement
will terminate, except for the obligations set forth in SECTIONS 7.19 and 12.16.
Termination of this Agreement pursuant to SECTIONS 10.1.2 OR 10.1.3 will not
limit or impair any remedies that any party may have with respect to a breach or
default by the other of its covenants, agreements or obligations under this
Agreement. Buyer will have no liability in any event upon exercise of its right
to terminate this Agreement pursuant to SECTION 10.1.4. Seller will have no
liability in any event upon exercise of its right to terminate this Agreement
pursuant to SECTION 10.1.5.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
11.1 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the parties in this Agreement and in the
Transaction Documents will survive until November 15, 1999 if the Closing occurs
on or before February 15, 1999, or until the first anniversary of the Closing
Date if the Closing occurs after February 15, 1999, except that (a) all such
representations and warranties of Seller with respect to any federal, state or
local Taxes, rates, Environmental Law, ERISA, employment matters or copyright
matters will survive until 60 days after the expiration of the applicable
statute of limitations (including any extensions) for such federal, state or
local Taxes, rates, Environmental Law, ERISA, employment matters or copyright
matters, respectively and (b) the representations and warranties of Seller as to
ownership of the Assets in SECTION 5.4, SECTION 5.7.1 and in the deed or deeds
delivered with respect to Real Property will survive the Closing and the
delivery of such deeds and will continue in full force and effect without
limitation. The periods of survival of the representations and warranties
prescribed by this SECTION 11.1 are referred to as the "Survival Period." The
liabilities of the parties under their respective representations and warranties
will expire as of the expiration of the applicable Survival Period; provided,
however, that such expiration will not include, extend or apply to any
representation or warranty, the breach of which has been asserted by a party in
a written notice to the other party before such expiration or about which such
party has given the other party written notice before such expiration indicating
that facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail). The covenants and agreements of the parties in
this Agreement (that are by their terms intended to be performed after Closing)
and in the Transaction Documents to be delivered by Seller or Buyer pursuant to
this Agreement, will survive the Closing and will continue in full force and
effect without limitation.
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11.2 Indemnification by Seller. Seller will indemnify and hold
-------------------------
harmless Buyer and its shareholders and its and their respective Affiliates, and
their shareholders, directors, officers, employees, agents, successors and
assigns and any Person claiming by or through any of them, as the case may be,
from and against:
(a) all Losses resulting from or arising out of (i) any breach of
any representation or warranty made by Seller in this Agreement or in the
Transactions Documents delivered by Seller, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or in the
Transaction Documents delivered by Seller, (iii) any act or omission of Seller
with respect to, or any event or circumstance related to, the ownership or
operation of the Assets or the conduct of the Business, which act, omission,
event or circumstance occurred or existed prior to or at the Closing Date,
without regard to whether a claim with respect to such matter is asserted before
or after the Closing Date, including any matter described on SCHEDULE 5.13, (iv)
any liability or obligation not included in the Assumed Liabilities, (v) any
title defect Seller fails to eliminate as an exception from a title insurance
commitment referred to in SECTION 7.7.1, (vi) any claim that the transactions
contemplated by this Agreement violates WARN, or any similar state or local law
or any bulk transfer or fraudulent conveyance laws of any jurisdiction, (vii)
the presence, generation, removal or transportation of a Hazardous Substance on
or from any of the Real Property prior to the Closing Date, including the costs
of removal or clean-up of such Hazardous Substance and other compliance with the
provisions of any Environmental Laws (whether before or after Closing), or
(viii) any rate refund ordered by any Governmental Authority for periods prior
to the Closing Date; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) through (a)(viii) of this SECTION 11.2, Buyer's
rights to pursue its claim under clauses (a)(ii) through (a)(viii), as
applicable, will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (a)(i).
11.3 Indemnification by Buyer. Buyer will indemnify and hold harmless
------------------------
Seller and Seller's partners and its and their respective Affiliates, and their
shareholders, directors, officers, employees, agents, successors and assigns and
any Person claiming by or through any of them, as the case may be, from and
against:
(a) all Losses resulting from or arising out of (i) any breach of
any representation or warranty made by Buyer in this Agreement or in the
Transaction Documents delivered by Buyer, (ii) any breach of any covenant,
agreement or obligation of Buyer contained in this Agreement or in the
Transaction Documents delivered by Buyer or (iii) the failure by Buyer to
perform any of its obligations in respect of the Assumed Liabilities; and
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(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) or (a)(iii) of this SECTION 11.3, Seller's rights
to pursue its claim under clauses (a)(ii) or (a)(iii), as applicable, will exist
notwithstanding the expiration of the Survival Period applicable to such claim
under clause (a)(i).
11.4 Third Party Claims. Promptly after the receipt by any party of
------------------
notice of any claim, action, suit or proceeding by any Person who is not a party
to this Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified Party") will
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action under
the terms of this SECTION 11, (b) notifies the Indemnified Party in writing of
the Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be liable
as a result of such Action and (d) retains legal counsel reasonably satisfactory
to the Indemnified Party to conduct the defense of such Action. The other party
will cooperate with the party assuming the defense, compromise or settlement of
any such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Action, but the fees and expenses of such counsel will be at
the expense of the Indemnified Party unless (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) any relief other than the payment of
money damages is sought against the Indemnified Party or (iii) the Indemnified
Party will have been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnity provided in this SECTION 11 will be paid by the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this SECTION 11.4. No Indemnifying Party will settle
or compromise any such Action (A) in which any relief other than the payment of
money damages is sought against any Indemnified Party or (B) in the case of any
Action relating to the Indemnified Party's liability for any Tax, if the effect
of such settlement would be an increase in the liability of the Indemnified
Party for the payment of any Tax for any period beginning
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after the Closing Date, unless the Indemnified Party consents in writing to such
compromise or settlement.
11.5 Limitations on Indemnification - Seller. Seller will not be
---------------------------------------
liable for indemnification arising solely under SECTION 11.2(A)(I) for (a) any
Losses of or to Buyer or any other person entitled to indemnification from
Seller or (b) any claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incidental or relating to or resulting from any of the
foregoing (the items described in clauses (a) and (b) collectively being
referred to for purposes of this SECTION 11.5 as "Buyer Damages") unless the
amount of Buyer Damages for which Seller would, but for the provisions of this
SECTION 11.5, be liable exceeds, on an aggregate basis, $250,000, in which case
Seller will be liable for all such Buyer Damages, which will be due and payable
within 15 days after Seller's receipt of a statement therefor.
11.6 Limitations on Indemnification - Buyer. Buyer will not be
--------------------------------------
liable for indemnification arising solely under SECTION 11.3(A)(I) for (a) any
Losses of or to Seller or any other person entitled to indemnification from
Buyer or (b) any claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incidental or relating to or resulting from any of the
foregoing the items described in clauses (a) and (b) collectively being referred
to for purposes of this SECTION 11.6 as "Seller Damages") unless the amount of
Seller Damages for which Buyer would, but for the provisions of this SECTION
11.6, be liable exceeds, on an aggregate basis, $250,000, in which case Buyer
will be liable for all such Seller Damages, which will be due and payable within
15 days after Buyer's receipt of a statement therefor.
SECTION 12. MISCELLANEOUS.
12.1 Parties Obligated and Benefited. Subject to the limitations set
-------------------------------
forth below, this Agreement will be binding upon the parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Without the prior written consent of the other party, neither party
may assign any of its rights under this Agreement or delegate any of its duties
under this Agreement, except as described in the following sentence. Seller
agrees (a) that Buyer will have the right to assign its rights and obligations
under this Agreement to any Affiliate of Buyer, provided, however, that any
assignment by Buyer to any Affiliate of Buyer must be made within five months
after the date of this Agreement and if made after filing of the Forms 394 with
the relevant Governmental Authorities, Buyer will be responsible for all costs
and expenses associated with filing any additional Forms 394 required to be
filed as a result of any such assignment by Buyer to an Affiliate of Buyer, and
(b) that either Buyer or any Affiliate of Buyer to which Buyer has assigned its
rights and obligations under this Agreement as provided in the preceding clause
(a) of this SECTION 12.1 may further assign its right to purchase the Assets
under this Agreement to Norwest Bank Colorado, National Association, acting as a
Qualified Intermediary (as
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such term is used in Treas. Reg. Section 1.1031(k)-1(g)(4)), and that this
Agreement constitutes notice to Seller of such assignment, which assignment
Buyer will make effective immediately prior to Closing (provided no assignment
by Buyer under this SECTION 12.1 will relieve Buyer of any obligations under
this Agreement).
12.2 Notices. Any notice, request, demand, waiver or other
-------
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier,
overnight delivery service or, if receipt is confirmed, by telecopier:
To Buyer at:
c/o Tele-Communications, Inc.
5619 DTC Parkway
Englewood Colorado 80111
Attention: William R. Fitzgerald
Telecopy: (303) 267-6672
With a copy similarly addressed to the attention of Legal
Department, and
With a copy to:
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Attention: Peggy B. Knight, Esq.
Telecopy: (303) 298-0940
To Seller at:
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
Englewood, Colorado 80112
Attention: President
Telecopy: (303) 799-1644
With a copy similarly addressed to the attention of Legal
Department.
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Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this SECTION 12.2. All
notices will be deemed to have been given only upon actual receipt.
12.3 Attorneys' Fees. In the event of any action or suit based upon
---------------
or arising out of any alleged breach by any party of any representation,
warranty, covenant or agreement contained in this Agreement, the prevailing
party will be entitled to recover reasonable attorneys' fees and other costs of
such action or suit from the other party.
12.4 Waiver. This Agreement or any of its provisions may not be
------
waived except in writing. The failure of any party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
12.5 Captions. The captions of this Agreement are for convenience
--------
only and do not constitute a part of this Agreement.
12.6 CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES
-------------
UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH
THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES
OF COLORADO.
12.7 Terms. Terms used with initial capital letters will have the
-----
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense.
12.8 Rights Cumulative. All rights and remedies of each of the
-----------------
parties under this Agreement will be cumulative, and the exercise of one or more
rights or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.9 Further Actions. Seller and Buyer will execute and deliver to
---------------
the other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
12.10 Time. Time is of the essence under this Agreement. If the last
----
day permitted for the giving of any notice or the performance of any act
required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding Business Day.
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12.11 Late Payments. If either party fails to pay the other any
-------------
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the date of payment at the annual rate publicly announced from
time to time by The Bank of New York as its prime rate (the "Prime Rate") plus
2%, adjusted as and when changes in the Prime Rate are made.
12.12 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be deemed an original.
12.13 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) and the Transaction Documents contain the entire
agreement of the parties and supersedes all prior oral or written agreements and
understandings with respect to the subject matter. This Agreement may not be
amended or modified except by a writing signed by the parties.
12.14 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer and
------------
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.16 Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
12.17 Risk of Loss; Condemnation.
--------------------------
12.17.1 Seller will bear the risk of any loss or damage to the
Assets resulting from fire, theft or other casualty (except reasonable wear and
tear) at all times prior to the Closing. If any such loss or damage is
sufficiently substantial so as to preclude or prevent resumption of normal
operations of any material portion of a System or the replacement or restoration
of the lost or damaged property within 30 days from the occurrence of the event
resulting in such loss or damage, Seller will immediately notify Buyer in
writing of that fact and Buyer, at any time within 10 days after receipt of such
notice, may elect by written notice to Seller either (a) to waive such defect
and proceed toward consummation of the transaction in accordance with terms of
this Agreement or (b) terminate this Agreement. If Buyer elects to so terminate
this Agreement, Buyer and Seller will stand fully released and discharged of any
and all obligations under this Agreement. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or
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damage and does so, there will be no adjustment in the consideration payable to
Seller on account of such loss or damage but all insurance proceeds payable as a
result of the occurrence of the event resulting in such loss or damage (to the
extent not used to replace or restore such lost or damaged property) will be
delivered by Seller to Buyer, or the rights to such proceeds will be assigned by
Seller to Buyer if not yet paid over to Seller.
12.17.2 If, prior to the Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller or Buyer
that it intends to condemn all or any part of or interest in the Assets (such
event being called, in either case, a "Taking"), and such Taking involves a
material part of or interest in the Assets, then Buyer may terminate this
Agreement. If Buyer does not elect or have the right to terminate this
Agreement, then (a) Buyer will have the sole right, in the name of Seller, if
Buyer so elects, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller will be relieved of its obligation to convey
to Buyer the Assets or interests that are the subject of the Taking, (c) at the
Closing Seller will assign to Buyer all of Seller's rights to all damages
payable with respect to such Taking and will pay to Buyer all damages previously
paid to Seller with respect to the Taking and (d) following the Closing, Seller
will give Buyer such further assurances of such rights and assignment with
respect to the taking as Buyer may from time to time reasonably request.
-43-
<PAGE>
The parties have executed this Agreement as of the day and year first
above written.
SELLER:
IDS/JONES JOINT VENTURE PARTNERS
By: IDS/Jones Growth Partners 89-B, Ltd. and
IDS/Jones Growth Partners II, L.P., its
general partners
By: Jones Cable Corporation, their general
partner
By:___________________________________________
Name:_________________________________________
Title:________________________________________
BUYER:
TCI COMMUNICATIONS, INC.
By: /s/ William R. Fitzgerald
-----------------------------------------------
Name: William R. Fitzgerald
---------------------------------------------
Title: Executive Vice President
--------------------------------------------
-44-
<PAGE>
The parties have executed this Agreement as of the day and year first
above written.
SELLER:
IDS/JONES JOINT VENTURE PARTNERS
By: IDS/Jones Growth Partners 89-B, Ltd. and
IDS/Jones Growth Partners II, L.P., its
general partners
By: Jones Cable Corporation, their general
partner
By: /s/ Elizabeth Steele
-----------------------------------------
Name: Elizabeth Steele
---------------------------------------
Title: Vice President
--------------------------------------
BUYER:
TCI COMMUNICATIONS, INC.
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
-45-
<PAGE>
Exhibit 99.2
September 15, 1998
RE: NOTICE OF PROXY MAILING: PROPOSED SALE OF THE AURORA ILLINOIS CABLE
TELEVISION SYSTEM BY IDS/JONES GROWTH PARTNERS II,
L.P.
Dear Beneficial Owner of IDS/Jones Growth Partners II, L.P.:
Our records indicate that you are a beneficial owner of limited partnership
interest in IDS/Jones Growth Partners II, L.P. (the "Partnership"). Enclosed for
your information and review are proxy solicitation materials.
Your qualified plan trustee/custodian, which is the registered owner of your
limited partnership interests, has authorized Jones Cable Corporation, the
Managing General Partner, to mail these proxy materials directly to you and has
authorized its clients, the beneficial owners, to execute the proxy cards on its
behalf.
By this authorization, your signature will be legally sufficient and your vote
of the limited partnership interests registered in the name of the
trustee/custodian will be counted without the trustee/custodian's
countersignature.
PLEASE VOTE, DATE AND SIGN AS BENEFICIAL OWNER (INVESTOR), AND RETURN YOUR
SIGNED PROXY CARD TO US IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE, BUT NO
LATER THAN OCTOBER 30, 1998.
----------------
If the proposed sale is consummated, the Partnership will mail your share of
the net sales proceeds to your Trustee for your benefit, and the Partnership
will notify you that the distribution has occurred. The closing of the sale of
the Aurora System is scheduled to occur during the fourth quarter of 1998.
No further distributions from the Partnership are expected other than from the
Partnership's portion of any amounts remaining after November 15, 1999 in the
indemnity escrow account. After the sale of the Aurora System and the
distribution of the net sales proceeds, including the amounts, if any, remaining
after November 15, 1999, the Partnership will be liquidated and dissolved, most
likely in the fourth quarter of 1999.
For 1998 tax planning, please refer to the Proxy Statement under the caption
Federal Income Tax Consequences including Reporting by Tax Exempt Entities.
- ------------------------------- --------------------------------
If you have any questions, please call the Jones Investor Services Department.
Sincerely,
Jones Cable Corporation
Managing General Partner
<PAGE>
Exhibit 99.3
To: Registered Representative of Clients in IDS/Jones Growth Partners II, L.P.
From: Jones Cable Corporation, Managing General Partner
Date: September 15, 1998
RE: NOTICE OF PROXY MAILING: PROPOSED SALE OF THE AURORA ILLINOIS CABLE
TELEVISION SYSTEM BY IDS/JONES JOINT VENTURE
PARTNERS
IDS/Jones Joint Venture Partners (the "Venture") - comprised of IDS/Jones Growth
Partners II, L.P. (the "Partnership") and IDS/Jones Growth Partners 89-B, Ltd.
("Growth Partners 89-B") - plans to sell its Aurora System to an unaffiliated
third party during the fourth quarter of 1998.
PROXY INFORMATION
- -----------------
The proposed sale and the distribution of net proceeds are contingent upon the
approval by the holders of a majority of the limited partnership interests of
each of the Partnership and Growth Partners 89-B, as well as the consents of
government authorities and other third parties. Enclosed for you information is
a copy of the Growth Partners II Notice and Proxy Statement. The proxy record
----------------
date is August 31, 1998.
- -----------------------
For taxable accounts, proxy materials are being sent directly to investors.
- --------------------
For tax-exempt accounts (IRAs and other qualified plans), proxy materials are
- -----------------------
being sent according to the instructions of the Trustees-which are the
registered owners of investors' interests in those plans. Some Trustees required
us to send proxy materials directly to their clients, the beneficial owners, and
to accept the investors' signatures as legally sufficient, to count the votes
without the Trustee's countersignature. Other Trustees required us to mail their
clients' proxy materials directly to the Trustee for their handling.
THE PROXY DUE DATE IS OCTOBER 30, 1998, BUT WE HOPE TO HAVE ALL VOTES IN AS SOON
----------------
AS POSSIBLE.
DISTRIBUTION INFORMATION
- ------------------------
If the proposed sale is consummated, limited partners in Growth Partners II are
expected to receive approximately $788 for each $1000 invested. Distribution
checks will be issued according to the account registration or payment
instruction of record. The closing of the sale is scheduled to occur during the
fourth quarter of 1998.
Under the Asset Purchase Agreement, the Venture will deposit $3,283,500 of the
sale proceeds into an indemnity escrow account until November 15, 1999. Any
funds remaining from this account at the end of the escrow period and not
subject to a claim by the buyer will be distributed to the partners of the
Venture and the Partnership and Growth Partners 89-B will be liquidated and
dissolved, most likely in the fourth quarter of 1999.
CLIENT SUMMARY
- --------------
Please review the enclosed list that shows registration and check information
for each of your clients in Growth Partners II. IF YOU FIND ANY DISCREPANCIES IN
THIS INFORMATION OR HAVE QUESTIONS, PLEASE CALL THE JONES INVESTOR SERVICES
DEPARTMENT AS SOON AS POSSIBLE.
Enclosures
<PAGE>
Exhibit 99.4
To: Qualified Plan Trustee/Custodian
From: Jones Cable Corporation, Managing General Partner
Date: September 15, 1998
RE: NOTICE OF PROXY MAILING: PROPOSED SALE OF THE AURORA ILLINOIS CABLE
TELEVISION SYSTEM BY IDS/JONES GROWTH PARTNERS
II, L.P.
IDS/Jones Growth Partners II, L.P. (the "Partnership") plans to sell its Aurora
System to an unaffiliated third party during the fourth quarter of 1998.
PROXY INFORMATION
- -----------------
The proposed sale and the distribution of net proceeds are contingent upon the
approval by the holders of a majority of the limited partnership interests of
each of the Partnership and IDS/Jones Growth Partners 89-B, Ltd., as well as the
consents of government authorities and other third parties. The proxy record
----------------
date is August 31, 1998.
- -----------------------
ENCLOSED PLEASE FIND PROXY MATERIALS FOR EACH INTEREST IN YOUR NAME AS THE
ENTITY REGISTERED AS A LIMITED PARTNER ON THE BOOKS AND RECORDS OF THE
PARTNERSHIP.
IMPORTANT
YOUR SIGNATURE AS AUTHORIZED TRUSTEE MUST BE ON EACH PROXY IN ORDER FOR
------------------------------------------------------------------------
THE VOTES TO BE COUNTED. If you send the proxies to your clients for their
-----------------------
vote and signature, please instruct the clients to return the proxies to
you for YOUR COUNTERSIGNATURE!
---------------------
PLEASE THEN RETURN THE PROXIES, WITH YOUR COUNTERSIGNATURE AS AUTHORIZED
TRUSTEE, TO US IN THE ENVELOPE PROVIDED, AS SOON AS POSSIBLE, BUT NO LATER
--------
THAN OCTOBER 30, 1998. Please note that you must bear any and all costs
---------------------
associated with proxy mailing services.
DISTRIBUTION INFORMATION
- ------------------------
If the proposed sale is consummated, the Partnership will distribute $788 for
each $1,000 invested. The Partnership will mail net sales proceeds to you on
behalf of the Beneficial Owners, and the Partnership will notify the Beneficial
Owners that the distribution has occurred.
After the closing of the sale of the Aurora System and the distribution of net
sales proceeds, including amounts, if any remaining after November 15, 1999 in
an indemnity escrow account, the Partnership will be liquidated and dissolved,
most likely in the fourth quarter of 1999.
1998 FEDERAL REPORTING BY TAX EXEMPT ENTITIES
- ---------------------------------------------
The sale of the Aurora System will generate Unrelated Business Taxable Income
(UBTI), which will require the filing of Form 990-T. WE STRONGLY URGE YOU TO
----------
REFER TO THE TAX DISCUSSION ON PAGES 12-14 OF THE PROXY STATEMENT FOR
INFORMATION THAT IS PROVIDED SOLELY FOR TAX PLANNING PURPOSES.
If you have any questions, please call the Jones Investor Services Department.
Enclosures
<PAGE>
Exhibit 99.5
To: Qualified Plan Trustee/Custodian
From: Jones Cable Corporation, Managing General Partner
Date: September 15, 1998
RE: NOTICE OF PROXY MAILING: PROPOSED SALE OF THE AURORA ILLINOIS CABLE
TELEVISION SYSTEM, BY IDS/JONES GROWTH
PARTNERS II, L.P.
IDS/Jones Growth Partners II, L.P. (the "Partnership") plans to sell its Aurora
System to an unaffiliated third party during the fourth quarter of 1998.
PROXY INFORMATION
- -----------------
The proposed sale and the distribution of net proceeds are contingent upon the
approval by the holders of a majority of the limited partnership interests of
each of the partnership and IDS/Jones Growth Partners 89-B, Ltd. As well as the
consents of government authorities and other third parties. The proxy record
----------------
date is August 31, 1998.
- -----------------------
According to our records, you have authorized the Managing General Partner to
send proxy materials directly to your clients, the beneficial owners of the
limited partnership interests that are registered in your name and for which you
act as trustee/custodian, and you have authorized the beneficial owners to
execute the proxy cards on your behalf without your countersignature.
At your request, the Managing General Partner has sent proxy materials directly
to such beneficial owners. THE DEADLINE FOR THE RETURN OF THE PROXY VOTE BY
LIMITED PARTNERS IS SEPTEMBER 30, 1998, BUT WE HOPE TO HAVE ALL VOTES IN AS
------------------
SOON AS POSSIBLE.
DISTRIBUTION INFORMATION
- ------------------------
If the proposed sale is consummated, the Partnership will distribute $788 for
each $1,000 invested. The Partnership will mail net sales proceeds to you on
behalf of the Beneficial Owners, and the Partnership will notify the Beneficial
Owners that the distribution has occurred.
After the closing of the sale of the Aurora System and the distribution of net
sales proceeds, including amounts, if any remaining after November 15, 1999 in
an indemnity escrow account, the Partnership will be liquidated and dissolved,
most likely in the fourth quarter of 1999.
1998 FEDERAL REPORTING BY TAX EXEMPT ENTITIES
- ---------------------------------------------
The sale of the Aurora System will generate Unrelated Business Taxable Income
(UBTI), which will require the filing of Form 990-T. WE STRONGLY URGE YOU TO
----------
REFER TO THE TAX DISCUSSION ON PAGES 12-14 OF THE PROXY STATEMENT FOR
INFORMATION THAT IS PROVIDED SOLELY FOR TAX PLANNING PURPOSES.
CLIENT SUMMARY
- --------------
Enclosed please find a copy of the Growth Partners II Notice and Proxy Statement
and the Managing General Partner's list of the beneficial owners of limited
partnership interest that are registered in your name. IF YOU FIND ANY
DISCREPANCIES IN THIS INFORMATION OR HAVE ANY QUESTIONS, PLEASE CALL THE JONES
INVESTOR SERVICES DEPARTMENT AS SOON AS POSSIBLE.
Enclosures
