-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VyD4TIBdWoRxQcHVEjTgkz8wXWPaYxpF9neb1AZb6K++v1yKNTbx1/39GOkZK2AO YhKw70RvTCfuuC1sg5exEQ== 0000950134-96-001019.txt : 19960401 0000950134-96-001019.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950134-96-001019 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CABLE TV FUND 11-B LTD CENTRAL INDEX KEY: 0000725684 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 840908730 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11911 FILM NUMBER: 96541485 BUSINESS ADDRESS: STREET 1: P.O.BOX 3309 STREET 2: 9697 EAST MINERAL AVENUE CITY: ENGLEWOOD STATE: CO ZIP: 80155-3309 BUSINESS PHONE: 3037923111 MAIL ADDRESS: STREET 1: 9697 E MINERAL AVE PO BOX 3309 STREET 2: C/O JONES INTERCABLE INC CITY: ENGLEWOOD STATE: CO ZIP: 80155-3309 10-K 1 FORM 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ---------- ----------- Commission file number: 0-11911 CABLE TV FUND 11-B, LTD. ------------------------ (Exact name of registrant as specified in its charter)
Colorado 84-0908730 - --------------------------------------------- --------------------------------- (State of Organization) (IRS Employer Identification No.) P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111 - --------------------------------------------- --------------------------------- (Address of principal executive office and Zip Code) (Registrant's telephone no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests Indicate by check mark whether the registrants, (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days: Yes x No ----- ----- Aggregate market value of the voting stock held by non-affiliates of the registrant: N/A Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. DOCUMENTS INCORPORATED BY REFERENCE: None 2 PART I. ITEM 1. BUSINESS THE PARTNERSHIP. Cable TV Fund 11-B, Ltd. (the "Partnership") is a Colorado limited partnership that was formed pursuant to the public offering of limited partnership interests in the Cable TV Fund 11 Limited Partnership Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the "General Partner"). Cable TV Fund 11-A, Ltd. ("Fund 11-A"), Cable TV Fund 11-C, Ltd. ("Fund 11-C") and Cable TV Fund 11-D, Ltd. ("Fund 11-D") are the other partnerships that were formed pursuant to the Program. The Partnership, Fund 11-A, Fund 11-C and Fund 11-D formed a general partnership known as Cable TV Joint Fund 11 (the "Venture") in which the Partnership owns an 8 percent interest, Fund 11-A owns an 18 percent interest, Fund 11-C owns a 27 percent interest and Fund 11-D owns a 47 percent interest. The Partnership and the Venture were formed for the purpose of acquiring and operating cable television systems. The Partnership directly owns cable television systems serving the communities of Lancaster, Lockport and Orchard Park, New York (the "New York System"), and the Venture operates a cable television system in Manitowoc, Wisconsin (the "Manitowoc System"). See Item 2. The New York System and the Manitowoc System may collectively hereinafter be referred to as the "Systems." PROPOSED DISPOSITIONS OF CABLE TELEVISION SYSTEMS. On October 6, 1995, the Partnership entered into an asset purchase agreement pursuant to which it agreed to sell the New York System to Global Acquisition Partners, L.P., an unaffiliated cable television system operator, for a sales price of $84,000,000 in cash, subject to normal working capital closing adjustments. The closing of the sale of the New York System is subject to a number of conditions, including approval of the transaction by the holders of a majority of the Partnership's limited partnership interests, which has been obtained, and the consent of the state and local franchising authorities to the transfer of the New York System's franchises, the approval of the Federal Communications Commission to the transfer of certain licenses and the consent of third parties with whom the Partnership has real property leases to the transfer thereof. The New York state cable authority has conditionally approved the sale of the New York System by the Partnership. Approvals of certain of the local franchising authorities to the transfer of certain of the New York System's franchises have been obtained. The remaining local government approvals are pending, and the General Partner expects that all such approvals will be obtained before the end of March 1996. The approvals of the Federal Communications Commission to the transfer of certain of the New York System's franchises also are pending and are expected to be received in the near future. Closing of this sale is expected to occur on or about April 1, 1996. Upon consummation of the proposed sale of the New York System, working capital closing adjustments will be determined, the Partnership will pay all of its indebtedness, which totaled approximately $23,808,000 at December 31, 1995, its sales tax liability of approximately $1,750,000 and a brokerage fee of $2,100,000 to The Jones Group, Ltd., a subsidiary of the General Partner, and then the Partnership will distribute the approximate $56,047,500 net proceeds to its partners of record as of February 29, 1996. Because limited partners have already received distributions in an amount equal to 100 percent of the capital initially contributed to the Partnership by the limited partners, the net proceeds from the New York System's sale will be distributed 75 percent to the limited partners and 25 percent to the General Partner. Based upon the pro forma financial information as of December 31, 1995, as a result of the New York System's sale, the limited partners of the Partnership, as a group, will receive approximately $42,035,600 and the General Partner will receive approximately $14,011,900. Limited partners will receive $1,105 for each $500 limited partnership interest, or $2,211 for each $1,000 invested in the Partnership, from the net proceeds of the New York System's sale. Once the distribution of the net proceeds from the sale of the New York System has been made, limited partners will have received a total of $1,605 for each $500 limited partnership interest, or $3,211 for each $1,000 invested in the Partnership, taking into account distributions to limited partners made in July 1990 and July 1992. The Partnership will continue to own its 8 percent interest in the Venture until the Manitowoc System also is sold, as discussed below. Upon the closing of the sale of the Partnership's New York System and the Venture's Manitowoc System, the Partnership will be liquidated and dissolved. 2 3 On September 5, 1995, the Venture entered into an asset purchase agreement pursuant to which it agreed to sell the Manitowoc System to the General Partner for a sales price of $15,735,667, subject to normal working capital closing adjustments. This sales price represents the average of three separate independent appraisals of the fair market value of the Manitowoc System obtained by the General Partner, and it was the only bid tendered in a public bidding process for the Manitowoc System. The General Partner has assigned its rights and obligations under the asset purchase agreement to Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary of the General Partner. The sale of the Manitowoc System is subject to a number of conditions, including approval of the transaction by the holders of a majority of the limited partnership interests in each of the four partnerships that comprise the Venture and approvals from governmental authorities and other third parties necessary to the transfer of the Manitowoc System. If all conditions precedent to JCH's obligation to close are not eventually satisfied or waived, JCH's obligation to purchase the Manitowoc System will terminate on September 30, 1996. In order to sell the Manitowoc System, the Venture must obtain the consent of the City of Manitowoc and third parties with whom the Venture has contracts related to the Manitowoc System, such as pole attachment agreements or other service agreements, to the transfer thereof. The Venture was unsuccessful in its efforts to sell the Manitowoc System in June 1990, at the time of the Venture's sale of its remaining Wisconsin cable television systems, due to the refusal of the City of Manitowoc to consent to the transfer of the system's franchise. Negotiations with the City of Manitowoc with respect to the renewal and transfer of the Manitowoc System's franchise are continuing, and the Manitowoc System currently is being operated pursuant to a temporary extension of the franchise's term. The General Partner hopes that the City ultimately will agree to the renewal and transfer of the franchise and that the City will not take any action that will prevent the closing of the sale of the Manitowoc System, but given the current status of the Venture's negotiations with the City there can be no assurance that the sale will occur as planned. The General Partner intends to conduct votes of the limited partners of each of the four partnerships that comprise the Venture to seek their approval of the Manitowoc System's sale. Because the limited partners of each of the four partnerships that comprise the Venture previously approved the sale of the Manitowoc System in 1990 only to have such sale frustrated by the refusal by the City of Manitowoc to consent to the transfer of the Manitowoc System's franchise, the General Partner believes it prudent to conduct the votes of the limited partners only after the City of Manitowoc consents to the transfer of the franchise. As discussed above, there can be no assurance that the City will consent to the transfer of the Manitowoc System's franchise. If the proposed sale of the Manitowoc System is closed, the Venture will pay all of its indebtedness, which totaled $55,175 at December 31, 1995, including the $45,258 owed to the General Partner, and then the net sale proceeds and the Venture's cash on hand, which total $18,420,800, will be distributed to the four constituent partnerships of the Venture in proportion to their ownership interests in the Venture. The Partnership accordingly will receive 8 percent of such proceeds, estimated to total approximately $1,432,700. Because limited partners will have already received distributions in an amount in excess of the capital initially contributed to the Partnership by the limited partners, the Partnership's portion of the net proceeds from the Manitowoc System's sale will be distributed 75 percent to the limited partners and 25 percent to the General Partner. Based upon pro forma financial information as of December 31, 1995, as a result of the Manitowoc System's sale, the limited partners of the Partnership, as a group, will receive approximately $1,074,500 and the General Partner will receive approximately $358,200. Limited partners will receive $28 for each $500 limited partnership interest, or $57 for each $1,000 invested in the Partnership, from the Partnership's portion of the net proceeds of the Manitowoc System's sale. Once the Partnership has completed the distribution of its portion of the net proceeds from the sale of the Manitowoc System, limited partners of the Partnership will have received a total of $1,634 for each $500 limited partnership interest, or $3,267 for each $1,000 invested in the Partnership, taking into account the prior distributions to limited partners made in 1990 and 1992, and the distribution to be made on the 3 4 sale of the Partnership's New York System in May 1996. After the Partnership distributes its portion of the proceeds from the sale of the Manitowoc System to its partners, the Partnership will be dissolved and liquidated. Although it previously was announced that the General Partner intended to acquire and then transfer the Manitowoc System to Time Warner Entertainment Company, L.P. ("Time Warner") as part of a larger exchange of cable television systems between the General Partner and Time Warner, the General Partner and Time Warner have agreed to exclude the Manitowoc System from that exchange. CABLE TELEVISION SERVICES. The Systems offer to their subscribers various types of programming, which include basic service, tier service, premium service, pay-per-view programs and packages including several of these services at combined rates. Basic cable television service usually consists of signals of all four national television networks, various independent and educational television stations (both VHF and UHF) and certain signals received from satellites. Basic service also usually includes programs originated locally by the system, which may consist of music, news, weather reports, stock market and financial information and live or videotaped programs of a public service or entertainment nature. FM radio signals are also frequently distributed to subscribers as part of the basic service. The Systems offer tier services on an optional basis to their subscribers. A tier generally includes most of the cable networks such as Entertainment and Sports Programming Network (ESPN), Cable News Network (CNN), Turner Network Television (TNT), Family Channel, Discovery and others, and the cable television operators buy tier programming from these networks. The Systems also offer a package that includes the basic service channels and the tier services. The Systems also offer premium services to their subscribers, which consist of feature films, sporting events and other special features that are presented without commercial interruption. The cable television operators buy premium programming from suppliers such as HBO, Showtime, Cinemax or others at a cost based on the number of subscribers the cable operator serves. Premium service programming usually is significantly more expensive than the basic service or tier service programming, and consequently cable operators price premium service separately when sold to subscribers. The Systems also offer to subscribers pay-per-view programming. Pay-per-view is a service that allows subscribers to receive single programs, frequently consisting of motion pictures that have recently completed their theatrical exhibitions and major sporting events, and to pay for such service on a program-by-program basis. REVENUES. Monthly service fees for basic, tier and premium services constitute the major source of revenue for the Systems. At December 31, 1995, the Systems' monthly basic service rates ranged from $5.00 to $11.08, monthly basic and tier ("basic plus") service rates ranged from $18.76 to $23.45, and monthly premium services ranged from $3.95 to $12.95 per premium service. In addition, the Partnership and the Venture earn revenues from the Systems' pay-per-view programs and advertising fees. Related charges may include a nonrecurring installation fee that ranges from $4.89 to $35.00; however, from time to time the Systems have followed the common industry practice of reducing or waiving the installation fee during promotional periods. Commercial subscribers such as hotels, motels and hospitals are charged a nonrecurring connection fee that usually covers the cost of installation. Except under the terms of certain contracts with commercial subscribers and residential apartment and condominium complexes, the subscribers are free to discontinue the service at any time without penalty. For the year ended December 31, 1995, of the total fees received by the Systems, basic service and tier service fees accounted for approximately 72% of total revenues, premium service fees accounted for approximately 14% of total revenues, pay-per-view fees were approximately 1% of total revenues, advertising fees were approximately 5% of total revenues and the remaining 8% of total revenues came principally from equipment rentals, installation fees and program guide sales. The Partnership and the Venture are dependent 4 5 upon the timely receipt of service fees to provide for maintenance and replacement of plant and equipment, current operating expenses and other costs of the Systems. FRANCHISES. The Systems are constructed and operated under non-exclusive, fixed-term franchises or other types of operating authorities (referred to collectively herein as "franchises") granted by local governmental authorities. These franchises typically contain many conditions, such as time limitations on commencement and completion of construction, conditions of services, including the number of channels, types of programming and the provision of free service to schools and certain other public institutions, and the maintenance of insurance and indemnity bonds. The provisions of local franchises are subject to federal regulation. The Partnership holds 10 franchises in connection with its ownership of the New York System, and the Venture holds one franchise issued by the City of Manitowoc, Wisconsin. These franchises provide for the payment of fees to the issuing authorities and generally range from 3% to 5% of the gross revenues of a cable television system. The 1984 Cable Act prohibits franchising authorities from imposing annual franchise fees in excess of 5% of gross revenues and also permits the cable television system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances. Neither the Partnership nor the Venture has ever had a franchise revoked, although, as discussed below, the Venture has been unsuccessful in its attempts to renew its franchise from the City of Manitowoc. The Partnership's New York System franchise expiration dates range from May 1996 to June 2005. Because the Partnership intends to sell its New York System (see Item 1, Proposed Dispositions of Cable Television Systems), the Partnership does not intend to renew the Village of Lancaster and the Town of Lancaster franchises that will expire in 1996. The renewal of these franchises will be the responsibility of the new owner. The Venture holds one franchise for the City of Manitowoc, which technically has expired. Negotiations between the Venture and the City of Manitowoc with respect to the renewal of the Manitowoc System's franchise are continuing, and the Manitowoc System currently is being operated pursuant to a temporary extension of the franchise's term. The General Partner hopes that the City soon will agree to the renewal of the franchise, but given the current status of negotiations with the City, there can be no assurance of this. If the current franchise is not renewed, the General Partner, on the Venture's behalf, will avail itself of all remedies and recourse granted to cable operators under federal and applicable state and local laws in order to preserve the Venture's right to provide cable services in the City of Manitowoc. The Venture also would seek the return of the $1,850,000, plus interest, that the Venture deposited with the City of Manitowoc in connection with the settlement of the Venture's lawsuit against the City. The settlement agreement provides for the return of this amount to the Venture if the City fails to renew the franchise. COMPETITION. Cable television systems currently experience competition from several sources. A potential source of significant competition is Direct Broadcast Satellite ("DBS") services that use video compression technology to increase channel capacity and provide packages of movies, network and other program services that are competitive with those of cable television systems. Two companies offering DBS services began operations in 1994, and two other companies offering DBS service recently began operations. In addition, a joint venture has won the right to provide a DBS service through a FCC spectrum auction. Not all subscribers terminate cable television service upon acquiring a DBS system. The General Partner has observed that a number of DBS subscribers also elect to subscribe to cable television service in order to obtain the greatest variety of programming on multiple television sets, including local video services programming not available through DBS service. Although neither the Partnership, the Venture nor the General Partner has yet encountered competition from a telephone company providing video services as a cable operator or video dialtone operator, it is anticipated that the cable television systems owned or managed by the General Partner will face such competition in the near future. Legislation recently enacted into law will make it possible for companies with considerable resources to enter the business. For example, in February 1996, one of the regional Bell operating companies entered into an agreement to acquire the nation's third largest cable television company. In addition, several telephone companies 5 6 have begun seeking cable television franchises from local governmental authorities as a consequence of litigation that successfully challenged the constitutionality of the cable television/telephone company cross-ownership rules. The General Partner cannot predict at this time when and to what extent telephone companies will provide cable television service within service areas in competition with cable television systems owned or managed by the General Partner. The General Partner is aware of the following imminent competition from telephone companies: Ameritech, one of the seven regional Bell operating companies, which provides telephone service in a multi-state region including Illinois, has just obtained a franchise that will allow it to provide cable television service in Naperville, Illinois, a community currently served by a cable system owned by another one of the public limited partnerships managed by the General Partner. Chesapeake and Potomac Telephone Company of Virginia and Bell Atlantic Video Service Company, both subsidiaries of Bell Atlantic, another of the regional Bell operating companies, have announced their intention to build a cable television system in Alexandria, Virginia in competition with a cable television system owned by the General Partner. Bell Atlantic is preparing for the operation of a telecommunications and video business in northern Virginia, including the Alexandria metropolitan area. The FCC has granted GTE Virginia's application for authority to construct, operate, own and maintain video dialtone facilities in northern Virginia, including in the service area of a cable television system owned by the General Partner. To date, GTE has not begun construction of a video distribution system. The entry of telephone companies as direct competitors could adversely affect the profitability and market value of the General Partner's owned and managed systems. Additional competition is present from several sources, including the following: Master Antenna Television and Satellite Master Antenna Television systems that serve multi-unit dwellings such as condominiums, apartment complexes, motels, hotels and private residential communities; private cable television/telephonic companies that have secured exclusive contracts to provide video and telephony services to multi-unit dwellings and similar complexes; and multichannel, multipoint distribution service ("MMDS") systems, commonly called wireless cable which generally focus on providing service to residents of rural areas. In addition, the FCC has established a new wireless telecommunications service known as Personal Communications Service ("PCS") that would provide portable non-vehicular mobile communications services similar to that available from cellular telephone companies, but at a lower cost. Several cable television multiple system operators hold or have requested experimental licenses from the FCC to test PCS technology. REGULATION AND LEGISLATION. The cable industry is regulated under the Telecommunications Act of 1996 (the "1996 Act"), the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") and the Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the regulations implementing these statutes. The Federal Communications Commission (the "FCC") has promulgated regulations covering such areas as the registration of cable television systems and other communications businesses, carriage of television broadcast programming, consumer education and lockbox enforcement, origination cablecasting and sponsorship identification, children's programming, the regulation of basic cable and cable programming service rates in areas where cable television systems are not subject to effective competition, signal leakage and frequency use, technical performance, maintenance of various records, equal employment opportunity, and antenna structure notification, marking and lighting. In addition, cable operators periodically are required to file various informational reports with the FCC. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. State or local franchising authorities, as applicable, also have the right to enforce various regulations, impose fines or sanctions, issue orders or seek revocation subject to the limitations imposed upon such franchising authorities by federal, state and local laws and regulations. Several states have assumed regulatory jurisdiction of the cable television industry, and it is anticipated that other states will do so in the future. To the extent the cable television industry begins providing telephone service, additional state regulations will be applied to the cable television industry. Cable television operations are subject to local regulation insofar as systems operate under franchises granted by local authorities. The following is a summary of federal laws and regulations materially affecting the cable television industry, and a description of state and local laws with which the cable industry must comply. 6 7 Telecommunications Act of 1996. The 1996 Act, which became law on February 28, 1996, substantially revised the Communications Act of 1934, as amended, including the 1984 Cable Act and the 1992 Cable Act, and has been described as one of the most significant changes in communications regulation since the original Communications Act of 1934. The 1996 Act is intended, in part, to promote substantial competition in the telephone local exchange and in the delivery of video and other services. As a result of the 1996 Act, local telephone companies (also known as local exchange carriers or "LECs") and other service providers are permitted to provide video programming, and cable television operators are permitted entry into the telephone local exchange market. The FCC is required to conduct rulemaking proceedings over the next several months to implement various provisions of the 1996 Act. Among other provisions, the 1996 Act modified the 1992 Cable Act by deregulating the cable programming service tier of large cable operators effective March 31, 1999 and the cable programming service tier of small cable operators (those that provide service to 50,000 or fewer subscribers) effective immediately. The 1996 Act also revised the procedures for filing a cable programming service tier rate complaint and adds a new effective competition test. The most far-reaching changes in the communications business will result from the telephony provisions of the 1996 Act. The statute expressly preempts any legal barriers to competition in the local telephone business that previously existed in state and local laws and regulations. Many of these barriers had been lifted by state actions over the last few years, but the 1996 Act completes the task. The 1996 Act also establishes new requirements for maintaining and enhancing universal telephone service and new obligations for telecommunications providers to maintain privacy of customer information. The 1996 Act establishes uniform requirements and standards for entry, competitive carrier interconnection and unbundling of LEC monopoly services. The 1996 Act repealed the cable television/telephone cross-ownership ban adopted in the 1984 Cable Act. The federal cross-ownership ban was particularly important to the cable industry because telephone companies already own certain facilities such as poles, ducts and associated rights of way. While this ban had been overturned by several courts, formal removal of the ban ended the last legal constraints on telephone company plans to enter the cable market. Under the 1996 Act, telephone companies in their capacity as common carriers now may lease capacity to others to provide cable television service. Telephone companies have the option of providing video service as cable operators or through "open video systems" ("OVS"), a regulatory regime that may provide more flexibility than traditional cable service. The 1996 Act exempts OVS operators from many of the regulatory obligations that currently apply to cable operators, such as rate regulation and franchise fees, although other requirements are still applicable. OVS operators, although not subject to franchise fees as defined by the 1992 Cable Act, are subject to fees charged by local franchising authorities or other governmental entities in lieu of franchise fees. (Under certain circumstances, cable operators also will be able to offer service through open video systems.) In addition, the 1996 Act eliminated the requirement that telephone companies file Section 214 applications (applications to provide video dialtone services) with the FCC before providing video service. This limits the opportunity of cable operators to mount challenges at the FCC regarding telephone company entry into the video market. The 1996 Act also contains restrictions on buying out incumbent cable operators in a telephone company's service area, especially in suburban and urban markets. Other parts of the 1996 Act also will affect cable operators. Under the 1996 Act, the FCC is required to revise the current pole attachment rate formula. This revision will result in an increase in the rates paid by entities, including cable operators, that provide telecommunication services. The rates will be phased in after a five-year period. (Cable operators that provide only cable services will be unaffected.) Under the V-chip provisions of the 1996 Act, cable operators and other video providers are required to pass along any program rating information that programmers include in video signals. Cable operators also are subject to new scrambling requirements for sexually explicit programming, and cable operators that provide Internet access or other online services are subject to the new indecency limitations for computer services. In addition, cable operators that 7 8 provide Internet access or other online services are subject to the new indecency limitations for computer services, although these provisions already have been challenged in court. These provisions already have been challenged, and the courts have preliminarily enjoined the enforcement of these content-based provisions. Under the 1996 Act, a franchising authority may not require a cable operator to provide telecommunications services or facilities, other than an institutional network, as a condition to a grant, renewal or transfer of a cable franchise, and franchising authorities are preempted from regulating telecommunications services provided by cable operators and from requiring cable operators to obtain a franchise to provide such services. The 1996 Act also repealed the 1992 Cable Act's anti-trafficking provision, which generally required the holding of cable television systems for three years. It is premature to predict the specific effects of the 1996 Act on the cable industry in general or the Partnership in particular. The FCC shortly will be undertaking numerous rulemaking proceedings to interpret and implement the 1996 Act. It is not possible at this time to predict the outcome of those proceedings or their effect on the Partnership. Cable Television Consumer Protection and Competition Act of 1992. The 1992 Cable Act, which became effective on December 4, 1992, caused significant changes to the regulatory environment in which the cable television industry operates. The 1992 Cable Act generally mandated a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable television systems in the United States, including those owned and managed by the General Partner, became subject to rate regulation of basic cable services. In addition, the 1992 Cable Act allowed the FCC to regulate rates for non-basic service tiers other than premium services in response to complaints filed by franchising authorities and/or cable subscribers. In April 1993, the FCC adopted regulations governing rates for basic and non-basic services. The FCC's rules became effective on September 1, 1993. In compliance with these rules, the General Partner on behalf of the Partnership and the Venture reduced rates charged for certain regulated services in the New York System and the Manitowoc System effective September 1, 1993. On February 22, 1994, however, the FCC adopted several additional rate orders including an order which revised its earlier-announced regulatory scheme with respect to rates. The FCC's new regulations generally required rate reductions, absent a successful cost-of-service showing, of 17 percent of September 30, 1992 rates, adjusted for inflation, channel modifications, equipment costs, and increases in programming costs. Further rate reductions for cable systems whose rates are below the revised benchmark levels, as well as reductions that would require operators to reduce rates below benchmark levels in order to achieve a 17 percent rate reduction, were held in abeyance pending completion of cable system cost studies. The FCC recently requested some of these "low price" systems to complete cost study questionnaires. After review of these questionnaires, the FCC could decide to permanently defer any further rate reductions, or require the additional 7 percent rate roll back for some or all of these systems. The FCC has also adopted its proposed upgrade methodology by which operators would be permitted to recover the costs of upgrading their plant. After analyzing the effects of the two methods of rate regulation, the Partnership elected to file cost-of-service showings for the New York System. The General Partner anticipates no further reduction of revenues or operating income before depreciation and amortization resulting from the FCC's rate regulations. At this time, the regulatory authorities have not approved the cost-of-service showings, and there can be no assurance that the Partnership's cost-of-service showings will prevent further rate reductions until such final approval is received. The Venture complied with the new benchmark regulations and further reduced rates in its Manitowoc System. The Venture will continue its efforts to mitigate the effect of such rate reductions. On November 10, 1994, the FCC also announced a revision to its regulations governing the manner in which cable operators may charge subscribers for new cable programming services. In addition to the present formula for calculating the permissible rate for new services, the FCC instituted a three-year flat fee mark-up plan for charges relating to new channels of cable programming services. Commencing on January 1, 1995, cable system operators may charge for new channels of cable programming services added after May 14, 1994 at a rate of up to 20 cents per channel, but may not make adjustments to monthly rates totaling more than $1.20 plus an 8 9 additional 30 cents for programming license fees per subscriber over the first two years of the three-year period for these new services. Operators may charge an additional 20 cents in the third year only for channels added in that year plus the costs for the programming. Operators electing to use the 20 cent per channel adjustment may not also take a 7.5 percent mark-up on programming cost increases, which is permitted under the FCC's current rate regulations. The FCC has requested further comment as to whether cable operators should continue to receive the 7.5 percent mark-up on increases in license fees on existing programming services. The FCC also announced that it will permit operators to offer a "new product tier" ("NPT"). Operators will be able to price the NPT as they elect so long as, among other conditions, other channels that are subject to rate regulation are priced in conformity with applicable regulations and operators do not remove programming services from existing tiers and offer them on the NPT. In September 1995, the FCC authorized a new, alternative method of implementing rate adjustments which will allow cable operators to increase rates for programming annually on the basis of projected increases in external costs (inflation, costs for programming, franchise-related obligations and changes in the number of regulated channels) rather than on the basis of cost increases incurred in the preceding calendar quarter. Operators that elect not to recover all of their accrued external costs and inflation pass-throughs each year may recover them (with interest) in subsequent years. In December 1995, the FCC adopted final cost-of-service rate regulations requiring, among other things, cable operators to exclude 34 percent of system acquisition costs related to intangible and tangible assets used to provide regulated services. The FCC also reaffirmed the industry-wide 11.25 percent after tax rate of return on an operator's allowable rate base, but initiated a further rulemaking in which it proposes to use an operator's actual debt cost and capital structure to determine an operator's cost of capital or rate of return. After a rate has been set pursuant to a cost-of-service showing, rate increases for regulated services are indexed for inflation, and operators are permitted to increase rates in response to increases in costs beyond their control, such as taxes and increased programming costs. The United States Court of Appeals for the District of Columbia Circuit recently upheld the FCC's rate regulations implemented pursuant to the 1992 Cable Act, but ruled that the FCC impermissibly failed to permit cable operators to adjust rates for certain cost increases incurred during the period between the date the 1992 Cable Act was passed through the initial date of rate regulation. The FCC has not yet implemented the court's ruling. There have been several lawsuits filed by cable operators and programmers in federal court challenging various aspects of the 1992 Cable Act including its provisions relating to mandatory broadcast signal carriage, retransmission consent, access to cable programming, rate regulations, commercial leased channels and public access channels. On April 8, 1993, a three-judge federal district court panel issued a decision upholding the constitutionality of the mandatory signal carriage requirements of the 1992 Cable Act. That decision was appealed directly to the United States Supreme Court. The United States Supreme Court vacated the lower court decision on June 27, 1994 and remanded the case to the district court for further development of a factual record. On December 12, 1995, the three-judge federal district court again upheld the must-carry rules' validity. This decision has been appealed to the United States Supreme Court. In 1993, a federal district court upheld provisions of the 1992 Cable Act concerning rate regulation, retransmission consent, restrictions on vertically integrated cable television operators and programmers, mandatory carriage of programming on commercial leased channels and public, educational and governmental access channels and the exemption for municipalities from civil damage liability arising out of local regulation of cable services. The 1992 Cable Act's provisions providing for multiple ownership limits for cable operators and advance notice of free previews for certain programming services have been found unconstitutional and these decisions have been appealed. The FCC's regulations relating to the carriage of indecent programming, which were recently upheld by the United States Court of Appeals for the District of Columbia, have been appealed to the United States Supreme Court. 9 10 Franchising. The responsibility for franchising or other authorization of cable television systems is left to state and local authorities. There are, however, several provisions in the 1984 Cable Act that govern the terms and conditions under which cable television systems provide service. These include uniform standards and policies that are applicable to cable television operators seeking renewal of a cable television franchise. The procedures established provide for a formal renewal process should the franchising authority and the cable television operator decline to use an informal procedure. A franchising authority unable to make a preliminary determination to renew a franchise is required to hold a hearing in which the operator has the right to participate. In the event a determination is made not to renew the franchise at the conclusion of the hearing, the franchising authority must provide the operator with a written decision stating the specific reasons for non-renewal. Generally, the franchising authority can finally decide not to renew a franchise only if it finds that the cable operator has not substantially complied with the material terms of the present franchise, has not provided reasonable service in light of the community's needs, does not have the financial, legal or technical ability to provide the services being proposed for the future, or has not presented a reasonable proposal for future service. A final decision of non-renewal by the franchising authority is appealable in court. A provision of the 1996 Act preempts franchising authorities from regulating telecommunications services provided by cable operators and from requiring cable operators to obtain a franchise to provide such services. A franchising authority may not require a cable operator to provide telecommunications services or facilities, other than an institutional network, as a condition to a grant, renewal or transfer of a cable franchise. GENERAL. The Partnership's and the Venture's business consist of providing cable television services to a large number of customers, the loss of any one of which would have no material effect on the Partnership's or the Venture's business. Each of the Systems has had some subscribers who later terminated the service. Terminations occur primarily because people move to another home or to another city. In other cases, people terminate on a seasonal basis or because they no longer can afford or are dissatisfied with the service. The amount of past due accounts in the Systems is not significant. The General Partner's policy with regard to past due accounts is basically one of disconnecting service before a past due account becomes material. Neither the Partnership nor the Venture depends to any material extent on the availability of raw materials; it carries no significant amounts of inventory and it has no material backlog of customer orders. The Partnership has no employees because all properties are managed by employees of the General Partner. The General Partner has engaged in research and development activities relating to the provision of new services but the amount of the Partnership's or the Venture's funds expended for such research and development has never been material. Compliance with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment has had no material effect upon the capital expenditures, earnings or competitive position of the Partnership or the Venture. ITEM 2. PROPERTIES The cable television systems owned by the Partnership and the Venture are described below: 10 11
FUND SYSTEM ACQUISITION DATE - ------------------------ ---------------- ---------------- Cable TV Fund 11-B, Ltd. New York System January 1988 Cable TV Fund 11-A, Ltd., Cable Manitowoc System April 1984 TV Fund 11-B, Ltd., Cable TV Fund 11-C, Ltd. and Cable TV Fund 11-D, Ltd. own an 18%, 8%, 27% and 47% interest, respectively, through their general partner interest in Cable TV Joint Fund 11
The following sets forth (i) the monthly basic plus service rates charged to subscribers and (ii) the number of basic subscribers and pay units for the Systems. The monthly basic service rates set forth herein represent, with respect to systems with multiple headends, the basic service rate charged to the majority of the subscribers within the system. In cable television systems, basic subscribers can subscribe to more than one pay TV service. Thus, the total number of pay services subscribed to by basic subscribers are called pay units. As of December 31, 1995, the New York System's cable plant passed approximately 57,700 homes, representing an approximate 68% penetration rate, and the Manitowoc System's cable plant passed approximately 16,000 homes, representing an approximate 71% penetration rate. Figures for numbers of subscribers, miles of cable plant and homes passed are compiled from the General Partner's records and may be subject to adjustments. CABLE TV FUND 11-B, LTD. - ------------------------
At December 31, ------------------------- NEW YORK SYSTEM 1995 1994 1993 - --------------- ------- ------- ------- Monthly basic plus service rate $ 23.45 $ 21.95 $ 21.95 Basic subscribers 39,735 37,619 35,877 Pay units 22,275 22,755 21,502
CABLE TV JOINT FUND 11 - ----------------------
At December 31, ------------------------ MANITOWOC SYSTEM 1995 1994 1993 - ---------------- ------- ------- ------ Monthly basic plus service rate $ 20.66 $ 19.86 $21.95 Basic subscribers 11,436 10,834 9,768 Pay units 7,726 7,091 5,296
ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS In January and February 1996, a special vote of the limited partners of the Partnership was conducted through the mails on behalf of the Partnership by the General Partner for the purpose of obtaining limited partner approval of the sale to Global Acquisition Partners, L.P. of the New York System for $84,000,000 in cash, subject to normal working capital closing adjustments. Limited partners of record at the close of business on December 31, 1995 were entitled to notice of, and to participate in, this vote of limited partners. Of the 38,026 11 12 limited partnership interests entitled to vote, 26,333 interests, or 69.25 percent, voted to approve the transaction, 76 interests, or .20 percent, voted against the transaction, 210 interests, or .55 percent, abstained from voting and 11,407 interests, or 30 percent, did not vote on the proposal. It is anticipated that the sale of the New York System will occur on or about April 1, 1996. See Item 1, Business. PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS While the Partnership is publicly held, there is no public market for the limited partnership interests, and it is not expected that a market will develop in the future. As of February 15, 1996, the number of equity security holders in the Partnership was 3,164. 12 13 Item 6. Selected Financial Data
For the Year Ended December 31, ------------------------------------------------------------------------------ Cable TV Fund 11-B, Ltd. 1995 1994 1993 1992 1991 - ------------------------ ----------- ----------- ----------- ----------- ----------- Revenues $14,366,359 $12,791,832 $11,922,307 $11,817,424 $11,434,838 Depreciation and Amortization 2,957,444 2,379,471 1,899,145 1,737,457 1,781,846 Operating Income 1,529,866 1,324,181 1,125,375 1,733,870 2,130,580 Net Income (Loss) (158,865) 136,953 480,661 12,900,586(a) 600,619 Net Income (Loss) per Limited Partnership Unit (4.14) 3.57 12.51 335.86(a) 15.64 Weighted Average Number of Limited Partnership Units Outstanding 38,026 38,026 38,026 38,026 38,026 General Partner's Capital (Deficit) 53,221 54,810 53,440 48,633 (80,373) Limited Partners' Capital (Deficit) 2,702,835 2,860,111 2,724,528 2,248,674 (663,525) Total Assets 28,153,665 26,514,695 22,298,044 14,496,416 14,672,979 Debt 23,807,849 20,228,189 18,089,150 10,624,649 13,585,067 General Partner Advances - 1,305,421 42,288 177,673 569,634
(a) Net income resulted primarily from the sale of the Grand Island System by Cable TV Fund 11-B, Ltd.
For the Year Ended December 31, ----------------------------------------------------------------------------- Cable TV Joint Fund 11 1995 1994 1993 1992 1991 - ---------------------- ---------- ---------- ---------- ---------- ---------- Revenues $3,632,675 $3,296,103 $3,292,675 $3,244,023 $3,019,516 Depreciation and Amortization 545,237 522,593 517,441 499,110 481,071 Operating Income 296,393 309,189 416,589 426,058 333,948 Net Income 453,912 373,181 246,536 325,547 457,909 Partners' Capital 7,051,757 6,597,845 6,224,664 5,978,128 5,652,581 Total Assets 7,504,046 7,099,110 6,610,142 6,723,916 6,137,193 Debt 9,917 26,385 20,129 29,188 28,738 Advances from Jones Intercable, Inc. 45,258 72,764 32,825 52,745 227,810
13 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations CABLE TV FUND 11-B, LTD. RESULTS OF OPERATIONS 1995 compared to 1994 Revenues of Cable TV Fund 11-B, Ltd. (the "Partnership") totaled $14,366,359 in 1995 as compared to $12,791,832 in 1994, an increase of $1,574,527, or approximately 12 percent. Basic rate increases accounted for approximately 64 percent of the increase in revenues. An increase in the subscriber base accounted for approximately 33 percent of the increase in revenues. The number of basic subscribers increased 2,116, or approximately 6 percent, to 39,735 at December 31, 1995 from 37,619 at December 31, 1994. No other factors individually were significant to the increase in revenues. Operating expenses consist primarily of costs associated with the administration of the Partnership's cable television system. The principal cost components are salaries paid to system personnel, programming expenses, professional fees, subscriber billing costs, rent for leased facilities, cable system maintenance expenses and consumer marketing expenses. Operating expenses totaled $8,123,450 in 1995 compared to $7,459,002 in 1994, an increase of $664,448, or approximately 9 percent. Operating expenses represented approximately 57 percent of revenues in 1995 compared to approximately 58 percent of revenues in 1994. The increase in operating expenses was due to increases in programming fees and system maintenance costs, due, in part, to the increase in the subscriber base. These increases were offset, in part, by decreases in personnel related expense. No other factors individually were significant to the increase in the Partnership's operating expenses. Management fees and allocated overhead from the General Partner totaled $1,755,599 in 1995 compared to $1,629,178 in 1994, an increase of $126,421, or approximately 8 percent, due to the increase in revenues, upon which such fees and allocations are based. Depreciation and amortization expense totaled $2,957,444 in 1995 compared to $2,379,471 in 1994, an increase of $577,973, or approximately 24 percent, due to capital additions in 1995 and 1994. Operating income totaled $1,529,866 in 1995 compared to $1,324,181 in 1994, an increase of $205,685, or approximately 16 percent, due to the increase in revenues exceeding the increases in operating expenses, management fees and allocated overhead from the General Partner and depreciation and amortization expense. The cable television industry generally measures the performance of a cable television system in terms of cash flow or operating income before depreciation and amortization. The value of a cable television system is often determined using multiples of cash flow. This measure is not intended to be a substitute or improvement upon the items disclosed on the financial statements, rather it is included because it is an industry standard. Operating income before depreciation and amortization totaled $4,487,310 in 1995 compared to $3,703,652 in 1994, an increase of $783,658, or approximately 21 percent, due to the increase in revenues exceeding the increases in operating expenses and management fees and overhead from the General Partner. Interest expense totaled $1,773,876 in 1995 compared to $1,126,399 in 1994, an increase of $647,477, or approximately 57 percent, due to higher outstanding balances on interest bearing obligations and higher effective interest rates during 1995. The Partnership recognized net loss before equity in net income of cable television joint venture of $194,179 in 1995 compared to income before equity in net income of cable television joint venture of $107,920 in 1994, a decrease of $302,099, due primarily to the increase in interest expense. 14 15 1994 compared to 1993 Revenues of the Partnership totaled $12,791,832 in 1994 compared to $11,922,307 in 1993, an increase of $869,525, or approximately 7 percent. An increase in basic subscribers primarily accounted for the increase in revenues. The number of basic subscribers increased 1,742, or approximately 5 percent, to 37,619 at December 31, 1994 from 35,877 at December 31, 1993. The increase in revenues would have been greater but for the reduction in basic rates due to basic rate regulations issued by the FCC in April 1993 with which the Partnership complied effective September 1, 1993. No other factors individually were significant to the increase in revenues. Operating expenses totaled $7,459,002 in 1994 compared to $7,476,761 in 1993, a decrease of $17,759, or less than 1 percent. Operating expenses represented approximately 58 percent of revenues in 1994 compared to approximately 63 percent in 1993. The decrease in operating expenses was due primarily to decreases in personnel related and marketing related expenses. These decreases were partially offset by increases in programming fees and plant maintenance costs. No other factors individually were significant to the decrease in operating expenses. Management fees and allocated overhead from the General Partner totaled $1,629,178 in 1994 compared to $1,421,026 in 1993, an increase of $208,152, or approximately 15 percent, due to the increase in revenues, upon which such fees and allocations are based, and to an increase in expenses allocated from the General Partner. The General Partner experienced increases in expenses in 1994. Depreciation and amortization expense totaled $2,379,471 in 1994 compared to $1,899,145 in 1993, an increase of $480,326, or approximately 25 percent, due to capital additions in 1994 and 1993. Operating income totaled $1,324,181 in 1994 compared to $1,125,375 in 1993, an increase of $198,806, or approximately 18 percent, due to the increase in revenues exceeding the increases in operating expenses, management fees and allocated overhead from the General Partner and depreciation and amortization expense. Interest expense totaled $1,126,399 in 1994 compared to $636,263 in 1993, an increase of $490,136, or approximately 77 percent, due to higher outstanding balances on interest bearing obligations and higher effective interest rates. Income before equity in net income of cable television joint venture totaled $107,920 in 1994 compared to $461,481 in 1993, a decrease of $353,561, or approximately 77 percent, due to the increase in interest expense exceeding the increase in operating income. In addition to the New York System owned by it, the Partnership also owns an 8 percent interest in Cable TV Joint Fund 11 ("Joint Fund 11"). Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for Joint Fund 11 for details pertaining to its operation. FINANCIAL CONDITION On October 6, 1995, the Partnership entered into an asset purchase agreement pursuant to which it agreed to sell the New York System to an unaffiliated cable television system operator for a sales price of $84,000,000. This transaction was approved by a majority of the Partnership's limited partnership interests in a vote conducted during the first quarter of 1996. The closing of the sale of the New York System is subject to the successful transfer of the New York System's franchises. Closing of this sale is expected to occur on or about April 1, 1996. Upon consummation of the proposed sale of the New York System, the Partnership will pay all of its indebtedness, which totaled approximately $23,808,000 at December 31, 1995, its sales tax liability of approximately $1,750,000 and a brokerage fee of $2,100,000 to The Jones Group, Ltd., a subsidiary of the General Partner, and then the Partnership will distribute the approximate $56,047,500 net proceeds to its partners of record as of February 29, 1996. Because limited partners have already received distributions in an amount equal to 100 percent of the capital initially contributed to the Partnership by the limited partners, the net proceeds from the New York System's sale will be distributed 75 percent to the limited partners and 25 percent to the General Partner. Based upon the pro forma financial information as of December 31, 1995, as a result of the New York System's sale, the limited partners of the Partnership, as a group, will receive approximately $42,035,600 and the General Partner will receive approximately $14,011,900. Limited partners will receive $1,105 for each $500 limited partnership interest, or $2,211 for each $1,000 invested in the 15 16 Partnership, from the net proceeds of the New York System's sale. Once the distribution of the net proceeds from the sale of the New York System has been made, limited partners will have received a total of $1,605 for each $500 limited partnership interest, or $3,211 for each $1,000 invested in the Partnership, taking into account distributions to limited partners made in July 1990 and July 1992. The Partnership will continue to own its 8 percent interest in the Venture until the Manitowoc System also is sold. Upon the closing of the sale of the Partnership's New York System and the Venture's Manitowoc System, the Partnership will be liquidated and dissolved. On September 5, 1995, Joint Fund 11 entered into an asset purchase agreement pursuant to which it agreed to sell the Manitowoc System to the General Partner for a sales price of $15,735,667, subject to normal working capital closing adjustments. The closing of the sale of the Manitowoc System is subject to a number of conditions, including the approval of the holders of a majority of the limited partnership interests in each of the four partnerships that comprise Joint Fund 11 in votes to be conducted in 1996 and the successful renewal and transfer of the Manitowoc System's franchise. If the proposed sale of the Manitowoc System is closed, Joint Fund 11 will pay all of its indebtedness, which totaled $55,175 at December 1995, including $45,258 owed to the General Partner, and then the net sales proceeds plus cash on hand will be distributed to Joint Fund 11's partners in proportion to their ownership interests in Joint Fund 11. The Partnership accordingly will receive 8 percent of such proceeds, estimated to total approximately $1,432,700. Because limited partners will have already received distributions in an amount in excess of the capital initially contributed to the Partnership by the limited partners, the Partnership's portion of the net proceeds from the Manitowoc System's sale will be distributed 75 percent to the limited partners and 25 percent to the General Partner. Based upon pro forma financial information as of December 31, 1995, as a result of the Manitowoc System's sale, the limited partners of the Partnership, as a group, will receive approximately $1,074,500 and the General Partner will receive approximately $358,200. As a result, it is anticipated that the limited partners will receive approximately $28 for each $500 limited partnership interest, or approximately $57 for each $1,000 invested in the Partnership, from the Partnership's portion of the net proceeds of the Manitowoc System's sale. After the Partnership distributes its portion of the proceeds from the sale of the Manitowoc System to its partners, the Partnership will be dissolved and liquidated. The Partnership expended approximately $4,143,000 on capital improvements during 1995. Of this total, approximately 34 percent related to the completion of the franchise required rebuild and upgrade of the New York System. Plant extensions and service drops to subscriber homes accounted for approximately 24 percent of the capital expenditures. Converters accounted for approximately 10 percent of the capital expenditures. The remainder of the expenditures were for various other enhancements in the New York System. Funding for these expenditures was provided primarily by cash generated from operations and borrowings under the Partnership's credit facility. Capital additions for 1996 will consist of expenditures necessary to maintain the value of the plant until the New York System is sold. Funding for these expenditures is expected to be provided by cash generated from operations and available borrowings from the Partnership's existing credit facility. On February 28, 1995, the Partnership entered into a $25,000,000 revolving credit and term loan agreement. The revolving credit period expires January 1, 1997, at which time the outstanding balance converts to a term loan payable in 24 consecutive quarterly installments commencing March 31, 1997. As of December 31, 1995, $23,600,000 was outstanding under this agreement, leaving $1,400,000 available for future needs of the Partnership. Interest payable on outstanding amounts is at the Partnership's option of the Base Rate plus 1/2 percent or the London InterBank Offered Rate plus 1-3/8 percent. This loan is expected to be paid in full upon closing of the sale of the New York System. The Partnership has sufficient sources of capital available to meet its presently anticipated needs from its ability to generate cash from operations and from borrowings available under its credit facility. In addition to the New York System owned by it, the Partnership owns an 8 percent interest in Joint Fund 11. This investment is accounted for under the equity method. When compared to the December 31, 1994 balance, this investment has increased by $35,314 from $550,483 at December 31, 1994 to $585,797 at December 31, 1995. This increase represents the Partnership's proportionate share of income generated by Joint Fund 11. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for Joint Fund 11 for details pertaining to its financial condition. REGULATION AND LEGISLATION The Partnership has filed cost-of-service showings in response to rulemakings concerning the 1992 Cable Act for the New York System and thus anticipates no further reductions in rates in this system. The cost-of-service showings have 16 17 not yet received final approvals from regulatory authorities, however, and there can be no assurance that the Partnership's cost-of-service showings will prevent further rate reductions in this system until such final approvals are received. The Telecommunications Act of 1996 (the "1996 Act"), which became law on February 8, 1996, substantially revised the Communications Act of 1934, as amended, including the 1984 Cable Act and the 1992 Cable Act, and has been described as one of the most significant changes in communications regulation since the original Communications Act of 1934. The 1996 Act is intended, in part, to promote substantial competition in the telephone local exchange and in the delivery of video and other services. As a result of the 1996 Act, local telephone companies (also known as local exchange carriers or "LECs") and other service providers are permitted to provide video programming, and cable television operators are permitted entry into the telephone local exchange market. The FCC is required to conduct rulemaking proceedings over the next several months to implement various provisions of the 1996 Act. Among other provisions, the 1996 Act modified the 1992 Cable Act by deregulating the cable programming service tier of large cable operators including the Partnership effective March 31, 1999 and the cable programming service tier of "small" cable operators in systems providing service to 50,000 or fewer subscribers effective immediately. The 1996 Act also revised the procedures for filing cable programming service tier rate complaints and adds a new effective competition test. It is premature to predict the specific effects of the 1996 Act on the cable industry in general or the Partnership in particular. The FCC will be undertaking numerous rulemaking proceedings to interpret and implement the 1996 Act. It is not possible at this time to predict the outcome of those proceedings or their effect on the Partnership. See Item 1. CABLE TV JOINT FUND 11 RESULTS OF OPERATIONS 1995 compared to 1994 Revenues in Joint Fund 11's Manitowoc System totaled $3,632,675 in 1995 compared to $3,296,103 in 1994, an increase of $336,572, or approximately 10 percent. An increase in the subscriber base accounted for approximately 55 percent of the increase in revenues in 1995. The number of basic subscribers increased by 602 subscribers, or approximately 6 percent, to 11,436 at December 31, 1995 from 10,834 at December 31, 1994. The number of premium subscribers increased by 635 subscriptions, or approximately 9 percent, to 7,726 at December 31, 1995 from 7,091 at December 31, 1994. Basic service rate increases accounted for approximately 14 percent of the increase in revenues. An increase in advertising sales activity accounted for approximately 22 percent of the increase in revenues. No other individual factor contributed significantly to the increase in revenues. Operating expenses consist primarily of costs associated with the administration of the Manitowoc System. The principal cost components are salaries paid to system personnel, programming expenses, professional fees, subscriber billing costs, rent for leased facilities, cable system maintenance expenses and consumer marketing expenses. Operating expenses in the Manitowoc System totaled $2,327,354 in 1995 compared to $2,026,763 in 1994, an increase of $300,591, or approximately 15 percent. Operating expenses represented approximately 64 percent of revenues in 1995 compared to approximately 61 percent of revenues in 1994. The increase in expenses was primarily due to an increase in programming fees, property tax expense and advertising sales related expenses. The increase in advertising sales related expenses was due, in part, to an increase in advertising sales activity. No other individual factor significantly affected the increase in operating expenses. Management fees and allocated overhead from the General Partner totaled $463,691 for 1995 compared to $437,558 in 1994, an increase of $26,133, or approximately 6 percent. The increase was due to the increase in revenues, upon which such fees and allocations are based, and increases in allocated expenses from the General Partner. Depreciation and amortization expense totaled $545,237 in 1995 compared to $522,593 in 1994, an increase of $22,644, or approximately 4 percent, due to capital additions in 1995 and 1994. 17 18 Operating income totaled $296,393 in 1995 compared to $309,189 in 1994, a decrease of $12,796, or approximately 4 percent. The decrease was due to the increases in operating expenses, management fees and allocated overhead from the General Partner and depreciation and amortization expense exceeding the increase in revenues. The cable television industry generally measures the performance of a cable television system in terms of cash flow or operating income before depreciation and amortization. The value of a cable television system is often determined using multiples of cash flow. This measure is not intended to be a substitute or improvement upon the items disclosed on the financial statements, rather it is included because it is an industry standard. Operating income before depreciation and amortization totaled $841,630 for 1995 compared to $831,782 in 1994, an increase of $9,848, or approximately 1 percent. The increase was due to the increase in revenues exceeding the increases in operating expenses and management fees and allocated overhead from the General Partner. Interest income totaled $166,280 in 1995 compared to $87,134 in 1994, an increase of $79,146, or approximately 91 percent. This increase was due to higher cash balances and higher interest rates on interest-bearing accounts in 1995. Interest expense totaled $10,003 in 1995 compared to $15,716 in 1994, a decrease of $5,713, or approximately 36 percent. The decrease was due to lower outstanding balances on interest bearing obligations in 1995. Net income of Joint Fund 11 totaled $453,912 in 1995 compared to $373,181 in 1994, an increase of $80,731, or approximately 22 percent. The increase was due primarily to the increase in interest income. 1994 compared to 1993 Revenues in the Manitowoc System totaled $3,296,103 in 1994 compared to $3,292,675 in 1993, an increase of $3,428, or less than 1 percent. An increase in the subscriber base primarily accounted for the increase in revenues. Basic service subscribers increased 1,066, or approximately 11 percent, to 10,834 at December 31, 1994 from 9,768 at December 31, 1993. Premium service subscriptions increased 1,795, or approximately 34 percent, to 7,091 at December 31, 1994 from 5,296 at December 31, 1993. The increase in revenues would have been greater but for reductions in basic service rates due to basic service rate regulations issued by the FCC in May 1993 and February 1994. No other individual factor was significant to the increase in revenues. Operating expenses in the Manitowoc System totaled $2,026,763 in 1994 compared to $1,947,068 in 1993, an increase of $79,695, or approximately 4 percent. The increase in operating expenses was due primarily to increases in programming fees and marketing related costs due to increases in basic service subscribers and premium service subscriptions. These increases were partially offset by a decrease in copyright fees. No other individual factor contributed significantly to the increase in operating expenses. Operating expenses represented approximately 61 percent of revenues in 1994 compared to approximately 59 percent of revenues in 1993. Management fees and allocated overhead from the General Partner totaled $437,558 in 1994 compared to $411,577 in 1993, an increase of $25,981, or approximately 6 percent. The increase was due to an increase in allocated expenses from the General Partner. The General Partner experienced increases in expenses in 1994. Depreciation and amortization expense totaled $522,593 in 1994 compared to $517,441 in 1993, an increase of $5,152, or approximately 1 percent, due to capital additions in 1994 and 1993. Operating income in the Manitowoc System totaled $309,189 in 1994 compared to $416,589 in 1993, a decrease of $107,400, or approximately 26 percent. The decrease was due to the increases in operating expenses, allocated overhead from the General Partner and depreciation and amortization expense exceeding the increase in revenues. Interest expense for Joint Fund 11 totaled $15,716 in 1994 compared to $22,912 in 1993, a decrease of $7,196, or approximately 31 percent, due to a lower outstanding balance on interest bearing obligations. Other expense totaled $7,426 in 1994 compared to $248,912 in 1993, primarily as a result of Joint Fund 11 incurring costs associated with the litigation with the City of Manitowoc during 1993. No such costs were incurred in 1994. Net income for Joint Fund 11 totaled $373,181 in 1994 compared to $246,536 in 1993, an increase of $126,645, or approximately 51 percent, due primarily to the decrease in litigation costs discussed above. 18 19 FINANCIAL CONDITION On September 5, 1995, Joint Fund 11 entered into an asset purchase agreement pursuant to which it agreed to sell the Manitowoc System to the General Partner for a sales price of $15,735,667, subject to normal working capital closing adjustments. This sales price is the average of three separate independent appraisals of the fair market value of the Manitowoc System and the General Partner's offer was the only bid tendered in a public bidding process for the Manitowoc System. The General Partner assigned its rights and obligations under the asset purchase agreement to Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary of the General Partner. The closing of the sale will occur on a date upon which Joint Fund 11 and JCH mutually agree by September 30, 1996. The sale of the Manitowoc System is subject to a number of conditions, including approval of the transaction by the holders of a majority of the Partnership's limited partnership interests and approvals from governmental authorities and other third parties necessary to the transfer of the Manitowoc System. If all conditions precedent to JCH's obligation to close are not eventually satisfied or waived, JCH's obligation to purchase the Manitowoc System will terminate on September 30, 1996. In order to sell the Manitowoc System, Joint Fund 11 must obtain the consent of the City of Manitowoc and third parties with whom Joint Fund 11 has contracts related to the Manitowoc System, such as pole attachment agreements or other service agreements, to the transfer thereof. Joint Fund 11 was unsuccessful in its efforts to sell the Manitowoc System in June 1990, at the time of Joint Fund 11's sale of its remaining Wisconsin cable television systems, due to the refusal of the City of Manitowoc to consent to the transfer of the system's franchise. Negotiations with the City of Manitowoc with respect to the renewal and transfer of the Manitowoc System's franchise are continuing, and the Manitowoc System currently is being operated pursuant to a temporary extension of the franchise's term until March 29, 1996. The General Partner hopes that the City ultimately will agree to the renewal and transfer of the franchise and that the City will not take any action that will prevent the closing of the sale of the Manitowoc System, but given the current status of negotiations with the City there can be no assurance that the sale will occur as planned. If the proposed sale of the Manitowoc System is closed, Joint Fund 11 intends to distribute the sale proceeds, after the repayment of debt, to Cable TV Fund 11-A, Ltd., Cable TV Fund 11-B, Ltd., Cable TV Fund 11-C, Ltd. and Cable TV Fund 11-D, Ltd. Net sales proceeds plus Joint Fund 11's cash on hand, which are expected to total approximately $18,420,800, will be distributed as follows: Cable TV Fund 11-A, Ltd. will receive approximately $3,356,700; Cable TV Fund 11-B, Ltd. will receive approximately $1,432,700; Cable TV Fund 11-C, Ltd. will receive approximately $4,994,100 and Cable TV Fund 11-D, Ltd. will receive approximately $8,637,300. After Joint Fund 11 distributes the proceeds from the sale of the Manitowoc System to its partners, Joint Fund 11 will be liquidated and dissolved. Joint Fund 11 had no bank debt outstanding at December 31, 1995. During 1995, Joint Fund 11 expended approximately $311,000 for capital expenditures in the Manitowoc System. These expenditures were used for various projects to maintain the value of the system. These expenditures were funded from cash generated from operations. Capital expenditures in 1996 for the Manitowoc System will consist of expenditures necessary to maintain the value of the Manitowoc System until it is sold. It is expected that these capital expenditures will be funded from cash on hand and cash generated from operations. Joint Fund 11 has sufficient liquidity and capital resources, including cash on hand and its ability to generate cash from operations, to meet its anticipated needs. REGULATION AND LEGISLATION The Telecommunications Act of 1996 (the "1996 Act"), which became law on February 8, 1996, substantially revised the Communications Act of 1934, as amended, including the 1984 Cable Act and the 1992 Cable Act, and has been described as one of the most significant changes in communications regulation since the original Communications Act of 1934. The 1996 Act is intended, in part, to promote substantial competition in the telephone local exchange and in the delivery of video and other services. As a result of the 1996 Act, local telephone companies (also known as local exchange carriers or "LECs") and other service providers are permitted to provide video programming, and cable television operators are permitted entry into the telephone local exchange market. The FCC is required to conduct rulemaking proceedings over the next several months to implement various provisions of the 1996 Act. 19 20 Among other provisions, the 1996 Act modified the 1992 Cable Act by deregulating the cable programming service tier of large cable operators including Joint Fund 11 effective March 31, 1999 and the cable programming service tier of "small" cable operators in systems providing service to 50,000 or fewer subscribers effective immediately. The 1996 Act also revised the procedures for filing cable programming service tier rate complaints and adds a new effective competition test. It is premature to predict the specific effects of the 1996 Act on the cable industry in general or Joint Fund 11 in particular. The FCC will be undertaking numerous rulemaking proceedings to interpret and implement the 1996 Act. It is not possible at this time to predict the outcome of those proceedings or their effect on Joint Fund 11. See Item 1. 20 21 Item 8. Financial Statements CABLE TV FUND 11-B, LTD. AND CABLE TV JOINT FUND 11 FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1994 INDEX
Page ------------------------------- 11-B Joint Fund 11 ---- ------------- Report of Independent Public Accountants 22 34 Balance Sheets 23 35 Statements of Operations 25 37 Statements of Partners' Capital (Deficit) 26 38 Statements of Cash Flows 27 39 Notes to Financial Statements 28 40
21 22 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Cable TV Fund 11-B, Ltd.: We have audited the accompanying balance sheets of CABLE TV FUND 11-B, LTD. (a Colorado limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the General Partner's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cable TV Fund 11-B, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Denver, Colorado, March 8, 1996. 22 23 CABLE TV FUND 11-B, LTD. (A Limited Partnership) BALANCE SHEETS
December 31, --------------------------------- ASSETS 1995 1994 ------ ------------ ------------ CASH $ 325,270 $ 139,532 TRADE RECEIVABLES, less allowance for doubtful receivables of $65,516 and $72,936 at December 31, 1995 and 1994, respectively 554,478 472,417 INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment, at cost 45,527,837 41,384,394 Less- accumulated depreciation (19,238,591) (16,361,119) ------------ ------------ 26,289,246 25,023,275 Investment in cable television joint venture 585,797 550,483 ------------ ------------ Total investment in cable television properties 26,875,043 25,573,758 DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 398,874 328,988 ------------ ------------ Total assets $ 28,153,665 $ 26,514,695 ============ ============
The accompanying notes to financial statements are an integral part of these balance sheets. 23 24 CABLE TV FUND 11-B, LTD. (A Limited Partnership) BALANCE SHEETS
December 31, --------------------------------- LIABILITIES AND PARTNERS' CAPITAL 1995 1994 --------------------------------- ------------ ------------ LIABILITIES: Debt $ 23,807,849 $ 20,228,189 Accounts payable- Trade 16,514 368,624 General Partner - 1,305,421 Accrued liabilities 1,521,748 1,647,247 Subscriber prepayments 51,498 50,293 ------------ ------------ Total liabilities 25,397,609 23,599,774 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Note 7) PARTNERS' CAPITAL: General Partner- Contributed capital 1,000 1,000 Accumulated earnings 52,221 53,810 ------------ ------------ 53,221 54,810 ------------ ------------ Limited Partners- Net contributed capital (38,026 units outstanding at December 31, 1995 and 1994) 15,661,049 15,661,049 Distributions (19,013,121) (19,013,121) Accumulated earnings 6,054,907 6,212,183 ------------ ------------ 2,702,835 2,860,111 ------------ ------------ Total liabilities and part capital $ 28,153,665 $ 26,514,695 ============ ============
The accompanying notes to financial statements are an integral part of these balance sheets. 24 25 CABLE TV FUND 11-B, LTD. (A Limited Partnership) STATEMENTS OF OPERATIONS
For the Year Ended December 31, ----------------------------------------------- 1995 1994 1993 ------------ ----------- ----------- REVENUES $14,366,359 $12,791,832 $11,922,307 COSTS AND EXPENSES: Operating expenses 8,123,450 7,459,002 7,476,761 Management fees and allocated overhead from General Partner 1,755,599 1,629,178 1,421,026 Depreciation and amortization 2,957,444 2,379,471 1,899,145 ----------- ----------- ----------- OPERATING INCOME 1,529,866 1,324,181 1,125,375 ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (1,773,876) (1,126,399) (636,263) Other, net 49,831 (89,862) (27,631) ----------- ----------- ----------- Total other income (expense) (1,724,045) (1,216,261) (663,894) ----------- ----------- ----------- INCOME (LOSS) BEFORE EQUITY IN NET INCOME OF CABLE TELEVISION JOINT VENTURE (194,179) 107,920 461,481 EQUITY IN NET INCOME OF CABLE TELEVISION JOINT VENTURE 35,314 29,033 19,180 ----------- ----------- ----------- NET INCOME (LOSS) $ (158,865) $ 136,953 $ 480,661 =========== =========== =========== ALLOCATION OF NET INCOME (LOSS): General Partner $ (1,589) $ 1,370 $ 4,807 =========== =========== =========== Limited Partners $ (157,276) $ 135,583 $ 475,854 =========== =========== =========== NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ (4.14) $ 3.57 $ 12.51 =========== =========== =========== WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 38,026 38,026 38,026 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 25 26 CABLE TV FUND 11-B, LTD. (A Limited Partnership) STATEMENTS OF PARTNERS' CAPITAL
For the Year Ended December 31, ---------------------------------------------- 1995 1994 1993 ---------- ---------- ---------- GENERAL PARTNER: Balance, beginning of year $ 54,810 $ 53,440 $ 48,633 Net income (loss) for year (1,589) 1,370 4,807 ---------- ---------- ---------- Balance, end of year $ 53,221 $ 54,810 $ 53,440 ========== ========== ========== LIMITED PARTNERS: Balance, beginning of year $2,860,111 $2,724,528 $2,248,674 Net income (loss) for year (157,276) 135,583 475,854 ---------- ---------- ---------- Balance, end of year $2,702,835 $2,860,111 $2,724,528 ========== ========== ==========
The accompanying notes to financial statements are an integral part of these statements. 26 27 CABLE TV FUND 11-B, LTD. (A Limited Partnership) STATEMENTS OF CASH FLOWS
For the Year Ended December 31, ---------------------------------------------- 1995 1994 1993 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (158,865) $ 136,953 $ 480,661 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,957,444 2,379,471 1,899,145 Equity in net income of cable television joint venture (35,314) (29,033) (19,180) Increase in trade receivables (82,061) (80,298) (82,789) Increase in deposits, prepaid expenses and deferred charges (149,858) (148,507) (630,171) Increase (decrease) in trade accounts payable, accrued liabilities and subscriber prepayments (476,404) 115,186 (8,149) Increase (decrease) in amount due General Partner (1,305,421) 1,263,133 (135,385) ----------- ----------- ----------- Net cash provided by operating activities 749,521 3,636,905 1,504,132 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment, net (4,143,443) (7,370,516) (7,984,770) ----------- ----------- ----------- Net cash used in investing activities (4,143,443) (7,370,516) (7,984,770) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 23,978,762 2,815,472 7,544,156 Repayment of debt (20,399,102) (114,093) (79,655) ----------- ----------- ----------- Net cash provided by financing activities 3,579,660 2,701,379 7,464,501 ----------- ----------- ----------- Increase (decrease) in cash 185,738 (1,032,232) 983,863 Cash, beginning of year 139,532 1,171,764 187,901 ----------- ----------- ----------- Cash, end of year $ 325,270 $ 139,532 $ 1,171,764 =========== =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 1,828,878 $ 916,971 $ 693,276 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 27 28 CABLE TV FUND 11-B, LTD. (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS (1) ORGANIZATION AND PARTNERS' INTERESTS Formation and Business Cable TV Fund 11-B, Ltd. (the "Partnership"), a Colorado limited partnership, was formed on June 17, 1983, under a public program sponsored by Jones Intercable, Inc. The Partnership was formed to acquire, construct, develop and operate cable television systems. Jones Intercable, Inc. ("Intercable"), a publicly held Colorado corporation, is the "General Partner" and manager of the Partnership. Intercable and its subsidiaries also own and operate cable television systems. In addition, Intercable manages cable television systems for other limited partnerships for which it is general partner and, also, for affiliated entities. The Partnership owns and operates the cable television system serving the municipalities of Lancaster, Lockport and Orchard Park, New York (the "New York System"). In addition to the New York System, the Partnership owns an 8 percent interest in Cable TV Joint Fund 11 ("Joint Fund 11") through capital contributions made during 1984 of $3,500,000. Joint Fund 11 owns and operates the cable television system serving the city of Manitowoc, Wisconsin (the "Manitowoc System"). Proposed Sales of Cable Television Systems On October 6, 1995, the Partnership entered into an asset purchase agreement pursuant to which it agreed to sell the New York System to an unaffiliated cable television system operator for a sales price of $84,000,000. This transaction was approved by a majority of the Partnership's limited partnership interests in a vote conducted during the first quarter of 1996. The closing of the sale of the New York System is subject to the successful transfer of the New York System's franchises. Closing of this sale is expected to occur on or about April 1, 1996. Upon consummation of the proposed sale of the New York System, the Partnership will pay all of its indebtedness, which totaled approximately $23,808,000 at December 31, 1995, its sales tax liability of approximately $1,750,000 and a brokerage fee of $2,100,000 to The Jones Group, Ltd., a subsidiary of the General Partner, and then the Partnership will distribute the approximate $56,047,500 net proceeds to its partners of record as of February 29, 1996. Because limited partners have already received distributions in an amount equal to 100 percent of the capital initially contributed to the Partnership by the limited partners, the net proceeds from the New York System's sale will be distributed 75 percent to the limited partners and 25 percent to the General Partner. Based upon the pro forma financial information as of December 31, 1995, as a result of the New York System's sale, the limited partners of the Partnership, as a group, will receive approximately $42,035,600 and the General Partner will receive approximately $14,011,900. Limited partners will receive $1,105 for each $500 limited partnership interest, or $2,211 for each $1,000 invested in the Partnership, from the net proceeds of the New York System's sale. Once the distribution of the net proceeds from the sale of the New York System has been made, limited partners will have received a total of $1,605 for each $500 limited partnership interest, or $3,211 for each $1,000 invested in the Partnership, taking into account distributions to limited partners made in July 1990 and July 1992. The Partnership will continue to own its 8 percent interest in the Venture until the Manitowoc System also is sold. Upon the closing of the sale of the Partnership's New York System and the Venture's Manitowoc System, the Partnership will be liquidated and dissolved. On September 5, 1995, Joint Fund 11 entered into an asset purchase agreement pursuant to which it agreed to sell the Manitowoc System to the General Partner for a sales price of $15,735,667, subject to normal working capital closing adjustments. The closing of the sale of the Manitowoc System is subject to a number of conditions, including the approval of the holders of a majority of the limited partnership interests in each of the four partnerships that comprise Joint Fund 11 in votes to be conducted in 1996 and the successful renewal and transfer of the Manitowoc System's franchise. If the proposed sale of the Manitowoc System is closed, Joint Fund 11 will pay all of its indebtedness, which totaled $55,175 at December 1995, including $45,258 owed to the General Partner, and then the net sales proceeds plus cash on hand will be distributed to Joint Fund 11's partners in proportion to their ownership interests in Joint Fund 11. The Partnership 28 29 accordingly will receive 8 percent of such proceeds, estimated to total approximately $1,432,700. Because limited partners will have already received distributions in an amount in excess of the capital initially contributed to the Partnership by the limited partners, the Partnership's portion of the net proceeds from the Manitowoc System's sale will be distributed 75 percent to the limited partners and 25 percent to the General Partner. Based upon pro forma financial information as of December 31, 1995, as a result of the Manitowoc System's sale, the limited partners of the Partnership, as a group, will receive approximately $1,074,500 and the General Partner will receive approximately $358,200. As a result, it is anticipated that the limited partners will receive approximately $28 for each $500 limited partnership interest, or approximately $57 for each $1,000 invested in the Partnership, from the Partnership's portion of the net proceeds of the Manitowoc System's sale. After the Partnership distributes its portion of the proceeds from the sale of the Manitowoc System to its partners, the Partnership will be dissolved and liquidated. Contributed Capital The capitalization of the Partnership is set forth in the accompanying statements of partners' capital. No limited partner is obligated to make any additional contribution to partnership capital. Intercable purchased its interest in the Partnership by contributing $1,000 to partnership capital. All profits and losses of the Partnership are allocated 99 percent to the limited partners and 1 percent to Intercable, except for income or gain from the sale or disposition of cable television properties, which will be allocated to the partners based upon the formula set forth in the partnership agreement and interest income earned prior to the first acquisition by the Partnership of a cable television system, which was allocated 100 percent to the limited partners. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Records The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. The Partnership's tax returns are also prepared on the accrual basis. The preparation of financial statements in conformity with generally accepted accounting principles requires the General Partner's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment in Cable Television Joint Venture The Partnership's investment in Joint Fund 11 is accounted for under the equity method due to the Partnership's influence on Joint Fund 11 as a general partner. When compared to the December 31, 1994 balance, this investment has increased by $35,314. This increase represents the Partnership's proportionate share of income generated by Joint Fund 11 during 1995. The operations of Joint Fund 11 are significant to the Partnership and should be reviewed in conjunction with these financial statements. Reference is made to the accompanying financial statements of Joint Fund 11 on pages 35 to 43. Property, Plant and Equipment Depreciation of property, plant and equipment is provided using the straight-line method over the following estimated service lives: Cable distribution systems 5-15 years Equipment and tools 3- 5 years Buildings 10-31 years Office furniture and equipment 5 years Vehicles 3 years
Replacements, renewals and improvements are capitalized and maintenance and repairs are charged to expense as incurred. 29 30 Allocation of Cost of Purchased Cable Television Systems The Partnership allocated the total contract purchase price of cable television systems acquired as follows: first, to the fair value of net tangible assets acquired; second, to the value of subscriber lists; and third, to franchise costs. Brokerage fees paid to an affiliate of Intercable and other system acquisition costs were capitalized and charged to distribution systems. Revenue Recognition Subscriber prepayments are initially deferred and recognized as revenue when earned. Reclassification Certain prior year amounts have been reclassified to conform to the 1995 presentation. (3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES Management Fees, Distribution Ratios and Reimbursement Intercable manages the Partnership and receives a fee for its services equal to 5 percent of the gross revenues of the Partnership, excluding revenues from the sale of cable television systems or franchises. For the years ended December 31, 1995, 1994 and 1993 management fees paid to Intercable, excluding the Partnership's 8 percent interest in Joint Fund 11, were $718,318, $639,592, and $596,115, respectively. Any partnership distributions made from cash flow (defined as cash receipts derived from routine operations, less debt principal and interest payments and cash expenses) are allocated 99 percent to the limited partners and 1 percent to Intercable. Any distributions other than interest income on limited partner subscriptions earned prior to the acquisition of the Partnership's first cable television system or from cash flow, such as from the sale or refinancing of the system or upon dissolution of the Partnership, will be made as follows: first, to the limited partners in an amount which, together with all prior distributions, will equal the amount initially contributed to the Partnership capital by the limited partners; the balance, 75 percent to the limited partners and 25 percent to Intercable. In July 1990, $9,153,740 of the limited partners' initial capital contributions was distributed to the limited partners from funds received from Joint Fund 11. In July 1992, the remaining amount of limited partners' initial capital ($9,859,381) was distributed to the limited partners from funds received from the sale of the Grand Island System. Any future distributions will be made 75 percent to the limited partners and 25 percent to Intercable. The Partnership reimburses Intercable for certain allocated overhead and administrative expenses. These expenses represent the salaries and related benefits paid to corporate personnel, rent, data processing services and other corporate facilities costs. Such personnel provide engineering, marketing, administrative, accounting, legal and investor relations services to the Partnership. These reimbursements are limited to 25 percent of the gross revenues of the Partnership. Allocations of personnel costs are primarily based upon actual time spent by employees of Intercable with respect to each partnership managed. Remaining expenses are allocated based on the pro rata relationship of the Partnership's revenues to the total revenues of all systems owned or managed by the General Partner and certain of its subsidiaries. Systems owned by Intercable and all other systems owned by partnerships for which Intercable is the general partner are also allocated a proportionate share of these expenses. The General Partner believes that the methodology used in allocating overhead and administrative expenses is reasonable. Reimbursements by the Partnership to the General Partner for allocated overhead and administrative expenses, excluding the Partnership's 8 percent interest in Joint Fund 11, were $1,037,281, $989,586 and $824,911 for the years ended December 31, 1995, 1994 and 1993, respectively. The Partnership was charged interest during 1995 at an average interest rate of 10.51 percent on amounts due Intercable, which approximated Intercable's weighted average cost of borrowings. Total interest charged by the General Partner to the Partnership was $13,980, $14,287 and $13,350 in 1995, 1994 and 1993, respectively. 30 31 Payments to/from Affiliates for Programming Services The Partnership receives programming from Superaudio, Mind Extension University, Jones Computer Network and Product Information Network, all of which are affiliates of Intercable. Payments to Superaudio totaled approximately $21,712, $21,977 and $21,590 in 1995, 1994 and 1993, respectively. Payments to Mind Extension University totaled approximately $23,227, $19,914 and $12,565 in 1995, 1994 and 1993, respectively. Payments to Jones Computer Network, which initiated service in 1994, totaled $46,392 and $-0- in 1995 and 1994, respectively. The Partnership receives a commission from Product Information Network based on a percentage of advertising revenue and number of subscribers. Product Information Network, which initiated service in 1994, paid commissions to the Partnership totaling $38,629 and $186 in 1995 and 1994, respectively. (4) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of December 31, 1995 and 1994, consisted of the following:
1995 1994 ------------ ------------ Cable distribution systems $ 38,743,119 $ 34,793,908 Equipment and tools 1,622,222 1,586,646 Office furniture and equipment 501,055 479,991 Buildings 3,612,257 3,441,156 Vehicles 954,764 988,273 Land 94,420 94,420 ------------ ------------ 45,527,837 41,384,394 Less - accumulated depreciation (19,238,591) (16,361,119) ------------ ------------ $ 26,289,246 $ 25,023,275 ============ ============
(5) DEBT Debt consists of the following:
December 31, ---------------------------- 1995 1994 ----------- ----------- Lending institutions- Revolving credit agreement $23,600,000 $20,000,000 Capital lease obligations 207,849 228,189 ----------- ----------- $23,807,849 $20,228,189 =========== ===========
On February 28, 1995, the Partnership entered into a $25,000,000 revolving credit and term loan agreement. The revolving credit period expires January 1, 1997, at which time the outstanding balance converts to a term loan payable in 24 consecutive quarterly installments commencing March 31, 1997. Proceeds from this credit facility were used to repay amounts outstanding under the Partnership's previous credit facility, repay amounts due the General Partner and fund capital expenditures. As of December 31, 1995, $23,600,000 was outstanding under this agreement, leaving $1,400,000 available for future needs of the Partnership. Interest payable on outstanding amounts is at the Partnership's option of the Base Rate plus 1/2 percent or the London InterBank Offered Rate plus 1-3/8 percent. The effective interest rates on outstanding obligations as of December 31, 1995 and 1994 were 7.03 percent and 6.77 percent, respectively. This loan is expected to be paid in full upon closing of the sale of the New York System. 31 32 Installments due on debt principal for each of the five years in the period ending December 31, 2000 and thereafter, $62,355, $2,894,355, $3,602,355, $3,796,784, $4,248,000 and $9,204,000. Substantially all of the Partnership's property, plant and equipment are pledged as security for the above indebtedness. At December 31, 1995, the carrying amount of the Partnership's long-term debt did not differ significantly from the estimated fair value of the financial instruments. The fair value of the Partnership's long-term debt is estimated based on the discounted amount of future debt service payments using rates of borrowing for a liability of similar risk. (6) INCOME TAXES Income taxes have not been recorded in the accompanying financial statements because they accrue directly to the partners. The Federal and state income tax returns of the Partnership are prepared and filed by Intercable. The Partnership's tax returns, the qualification of the Partnership as such for tax purposes, and the amount of distributable income or loss are subject to examination by Federal and state taxing authorities. If such examinations result in changes with respect to the Partnership's qualification as such, or in changes with respect to the Partnership's recorded income or loss, the tax liability of the general and limited partners would likely be changed accordingly. Taxable income reported to the partners is different from that reported in the statements of operations due to the difference in depreciation allowed under generally accepted accounting principles and the expense allowed for tax purposes under the Modified Accelerated Cost Recovery System (MACRS). There are no other significant differences between taxable income or losses and the net income or losses reported in the statements of operations. (7) COMMITMENTS AND CONTINGENCIES The Partnership has filed cost-of-service showings in response to rulemakings concerning the 1992 Cable Act for the New York System and thus anticipates no further reductions in rates in this system. The cost-of-service showings have not yet received final approvals from regulatory authorities, however, and there can be no assurance that the Partnership's cost-of-service showings will prevent further rate reductions in this system until such final approvals are received. The Partnership rents office and other facilities under various long-term lease arrangements. Rent expense paid under such lease arrangements totaled $9,145, $16,093 and $31,480, respectively, for the years ended December 31, 1995, 1994 and 1993. Minimum commitments under operating leases for the five years in the period ending December 31, 2000 and thereafter are as follows: 1996 $7,640 1997 1,424 1998 - 1999 - 2000 - Thereafter - ------ $9,064 ======
32 33 (8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION Supplementary profit and loss information is presented below:
For the Year Ended December 31, --------------------------------------------- 1995 1994 1993 ---------- ---------- ---------- Maintenance and repairs $ 174,344 $ 169,070 $ 223,569 ========== ========== ========== Taxes, other than income and payroll taxes $ 228,187 $ 175,771 $ 137,070 ========== ========== ========== Advertising $ 98,473 $ 114,475 $ 208,035 ========== ========== ========== Depreciation of property, plant and equipment $2,957,444 $2,379,471 $1,899,145 ========== ========== ========== Amortization of intangible assets $ - $ - $ - ========== ========== ==========
33 34 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Cable TV Joint Fund 11: We have audited the accompanying balance sheets of CABLE TV JOINT FUND 11 (a Colorado general partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the General Partners' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cable TV Joint Fund 11 as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Denver, Colorado, March 8, 1996. 34 35 CABLE TV JOINT FUND 11 (A General Partnership) BALANCE SHEETS
December 31, -------------------------------- ASSETS 1995 1994 ------ ----------- ----------- CASH $ 2,984,284 $ 2,429,603 TRADE RECEIVABLES, less allowance for doubtful receivables of $6,374 and $4,412 at December 31, 1995 and 1994, respectively 133,491 92,110 INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment, at cost 7,957,720 7,646,689 Less- accumulated depreciation (5,441,063) (5,051,015) ----------- ----------- 2,516,657 2,595,674 Franchise costs, net of accumulated amortization of $1,396,225 and $1,287,891 at December 31, 1995 and 1994, respectively - 108,334 Subscriber lists, net of accumulated amortization of $257,775 and $237,741 at December 31, 1995 and 1994, respectively - 20,034 ----------- ----------- Total investment in cable television properties 2,516,657 2,724,042 DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 1,869,614 1,853,355 ----------- ----------- Total assets $ 7,504,046 $ 7,099,110 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. 35 36 CABLE TV JOINT FUND 11 (A General Partnership) BALANCE SHEETS
December 31, ------------------------------------ LIABILITIES AND PARTNERS' CAPITAL 1995 1994 --------------------------------- -------------- -------------- LIABILITIES: Capital lease obligations $ 9,917 $ 26,385 Accounts payable- Trade 612 16,340 Jones Intercable, Inc. 45,258 72,764 Accrued liabilities 381,153 368,106 Subscriber prepayments 15,349 17,670 ------------- ------------- Total liabilities 452,289 501,265 ------------- ------------- PARTNERS' CAPITAL: Contributed capital 45,000,000 45,000,000 Distributions (118,914,493) (118,914,493) Accumulated earnings 80,966,250 80,512,338 ------------- ------------- 7,051,757 6,597,845 ------------- ------------- Total liabilities and partners' capital $ 7,504,046 $ 7,099,110 ============= =============
The accompanying notes to financial statements are an integral part of these balance sheets. 36 37 CABLE TV JOINT FUND 11 (A General Partnership) STATEMENTS OF OPERATIONS
For the Year Ended December 31, -------------------------------------------- 1995 1994 1993 ----------- ---------- ---------- REVENUES $3,632,675 $3,296,103 $3,292,675 COSTS AND EXPENSES: Operating expenses 2,327,354 2,026,763 1,947,068 Management fees and allocated expenses from Jones Intercable, Inc. 463,691 437,558 411,577 Depreciation and amortization 545,237 522,593 517,441 ---------- ---------- --------- OPERATING INCOME 296,393 309,189 416,589 ---------- ---------- --------- OTHER INCOME (EXPENSE): Interest expense (10,003) (15,716) (22,912) Interest income 166,280 87,134 101,771 Other, net 1,242 (7,426) (248,912) ---------- ---------- --------- Total other income (expense), net 157,519 63,992 (170,053) ---------- ---------- --------- NET INCOME $ 453,912 $ 373,181 $ 246,536 ========== ========== =========
The accompanying notes to financial statements are an integral part of these statements. 37 38 CABLE TV JOINT FUND 11 (A General Partnership) STATEMENTS OF PARTNERS' CAPITAL
For the Year Ended December 31, --------------------------------------------- 1995 1994 1993 ---------- --------- ---------- CABLE TV FUND 11-A, LTD. (18%): Balance, beginning of year $1,231,800 $1,163,806 $1,118,887 Net income for year 82,703 67,994 44,919 ---------- ---------- ---------- Balance, end of year $1,314,503 $1,231,800 $1,163,806 ---------- ---------- ---------- CABLE TV FUND 11-B, LTD. (8%): Balance, beginning of year $ 550,483 $ 521,450 $ 502,270 Net income for year 35,314 29,033 19,180 ---------- ---------- ---------- Balance, end of year $ 585,797 $ 550,483 $ 521,450 ---------- ---------- ---------- CABLE TV FUND 11-C, LTD. (27%): Balance, beginning of year $2,316,337 $2,215,168 $2,148,332 Net income for year 123,056 101,169 66,836 ---------- ---------- ---------- Balance, end of year $2,439,393 $2,316,337 $2,215,168 ---------- ---------- ---------- CABLE TV FUND 11-D, LTD. (47%): Balance, beginning of year $2,499,225 $2,324,240 $2,208,639 Net income for year 212,839 174,985 115,601 ---------- ---------- ---------- Balance, end of year $2,712,064 $2,499,225 $2,324,240 ---------- ---------- ---------- TOTAL: Balance, beginning of year $6,597,845 $6,224,664 $5,978,128 Net income for year 453,912 373,181 246,536 ---------- ---------- ---------- Balance, end of year $7,051,757 $6,597,845 $6,224,664 ========== ========== ==========
The accompanying notes to financial statements are an integral part of these statements. 38 39 CABLE TV JOINT FUND 11 (A General Partnership) STATEMENTS OF CASH FLOWS
For the Year Ended December 31, ---------------------------------------------- 1995 1994 1993 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 453,912 $ 373,181 $ 246,536 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 545,237 522,593 517,441 Increase in trade receivables (41,381) (41,640) (14,686) Increase in deposits, prepaid expenses and deferred charges (43,080) (1,372) (1,625) Increase (decrease) in trade accounts payable, accrued liabilities and subscriber prepayments (5,002) 69,592 (331,331) Increase (decrease) in amount due Jones Intercable, Inc. (27,506) 39,939 (19,920) ---------- ---------- ----------- Net cash provided by operating activities 882,180 962,293 396,415 ---------- ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment, net (311,031) (379,930) (248,223) Franchise renewal deposit - - (1,850,000) ---------- ---------- ----------- Net cash used in investing activities (311,031) (379,930) (2,098,223) ---------- ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings - 18,264 - Repayment of debt (16,468) (12,008) (9,059) ---------- ---------- ----------- Net cash provided by (used in) financing activities (16,468) 6,256 (9,059) ---------- ---------- ----------- Increase (decrease) in cash 554,681 588,619 (1,710,867) Cash, beginning of year 2,429,603 1,840,984 3,551,851 ---------- ---------- ----------- Cash, end of year $2,984,284 $2,429,603 $ 1,840,984 ========== ========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 10,003 $ 15,716 $ 22,912 ========== ========== ===========
The accompanying notes to financial statements are an integral part of these statements. 39 40 CABLE TV JOINT FUND 11 (A General Partnership) NOTES TO FINANCIAL STATEMENTS (1) ORGANIZATION AND PARTNERS' INTERESTS Formation and Business Cable TV Joint Fund 11 ("Joint Fund 11"), a Colorado general partnership, was formed on February 1, 1984, through a joint venture agreement made by and among Cable TV Fund 11-A, Ltd. ("Fund 11-A"), Cable TV Fund 11-B, Ltd. ("Fund 11-B"), Cable TV Fund 11-C, Ltd. ("Fund 11-C") and Cable TV Fund 11-D, Ltd ("Fund 11-D"), all Colorado limited partnerships (the "Joint Venture Partners"). Joint Fund 11 was formed to acquire, construct, develop and operate cable television systems. Joint Fund 11 owns and operates the cable television system serving the areas in and around the city of Manitowoc, Wisconsin (the "Manitowoc System"). Jones Intercable, Inc. ("Intercable"), who is the "General Partner" of each of the Joint Venture Partners, manages Joint Fund 11. Intercable and its subsidiaries also own and operate other cable television systems. In addition, Intercable manages cable television systems for other limited partnerships for which it is general partner and, also, for affiliated entities. Proposed Sale of Cable Television System On September 5, 1995, Joint Fund 11 entered into an asset purchase agreement pursuant to which it agreed to sell the Manitowoc System to the General Partner for a sales price of $15,735,667, subject to normal working capital closing adjustments. This sales price is the average of three separate independent appraisals of the fair market value of the Manitowoc System and the General Partner's offer was the only bid tendered in a public bidding process for the Manitowoc System. The General Partner assigned its rights and obligations under the asset purchase agreement to Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary of the General Partner. The closing of the sale will occur on a date upon which Joint Fund 11 and JCH mutually agree by September 30, 1996. The sale of the Manitowoc System is subject to a number of conditions, including approval of the transaction by the holders of a majority of the Partnership's limited partnership interests and approvals from governmental authorities and other third parties necessary to the transfer of the Manitowoc System. If all conditions precedent to JCH's obligation to close are not eventually satisfied or waived, JCH's obligation to purchase the Manitowoc System will terminate on September 30, 1996. In order to sell the Manitowoc System, Joint Fund 11 must obtain the consent of the City of Manitowoc and third parties with whom Joint Fund 11 has contracts related to the Manitowoc System, such as pole attachment agreements or other service agreements, to the transfer thereof. Joint Fund 11 was unsuccessful in its efforts to sell the Manitowoc System in June 1990, at the time of Joint Fund 11's sale of its remaining Wisconsin cable television systems, due to the refusal of the City of Manitowoc to consent to the transfer of the system's franchise. Negotiations with the City of Manitowoc with respect to the renewal and transfer of the Manitowoc System's franchise are continuing, and the Manitowoc System currently is being operated pursuant to a temporary extension of the franchise's term until March 29, 1996. The General Partner hopes that the City ultimately will agree to the renewal and transfer of the franchise and that the City will not take any action that will prevent the closing of the sale of the Manitowoc System, but given the current status of negotiations with the City there can be no assurance that the sale will occur as planned. If the proposed sale of the Manitowoc System is closed, Joint Fund 11 will pay all of its indebtedness, which totaled $55,175 at December 1995, including $45,258 owed to the General Partner, and then the net sales proceeds plus cash on hand will be distributed to the Joint Venture Partners in proportion to their ownership interests in Joint Fund 11. The net sales proceeds will be distributed as follows: Fund 11-A will receive approximately $3,356,700; Fund 11-B will receive approximately $1,432,700; Fund 11-C will receive approximately $4,994,100 and Fund 11-D will receive approximately $8,637,300. Contributed Capital, Sharing Ratios and Distribution The capitalization of Joint Fund 11 is set forth in the accompanying statements of partners' capital. Profits and losses of Joint Fund 11 are allocated to the partners in proportion to their respective partnership interests. 40 41 All partnership distributions, including those made from cash flow (defined as cash receipts derived from routine operations, less debt principal and interest payments and cash expenses), from the sale or refinancing of partnership property and on dissolution of Joint Fund 11, are made to the partners also in proportion to their approximate respective interests in Joint Fund 11 as follows: Cable TV Fund 11-A, Ltd. 18% Cable TV Fund 11-B, Ltd. 8% Cable TV Fund 11-C, Ltd. 27% Cable TV Fund 11-D, Ltd. 47% --- 100% ===
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Records The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Joint Fund 11's tax returns are also prepared on the accrual basis. The preparation of financial statements in conformity with generally accepted accounting principles requires the General Partner's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Property, Plant and Equipment Depreciation is determined using the straight-line method over the following estimated service lives: Cable distribution systems 5-15 years Equipment and tools 3-5 years Buildings 20 years Office furniture and equipment 5 years Vehicles 3 years
Replacements, renewals and improvements are capitalized and maintenance and repairs are charged to expense as incurred. Intangible Assets Costs assigned to franchises and subscriber lists were amortized using the straight-line method over their estimated useful lives. Revenue Recognition Subscriber prepayments are initially deferred and recognized as revenue when earned. (3) TRANSACTIONS WITH JONES INTERCABLE, INC. AND AFFILIATES Management Fees and Reimbursements Intercable manages Joint Fund 11 and receives a fee for its services equal to 5 percent of the gross revenues, excluding revenues from the sale of the cable television systems or franchises. Management fees paid to Intercable during 1995, 1994 and 1993 were $181,634, $164,805 and $164,634, respectively. Intercable is reimbursed for certain allocated overhead and administrative expenses. These expenses represent the salaries and related benefits paid to corporate personnel, rent, data processing services and other corporate facilities costs. 41 42 Such personnel provide engineering, marketing, administrative, accounting, legal and investor relations services to Joint Fund 11. Allocations of personnel costs are primarily based upon actual time spent by employees of Intercable with respect to each partnership managed. Remaining expenses are allocated based on the pro rata relationship of the Partnership's revenues to the total revenues of all systems owned or managed by Intercable and certain of its subsidiaries. Systems owned by Intercable and all other systems owned by partnerships for which Intercable is the general partner are also allocated a proportionate share of these expenses. Intercable believes that the methodology used in allocating overhead and administrative expenses is reasonable. The amount of allocated overhead and administrative expenses charged to Joint Fund 11 during 1995, 1994 and 1993 was $282,057, $272,753 and $246,943, respectively. Joint Fund 11 was charged interest during 1995 at an average interest rate of 10.5 percent on the amounts due Intercable, which approximated Intercable's weighted average cost of borrowings. Total interest charged during 1995, 1994 and 1993 was $6,848, $13,306 and $21,071, respectively. Payments to/from Affiliates for Programming Services Joint Fund 11 receives programming from Superaudio, Mind Extension University, Jones Computer Network and Product Information Network, all of which are affiliates of Intercable. Payments to Superaudio totaled $6,318, $6,105 and $6,040 in 1995, 1994 and 1993, respectively. Payments to Mind Extension University totaled $6,759, $5,532 and $3,515 in 1995, 1994 and 1993, respectively. Payments to Jones Computer Network, which initiated service in 1994, totaled $12,760 and $3,316 in 1995 and 1994, respectively. Joint Fund 11 receives a commission from Product Information Network based on a percentage of advertising revenue and number of subscribers. Product Information Network, which initiated service in 1994, paid commissions to Joint Fund 11 totaling $4,559 and $510 in 1995 and 1994, respectively. (4) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of December 31, 1995 and 1994, consisted of the following:
1995 1994 ----------- ------------ Cable distribution systems $ 7,279,475 $ 6,957,103 Equipment and tools 259,414 249,348 Office furniture and equipment 147,163 146,463 Buildings 113,431 113,431 Vehicles 158,237 180,344 ----------- ------------ 7,957,720 7,646,689 Less - accumulated depreciation (5,441,063) (5,051,015) ----------- ------------ $ 2,516,657 $ 2,595,674 =========== ============
(5) DEBT Debt consists of capital lease obligations with maturities of 1 to 4 years. Installments due on debt principal for the five years in the period ending December 31, 2000, respectively, are: $2,776, $2,776, $2,776, $1,589, and $-0-. (6) INCOME TAXES Income taxes have not been recorded in the accompanying financial statements because they accrue to the partners of Funds 11-A, 11-B, 11-C and 11-D, which are general partners in Joint Fund 11. Joint Fund 11's tax returns, the qualification of the Partnership as such for tax purposes, and the amount of distributable partnership income or loss are subject to examination by federal and state taxing authorities. If such examinations result in changes with respect to the Joint 42 43 Fund 11's qualification as such, or in changes with respect to Joint Fund 11's recorded income or loss, the tax liability of the general and limited partners would likely be changed accordingly. Taxable income reported to the partners is different from that reported in the statements of operations due to the difference in depreciation allowed under generally accepted accounting principles and the expense allowed for tax purposes under the Modified Accelerated Cost Recovery System (MACRS). There are no other significant differences between taxable income and the net income reported in the statements of operations. (7) SUPPLEMENTARY PROFIT AND LOSS INFORMATION Supplementary profit and loss information is presented below:
Year Ended December 31, ----------------------------------------- 1995 1994 1993 -------- -------- -------- Maintenance and repairs $ 27,102 $ 41,329 $ 34,813 ======== ======== ======== Taxes, other than income and payroll taxes $124,403 $ 52,294 $ 57,152 ======== ======== ======== Advertising $ 62,160 $ 81,763 $ 56,930 ======== ======== ======== Depreciation of property, plant and equipment $416,869 $379,817 $374,665 ======== ======== ======== Amortization of intangible assets $128,368 $142,776 $142,776 ======== ======== ========
43 44 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership itself has no officers or directors. Certain information concerning the directors and executive officers of the General Partner is set forth below. Glenn R. Jones 66 Chairman of the Board and Chief Executive Officer Derek H. Burney 56 Vice Chairman of the Board James B. O'Brien 46 President and Director Ruth E. Warren 46 Group Vice President/Operations Kevin P. Coyle 44 Group Vice President/Finance Christopher J. Bowick 40 Group Vice President/Technology George H. Newton 61 Group Vice President/Telecommunications Timothy J. Burke 45 Group Vice President/Taxation/Administration Raymond L. Vigil 49 Group Vice President/Human Resources and Director Cynthia A. Winning 44 Group Vice President/Marketing Elizabeth M. Steele 44 Vice President/General Counsel/Secretary Larry W. Kaschinske 36 Controller Robert E. Cole 63 Director William E. Frenzel 67 Director Donald L. Jacobs 57 Director James J. Krejci 54 Director John A. MacDonald 42 Director William E. Frenzel 67 Director Raphael M. Solot 62 Director Daniel E. Somers 48 Director Howard O. Thrall 48 Director Robert B. Zoellick 42 Director Mr. Glenn R. Jones has served as Chairman of the Board of Directors and Chief Executive Officer of the General Partner since its formation in 1970, and he was President from June 1984 until April 1988. Mr. Jones is the sole shareholder, President and Chairman of the Board of Directors of Jones International, Ltd. He is also Chairman of the Board of Directors of the subsidiaries of the General Partner and of certain other affiliates of the General Partner. Mr. Jones has been involved in the cable television business in various capacities since 1961, is a past and present member of the Board of Directors and the Executive Committee of the National Cable Television Association. He also is on the Executive Committee of Cable in the Classroom, an organization dedicated to education via cable. Additionally, in March 1991, Mr. Jones was appointed to the Board of Governors for the American Society for Training and Development, and in November 1992 to the Board of Education Council of the National Alliance of Business. Mr. Jones is also a founding member of the James Madison Council of the Library of Congress. Mr. Jones is a past director and member of the Executive Committee of C-Span. Mr. Jones has been the recipient of several awards including the Grand Tam Award in 1989, the highest award from the Cable Television Administration and Marketing Society; the Chairman's Award from the Investment Partnership Association, which is an association of sponsors of public syndications; the cable television industry's Public Affairs Association President's Award in 1990, the Donald G. McGannon award for the advancement of minorities and women in cable; the STAR Award from American Women in Radio and Television, Inc. for exhibition of a commitment to the issues and concerns of women in television and radio; the Women in Cable Accolade in 1990 in recognition of support of this organization; the Most Outstanding Corporate 44 45 Individual Achievement award from the International Distance Learning Conference; the Golden Plate Award from the American Academy of Achievement for his advances in distance education; the Man of the Year named by the Denver chapter of the Achievement Rewards for College Scientists; and in 1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame. Mr. Derek H. Burney was appointed a Director of the General Partner on December 20, 1994 and Vice Chairman of the Board of Directors on January 31, 1995. Mr. Burney joined BCE Inc., Canada's largest telecommunications company, in January 1993 as Executive Vice President, International. He has been the Chairman of Bell Canada International Inc., a subsidiary of BCE, since January 1993 and, in addition, has been Chief Executive Officer of BCI since July 1993. Prior to joining BCE, Mr. Burney served as Canada's ambassador to the United States from 1989 to 1992. Mr. Burney also served as chief of staff to the Prime Minister of Canada from March 1987 to January 1989 where he was directly involved with the negotiation of the U.S. - Canada Free Trade Agreement. In July 1993, he was named an Officer of the Order of Canada. Mr. Burney is chairman of Bell Cablemedia plc. He is a director of Mercury Communications Limited, Videotron Holdings plc, Tele-Direct (Publications) Inc., Teleglobe Inc., Bimcor Inc., Maritime Telegraph and Telephone Company, Limited, Moore Corporation Limited and Northbridge Programming Inc. Mr. James B. O'Brien, the General Partner's President, joined the General Partner in January 1982. Prior to being elected President and a Director of the General Partner in December 1989, Mr. O'Brien served as a Division Manager, Director of Operations Planning/Assistant to the CEO, Fund Vice President and Group Vice President/Operations. Mr. O'Brien was appointed to the General Partner's Executive Committee in August 1993. As President, he is responsible for the day-to-day operations of the cable television systems managed and owned by the General Partner. Mr. O'Brien is a board member of Cable Labs, Inc., the research arm of the U.S. cable television industry. He also serves as a director of the Cable Television Administration and Marketing Association and as a director of the Walter Kaitz Foundation, a foundation that places people of ethnic minority groups in positions with cable television systems, networks and vendor companies. Ms. Ruth E. Warren joined the General Partner in August 1980 and has served in various operational capacities, including system manager and Fund Vice President, since then. Ms. Warren was elected Group Vice President/Operations of the General Partner in September 1990. Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice President/Financial Services. In September 1985, he was appointed Senior Vice President/Financial Services. He was elected Treasurer of the General Partner in August 1987, Vice President/Treasurer in April 1988 and Group Vice President/Finance and Chief Financial Officer in October 1990. Mr. Christopher J. Bowick joined the General Partner in September 1991 as Group Vice President/Technology and Chief Technical Officer. Previous to joining the General Partner, Mr. Bowick worked for Scientific Atlanta's Transmission Systems Business Division in various technical management capacities since 1981, and as Vice President of Engineering since 1989. Mr. George H. Newton joined the General Partner in January 1996 as Group Vice President/Telecommunications. Prior to joining the General Partner, Mr. Newton was President of his own consulting business, Clear Solutions, and since 1994 Mr. Newton has served as a Senior Advisor to Bell Canada International. From 1990 to 1993, Mr. Newton served as the founding Chief Executive Officer and Managing Director of Clear Communications, New Zealand, where he established an alternative telephone company in New Zealand. From 1964 to 1990, Mr. Newton held a wide variety of operational and business assignments with Bell Canada International. Mr. Timothy J. Burke joined the General Partner in August 1982 as corporate tax manager, was elected Vice President/Taxation in November 1986 and Group Vice President/Taxation/Administration in October 1990. Mr. Raymond L. Vigil joined the General Partner in June 1993 as Group Vice President/Human Resources. Previous to joining the General Partner, Mr. Vigil served as Executive Director of Learning with 45 46 USWest. Prior to USWest, Mr. Vigil worked in various human resources posts over a 14-year term with the IBM Corporation. Ms. Cynthia A. Winning joined the General Partner as Group Vice President/Marketing in December 1994. Previous to joining the General Partner, Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a sports and event marketing company. From 1979 to 1981 and from 1986 to 1994, Ms. Winning served as the Vice President and Director of Marketing for Citicorp Retail Services, Inc., a provider of private-label credit cards for ten national retail department store chains. From 1981 to 1986, Ms. Winning was the Director of Marketing Services for Daniels & Associates cable television operations, as well as the Western Division Marketing Director for Capital Cities Cable. Ms. Winning also serves as a board member of Cities in Schools, a dropout intervention/prevention program. Ms. Elizabeth M. Steele joined the General Partner in August 1987 as Vice President/General Counsel and Secretary. From August 1980 until joining the General Partner, Ms. Steele was an associate and then a partner at the Denver law firm of Davis, Graham & Stubbs, which serves as counsel to the General Partner. Mr. Larry Kaschinske joined the General Partner in 1984 as a staff accountant in the General Partner's former Wisconsin Division, was promoted to Assistant Controller in 1990 and named Controller in August 1994. Mr. Robert E. Cole was appointed a Director of the General Partner in March 1996. Mr. Cole is currently self-employed as a partner of First Variable Insurance Marketing and is responsible for marketing to National Association of Securities Dealers, Inc. firms in northern California, Oregon, Washington and Alaska. From 1993 to 1995, Mr. Cole was the Director of Marketing for Lamar Life Insurance Company; from 1992 to 1993, Mr. Cole was Senior Vice President of PMI Inc., a third party lender serving the special needs of Corporate Owned Life Insurance (COLI) and from 1988 to 1992, Mr. Cole was the principal and co-founder of a specialty investment banking firm that provided services to finance the ownership and growth of emerging companies, productive assets and real property. Mr. Cole is a Certified Financial Planner and a former United States Naval Aviator. Mr. William E. Frenzel was appointed a Director of the General Partner on April 11, 1995. Mr. Frenzel has been a Guest Scholar since 1991 with the Brookings Institution, a research organization located in Washington D. C. Until his retirement in January 1991, Mr. Frenzel served for twenty years in the United States House of Representatives, representing the State of Minnesota, where he was a member of the House Ways and Means Committee and its Trade Subcommittee, the Congressional Representative to the General Agreement on Tariffs and Trade (GATT), the Ranking Minority Member on the House Budget Committee and a member of the National Economic Commission. Mr. Frenzel also served in the Minnesota Legislature for eight years. He is a Distinguished Fellow of the Tax Foundation, Vice Chairman of the Eurasia Foundation, a Board Member of the U.S.-Japan Foundation, the Close-Up Foundation, Sit Mutual Funds and Chairman of the Japan-America Society of Washington. Mr. Donald L. Jacobs was appointed a Director of the General Partner on April 11, 1995. Mr. Jacobs is a retired executive officer of TRW. Prior to his retirement, he was Vice President and Deputy Manager of the Space and Defense Sector; prior to that appointment, he was the Vice President and General Manager of the Defense Systems Group and prior to his appointment as Group General Manager, he was President of ESL, Inc., a wholly owned subsidiary of TRW. During his career, Mr. Jacobs served on several corporate, professional and civic boards. Mr. James J. Krejci was President of the International Division of International Gaming Technology, International headquartered in Reno, Nevada, until March 1995. Prior to joining IGT in May 1994, Mr. Krejci was Group Vice President of Jones International, Ltd. and was Group Vice President of the General Partner. He also served as an officer of Jones Futurex, Inc., a subsidiary of the General Partner engaged in manufacturing and marketing data encryption devices, Jones Interactive, Inc., a subsidiary of Jones International, Ltd. providing computer data and billing processing facilities and Jones Lightwave, Ltd., a company owned by Jones International, Ltd. and Mr. Jones, and several of its subsidiaries engaged in the provision of telecommunications 46 47 services until leaving the General Partner in May 1994. Mr. Krejci has been a Director of the General Partner since August 1987. Mr. John A. MacDonald was appointed a Director of the General Partner on November 8, 1995. Mr. MacDonald is Executive Vice President of Business Development and Chief Technology Officer of Bell Canada International Inc. Prior to joining Bell Canada in November 1994, Mr. MacDonald was President and Chief Executive Officer of The New Brunswick Telephone Company, Limited, a post he had held since March of that year. Prior to March 1994, Mr. MacDonald was with NBTel for 17 years serving in various capacities, including Market Planning Manager, Corporate Planning Manager, Manager of Systems Planning and Development and General Manager, Chief Engineer and General Manager of Engineering and Information Systems and Vice President of Planning. Mr. MacDonald was the former Chairman of the New Brunswick section of the Institute of Electrical and Electronic Engineers and also served on the Federal Government's Information Highway Advisory Council. Mr. MacDonald is Chairman of MediaLinx Interactive Inc. and Stentor Canadian Network Management and is presently a Governor of the Montreal Exchange. He also serves on the Board of Directors of Tele-Direct (Publications) Inc., Bell-Northern Research, Ltd., SRCI, Bell Sygma, Canarie Inc., and is a member of the University of New Brunswick Venture Campaign Cabinet. Mr. Raphael M. Solot was appointed a Director of the General Partner in March 1996. Mr. Solot is an attorney licensed to practice law in the State of Colorado. Mr. Solot has practiced law in the State of Colorado as a sole practitioner since obtaining his Juris Doctor degree from the University of Colorado in 1964. Mr. Daniel E. Somers was initially appointed a Director of the General Partner on December 20, 1994. Mr. Somers resigned as a Director on December 31, 1995, at the time he was elected Chief Executive Officer of Bell Cablemedia. Mr. Somers was reinstated as a Director of the General Partner on February 2, 1996. From January 1992 to January 1995, Mr. Somers worked as senior Vice President and Chief Financial Officer of Bell Canada International Inc. and was appointed Executive Vice President and Chief Financial Officer on February 1, 1995. He is also a Director of certain of its affiliates. Mr. Somers currently serves as Chief Executive Officer of Bell Cablemedia. Prior to joining Bell Canada International Inc. and since January 1989, Mr. Somers was the President and Chief Executive Officer of Radio Atlantic Holdings Limited. Mr. Somers is a member of the North American Society of Corporate Planning, the Financial Executives Institution and the Financial Analysts Federation. Mr. Howard O. Thrall was appointed a Director of the General Partner on March 6, 1996. Mr. Thrall had previously served as a Director of the General Partner from December 1988 to December 1994. Since September 1993, Mr. Thrall has served as Vice President of Sales, Asian Region, for World Airways, Inc. From 1984 until August 1993, Mr. Thrall was with the McDonnell Douglas Corporation, where he concluded as a Regional Vice President, Commercial Marketing with the Douglas Aircraft Company subsidiary. Mr. Thrall is also a management and international marketing consultant, having completed assignments with First National Net, Inc., Cheong Kang Associated (Korea), Aero Investment Alliance, Inc. and Western Real Estate Partners. Mr. Robert B. Zoellick was appointed a Director of the General Partner on April 11, 1995. Mr. Zoellick is Executive Vice President, General Counsel and Corporate Secretary of Fannie Mae, a federally chartered and stockholder-owned corporation that is the largest housing finance investor in the United States. From August 1992 to January 1993, Mr. Zoellick served as Deputy Chief of Staff of the White House and Assistant to the President. From May 1991 to August 1992, Mr. Zoellick served concurrently as the Under Secretary of State for Economic and Agricultural Affairs and as Counselor of the Department of State, a post he assumed in March 1989. From 1985 to 1988, Mr. Zoellick served at the Department of Treasury in a number of capacities, including Counselor to the Secretary. Mr. Zoellick received the Alexander Hamilton and Distinguished Service Awards, highest honors of the Departments of Treasury and State, respectively. The German Government awarded him the Knight Commanders Cross for his work on Germany unification. Mr. Zoellick currently serves on the boards of the Council on Foreign Relations, the Congressional Institute, the German Marshall Fund of the U.S., the European Institute, the National Bureau of Asian Research, the American Council on Germany and the Overseas Development Council. 47 48 Christopher J. Bowick, Cynthia A. Winning and Larry W. Kaschinske are executive officers of the General Partner; Raymond L. Vigil is an executive officer and a director of the General Partner; and Derek H. Burney, John A. MacDonald and Daniel E. Somers are directors of the General Partner. Reports by these persons with respect to the ownership of limited partnership interests in the Partnership required by Section 16(a) of the Securities Exchange Act of 1934, as amended, were not filed within the required time. None of these individuals own any limited partnership interests in the Partnership. ITEM 11. EXECUTIVE COMPENSATION The Partnership has no employees; however, various personnel are required to operate the cable television systems owned by the Partnership and the Venture. Such personnel are employed by the General Partner and, the cost of such employment is charged by the General Partner to the Partnership or the Venture as a direct reimbursement item. See Item 13. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS No person or entity owns more than 5 percent of the limited partnership interests of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The General Partner and its affiliates engage in certain transactions with the Partnership and the Venture. The General Partner believes that the terms of such transactions are generally as favorable as could be obtained by the Partnership or the Venture from unaffiliated parties. This determination has been made by the General Partner in good faith, but none of the terms were or will be negotiated at arm's-length and there can be no assurance that the terms of such transactions have been or will be as favorable as those that could have been obtained by the Partnership or the Venture from unaffiliated parties. The General Partner charges a management fee, and the General Partner is reimbursed for certain allocated overhead and administrative expenses. These expenses represent the salaries and benefits paid to corporate personnel, rent, data processing services and other corporate facilities costs. Such personnel provide engineering, marketing, administrative, accounting, legal and investor relations services to the Partnership and the Venture. Allocations of personnel costs are based primarily on actual time spent by employees of the General Partner with respect to each partnership managed. Remaining expenses are allocated based on the pro rata relationship of the Partnership's revenues to the total revenues of all systems owned or managed by the General Partner and certain of its subsidiaries. Systems owned by the General Partner and all other systems owned by partnerships for which Jones Intercable, Inc. is the general partner, are also allocated a proportionate share of these expenses. The General Partner also advances funds and charges interest on the balance payable. The interest rate charged approximates the General Partner's weighted average cost of borrowing. The Systems receive stereo audio programming from Superaudio, a joint venture owned 50% by an affiliate of the General Partner and 50% by an unaffiliated party, educational video programming from Mind Extension University, Inc., an affiliate of the General Partner, and computer video programming from Jones Computer Network, Ltd., an affiliate of the General Partner, for fees based upon the number of subscribers receiving the programming. Product Information Network ("PIN"), an affiliate of the General Partner, provides advertising time for third parties on the Systems. In consideration, the revenues generated from the third parties are shared between PIN and the Partnership and the Venture. During the year ended December 31, 1995, the Partnership received revenues from PIN of $38,629, and the Venture received revenues from PIN of $4,559. 48 49 The charges to the Partnership and the Venture for related party transactions are as follows for the periods indicated:
At December 31, --------------- Cable TV Fund 11-B 1995 1994 1993 - ------------------ ---------- ---------- ---------- Management fees $ 718,318 $ 639,592 $ 596,115 Allocation of expenses 1,037,281 989,586 824,911 Interest on advances paid to the General Partner 13,980 14,287 13,350 Amount of advances outstanding -0- 1,305,421 42,288 Highest amount of advances outstanding 109,264 1,305,421 177,673 Programming fees: Superaudio 21,712 21,977 21,590 Mind Extension University 23,227 19,914 12,565 Jones Computer Network 46,392 -0- -0-
At December 31, --------------- Cable TV Joint Fund 11 1995 1994 1993 - ---------------------- ---------- ---------- ---------- Management fees $ 181,634 $ 164,805 $ 164,634 Allocation of expenses 282,057 272,753 246,943 Interest on advances paid to the General Partner 6,848 13,306 21,071 Amount of advances outstanding 45,258 72,764 32,825 Highest amount of advances outstanding 77,215 72,764 52,745 Programming fees: Superaudio 6,318 6,105 6,040 Mind Extension University 6,759 5,532 3,515 Jones Computer Network 12,760 3,316 -0-
49 50 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. See index to financial statements for the list of financial statements and exhibits thereto filed as part of this report. 3. The following exhibits are filed herewith. 2.1 Asset Purchase Agreement dated September 5, 1995 between Cable TV Joint Fund 11 and Jones Intercable, Inc. relating to the Manitowoc System. (1) 2.2 Purchase and Sale Agreement dated October 6, 1995 among Cable TV Fund 11-B, Ltd., Jones Intercable, Inc. and Global Acquisition Partners, L.P. 4.1 Limited Partnership Agreement of Cable TV Fund 11-B, Ltd. (2) 10.1.1 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Manitowoc, Wisconsin. (Joint Fund 11) (2) 10.1.2 Copy of a franchise and related documents thereto granting a community antenna television system franchise for Barker, New York. (Fund 11-B) (3) 10.1.3 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Clarence, New York. (Fund 11-B) 10.1.4 Copy of order renewing franchise adopted 12/11/91. (Fund 11-B) (4) 10.1.5 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Cheektowaga, New York. (Fund 11-B) (5) 10.1.6 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Elma, New York. (Fund 11-B) (2) 10.1.7 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Lancaster, New York. (Fund 11-B) 10.1.8 Copy of renewal order adopted 12/11/91. (Fund 11-B) (4) 10.1.9 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Lancaster, New York. (Fund 11-B) (2) 10.1.10 Copy of renewal order adopted 5/4/88. (Fund 11-B) (4) 10.1.11 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Lockport, New York. (Fund 11-B) (4) 10.1.12 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Newfane, New York. (Fund 11-B) (2) 10.1.13 Copy of renewal order adopted 12/11/91. (Fund 11-B) (4) 50 51 10.1.14 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town and Village of Orchard Park, New York. (Fund 11-B) 10.1.15 Copy of a franchise and related documents thereto granting a community antenna television system franchise for Somerset, New York. (Fund 11-B) (3) 10.2.1 Copy of Credit Agreement dated as of February 28, 1995 among the Registrant, various financial institutions as lenders and Shawmut Bank Connecticut, N.A., as agent for the lenders 27 Financial Data Schedule (1) Incorporated by reference from Registrant's Report on Form 8-K dated September 8, 1995. (2) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1985. (2) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1989. (3) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992. (4) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990. (b) Reports on Form 8-K. None. 51 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CABLE TV FUND 11-B, LTD. a Colorado limited partnership By: Jones Intercable, Inc. By: /s/ Glenn R. Jones ------------------------------- Glenn R. Jones Chairman of the Board and Chief Dated: March 25, 1996 Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Glenn R. Jones ------------------------------- Glenn R. Jones Chairman of the Board and Chief Executive Officer Dated: March 25, 1996 (Principal Executive Officer) By: /s/ Kevin P. Coyle ------------------------------- Kevin P. Coyle Group Vice President/Finance Dated: March 25, 1996 (Principal Financial Officer) By: /s/ Larry Kaschinske ------------------------------- Larry Kaschinske Controller Dated: March 25, 1996 (Principal Accounting Officer) By: /s/ James B. O'Brien ------------------------------- James B. O'Brien Dated: March 25, 1996 President and Director By: /s/ Raymond L. Vigil ------------------------------- Raymond L. Vigil Dated: March 25, 1996 Group Vice President and Director By: /s/ Derek H. Burney --------------------------------- Derek H. Burney Dated: March 25, 1996 Director 52 53 By: --------------------------------- Robert E. Cole Dated: Director By: /s/ William E. Frenzel --------------------------------- William E. Frenzel Dated: March 25, 1996 Director By: /s/ Donald L. Jacobs --------------------------------- Donald L. Jacobs Dated: March 25, 1996 Director By: /s/ James J. Krejci --------------------------------- James J. Krejci Dated: March 25, 1996 Director By: /s/ John A. MacDonald --------------------------------- John A. MacDonald Dated: March 25, 1996 Director By: --------------------------------- Raphael M. Solot Dated: Director By: /s/ Daniel E. Somers --------------------------------- Daniel E. Somers Dated: March 25, 1996 Director By: /s/ Howard O. Thrall --------------------------------- Howard O. Thrall Dated: March 25, 1996 Director By: /s/ Robert B. Zoellick --------------------------------- Robert B. Zoellick Dated: March 25, 1996 Director 53 54 EXHIBIT INDEX Exhibit Number Exhibit Description Page - ------- ------------------- ---- 2.1 Asset Purchase Agreement dated September 5, 1995 between Cable TV Joint Fund 11 and Jones Intercable, Inc. relating to the Manitowoc System. (1) 2.2 Purchase and Sale Agreement dated October 6, 1995 among Cable TV Fund 11-B, Ltd., Jones Intercable, Inc. and Global Acquisition Partners, L.P. 4.1 Limited Partnership Agreement of Cable TV Fund 11-B, Ltd. (2) 10.1.1 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Manitowoc, Wisconsin. (Joint Fund 11) (2) 10.1.2 Copy of a franchise and related documents thereto granting a community antenna television system franchise for Barker, New York. (Fund 11-B) (3) 10.1.3 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Clarence, New York. (Fund 11-B) 10.1.4 Copy of order renewing franchise adopted 12/11/91. (Fund 11-B) (4) 10.1.5 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Cheektowaga, New York. (Fund 11-B) (5) 10.1.6 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Elma, New York. (Fund 11-B) (2) 10.1.7 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Lancaster, New York. (Fund 11-B) 10.1.8 Copy of renewal order adopted 12/11/91. (Fund 11-B) (4) 10.1.9 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Lancaster, New York. (Fund 11-B) (2) 10.1.10 Copy of renewal order adopted 5/4/88. (Fund 11-B) (4) 10.1.11 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Lockport, New York. (Fund 11-B) (4) 10.1.12 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Newfane, New York. (Fund 11-B) (2) 10.1.13 Copy of renewal order adopted 12/11/91. (Fund 11-B) (4) 55 EXHIBIT INDEX Exhibit Number Exhibit Description Page - ------- ------------------- ---- 10.1.14 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town and Village of Orchard Park, New York. (Fund 11-B) 10.1.15 Copy of a franchise and related documents thereto granting a community antenna television system franchise for Somerset, New York. (Fund 11-B) (3) 10.2.1 Copy of Credit Agreement dated as of February 28, 1995 among the Registrant, various financial institutions as lenders and Shawmut Bank Connecticut, N.A., as agent for the lenders 27 Financial Data Schedule (1) Incorporated by reference from Registrant's Report on Form 8-K dated September 8, 1995. (2) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1985. (2) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1989. (3) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992. (4) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990. EX-2.2 2 PURCHASE AGREEMENT 1 PURCHASE AND SALE AGREEMENT BY AND AMONG CABLE TV FUND 11-B, LTD., as Seller JONES INTERCABLE, INC. AND GLOBAL ACQUISITION PARTNERS, L.P. as Buyer 2 TABLE OF CONTENTS
Page 1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . 1 1.01 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . 1 1.02 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . 2 1.03 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . 3 2. CLOSING DATE; PURCHASE PRICE, PAYMENT AND ADJUSTMENTS . . . . . . . 5 2.01 Closing; Date Location . . . . . . . . . . . . . . . . . . . 5 2.02 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 5 2.03 Payment of the Purchase Price . . . . . . . . . . . . . . . . 5 2.04 Allocation of Purchase Price . . . . . . . . . . . . . . . . 5 2.05 Adjustments to the Purchase Price; Prorations . . . . . . . . 6 2.06 Non-Competition Agreements . . . . . . . . . . . . . . . . . 8 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER . . . . . . . . 9 3.01 Partnership Standing . . . . . . . . . . . . . . . . . . . . 9 3.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 9 3.03 Financial Statements . . . . . . . . . . . . . . . . . . . 10 3.04 Title to Assets . . . . . . . . . . . . . . . . . . . . . . 10 3.05 The Acquired Systems . . . . . . . . . . . . . . . . . . . 10 3.06 Franchises . . . . . . . . . . . . . . . . . . . . . . . . 14 3.07 Pole Attachment Agreements . . . . . . . . . . . . . . . . 15 3.08 Head-end Sites and Office Locations . . . . . . . . . . . . 16 3.09 Other Contracts and Leases . . . . . . . . . . . . . . . . 17 3.10 Agreements with Employees . . . . . . . . . . . . . . . . . 17 3.11 Litigation or Judgments . . . . . . . . . . . . . . . . . . 17 3.12 Tax Returns and Payments . . . . . . . . . . . . . . . . . 18 3.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . 18 3.14 Adverse Developments . . . . . . . . . . . . . . . . . . . 18 3.15 Condition of Assets to be Acquired and Insurance . . . . . 18 3.16 Patents, Trademarks and Copyrights . . . . . . . . . . . . 19 3.17 Labor Relations . . . . . . . . . . . . . . . . . . . . . . 19 3.18 Restoration . . . . . . . . . . . . . . . . . . . . . . . . 19 3.19 Bulk Sales Compliance . . . . . . . . . . . . . . . . . . . 20 3.20 Right of First Refusal . . . . . . . . . . . . . . . . . . 20 3.21 Environmental Matters . . . . . . . . . . . . . . . . . . . 20 3.22 HSR Act Filing . . . . . . . . . . . . . . . . . . . . . . 20 3.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 21
-i- 3 TABLE OF CONTENTS (Continued)
Page 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER . . . . . . . . 21 4.01 Status, Power and Authority . . . . . . . . . . . . . . . . 21 4.02 Authorization of Agreement . . . . . . . . . . . . . . . . 21 4.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 22 4.04 HSR Act Filing . . . . . . . . . . . . . . . . . . . . . . 22 4.05 Consummation of Agreement . . . . . . . . . . . . . . . . . 22 5. CONDUCT OF BUSINESS OF ACQUIRED SYSTEMS PENDING CLOSING AND ADDITIONAL COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . 22 5.01 Maintenance of Business . . . . . . . . . . . . . . . . . . 22 5.02 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.03 Organization . . . . . . . . . . . . . . . . . . . . . . . 24 5.04 Access for Investigation . . . . . . . . . . . . . . . . . 24 5.05 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.06 Consummation of Agreement . . . . . . . . . . . . . . . . . 24 5.07 Cooperation with Buyer . . . . . . . . . . . . . . . . . . 24 5.08 Accounts List . . . . . . . . . . . . . . . . . . . . . . . 25 5.09 FCC Approval . . . . . . . . . . . . . . . . . . . . . . . 25 5.10 Certificates . . . . . . . . . . . . . . . . . . . . . . . 25 5.11 Third-Party Consents . . . . . . . . . . . . . . . . . . . 25 5.12 Approval of Franchise Authorities . . . . . . . . . . . . . 25 5.13 FCC and Other Regulatory Compliance . . . . . . . . . . . . 26 5.14 Approval of Lessors . . . . . . . . . . . . . . . . . . . . 26 5.15 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 26 5.16 Transitional Billing Services . . . . . . . . . . . . . . . 27 5.17 Financial Statements . . . . . . . . . . . . . . . . . . . 27 6. CONDITIONS TO CLOSING - BUYER . . . . . . . . . . . . . . . . . . 27 6.01 Conditions to Obligations of Buyer . . . . . . . . . . . . 27 7. CONDITIONS TO CLOSING - SELLER . . . . . . . . . . . . . . . . . . 29 7.01 Conditions to Obligations of Seller . . . . . . . . . . . . 29 8. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8.01 Action to be Taken at and after Closing . . . . . . . . . . 31 9. REAL ESTATE PRORATION AND ADJUSTMENT ITEMS . . . . . . . . . . . . 32 10. DAMAGE TO PROPERTY AND RISK OF LOSS. . . . . . . . . . . . . . . . 32
-ii- 4 TABLE OF CONTENTS (Continued)
Page 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . 33 11.01 Survival of Representations and Warranties . . . . . . . . 33 11.02 Indemnification . . . . . . . . . . . . . . . . . . . . . . 33 11.03 Indemnification with Respect to Third-Party Claims . . . . 34 12. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 12.01 Termination by Mutual Agreement . . . . . . . . . . . . . . 37 12.02 Buyer's Default . . . . . . . . . . . . . . . . . . . . . . 38 12.03 Seller's Default . . . . . . . . . . . . . . . . . . . . . 38 12.04 Termination by Buyer or Seller . . . . . . . . . . . . . . 38 13. NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 14. BROKERAGE COMMISSION . . . . . . . . . . . . . . . . . . . . . . . 40 15. LAWS GOVERNING . . . . . . . . . . . . . . . . . . . . . . . . . . 40 15.01 Laws Governing . . . . . . . . . . . . . . . . . . . . . . 40 15.02 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . 40 16. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 40 16.01 Counterparts; Telecopy . . . . . . . . . . . . . . . . . . 40 16.02 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 41 16.03 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 41 16.04 Interpretation . . . . . . . . . . . . . . . . . . . . . . 41 16.05 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 41 16.06 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 42 16.07 Public Announcements . . . . . . . . . . . . . . . . . . . 42 16.08 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 42 16.09 Partial Invalidity . . . . . . . . . . . . . . . . . . . . 43 16.10 Incorporation by Reference . . . . . . . . . . . . . . . . 43 16.11 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . 43
-iii- 5 INDEX OF SCHEDULES AND EXHIBITS Schedules 1.03 Excluded Assets 3.02 Consents 3.03 Financial Statements 3.04 Liens and Encumbrances 3.05 The Acquired Systems 3.06 Franchises 3.07 Pole Attachment Agreements 3.08 Real Property 3.09 Other Contracts and Leases 3.10 Agreements with Employees 3.12 Tax Returns and Payments 3.15 Condition of Assets and Insurance 3.17 Labor Relations 3.20 Rights of First Refusal 3.21 Environmental Matters Exhibits A Non-Competition Agreement B Opinion of Seller's Counsel C Opinion of Seller's FCC Counsel D Opinion of Buyer's Counsel E Letter of Credit -iv- 6 AGREEMENT THIS AGREEMENT, made this 6th day of October, 1995, by and among CABLE TV FUND 11-B, LTD., a Colorado limited partnership ("Seller"), GLOBAL ACQUISITION PARTNERS, L.P., a Delaware limited partnership ("Buyer") and, solely with respect to its obligations in Section 11 hereof, Jones Intercable, Inc. ("Jones"). RECITALS WHEREAS, Seller owns and operates cable television ("CATV") systems serving the Village of Barker, Town of Clarence, Town of Elma, Town of Lancaster, Village of Lancaster, City and Town of Lockport, Town of Newfane, Town and Village of Orchard Park, and Town of Somerset, all in the State of New York (the "Acquired Systems"); and WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, on the terms and conditions hereinafter set forth, all of the assets of Seller used by, or useful to, Seller in connection with the operation of the Acquired Systems, except the Excluded Assets (as defined in Section 1.03); and WHEREAS, Jones is the general partner of Seller. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth and each act done pursuant hereto, the parties hereto, intending to be legally bound, do represent, warrant, covenant and agree as follows: 1. PURCHASE AND SALE OF ASSETS. 1.01 Transfer of Assets. On the Closing Date, as defined in Section 2.01, Seller shall sell, convey, transfer and assign to Buyer, and Buyer shall purchase from Seller, all of the assets of Seller of every kind and character, real, personal, tangible, intangible or mixed, used by, or useful to, Seller in connection with the operation of, the Acquired Systems in existence on the Closing Date (the "Assets to be Acquired"), which shall include, but not be limited to, the following: (a) All items of tangible personal property owned or leased and used by Seller in connection with the operation of the Acquired Systems, including all equipment associated with receiving and distributing signals at the head-end sites, and all other antennas and down leads and all electronic equipment, head-end amplifiers and associated equipment, line amplifiers, aerial and underground trunk and feeder line cable, distribution plant, programming -1- 7 signal decoders for each satellite service which scrambles its signal, converters, housedrops, including disconnected housedrops, installed subscriber devices, utility poles, local origination equipment (wherever located), test equipment, machinery, spare equipment and parts inventory, housedrop equipment inventory, system design and engineering maps and drawings, supplies, vehicles and trailers (to be transferred under fee title and not under lease), furnishings and other personal property of any nature, and all leasehold and rights-of-way in real property, buildings and improvements and construction-in-progress, towers, fixtures, poles, vaults and pedestals. (b) All of the rights of Seller to, in and under any and all subscription contracts with subscribers for CATV service; except as provided in Section 1.03, all instruments and agreements for the purchase, sale or other receipt or distribution of programming, news, data and microwave relay signals which Buyer expressly agrees to include among the Assets to be Acquired at Closing; and all of the Franchises (as herein defined) and any franchise applications; all of the Pole Attachment Agreements (as herein defined) and all retransmission consent agreements which Buyer expressly agrees to include among the Assets to be Acquired at Closing; all variances, easements, right-of-way agreements, licenses, registrations, copyright notices, signal registration and other statements, construction and other permits, leases, including leases of all head-end sites, and all other contracts or agreements relating to the Acquired Systems. (c) All options, claims, contract rights and trade secrets; all goodwill; all subscriber accounts receivable for all periods prior and subsequent to Closing; subscriber lists and subscription contracts of the Acquired Systems; and all books and records which relate to the operation of the Acquired Systems (including, without limitation, subscriber records, vendor records, accounting records, accounts payable records, accounts receivable records, general ledgers and any other documents necessary to support a regulatory filing). 1.02 Assumed Liabilities. At the Closing on the Closing Date, Buyer shall assume, by instruments of assumption reasonably satisfactory to counsel for Seller, and discharge at the Closing or as they become due and payable, the following liabilities and obligations of Seller and no others: (a) All obligations of the Seller arising after the Closing Date under the Franchises, Leases and Rights-of-Way, Pole Attachment Agreements, licenses, and any agreements, consents, permits and other instruments relating to the Acquired Systems and in existence on the Closing Date and entered into in the ordinary course of business to the extent included in the Assets to be Acquired; (b) Those liabilities and obligations of Seller shown on the June 30, 1995 balance sheets of Seller as current liabilities, part of Schedule 3.03 attached thereto, to the extent that such liabilities are so shown and have not been paid prior to the Closing Date, unless as of the Closing Date, such liabilities no longer meet the definition of a current liability in -2- 8 accordance with generally accepted accounting principles ("GAAP"), and other than any liabilities secured by any of the Assets to be Acquired; (c) All unpaid liabilities and obligations of the Seller incurred in its operations in the ordinary course of business from the date of the June 30, 1995 balance sheets to the Closing Date which would appear as current liabilities on a balance sheet prepared in accordance with GAAP and are identified by name and amount on a schedule to be delivered by Seller to Buyer on the Closing Date, other than any liabilities secured by the Assets to be Acquired; and (d) The remaining capital lease obligations of Seller under that certain Lease Agreement dated as of March 1, 1989 between the Town of Lancaster Industrial Development Agency and Athlete's Den Incorporated (the "Lancaster Capital Lease Agreement"), which was assigned to and assumed by Seller pursuant to that certain Assignment and Assumption of Lease dated July 1, 1993. As of June 30, 1995, the remaining capital lease obligations of Seller under the Lancaster Capital Lease Agreement were $552,172. The liabilities and obligations described in this Section 1.02 so and to the extent to be assumed by Buyer shall be herein referred to as "Assumed Liabilities." Buyer shall assume only those Assumed Liabilities specifically stated in this Section 1.02 and no others. Without limiting the foregoing, Buyer shall not assume or become liable for (i) any income, profits, franchise, sales, use, occupation, property, excise, ad valorem or any other tax to which the Assets to be Acquired are subject prior to the Closing Date or to which Seller is subject, and Buyer shall not assume or become liable for any liability or tax due as a result of any contest, audit or other tax proceeding involving Seller or the Assets to be Acquired for any taxable period ending on or prior to the Closing Date, except as otherwise provided herein, (ii) any liabilities relating to the Excluded Assets, (iii) any liability for franchise fees, pole attachment fees, leasehold rentals, any obligation for wages, commissions, overtime, vacation and holiday pay, sick pay, bonuses, other employee benefits or any pension withdrawal liability, any on-going workers' compensation benefits for any accident arising prior to the Closing Date except for accrued overtime, sick pay, vacation pay, holiday pay or other employee benefits treated as a current liability under Section 2.05(a)(xii) hereof, or any obligation under any employment agreement or employment-at-will relationship other than obligations arising from and after the Closing Date, (iv) any liability or obligation under any collective bargaining agreement in existence prior to or as of the Closing Date, regardless of whether the liability or obligation arises prior to or after the Closing Date, or (v) any liability or obligation of Seller which is not a current liability as defined under GAAP. 1.03 Excluded Assets. Notwithstanding the foregoing, it is specifically agreed that the following assets are excluded from the Assets to be Acquired (collectively, the "Excluded Assets"): -3- 9 (a) cash and cash equivalents on hand or in the bank accounts of Seller; (b) the satellite programming agreements and agreements which Seller maintains with any of its respective suppliers of programming; (c) any retransmission consents, must carry or will carry agreements which Seller maintains (collectively, the "Broadcast Signal Agreements"), except as otherwise agreed by Buyer pursuant to written notice to the Seller given no later than ten (10) days prior to the Closing Date to the effect that the agreements named in such notice are to be included among the Assets to be Acquired at Closing with no increase in the Purchase Price therefor (the "Acquired Broadcast Signal Agreements"); provided, however, that Buyer may not designate as Acquired Broadcast Signal Agreements any Broadcast Signal Agreements that relate to broadcast signals which are carried on other Jones cable systems; and provided further that Seller shall not be required to obtain the consents to the assignment of the Acquired Broadcast Signal Agreements to the Buyer unless Buyer notifies Seller that they shall be included in the Assets to be Acquired within 30 days after the date hereof; (d) all documents relating to the legal existence of the Seller; (e) insurance policies, intercompany receivables, letters of credit and surety bonds; (f) all claims, rights and interest in and to any refunds for federal, state or local income or other taxes or fees of any nature whatsoever for periods prior to the Closing Date, including, without limitation, fees paid to the United States Copyright Office; (g) any books and records that Seller is required by law to retain, subject to the right of Buyer to have access to and to copy for a reasonable period, not to exceed five years from the Closing Date, and other books and records related to internal corporate matters and financial relationships with Seller's lenders, provided that nothing herein shall limit Buyer's right to receive at Closing copies of all documents, books and records necessary in connection with the operation of the Business; (h) the trademarks, trade names, service marks and all other information and similar intangible assets relating to Seller or the Acquired Systems; (i) contracts and agreements relating to Seller's subscriber billing system and all equipment related thereto; (j) that certain office building located at 37 Central in Lancaster, New York; and (k) The rights, assets and properties described on Schedule 1.03. -4- 10 2. CLOSING DATE: PURCHASE PRICE, PAYMENT AND ADJUSTMENTS. 2.01 Closing Date and Location. The consummation of the transfer and delivery of the Assets to be Acquired to Buyer and the receipt of the consideration therefor by Seller shall constitute the "Closing." Unless otherwise mutually agreed to by the parties, the Closing shall take place at 10:00 a.m., local time, at the offices of Jones Intercable, Inc., 9697 East Mineral Avenue, Englewood, Colorado 80112. The parties agree to close the transactions contemplated by this Agreement upon a date designated in a Closing Notice, as herein defined, which in no event shall be sooner than ten (10) business days after each party's receipt of such Closing Notice, and after all of the conditions to Closing set forth in Sections 6 and 7 have been satisfied or waived, whichever shall later occur, which specified date and time shall constitute the "Closing Date." Either Buyer or Seller may deliver notice in writing to the other parties hereto setting a Closing Date in accordance with this Section 2.01 (a "Closing Notice"). The effective date of the sale of the Acquired Systems shall be at the close of business on the Closing Date and all prorations and allocations provided for hereunder shall be made as of the close of business on the Closing Date, except as otherwise agreed in writing by the parties. Notwithstanding the foregoing, this Agreement may be terminated pursuant to Section 12 hereof if the Closing has not occurred by September 30, 1996. 2.02 Purchase Price. Buyer shall acquire and accept the Assets to be Acquired from Seller and shall pay to Seller the aggregate amount of Eighty-Four Million Dollars ($84,000,000) for the Assets to be Acquired (the "Purchase Price"), subject to adjustment pursuant to the provisions of Section 2.05. 2.03 Payment of the Purchase Price. On the Closing Date, Buyer will pay to Seller an amount equal to the Purchase Price as adjusted at Closing pursuant to the provisions of Section 2.05 in immediately available funds by wire transfer. 2.04 Allocation of Purchase Price. The Purchase Price shall be allocated among the Assets to be Acquired based upon an appraisal to be obtained prior to the Closing. The parties agree to engage Kane Reece Associates, Inc. ("KRA") or, if unavailable, Malarky-Taylor Associates, to prepare such appraisal, and agree to share equally the costs of the appraisal. The parties shall cause the appraiser to consult with Buyer and Seller during the preparation of such appraisal, and the appraiser shall deliver the final appraisal to Buyer and Seller simultaneously. Buyer and Seller agree to be bound by such allocation and to file all returns and reports in respect of the -5- 11 3.09 Other Contracts and Leases. Schedule 3.09 lists each existing contract, agreement, lease, permit, consent, license, microwave agreement or commitment, including pole line agreements, whether written or oral, affecting or relating to the Acquired Systems (the "Agreements") other than the Excluded Assets; the Franchises; the Pole Attachment Agreements; the Leases and Rights-of-Way; subscription agreements with individual residential subscribers for the cable services provided in the ordinary course of business, which may be canceled by Seller without penalty on not more than 30 days notice; miscellaneous service contracts terminable at will without penalty; other contracts or agreements relating to the Acquired Systems not involving either aggregate liabilities under all such agreements exceeding $25,000 or any material nonmonetary obligation; and programming agreements. Each of the Agreements is in full force and effect in accordance with its terms. Without limiting the foregoing, the Acquired Systems and all equipment and real property used in connection therewith are now being utilized, operated and maintained in conformity in all material respects with the provisions of the Agreements. Seller has not in any manner failed to so utilize, operate and maintain the Acquired Systems in a manner which could now or hereafter result in cancellation or termination of, or liability for damages under, the Agreements, nor is Seller in default in any material respect in the performance of one or more of its obligations pursuant to the Agreements. 3.10 Agreements with Employees. (a) Except as set forth on Schedule 3.10, Seller is not a party to any employment agreement, written or oral, which cannot be terminated at will by Seller, and, except as set forth on Schedule 3.10, Seller has not had and currently does not have any pension or profit sharing or other employee benefit plan for its employees. True, correct and complete copies of all agreements and plans listed on Schedule 3.10 hereto have heretofore been delivered by Seller to Buyer. (b) The names, titles and rates of compensation of all of the employees of Seller are listed on Schedule 3.10. (c) Seller's policy with respect to the amount of vacation time earned by employees is set forth on Schedule 3.10. 3.11 Litigation or Judgments. Except as set forth in the Schedules to this Agreement, there is no litigation, at law or in equity, or any proceedings before any commission, agency or other governmental authority, pending or, to Seller's knowledge, after due inquiry, threatened against Seller or the Acquired Systems, and, to Seller's knowledge, after due inquiry, no facts or circumstances exist which could reasonably be expected to give rise to any such litigation or proceedings. -17- 12 3.12 Tax Returns and Payments. With respect to the Acquired Systems, Seller has timely and properly filed or caused to be filed all tax returns which it is or has been required to file on or prior to the date hereof by any jurisdiction to which it is or has been subject, all such tax returns being true, correct and complete in all material respects. All income, unemployment, social security, franchise, property and other taxes levied, assessed or imposed upon Seller or the Acquired Systems by the United States, or any state, or governmental sub-division of either, to the extent due and payable and not contested by Seller, have been timely and properly paid to date, and no liability exists for deficiencies. Except as set forth on Schedule 3.12 attached hereto, there are no tax audits pending nor any outstanding agreements or waivers extending the statutory period of limitations applicable to any federal, state or local income tax return of Seller for any period. Except as set forth on Schedule 3.12, to Seller's knowledge, after due inquiry, no tax deficiencies have been determined, nor proposed tax assessments charged, against Seller (nor is there any reasonable basis therefor). Seller has made or caused to be made all withholdings of taxes required to be made, and such withholdings have either been paid to the appropriate governmental agency or set aside in appropriate accounts for such purpose. True, correct and complete copies of the federal, state and local tax returns of Seller for the Acquired Systems for all income, gross receipts, franchise and property taxes for the last three (3) fiscal years have been delivered to Buyer. 3.13 Compliance with Laws. Seller is in compliance in all material respects with all applicable foreign, federal, state and local laws, rules, regulations, orders, writs, injunctions, ordinances or decrees of any governing authority, federal, state or local court, or of any municipal or governmental department, commission, board, bureau, agency or municipality having jurisdiction over it or the Acquired Systems. 3.14 Adverse Developments. Since June 30, 1995, (i) no material adverse change has occurred with respect to the Acquired Systems or their financial conditions or operations, taken as a whole, other than any change arising out of events or conditions that affect the CATV industry generally, and (ii) there has been no material damage, destruction, loss or other casualty to the Assets to be Acquired, taken as a whole, that has not been repaired or replaced. 3.15 Condition of Assets to be Acquired and Insurance. The Acquired Systems, both as integrated systems and in their respective component parts, are operated and maintained in a proper manner; are free from any material (either individually or in the aggregate) defects of workmanship or material in light of its age and the use to which it has been put; and meet in all material respects the requirements of: (i) the Franchises, (ii) the Pole Attachment Agreements, (iii) the Agreements, and (iv) all applicable -18- 13 technical standards, rules, regulations and orders of federal, state and local governing or regulatory authorities. The Assets to be Acquired are all in good operating condition, reasonable wear and tear excepted. None of the cable used in the Acquired Systems requires any rearrangement or rehabilitation other than routine system maintenance. The Assets to be Acquired include such spare parts as are necessary in order to permit the operation of the Acquired Systems without material interruption for a thirty-day period. Except as set forth on Schedule 3.15, the Assets to be Acquired are and have been insured, and all such insurance policies are in full force and effect, are on an "occurrence" basis, and are in terms and scope and amounts which are customary in accordance with industry standards for CATV systems of comparable size. Seller has not received any notice of cancellation with respect to such policies. During the past three (3) years, no application by Seller for insurance with respect to the Assets to be Acquired has been denied for any reason. Seller has provided Buyer with copies of the loss claims history of Seller for the past three (3) years. 3.16 Patents, Trademarks and Copyrights. The operation of the Acquired Systems by Seller does not infringe upon, or otherwise violate, the rights of any person or entity in any copyright, trade name, trademark right, service mark, service name, patent, patent right, license, trade secret or franchise, and there is not pending or, to Seller's knowledge, after due inquiry, threatened any action with respect to any such infringement or breach. 3.17 Labor Relations. Except as set forth on Schedule 3,17, the employees of Seller are not parties to any collective bargaining agreement. This Agreement and the transactions contemplated hereunder shall not obligate Buyer to recognize any union or to assume any collective bargaining agreement that applies to Seller's employees. There currently are not, nor in the past five years have there been, any grievances, unfair labor practice claims, disputes or controversies with any union, or threats of strikes, work stoppages or any pending demands for collective bargaining by any union. Seller has received no notice of any grievances, unfair labor practice claims, disputes or controversies with any other organization of Seller's employees, or threats of strikes, work stoppages or any pending demands for collective bargaining by any such organization. 3.18 Restoration. No material restoration, repaving, repair or other work is required to be made by Seller to any street, sidewalk or abutting or adjacent area pursuant to the requirements of any ordinance, code, permit, easement or contract relating to the installation, construction or operation of the Acquired Systems. No property of any person or entity has been damaged, destroyed, disturbed or removed in the process of construction or maintenance of the Acquired Systems which has not been, or will not be, prior to Closing, repaired, restored or replaced, or, if not repaired, restored or replaced, for which an adequate reserve has not been accrued by the Seller prior to Closing. -19- 14 3.19 Bulk Sales Compliance. Seller shall comply, in connection with the sale and transfer of the Assets to be Acquired pursuant to this Agreement, with any applicable law pertaining to bulk sales or transfers. 3.10 Right of First Refusal. Except as set forth on Schedule 3.20, no person or entity has any option, warrant or right of first refusal to purchase either the Acquired Systems or any of the Assets to be Acquired. 3.21 Environmental Matters. Except as set forth on Schedule 3.21, Seller has complied and is in compliance in all material respects with all applicable federal, state and local laws, regulations and ordinances relating to protection of human health and the environment ("Environmental Laws"), including those related to hazardous substances, wastes, discharges, emissions, disposals, dumping, burial or other forms of disposal, as defined by the Environmental Laws. Except as set forth on Schedule 3.2.1, there are no current or pending claims, administrative proceedings, judgments, declarations or orders relating to violations of Environmental Laws or to the presence of Hazardous Substances (as defined by the Environmental Laws) on, in or under the owned or leased real property of Seller. No hazardous waste has been dumped, buried, discharged or disposed of on, in or under the owned or leased real property of Seller by Seller or, to the best knowledge of Seller, by any other person or entity. Except as set forth on Schedule 3.21, neither Seller nor, to the best knowledge of Seller, any third party has installed or placed on, under or in the owned real property or the leased real property of Seller: (i) any treatment, storage, recycling or disposal facility for any hazardous waste as that term is defined under 40 CFR Part 261 or any state equivalent; (ii) any underground storage tanks, in use or abandoned; or (iii) any polychlorinated biphenyls (PCBs) in any hydraulic oils, transformers, capacitors or other electrical equipment. 3.22 HSR Act Filing. Seller shall cooperate reasonably with Buyer and, to the extent required, shall file or cause to be filed with the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ") within thirty (30) days after the date hereof a notification and report on behalf of Seller, completed in accordance with applicable law and regulations, with respect to the transactions contemplated hereby, pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the rules promulgated thereunder .Seller agrees to use its best efforts to comply with any additional requests for information, whether formal or informal, under the HSR Act; provided, however, that, notwithstanding such efforts, if the FTC or the DOJ has not certified as complete each party's compliance with a formal second request under the HSR -20- 15 Act by the Termination Date, as herein defined, then Seller may terminate this Agreement without further obligation hereunder. 3.23 Disclosure. No representation or warranty by Seller in this Agreement or any Schedule or Exhibit, or any statement, list or certificate furnished or to be furnished by Seller pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading or necessary in order to provide a prospective purchaser of the Acquired Systems with proper material information as to the Assets to be Acquired and the business of Seller. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. Buyer represents and warrants that the following representations and warranties are true and correct as of the date hereof and will also be true and correct on the Closing Date, in addition to which it covenants with Seller that: 4.01 Status, Power and Authority. Buyer is a limited partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and has the partnership power and authority to own and lease its properties and to conduct its business as currently conducted and to acquire the Assets to be Acquired. 4.02 Authorization of Agreement. (a) Buyer has taken all necessary action to authorize and approve this Agreement, the consummation of the transactions contemplated hereby and the performance by Buyer of all of the terms and conditions hereof on the part of Buyer to be performed. The execution and delivery by Buyer of this Agreement and each and every other agreement, instrument, certificate or document to which Buyer is a party that is to be executed, delivered and performed by Buyer pursuant thereto (collectively, "Buyer Transaction Documents"), and the consummation of the transactions contemplated hereby and thereby, do not and will not: (i) violate any provisions of any judicial or administrative order, award, judgment or decree applicable to Buyer, or (ii) conflict with any of the provisions of the charter documents of Buyer, or (iii) conflict with, result in a breach of or constitute a default under any material agreement or instrument to which Buyer is a party or by which it is bound. (b) This Agreement and the Buyer Transaction Documents, when executed and delivered by Buyer, will have been duly authorized, executed and delivered by Buyer, and this Agreement constitutes, and the Buyer Transaction Documents, when executed -21- 16 and delivered by Buyer, will constitute, legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. 4.03 Litigation. There is no litigation, at law or in equity, or any proceedings before any commission or other governmental authority, pending or, to the knowledge of Buyer, after due inquiry, threatened against Buyer which could reasonably be expected to impair the ability of Buyer to consummate the transactions contemplated by this Agreement. 4.04 HSR Act Filing. Buyer shall, to the extent required, file or cause to be filed with the FTC and the DOJ within thirty (30) days after the date hereof a notification and report form on behalf of Buyer, completed in accordance with applicable law and regulations, with respect to the transactions contemplated hereby, pursuant to the HSR Act and the rules promulgated thereunder. Buyer agrees to use its best efforts to comply with any additional requests for information, whether formal or informal, under the HSR Act; provided, however, that, notwithstanding such efforts, if the FTC or the DOJ has not certified as complete each party's compliance with a formal second request under the HSR Act by the Termination Date, then Buyer may terminate this Agreement without further obligation hereunder. 4.05 Consummation of Agreement. Buyer shall use commercially reasonable efforts to perform and fulfill all obligations and conditions on its part to be performed and fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be fully carried out. 5. CONDUCT OF BUSINESS OF ACQUIRED SYSTEMS PENDING CLOSING ADDITIONAL COVENANTS OF SELLER. Seller covenants and agrees with Buyer that from the date hereof to and including the Closing Date: 5.01 Maintenance of Business. Seller shall continue to operate the Acquired Systems, shall maintain the Assets to be Acquired (including the maintaining of a level of inventory of spare equipment and parts which is adequate for the continued operation of the Acquired Systems for a thirty-day period) and shall keep all of its business books, records and files, all in the ordinary course of business in accordance with past practices consistently applied and in accordance with the capital budget and operating budget delivered by Seller to Buyer; provided, however, that Seller shall have the right to make payment in full of all outstanding obligations under the Lancaster Capital Lease Agreement in order to obtain unencumbered fee simple title to the real property subject to such -22- 17 lease in anticipation of transferring such real property to Buyer at Closing in the event Seller is unable to obtain consent to the assignment of the Lancaster Capital Lease Agreement. Seller shall not sell, transfer or assign any assets except in the ordinary course of business and for full and fair value. Seller shall not permit the creation of any lien, charge or encumbrance on any of its assets that would survive the Closing other than the lien of current taxes not yet due and payable. Seller shall not initiate or otherwise cause any other person to initiate any action to amend or cancel, nor permit any other person to take any action to amend or cancel, any of the Franchises, the Pole Attachment Agreements or the Agreements without the prior written consent of Buyer; provided, however, that Seller shall use its reasonable efforts to renew any Franchises currently held under temporary operating authority as disclosed on Schedule 3.06. Promptly after becoming aware thereof, Seller shall notify Buyer of any action taken or proposed to be taken by a person other than Seller to amend or cancel any of the Franchises, the Pole Attachment Agreements or the Agreements. Seller shall not enter into any contract or commitment nor incur any indebtedness or other liability or obligation of any kind relating to the Acquired Systems which is not in the ordinary course of business in accordance with past practices without the prior written consent of Buyer. Seller shall not permit any of its partners, officers, directors, shareholders, agents, employees or affiliates to pay any of Seller's accounts receivable from subscribers outstanding on the date hereof. Notwithstanding the foregoing, such persons shall be permitted to make payment for CATV services received by them at their own dwellings. Without the prior written consent of Buyer, which consent shall not be unreasonably withheld, delayed or conditioned, Seller shall not, except as otherwise required by law: change the channel lineup of the Acquired Systems; add additional channels to the Acquired Systems, except for channels added at the request of a franchising authority as part of the process of renewing a Franchise (in which event, Seller shall give Buyer written notice of the addition of such channels); change its subscriber rates (provided, however, that if Seller is required to change its subscriber rates pursuant to a regulatory order, Seller may do so without the consent of Buyer upon 30 days' prior written notice); or conduct any extraordinary or unusual marketing or collection programs, including, without limitation, any amnesty programs, or any extraordinary collection practices which might adversely affect customer relationships. Seller shall comply with all laws, rules and regulations of federal, state, city and local governments. Seller shall not violate the terms of any lease or contract connected with the operation of the Acquired Systems or with the utilization of the Assets to be Acquired. Seller shall not grant any increase in the rate of wages, salaries, bonuses or other remuneration of any employee, except in accordance with past practices, and provided that Seller may incent employees to remain employees of the Acquired Systems through the Closing Date without violating this covenant. 5.02 Insurance. Seller shall use commercially reasonable efforts to maintain in full force and effect until Closing all existing insurance policies to cover and protect the Assets to be Acquired against damage or destruction. -23- 18 5.03 Organization Seller shall use commercially reasonable efforts consistent with sound business judgment to preserve intact its present business and organization, to retain the services of its present employees, to preserve its relationships with subscribers, suppliers and others having business relationships with it and to maintain the goodwill enjoyed within the municipalities serviced by the Acquired Systems. 5.04 Access for Investigation. Seller shall afford Buyer and its representatives access during normal business hours to the properties, plant and equipment and to the books and records of Seller in order that Buyer shall have full opportunity to investigate the business affairs of Seller. 5.05 Notice. (a) Promptly upon Seller becoming aware of the occurrence of, or the impending or threatened occurrence of, any event which would cause any of the representations or warranties of Seller contained herein, or in any Schedule or Exhibit, to be inaccurate in any material respect, Seller shall give detailed written notice thereof to Buyer and shall use its best efforts to prevent or promptly remedy the same. (b) Seller shall refrain from knowingly taking, and shall use commercially reasonable efforts to refrain from knowingly suffering or permitting, any action which would render untrue any of the representations or warranties of Seller contained herein, and Seller shall not knowingly omit to take any action reasonably required to maintain the goodwill enjoyed within the municipalities serviced by the Acquired Systems in the ordinary course of business, consistent with past practice. 5.06 Consummation of Agreement. Seller shall use commercially reasonable efforts to perform and fulfill all obligations and conditions on its part to be performed and fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be fully carried out. 5.07 Cooperation with Buyer. Seller shall cooperate, to the extent not inconsistent with its obligations hereunder, as Buyer may reasonably request, in apprising the municipalities serviced by the Acquired Systems and the utility companies which have issued the Pole Attachment Agreements of the sale of the Acquired Systems to Buyer in such manner as to preserve the goodwill of such municipalities and utility companies. -24- 19 5.08 Accounts List. Prior to the Closing Date, Seller shall deliver to Buyer a list of all persons to whom Seller makes recurring periodic payments in connection with the business and operations of the Acquired Systems (the "Accounts List"), except for persons to whom Seller makes recurring periodic payments in connection with any Excluded Asset. Each individual entry set forth on the Accounts List shall list the name and address of each account creditor and the approximate average amount and approximate frequency of the recurring periodic payments paid to each such account creditor. Seller shall use its reasonable efforts to ensure the accuracy and completeness of the Accounts List. 5.09 FCC Approval. Seller shall make application to the FCC for the consent and approval of the FCC to the transfer of the ownership and operation of any FCC licenses of the Acquired Systems from Seller to Buyer, to the extent such consent and approval is required to be obtained. 5.10 Certificates. On or before the Closing Date, Seller shall deliver to Buyer: Certificates of Good Standing issued by the Secretary of State of Colorado as to Seller's good standing in such state and as to the general partner of Seller's good standing in such state and a Certificate of Good Standing from the State of New York. 5.11 Third-Party Consents. Except for fees relating to filings required by the Hart-Scott-Rodino Antitrust Improvements Act, the costs of which shall be shared equally by Buyer and Seller, Seller shall, at its sole cost and expense, use commercially reasonable efforts to obtain prior to Closing all consents and approvals from third parties which are identified on Schedule 3.02; provided, however, that the costs and expenses associated with the performance after the Closing Date of obligations which are required by a third party as a condition of granting its consent or approval and which obligations are accepted by the Buyer shall be borne solely by the Buyer. All such consents shall be in writing and in form and substance reasonably satisfactory to Buyer. In the event that Buyer's cooperation is required to obtain such consents, Buyer shall reasonably cooperate with Seller and shall be responsible for its own out-of-pocket costs in connection therewith. 5.12 Approval of Franchise Authorities. Seller shall use its commercially reasonable efforts to obtain the consent of the applicable franchisors to the transfer to Buyer of all of the Franchises. Seller shall use commercially reasonable efforts to obtain a certificate from each franchisor certifying that: (a) the Franchise was properly granted; (b) the Franchise was properly extended (if applicable); -25- 20 (c) the Franchise is in accordance with all state and local laws; (d) the Franchise is validly existing and in full force and effect; (e) there exists no fact or circumstance which, with the passage of time or the giving of notice or both, would constitute a default under the Franchise, or permit the franchisor to cancel or terminate the rights thereunder, except upon the expiration of the full term thereof; and (f) the Franchise may be collaterally assigned to Buyer's lenders. Seller shall use its commercially reasonable efforts to obtain the approval of the New York State Cable Commission to the transfer of the Acquired Systems to Buyer, with no adverse conditions imposed on such transfer by the Commission. Buyer shall reasonably cooperate with Seller in Seller's efforts to secure such approvals and consents, including attending such meetings and providing such information with respect to Buyer as the franchisors or New York State Cable Commission may reasonably request. Buyer shall post any bond or other security reasonably required pursuant to the terms of such approvals and consents. 5.13 FCC and Other Regulatory Compliance. Seller shall consult with Buyer prior to implementing any subscriber rate changes relating to the implementation of any FCC regulations, except as otherwise provided in Section 5.01 hereof. 5.14 Approval of Lessors. Seller shall use its commercially reasonable efforts to obtain the consent of each lessor of real property relating to the Acquired Systems listed on Schedule 3.02 as being required to consent to the assignment to Buyer of any lease. Seller shall use its commercially reasonable efforts to obtain a certificate from the lessor under each lease for real property relating to the Acquired Systems to which Seller is a party and which is listed on Schedule 3.08 certifying that: (a) the lease is validly existing and in full force and effect; and (b) all payments under the lease due and payable prior to the date of such certificate have been paid in full. 5.15 Employees. Seller shall terminate all of its employees immediately prior to Closing. Seller shall remain solely responsible for any termination benefits to which any of the employees is entitled by reason of such termination whether or not such person is subsequently employed by Buyer. Buyer shall have no obligation to offer employment to any of the employees of Buyer. Buyer shall notify Seller at least fifteen (15) days prior to the Closing Date of those employees to whom Buyer intends to offer employment. Buyer agrees to offer such employees credit for accrued overtime, sick pay, vacation pay, holiday pay and other employee benefits to the extent Buyer offers equivalent benefits to its existing employees and to the extent the foregoing are included as current liabilities under Section 2.05(a) hereof. Seller shall refrain from making any statements or communications to its employees regarding subsequent employment by Buyer or Buyer's employment policies without Buyer's prior written consent. -26- 21 5.16 Transitional Billing Services. Seller shall provide to Buyer, upon request, access to and the right to use its billing system computers, software and related fixed assets in connection with the Acquired Systems for a period of up to 90 days following the Closing Date to allow for conversion of existing billing arrangements ("Transitional Billing Services"). Buyer shall notify Seller at least 10 days prior to Closing as to whether it desires Transitional Billing Services. Transitional Billing Services, if any, that are requested by Buyer shall be provided on terms and conditions reasonably satisfactory to Seller; provided, however, that the amount to be paid by Buyer for such Transitional Billing Services shall not exceed the reasonable direct incremental cost to Seller of providing such Transitional Billing Services. 5.17 Financial Statements. Seller shall provide Buyer with copies of all regularly prepared monthly financial statements relating to the Acquired Systems promptly after the same become available in the ordinary course, as well as copies of audited statements for the year ended December 31, 1995. 6. CONDITIONS TO CLOSING - BUYER. 6.01 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the purchase of the Assets to be Acquired at Closing shall be subject to the satisfaction of the following conditions precedent, except to the extent waived by Buyer in writing: (a) All of the representations and warranties of the Seller contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of such time; Seller shall have performed and be in compliance in all material respects with all of the covenants, agreements, terms and provisions set forth herein on its part to be observed or performed, and no event which would constitute a material breach of the terms of this Agreement on the part of Seller shall have occurred and be continuing at the Closing Date. (b) Since the date of this Agreement, (i) there shall not have occurred any material adverse change with respect to the Acquired Systems or their financial condition or operations, taken as a whole, other than any change arising out of events or conditions that affect the CATV industry generally, and (ii) there shall not have occurred any material damage, destruction, loss or other casualty to the Assets to be Acquired, taken as a whole, that has not been repaired or replaced. (c) The general partner of Seller shall have executed and delivered to Buyer on the Closing Date a Certificate, dated that date, in form and substance reasonably -27- 22 satisfactory to Buyer to the effect that the conditions set forth in each of the provisions of Section 6.01 (a) and (b) of this Agreement have been satisfied in full. (d) Seller shall have delivered to Buyer complete and correct copies of the resolutions of its general and limited partners authorizing the execution, delivery and performance of the Seller Transaction Documents and the sale of the Assets to be Acquired and the transactions contemplated hereby, certified by the general partner of Seller. (e) Seller shall have obtained and delivered to Buyer each of the consents of the governmental agencies and third parties designated on Schedule 3.02 as Required Consents, with no adverse conditions imposed by such consents. (f) Buyer shall have received a legal opinion from the General Counsel of the general partner of Seller, dated the Closing Date and substantially in the form of Exhibit B attached hereto. (g) Seller shall have delivered to Buyer: (i) the Non-Competition Agreements duly executed by Seller and its general partner; (ii) the Good Standing Certificates described in Section 5.1 0, and (iii) a certificate of incumbency of the general partner of Seller duly executed by the Assistant Secretary and each of the officers of the general partner executing this Agreement and the documents delivered hereunder on behalf of Seller. (h) Buyer shall have received an opinion of Dow Lohnes & Albertson, FCC counsel for Seller, dated the Closing Date and substantially in the form of Exhibit C. (i) All documents and other items required to be delivered hereunder to Buyer at or prior to Closing shall have been delivered or shall be tendered at the Closing. (j) On the Closing Date, no suit or action or other proceeding shall be pending or threatened before any court or other governmental agency against Seller or Buyer in which the consummation of the transactions contemplated by this Agreement are sought to be enjoined. (k) Seller shall have delivered to Buyer, at Seller's expense, at least ten (10) days prior to the Closing Date, lien searches dated not more than forty (40) days prior to the Closing Date showing all UCC-1 financing statements filed with any filing offices in the States of New York and Colorado wherein Seller is named a debtor, all federal, state or local tax liens -28- 23 filed against the Seller, and all unsatisfied judgments naming Seller as judgment debtor, all of which shall be released or terminated prior to or at the Closing. (l) All notification and report forms required to be filed on behalf of the parties to this Agreement with the FTC and the DOJ under the HSR Act and rules shall have been filed, and the waiting period required to expire under the HSR Act and rules, including any extension thereof, shall have expired or early termination of the waiting period shall have been granted. (m) Seller shall have delivered to Buyer a commitment or commitments for owner's title insurance with respect to real estate owned by Seller as part of the Assets to be Acquired, issued by a nationally reputable entity, agreeing to insure marketable title in fee simple to each parcel of real property, subject only to (a) zoning restrictions, prohibitions, and other requirements imposed by any governmental authority having jurisdiction over the property, (b) public utility easements of record, (c) taxes not yet due and payable, (d) easements, rights-of-way, restrictions, and other similar encumbrances incurred in the ordinary course of business which do not materially interfere with the ordinary use of the property, and (e) other standard exceptions, including survey exceptions. Such commitment or commitments shall be dated not more than sixty (60) days prior to the Closing Date (provided that any insurance shall be obtained at Buyer's cost). (n) Seller shall stand ready to deliver the matters described in Section 8 hereof. 7. CONDITIONS TO CLOSING - SELLER. 7.01 Conditions to Obligations of Seller. The obligations of the Seller to consummate the sale of the Assets to be Acquired at Closing shall be subject to the satisfaction of the following conditions precedent, except to the extent waived by Seller in writing: (a) All of the representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of such time, and Buyer shall be in compliance in all material respects with all of the covenants, agreements, terms and provisions set forth herein on its part to be observed and performed, and no event which would constitute a material breach of the terms of this Agreement on the part of Buyer shall have occurred and be continuing at the Closing Date. (b) An executive officer of Buyer shall have executed and delivered to Seller on the Closing Date a Certificate, dated that date, in form and substance reasonably satisfactory to Seller to the effect that the conditions set forth in each of the provisions of Section 7.01(a) of this Agreement have been satisfied in full. -29- 24 (c) Buyer shall have delivered the Purchase Price, as adjusted, to Seller in accordance with Section 2.03. (d) Buyer shall have delivered to Seller complete and correct copies of the corporate resolutions of Buyer authorizing the execution, delivery and performance of this Agreement and the purchase of the Assets to be Acquired. (e) Seller shall have received an opinion from Colin Higgin, Deputy General Counsel for Buyer, dated the Closing Date substantially in the form of Exhibit D hereto. (f) On the Closing Date, no suit or action or other proceeding shall be pending or threatened before any court or other governmental agency against Seller or Buyer in which the consummation of the transactions contemplated by this Agreement are sought to be enjoined. (g) Buyer shall have executed and delivered to Seller assumption documents in form and substance reasonably satisfactory to Seller pursuant to which Buyer shall have assumed the Assumed Liabilities. (h) Buyer shall have delivered to Seller Certificates of Good Standing issued by the Secretary of State of Delaware and the Commonwealth of Pennsylvania as to Buyer's good standing in such jurisdictions. (i) The limited partners of Seller shall have approved the transaction contemplated by this Agreement in accordance with the requirements of the Seller's Limited Partnership Agreement. The general partner of Seller shall use commercially reasonable efforts to obtain such approval as soon as practicable after the execution of this Agreement, and shall continue such efforts up until the Termination Date, if necessary, and the general partner of Seller agrees to recommend such approval to each limited partner of Seller during such period and during such period to otherwise take such steps as are necessary or reasonable to obtain such approval. (j) All notification and report forms required to be filed on behalf of the parties to this Agreement with the FTC and the DOJ under the HSR Act and rules thereunder shall have been filed, and the waiting period required to expire under the HSR Act and rules thereunder, including any extension thereof, shall have expired or early termination of the waiting period shall have been granted. (k) Buyer shall have delivered to Seller a certificate of incumbency duly executed by the Assistant Secretary of the Buyer and each of the officers of Buyer executing this Agreement and the documents delivered hereunder. -30- 25 8. CLOSING. 8.01 Action to be Taken at and after Closing. (a) At Closing, Seller shall deliver to Buyer: (i) Such bills of sale, endorsements, assignments, general warranty deeds and other good and sufficient instruments of transfer and conveyance as shall be reasonably deemed necessary or appropriate by Buyer to vest in or confirm to Buyer good and marketable title to all of the assets and properties constituting the Assets to be Acquired, free and clear of any and all liens, security interests, mortgages, charges or encumbrances of any kind, except for current taxes which are not yet due and payable but which are timely paid; (ii) A complete itemized list of all of Seller's subscriber accounts receivable relating to the Acquired Systems as of a date no later than thirty (30) days prior to the Closing Date, showing sums due and their respective aging for the period ending on the Closing Date; (iii) A true, accurate and complete schedule as of the Closing Date of monetary obligations owed by Seller and not yet paid, items billed to Seller and not yet paid, items charged to or claimed against Seller and not yet paid, whether or not disputed, under each of the Franchises, Pole Attachment Agreements and Agreements to be assumed by Buyer under the terms of this Agreement; (iv) Actual possession and operating control of the Acquired Systems; (v) The documents and instruments required to be delivered by Seller to Buyer pursuant to the terms of Section 6; and (vi) All of the consents designated as Required Consents on Schedule 3.02. (b) At Closing, Buyer shall deliver to Seller: (i) The Purchase Price, as adjusted in accordance with Section 2.03; and (ii) The documents and instruments required to be delivered by Buyer to Seller pursuant to the terms of Section 7. (c) After Closing, Seller shall deliver to Buyer, as received from time to time: -31- 26 (i) any cash or other property that it may receive in respect to subscriber accounts receivable received after the Closing Date relating to the business and operations of the Acquired Systems arising prior to or subsequent to the Closing Date; (ii) any Assets to be Acquired not effectively transferred to Buyer at the Closing; and (iii) from time to time at the request of Buyer and without further consideration, such further instruments of conveyance, transfer and assignment as Buyer may reasonably request in order to convey more effectively the transfer to Buyer of any of the Assets to be Acquired, and Seller shall assist Buyer in the reduction to possession of any such assets, possession of which was not delivered to Buyer at Closing. Buyer shall be responsible for the preparation of all of the documents incidental to such conveyance, transfer and reduction to possession. 9. REAL ESTATE PRORATION AND ADJUSTMENT ITEMS. Water and sewer charges, municipal garbage and rubbish removal charges, rents, interest, real estate taxes, utilities and other charges of an annual or recurrent nature assessed against or paid in conjunction with the ownership or operation of any real property owned by Seller to be transferred to Buyer hereunder shall be prorated as of the Closing Date. Real estate taxes shall be prorated as of the Closing Date. Real estate taxes for the calendar year of Closing shall be prorated based upon real estate taxes levied or estimated to be levied in that year by each taxing body (without regard to the date of levy or the fiscal year of the taxing body); provided, however, if any of such real estate taxes have not yet been levied as of the Closing Date for the calendar year in which the Closing Date occurs, the tax proration shall be based upon the prior year's tax levy, taking into account any adjustments in real estate tax assessments which may have been made. Upon final levy of the real estate taxes, Seller and Buyer agree that a final proration will be made as of the Closing Date, and if it is determined that either party shall owe the other based upon a discrepancy between the amounts included in the Final Adjustment and the final proration, then the owing party shall make payment to the other within thirty (30) days of final settlement thereof. 10. DAMAGE TO PROPERTY AND RISK OF LOSS. (a) The risk of any loss or damage to the Assets to be Acquired and the Acquired Systems resulting from fire, theft or any other casualty (but excluding any loss or damage attributable to reasonable wear and tear) ("Damage") shall be borne by Seller at all times prior to the Closing. In the event that any such Damage shall be sufficiently substantial so as to preclude and prevent resumption of normal operations of all or any portion of the Acquired Systems within twenty (20) days from the occurrence of the event resulting in such loss or damage, Seller shall immediately notify Buyer in writing of its inability to resume normal -32- 27 operations or to replace or restore the lost or damaged property, and Buyer, at any time within ten (10) days after receipt of such notice, may elect either (a) to waive such defect and proceed toward consummation of the transaction in accordance with the terms of this Agreement, or (b) to terminate this Agreement. If Buyer elects to terminate this Agreement pursuant to this Section, the parties hereto shall stand fully released and discharged of any and all obligations hereunder. (b) If Buyer shall elect to consummate this transaction notwithstanding such Damage and does so, there shall be no diminution of the Purchase Price, and all insurance proceeds (other than for bodily injury or for damage to property other than the Assets to be Acquired or for business interruption prior to the Closing Date) payable as a result of the occurrence of the event resulting in the Damage shall be delivered to Buyer, or the rights thereto shall be assigned to Buyer if not yet paid over to Seller, and Seller shall pay to Buyer the amount of any deductible associated with the insurance claim. (c) Notwithstanding the provisions of this Section 10, in the event of Damage to the Acquired Systems which is not material damage to the Acquired Systems, Seller shall have the full responsibility for the completion of all necessary repair and/or restoration work with respect to such damage, whether or not such work is capable of being completed prior to the Closing Date, and shall promptly and with due diligence, in a prudent and workmanlike manner, proceed with such work, time being of the essence. 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES: INDEMNIFICATION. 11.01 Survival of Representations and Warranties. All representations, warranties, covenants, stipulations, certifications, indemnities and agreements contained herein or in any document delivered pursuant hereto shall survive the consummation of the transactions provided for in this Agreement; provided that the representations and warranties contained in this Agreement shall expire and be extinguished six months after the Closing Date, except for representations and warranties relating to (i) title and ownership, which shall survive forever, (ii) environmental matters, which shall survive for five years, and (iii) tax matters, which shall survive until the third annual anniversary of the Closing Date, and Buyer's and Seller's rights to make claims based thereon shall likewise expire and be extinguished on such dates. The parties hereto acknowledge and agree that Seller shall remain responsible for any refund liability with respect to the rates charged by Seller in the Acquired Systems through the Closing Date and Buyer's right to be indemnified for any such claims shall survive forever. 11.02 Indemnification. (a) Seller and Jones shall, jointly and severally, defend, indemnify and hold Buyer harmless from and against any and all claims, liabilities, damages, losses, deficiencies and expenses (including reasonable attorneys' fees and expenses and costs of suit. -33- 28 including, but not limited to, travel expenses and discovery costs for such matters as transcripts, photocopying, subpoenas and telecopies) (individually, a "Loss" and collectively, "Losses") arising out of (i) any and all inaccurate representations and warranties, and out of any and all breaches of covenants, agreements and certifications made by or on behalf of Seller in this Agreement or in any document delivered hereunder, (ii) any failure to comply with any applicable bulk transfer acts, or (iii) any and all liabilities and obligations of Seller (except for the Assumed Liabilities) and any and all liabilities and obligations of Seller not disclosed to Buyer in this Agreement; provided that in connection with the indemnification provided for in Section 11.02(a)(i) hereof, Seller and Jones shall not be obligated to indemnify Buyer for Losses subject to indemnification thereunder (other than Losses relating to tax matters) once the total amount of Losses for which Seller and Jones have provided indemnification under such Section 11.02(a)(i) equals $4,500,000 ("Seller's Cap"). Buyer shall not be entitled to be indemnified by Seller or Jones for any Losses under this Section 11.02(a) arising out of any single claim or aggregate claims until the total amount of all such Losses suffered or paid by Buyer exceeds $250,000 ("Seller's Basket"). Buyer shall then be entitled to be indemnified for all such Losses under this Section 11.02(a) arising out a single claim or aggregate claims. For example, if the total amount of such Losses equals $252,000, Buyer shall be entitled to be indemnified for the entire amount of such Losses, and not just the amount of Losses in excess of $250,000. (b) Buyer shall defend, indemnify and hold Seller harmless from and against any and all Losses arising out of (i) any and all inaccurate representations, and out of any and all breaches of covenants, warranties, stipulations, agreements and certifications made by or on behalf of Buyer in this Agreement or in any document delivered by Buyer hereunder; (ii) the Assumed Liabilities; and (iii) all debts, liabilities or claims owing by or against Buyer subsequent to the Closing Date or arising out of the business activities of Buyer subsequent thereto; provided that Buyer shall not be obligated to indemnify Seller for Losses subject to indemnification hereunder once the total amount of Losses for which Buyer has provided indemnification hereunder equals $4,500,000. 11.03 Indemnification with Respect to Third-Party Claims. (a) Definition. As used herein, a "Third-Party Claim" means a Loss or potential Loss for which indemnification is claimed by Buyer or Seller (the "Indemnitee") under the provisions of this Article 11 and which is consequent to a claim against the Indemnitee by a person, corporation, association, partnership or other business organization, or an individual, or a government, any political subdivision thereof or a governmental agency by commencement against the Indemnitee of a legal action or proceeding or receipt by the Indemnitee of an assertion of a claim for which indemnification is provided pursuant to this Article 11 by Buyer or Seller and Jones, as the case may be (the "Indemnitor"). (b) The Indemnitee will give notice of a Third-Party Claim to the Indemnitor, together with, if such Third-Party Claim is subject to arbitration pursuant to Section 14 hereof, demand for arbitration, stating the nature thereof and enclosing copies of any complaint, summons, written assertion of such Third-Party Claim or similar document. No claim -34- 29 for indemnification on account of a Third-Party Claim shall be made and no indemnification therefor shall be available under this Article 11 until the Indemnitee shall have given initial written notice of its claim to the Indemnitor. (c) Retention of Counsel by the Indemnitor. Except as hereinafter provided (including, but not limited to, Section 11.03(d)(ii) hereof), the Indemnitor shall engage counsel to defend a Third-Party Claim, and shall provide notice to the Indemnitee not later than 15 business days following delivery by the Indemnitee to the Indemnitor of a notice of a Third Party Claim, such notice to include an acknowledgment by the Indemnitor that it will be liable in full to the Indemnitee for any Losses in connection with such Third-Party Claim. The Indemnitee will fully cooperate with such counsel. The Indemnitor will cause such counsel to consult with the Indemnitee as appropriate as to the defense of such claim, and the Indemnitee may, at its own expense, participate in such defense, assistance or enforcement, but the Indemnitor shall control such defense, assistance or enforcement. The Indemnitor will cause such counsel engaged by the Indemnitor to keep the Indemnitee informed at all times of the status of such defense, assistance or enforcement. (d) Employment of Counsel by the Indemnitee. (i) Notwithstanding the provisions of Section 11.03(c), the Indemnitee shall have the right to engage counsel and to control the defense of a Third-Party Claim if the Indemnitor shall not have notified the Indemnitee of its appointment of counsel and control of the defense of a Third-Party Claim pursuant to Section 11.03(c) within the time period therein provided. (ii) Notwithstanding the engagement of counsel by the Indemnitor, the Indemnitee shall have the right, at its own expense, to engage counsel to participate jointly with the Indemnitor in, and to control jointly with the Indemnitor, the defense of a Third-Party Claim if (x) the Third-Party Claim involves remedies other than monetary damages and such remedies, in the Indemnitee's reasonable judgment, could have an effect on the conduct of the Indemnitee's business, or (y) the Third-Party Claim relates to acts, omissions, conditions, events or other matters occurring after the Closing Date as well as to acts, omissions, conditions, events or other matters occurring prior to the Closing Date, or (z) the claims involve monetary damages which could exceed Seller's Cap. (iii) If the Indemnitee chooses to exercise its right to appoint counsel under this Section 11.03(d), the Indemnitee shall deliver notice thereof to the Indemnitor setting forth in reasonable detail why it believes that it has such right and the name of the counsel it proposes to employ. The Indemnitee may deliver such notice at any time that the conditions to the exercise of such right appear to be fulfilled, it being recognized that in the course of litigation, the scope -35- 30 of litigation and the amount at stake may change. The Indemnitee shall thereupon have the right to appoint such counsel. (iv) The reasonable fees and expenses of counsel and any accountants, experts or consultants engaged by the Indemnitee in accordance with the provisions of Section 11.03(d)(i) in connection with defending a Third-Party Claim shall be paid by the Indemnitor in accordance with the provisions of this Article 11. If the Indemnitee's employment of counsel is for a Third-Party Claim of the type described in subdivision (ii)(y) or (ii)(z) of this Section 11.03(d), then subject to the provisions of Section 11.03(e), the amount of fees and expenses so payable by the Indemnitor shall be that fraction of the aggregate of such fees and expenses, the numerator of which is the portion of the amount of any judgment on, or settlement of, such Third-Party Claim for which the Indemnitee is indemnified pursuant to this Article 11 and the denominator of which is the total amount of such judgment or settlement, but provided further, if such defense of a Third-Party Claim is successful (in the sense that as a consequence thereof, there is no Loss (other than such fees and expenses) for which the Indemnitee is indemnified pursuant to this Article 11), the Indemnitee and the Indemnitor will attempt in good faith to reach an agreement on the amount of such fees and expenses so payable by the Indemnitor. (e) Settlement of Third-Party Claims. (i) The Indemnitor may settle any Third-Party Claim solely involving monetary damages only if the amount of such settlement is to be paid entirely by the Indemnitor pursuant to this Article 11. (ii) The Indemnitor will not enter into a settlement of a Third Party Claim which involves a non-monetary remedy or which will not be paid entirely by the Indemnitor pursuant to this Article 11 without the written consent of the Indemnitee (which consent shall not be unreasonably withheld, delayed or conditioned). (iii) The Indemnitee will not enter into a settlement of a Third Party Claim without the written consent of the Indemnitor, which consent shall not be unreasonably withheld, under the circumstances described in subdivision (i) of Section 11.03(d), if the Indemnitor has accepted all or any portion of the liability for such Third-Party Claim. Otherwise, the Indemnitee shall be free to compromise, defend and settle Third-Party Claims without prejudice to any of its rights hereunder or under applicable law. (iv) As to any Third-Party Claim of the type described in subsection (ii)(y) or subsection (ii)(z) of Section 11.03(d), the Indemnitee and the Indemnitor shall consult as to any proposed settlement. If the Indemnitee notifies the Indemnitor that it wishes to accept a proposed settlement and the Indemnitor is -36- 31 unwilling to do so, if the amount for which the Third-Party Claim is ultimately resolved is greater than the amount for which the Indemnitee desired to settle, then (x) the Indemnitee shall be liable only for the amount, if any, which it would have paid had the Third-Party Claim been settled as proposed by the Indemnitee, and (y) all reasonable attorneys' fees and expenses and costs of suit incurred by the Indemnitee subsequent to the time of the proposed settlement shall be paid or reimbursed by the Indemnitor. (v) In determining whether to accept or reject any settlement proposal, each party shall act in good faith and with due regard for the reasonable commercial and financial interests of the other. (f) Claims as to Which Indemnification is Partially Payable. Notwithstanding the foregoing, in the event of any settlement of, or final judgment with respect to, a Third-Party Claim which relates to acts, omissions, conditions, events or other matters occurring both before and after the Closing Date, the Indemnitee and the Indemnitor shall negotiate in good faith as to the portion of such Third-Party Claim as to which such indemnification is payable. (g) Cooperation, etc. The Indemnitee and the Indemnitor shall cooperate with one another in good faith in connection with the defense, compromise or settlement of any claim or action. Without limiting the generality of the foregoing, the party controlling the defense or settlement of any matter shall take steps reasonably designed to ensure that the other party and its counsel are informed at all times of the status of such matter. Neither party shall dispose of, compromise or settle any claim or action in a manner that is not reasonable under the circumstances and in good faith. The Indemnitor and Indemnitee shall enter into such confidentiality and other non-disclosure agreements as the Indemnitee or Indemnitor, as the case may be, shall reasonably request in order to protect trade secrets and other confidential or proprietary information of the Indemnitee or Indemnitor, as the case may be. 12. TERMINATION. 12.01 Termination by Mutual Agreement. This Agreement may be terminated prior to Closing (i) by mutual agreement of Seller and Buyer or (ii) by Buyer in the event of a substantial loss under Section 10. In such event, this Agreement shall terminate and neither Buyer nor Seller shall have any further obligation or liability to the other hereunder, except that Sections 14, 15, 16.05, 16.06 and 16.07 of the Agreement shall survive and continue in full force and effect notwithstanding such termination. -37- 32 12.02 Buyer's Default. Concurrently with the execution of this Agreement, Buyer has delivered to Seller an irrevocable letter of credit issued by a financial institution reasonably acceptable to Seller in the amount of $84,000,000 and in the form attached hereto as Exhibit E (the "Letter of Credit"). In the event that the transactions contemplated by this Agreement are not consummated on the Closing Date (if and as extended upon the mutual agreement of Seller and Buyer) due to Buyer's failure or refusal to close, and all of the conditions specified in Section 6 shall have been satisfied, Seller shall be entitled, at its sole option and discretion, either to: (A) draw down the amount of the Purchase Price, as adjusted in accordance with Section 2.03, under the Letter of Credit immediately upon tendering to Buyer the instruments and documents specified in Section 8.01(a), provided that Seller's Closing Notice advised Buyer of Seller's intent to make such draw in the event Buyer failed or refused to close; or (B) terminate this Agreement and pursue any and all of its equitable and legal causes of action against Buyer, provided that Seller's right to recover damages against Buyer shall not be limited in any respect by the provisions of Section 11.02 hereof or otherwise, and provided further that the Letter of Credit shall be returned to the financial institution issuing the Letter of Credit upon such termination. Payment of a draw under the Letter of Credit shall not constitute an admission by Buyer of Seller's entitlement to such funds. Buyer shall have the right to pursue all of its equitable and legal causes of action against Seller as a result of any such draw and Buyer's right to recover damages from Seller as a result thereof shall not be limited in any respect by the provisions of Section 11.02 hereof or otherwise. 12.03 Seller's Default. In the event that the transactions contemplated by this Agreement are not consummated on the Closing Date (if and as extended) due to Seller's failure or refusal to close, and all of the conditions specified in Section 7 shall have been satisfied, Buyer shall be entitled to pursue any and all of its equitable and legal causes of action against Seller. 12.04 Termination by Buyer or Seller. This Agreement may be terminated by Buyer or Seller at any time after September 30, 1996 (the "Termination Date") in the event that any condition set forth in Sections 6 or 7 hereof has not been satisfied or tendered by the party owing performance 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 waived by the party for whose benefit the condition is intended. Upon such termination, neither Buyer nor Seller shall have any further obligation or liability to the other hereunder, except that Sections 14, 15, 16.05, 16.06 and 16.07 of this Agreement shall survive and continue in full force and effect notwithstanding such termination. -38- 33 13. NOTICE. All notices and other communications hereunder shall be in writing and delivered by one of the following methods of delivery: (i) personally, (ii) by registered or certified mail, return receipt requested, postage prepaid, (iii) by overnight courier, or (iv) by legible facsimile transmission, in all cases addressed as follows: To Buyer: Global Acquisition Partners, L.P. 5 West Third Street Coudersport, PA 16915 Telecopy: (814) 274-8631 Attention: Colin H. Higgin, Esq. With a copy to: Buchanan Ingersoll Professional Corporation One Oxford Centre 301 Grant Street, 20th Floor Pittsburgh, PA 15219-1410 Telecopy: (412) 562-1041 Attention: Bruce I. Booken, Esq. To Seller or Jones: Jones Intercable, Inc. 9697 E. Mineral Avenue Englewood, CO 80112 Telecopy: (303) 799-4675 Attention: President With a copy to: Jones Intercable, Inc. 9697 E. Mineral Avenue Englewood, CO 80112 Telecopy: (303) 799-1644 Attention: General Counsel or to such address as such party may indicate by a notice delivered to the other parties hereto. Notice shall be deemed received the same day (when delivered personally), five (5) days after mailing (when sent by registered or certified mail) or the next business day (when sent by facsimile transmission or when delivered BY OVERNIGHT courier). Any party to this Agreement -39- 34 may change its address to which all communications and notices may be sent hereunder by addressing notices of such change in the manner provided. 14. BROKERAGE COMMISSION. Buyer and Seller each represent and warrant that all negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by each directly with the other without intervention of any person, except that Seller has retained The Jones Group, Ltd. (the "Group") as its sole broker and finder in connection with this Agreement and the transactions contemplated hereby, and Seller has agreed to pay the entire commission of the Group. Buyer shall have no liability or responsibility for the commissions payable to the Group. Each party to this Agreement indemnifies the other and holds it harmless against and in respect of any claim against the other for brokerage or other commissions relative to this Agreement and the transactions contemplated hereby by the indemnifying party's employees, agents or consultants. 15. LAWS GOVERNING. 15.01 Laws Governing. The construction, interpretation and enforcement of this Agreement and the rights of the parties hereunder shall be governed by the laws of the State of New York without regard to any jurisdiction's conflicts of law provisions. 15.02 Consent to Jurisdiction. Each of the parties hereto hereby irrevocably consents and submits to the nonexclusive personal jurisdiction of the United States District Court for the Western District of New York and the courts of Erie County, New York over any suit, action or proceeding under this Agreement, and irrevocably agrees that all claims with respect thereto may be heard and determined in such courts. Service of process in any such suit, action or proceeding may be made in the manner hereinabove set forth for the giving of notices and the same shall constitute valid personal service for all purposes, each party hereby waiving personal service by other means. 16. MISCELLANEOUS. 16.01 Counterparts; Telecopy. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument. Delivery of executed signature pages hereof by facsimile transmission shall constitute effective and binding execution and delivery hereof. -40- 35 16.02 Assignment. This Agreement may not be assigned by any party hereto without the prior written consent of the other parties; provided, however, that Buyer may assign this Agreement to one or more of the subsidiaries or affiliates of Buyer, without the prior written consent of Seller, provided Buyer remains primarily liable to fully perform the terms of this Agreement. 16.03 Entire Agreement. This Agreement is an integrated document, contains the entire agreement between the parties, wholly cancels, terminates and supersedes any and all previous and/or contemporaneous oral agreements, negotiations, commitments and writings between the parties hereto with respect to such subject matter. No change, modification, termination, notice of termination, discharge or abandonment of this Agreement or any of the provisions hereof, nor any representation, promise or condition relating to this Agreement, shall be binding upon the parties hereto unless made in writing and signed by the parties hereto, except that termination or notices of termination which may be effected pursuant to the terms of this Agreement by either party to the Agreement shall be binding if made in writing and signed by the applicable party. 16.04 Interpretation. Article titles and headings to Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of any of the provisions of this Agreement. All references to Sections, subsections, Schedules or Exhibits contained in this Agreement are references to the Sections and subsections of this Agreement and the Schedules or Exhibits described on the list immediately following the signature page hereto and attached hereto. All references to the word "including" shall have the meaning represented by the phrase "including without limitation." As used herein, the phrase "after due inquiry" is limited to inquiry within the organization of Seller or Buyer, as the case may be. As used herein, the phrase "commercially reasonable efforts" shall not be deemed to require a party to undertake extraordinary measures, including the initiation or prosecution of legal proceedings or the payment of amounts in excess of normal and usual filing and processing fees, if any. 16.05 Expenses. Except as otherwise expressly provided herein, Seller and Buyer each will pay all costs and expenses, including any and all legal and accounting fees, of its performance and compliance with all agreements and conditions contained herein on its part to be performed or complied with. Seller and Buyer agree to share equally (i) any sales or transfer taxes, recording fees or other similar costs or fees payable in connection with the transfer of the Assets to be Acquired, (ii) the costs and expenses relating to the appraisals performed pursuant to Section 2.04, and (iii) the fees required under the HSR Act. -41- 36 16.06 Confidentiality. Any and all information obtained by Buyer from Seller in connection with the transactions contemplated by this Agreement which is confidential in nature (collectively, the "Evaluation Material") shall be kept strictly confidential by Buyer prior to the Closing Date; provided, however, that any Evaluation Material may be disclosed to agents, employees, officers, directors, investors, advisors and other representatives of Buyer who need to know such Evaluation Material (it being agreed that such representative shall be informed by Buyer of the confidential nature of such Evaluation Material and shall be directed to deal with such Evaluation Material confidentially) and, further, may be disclosed to the extent required by law, including applicable securities laws, or by written or oral question or request for information or documents in legal proceedings, interrogatories, subpoenas, civil investigative demands or similar processes. For purposes of this Agreement, the term "Evaluation Material" does not include information which (i) becomes generally available to the public other than as a result of disclosure by Buyer or any Buyer representative in violation of the terms hereof, (ii) was available on a non-confidential basis prior to disclosure to Buyer by Seller or any of their directors or any of its directors, officers, employees, agents or representatives, or (iii) becomes available to Buyer on a non-confidential basis from a source which is not bound by a confidentiality agreement with Seller. 16.07 Public Announcements. Neither Buyer nor Seller shall, without the approval of the other party (which may not be unreasonably withheld), make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that such party shall be so obligated by law (including any legal obligation imposed on Buyer in connection with its status as a publicly-held corporation), in which case the other party shall be advised and Buyer and Seller shall use their reasonable efforts to cause a mutually agreeable release or announcement to be issued. 16.08 Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof, but any such waiver must be in writing and must comply with the notice provisions contained in Section 13. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. -42- 37 16.09 Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such a manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein, unless the deletion of such provision or provisions would result in such a material change as to cause the completion of the transactions contemplated hereby to be unreasonable. 16.10 Incorporation by Reference. Any and all Schedules, Exhibits, Recitals, statements, reports, certificates or other documents or instruments referred to herein or attached hereto are incorporated herein by reference thereto as though fully set forth at the point referred to in this Agreement. 16.11 Attorneys' Fees. Notwithstanding any other provision of this Agreement, the prevailing party in any litigation or other legal proceeding between Buyer and Seller with respect to this Agreement or the transactions contemplated hereby shall be entitled to recover from the nonprevailing party its reasonable attorneys' fees and costs of the proceeding. -43- 38 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized corporate officers on the day and year first above written. GLOBAL ACQUISITION PARTNERS, L.P. By: /s/ [ILLEGIBLE] ------------------------------- Title: General Partner ------------------------------- CABLE TV FUND 11-B, LTD, By: JONES INTERCABLE, INC., General Partner By: /s/ JAMES B. O'BRIEN ------------------------------- Title: President ------------------------------- JONES INTERCABLE, INC. By: /s/ JAMES B. O'BRIEN ------------------------------- Title: President ------------------------------- -44- EX-10.1.3 3 FRANCHISE DOCUMENTS FOR CLARENCE 1 Town of Clarence FRANCHISE AGREEMENT 2 STATE OF NEW YORK Town of Clarence, County of Erie This FRANCHISE AGREEMENT made this 25th day of April, 1995 between the Incorporated Town of Clarence (hereinafter called "Clarence") and Cable TV Fund 11-B, LTD., a Colorado limited partnership doing business as Jones Intercable Inc., (hereinafter called "Franchisee"). WHEREAS Franchisee wishes to construct, maintain and operate a cable television system in Clarence; and WHEREAS the construction, maintenance and operation of said cable television system involves the use and occupation by Franchisee of the streets, thoroughfares and other public rights-of-way belonging to Clarence; and WHEREAS the technical ability, financial condition and character of Franchisee and its principals have been considered and approved by the Town Board of Clarence in full public proceedings affording due process; and WHEREAS, by resolution of the Town Board dated April 12,1995, Clarence has granted a renewal of the non-exclusive cable television franchise to Franchisee and authorized the Town Supervisor or other designated representative of the Town Board to execute the instant FRANCHISE AGREEMENT with Franchisee upon the terms hereinafter set forth; and WHEREAS, the instant FRANCHISE AGREEMENT complies with the franchise standards required by the New York State Commission of Cable Television and the Federal Communications Commission; NOW, THEREFORE, in consideration of the mutual conditions and covenants contained herein: IT IS MUTUALLY AGREED AS FOLLOWS: 2 3 1. Grant Clarence hereby grants to Franchisee, its successors and assigns the non-exclusive right and privilege to erect and place in Clarence and to construct, maintain and operate in, over or under the present and future streets, sidewalks, alleys, public land and places and highways in or of Clarence, towers, poles, lines, cables, necessary wiring and other apparatus for the purpose of transmitting, receiving, amplifying and distributing telephone, telegraph, television, data, radio signals and other video and aural programming and communications services within said Clarence and to the inhabitants thereof. Any and all towers intended to be erected shall be subject to the prior approval of the Town Board of Clarence. No antennas nor poles shall exceed the height of existing utility poles without the prior approval of the Town Board. All installations shall comply with Clarence ordinances and federal, state and local laws and regulations. 2. Term The term of this Agreement shall be for a period of ten (10) years from June 11,1995. 3. Franchise Area The franchise rights and obligations set forth in this Agreement shall be applicable to the present territorial limits of the Town of Clarence and to any area added thereto during the term of this Agreement. 4. Construction (a) Franchisee shall construct and maintain its cable system in a safe and reliable manner. (b) The population density shall be established at a minimum of 25 dwelling units per aerial mile of cable for years 1 thru 5 of this franchise. During years 6 - 10 of this franchise the population density shall be established at 20 dwelling units per aerial mile of cable. Areas adjoining existing cable plant meeting the above density requirements shall be cabled without a contribution in aid of construction by subscribers. Areas not immediately adjoining the cable plant and whose population density is less than the number of dwelling units per lineal mile of aerial cable established above, shall be considered to be located in a line extension area. Subscribers residing in such an area and who are willing to contribute to the 3 4 cost of construction shall be entitled to services in accordance with the following formula C/LE -CA/P = SC. C = The actual cost of new construction in the line extension area; LE = The number of dwelling units requesting service in the line extension area; CA = The average cost of construction per mile in the primary service area; P = The minimum number of dwelling units per mile which would require the franchisee to provide service in the primary service area. This is determined by taking the minimum number, or the average (which is determined by dividing the number of dwelling units in the primary service area by the number of lineal miles of cable in the same area) whichever of the two numbers is lower; SC = Subscriber contribution in aid of construction in the line extension area. (c) Franchisee shall construct its cable system using materials of good and durable quality, and all work involved in construction, installation, maintenance, and repair of the cable system shall be performed in a safe, thorough, and reliable manner. (d) New subdivisions where cable facilities have been installed in joint trench with power and/or telephone that are located within cabled areas shall have service activated when the number of occupied homes equals 25% of the planned lots in the subdivision. The calculation of the percentage occupied will be determined based on the area where cable facilities have been placed in joint trench rather than including future phases of the subdivision in the lots calculation. (e) The Clarence Cable Committee may schedule two construction meetings per year, 1.) in September to provide input to the Franchisee on future home construction and any cable construction requests received by the commission and 2.) in March for the Franchisee to update the Commission on construction plans. (f) Operator may, in its discretion, solicit door to door for the purpose of selling Operator's services. Operator shall provide Franchisee with thirty (30) days advance written notice of its intent to solicit door to door. Operator may survey and solicit door to door in areas not serviced by Franchisee for the purpose of determining the feasibility of providing service to said area by giving Clarence advanced notice verbally. 4 5 5. Subscriber Rates (a) The Franchisee may make such charges for services provided to subscribers as are permitted by Federal, State, or Local law. Under this subsection, neither party surrenders any other rights or obligations due them under any other Federal, State, or Local statute rule or regulation. (b) Any subscriber over 65 years of age who is the principal resident of the service dwelling will be entitled to a discount of 10% on basic cable television services, including initial installation. This discount will be extended to the Limited Basic customer and the Basic Plus customer. Franchisee shall establish a procedure for subscribers to apply for this discount. (c) The Town Hall, Town Library, all public schools, Senior Center, and Youth Center within Clarence which are in areas meeting the density requirements of section 4(b) will receive one free outlet and free Basic Plus Service. (d) Franchisee agrees to seek the Clarence Cable Commission's input during regularly scheduled meetings on any programming changes. Franchisee will consult with the Town's representative prior to customer notification of planned changes so long as the changes are within the Franchisee's control. Both parties agree that the input and notification process in no way abridges Franchisee' rights to make programming decisions. Franchisee shall have the right to conduct door to door sales for the purpose of selling Franchisee's products. All telemarketers shall act in professional and courteous manner. To the extent, that Clarence should receive citizen complaints regarding door to door telemarketers, Franchisee agrees to work closely with Clarence to correct the complaints and to prevent future complaints from occurring. (e) Franchisee agrees to make available to the Clarence High School production equipment, not to exceed twenty five thousand ($25,000) in value, to allow the school to originate programming from the high school. Clarence agrees that if at least twenty (20) hours of programming in the first year, twenty eight (28) hours of programming the second year and forty (40) hours of programming in the third year and each year thereafter, is not made available to Franchisee for cablecast per school year, the franchisee, at its option, may remove the equipment for use at a another location. Equipment will be made available no latter than the start of the 1995 school year. Franchisee agrees to provide one (1) preventive maintenance service per year for the above provided production equipment. Franchisee is not responsible for any damages caused by the users actions, direct or indirect, negligence, or lack of action. 5 6 6. Complaints (a) Franchisee shall maintain an office with a listed telephone number within the Village of Lancaster for the purpose of receiving and responding to cable television subscriber complaints. (b) All subscriber complaints or trouble calls shall receive investigative action on the same day such complaint or call is received at the local office, if possible, but in no case later than the following business day. Subscriber complaints and trouble calls shall be processed in compliance with the standards set forth in Section 596.8 of the rules and regulations of the New York State Commission on Cable Television. (c) Franchisee shall provide notice to each subscriber, at intervals of not more than one year, of the procedure for reporting and resolving subscriber complaints. (Such notice may be written or by such other means as the State Commission on Cable Television may from time to time approve.) 7. Prohibition of Abandonment Franchisee shall provide continuous cable television service during the term of this agreement and shall at no time during the term of this agreement abandon or cease to operate its cable system. 8. Indemnification and Insurance (a) Franchisee shall indemnify and save Clarence harmless from all losses sustained by Clarence on account of any suit, judgment, execution, claim, damage, or demand whatsoever occasioned by or arising out of the construction, erection, maintenance, repair, or operation of Franchisee's cable television system or the exercise by Clarence of the franchise rights granted herein. For this purpose, Franchisee shall obtain and carry property damage and personal liability insurance written by an insurance company or companies qualified to do business in the State of New York. The amounts of such insurance shall be not less than $250,000 for liability due to damage to property, no less than $500,000 for liability due to injury or death of any person, and not less than $1,000,000 for liability due to any one accident. Clarence shall notify Franchisee within thirty (30) days after the presentation of any claim or demand, either by suit or otherwise, made against Clarence on account of any negligence or other conduct on the part of Franchisee. 6 7 (b) Franchisee specifically agrees that it will pay all expenses incurred by Clarence to defend itself in regard to any matter mentioned in paragraph (a), above. These expenses shall include out-of pocket expenses, such as reasonable attorney's fees, and shall include the reasonable value of any service rendered by Clarence's attorneys or their assistants or any other employees of Clarence. (c) A certificate evidencing the insurance coverage required by paragraph (a), above, shall be delivered by Franchisee to the Town Clerk' within 60 days of the date of this franchise. 9. Repair of Property Any property of the Town of Clarence damaged or destroyed by reason of any activity undertaken pursuant to this Agreement shall be repaired or replaced within 48 hours by Franchisee and restored to serviceable condition acceptable to the Superintendent of Highways and the Town Engineer. All openings or obstructions in public ways will be protected by fencing or other protective devices at the sole expense of Franchisee. At its own expense Franchisee will disconnect or relocate any of its equipment in public rights-of-way as may be required by the Town by reason of street construction and public safety. If requested by a private party holding an appropriate permit issued by the Town, Franchisee will temporarily raise or lower its lines to enable the moving of any building or structure if expenses related thereto are paid by the requesting party. Franchisee will restore any damage to private property resulting from the installation and operation of its cable television system within thirty(30) days of notice from such property owner. 10. Equal Employment Franchisee shall not refuse to hire or employ, nor bar or discharge from employment, nor discriminate against any person in compensation or in terms, conditions, or privileges of employment because of age, race, creed, color, national origin, or sex. 11. Additional Regulations Clarence reserves the right to adopt such additional regulations as it shall find necessary in the exercise of its police power, provided such regulations are reasonable and not materially in conflict with the rights and privileges granted in this Agreement. 7 8 12. Municipal Inspection Clarence reserves the right to inspect all pertinent books, records, maps, plans, financial statements, and other like materials of Franchisee upon reasonable notice during normal business hours. 13. Responsible Municipal Officer The Town Board of Clarence shall be responsible for the continuing administration of this Agreement. 14. Material Provisions and Severability Should any provision of this Agreement be held invalid by any court or regulatory agency of competent jurisdiction, the remaining provisions of this Agreement shall remain in full force and effect. 15. Approval and Amendment of Provisions (a) The terms and provisions of this Agreement are subject to the approval of the New York State Commission on Cable Television. (b) Should the Federal Communications Commission or the New York State Commission on Cable Television make such modifications of the provisions of its rules and regulations that would require the amendment of this Agreement, such amendment is hereby agreed upon and such necessary provisions or changes are incorporated herein by reference. Necessary amendments will be made within one year or upon the expiration of this Agreement, whichever occurs first. 16. Franchise Fees and Reporting Franchisee agrees to pay to Clarence for the rights and privileges enjoyed hereunder, a sum equal to three percent (3%) of Franchisee's gross annual receipts attributable to providing the services contemplated in this Franchise Agreement. Such sum shall be paid in semiannual installments within 90 days of the end of each fiscal half year of Franchisee. In addition to the above described franchise fee, Franchisee shall be responsible for all applicable local, state, and federal property, sales, income, and franchise and other taxes or assessments. Franchisee shall provide a financial statement to 8 9 Clarence annually, within 90 days of the close of its fiscal year. Such financial reports will be prepared in accordance with generally accepted accounting principals and shall be audited by a public accountant or certified by a senior financial officer of Franchisee. 17. Future Technology Initiative (a) The Franchisee and Clarence recognize that during the period of this Agreement that technology changes in the Cable industry may make new products and services available that may benefit the Town of Clarence and its residents. Both parties agree to evaluate these products and services as they become available. Nothing in this section will require either party to offer a specific service or to purchase it if made available. (b) Franchisee agrees to evaluate the feasibility of a school network and a Town business network within the first three years of this Agreement. The evaluation will include a section specifying the rates for these products should the town or school elect to proceed. The parties have duly executed this agreement as of the date first written above. TOWN OF CLARENCE By: /s/ ANNE L. CASE ----------------------------------- Title: Supervisor -------------------------------- CABLE TV FUND 11-B, LTD By: Jones Intercable Inc. its General Partner By: /s/ RUTH E. WARREN ----------------------------------- Ruth E. Warren Group Vice President/Operations 9 EX-10.1.7 4 FRANCHISE DOCUMENTS FOR LANCASTER 1 [SEAL] NEW YORK STATE COMMISSION ON CABLE TELEVISION In the Matter of 94-130 Application of Cable TV Fund 11-B, Ltd ) (Jones Intercable, Inc., General Partner) ) for approval of the renewal by option of ) DOCKET NO. 31616 its cable television franchise for the Town ) of Elma (Erie County) ) Initial Docket No. 11323 ) ORDER APPROVING RENEWAL (Adopted: March 2, 1994; Released: March 23, 1994) The above-captioned application was submitted by Cable TV Fund 11-B, Ltd. (Jones Intercable, Inc., General Partner) on January 31, 1994. A copy of same was served upon the Town and all local notice requirements were met. Notice was also published in this Commission's Weekly Bulletin on February 4, 1994. No comments or objections have been received. This application is governed by Section 822 of the Executive Law which requires our approval unless we find specific violations of law, the regulations of this Commission, or the public interest. Section 822(4) of the Executive Law provides that we may approve the renewal contingent upon compliance with standards or conditions consistent with the public interest. Having reviewed this application in the context of all applicable statutory and regulatory standards, we have determined to approve the renewal subject to conditions as hereinafter set forth. This application seeks our approval of a renewal of a franchise granted by Town of Elma on August 1, 1984, which provided for an optional five year renewal in favor of the company. The terms of the franchise, as renewed, are subject to the Cable Act. Channel Capacity The cable operator has committed itself to a technical upgrade and rebuild of its system to a minimum capacity of 450 MHz by December 31, 1995. We wish to emphasize that the timely fulfillment of this commitment is an express and material condition of our approval herein. Public, Educational and Governmental (PEG) Access Our approval is granted with the understanding that the provisions of Section 595.4 of our rules pertaining to minimum standards for public, educational and governmental access are controlling. 2 2 Line Extension Our approval is granted with the understanding that our line extension rules as provided in Section 595.5 of 9 NYCRR are controlling. Subscriber Complaints, Trouble Call Processing and Consumer Service Standards Approval is granted with the understanding that our rules applicable to trouble call processing, credit for service outages and consumer protection and service standards as set forth in Section 596.8 and Part 590 of our rules are controlling. Franchise Fee Offset Section 15 Of the subject franchise provides for a franchise fee payment of three percent (3%) of annual gross revenues "less any taxes levied by the New York State Department of Equalization and Assessment and paid to the Town." Such provision indicates an intent by the franchising parties to reverse the procedure set forth in Section 626 of the Real Property Tax Law whereby franchise fees may be credited as an offset against Special franchise tax assessments. In effect, this franchise provision contemplates that the special franchise assessment will instead be paid to the Town but the amount paid will be deducted from the amount Of franchise fees otherwise due to the Town. Under either method of applying the statutory credit authorized by RPTL Section 626, it is apparent that the net effect will be the same. Therefore, we shall approve this provision with the understanding that only the amount of special franchise tax actually paid to the Town may be credited as an offset against franchise fees otherwise payable. We also note that the wording of this franchise provision referring to "any taxes" does not include real property tax assessments other than the special franchise tax assessed by the Department of Equalization and Assessment. THE COMMISSION ORDERS: 1. Pursuant to Section 822 of the Executive Law and the rules and regulations of this Commission, the application of Cable TV Fund 11-B, Ltd. (Jones Intercable, Inc., General Partner) for approval of the renewal of its cable television franchise for the Town of Elma (Erie County) is hereby approved, subject to the conditions and understandings expressed herein. Said renewal shall expire on August 1, 1999. 2. This Order does not in any way confer rights or privileges other than those granted in the underlying franchise and the certificate holder remains subject to the obligations imposed by Article 28 of the Executive Law, the underlying franchise and all applicable rules, regulations and orders of this Commission. Commissioners Participating: William B. Finneran, Chairman; John A. Passidomo, Barbara T. Rochman, Commissioners EX-10.1.14 5 FRANCHISE DOCUMENTS ORCHARD PARK 1 TOWN OF ORCHARD PARK and VILLAGE OF ORCHARD PARK FRANCHISE AGREEMENT 2 STATE OF NEW YORK Town of Orchard Park and Village of Orchard Park, County of Erie This FRANCHISE AGREEMENT made this 28th day of May, 1995 between the Incorporated Town of Orchard Park and Village of Orchard Park (hereinafter called "Orchard Park") and Cable TV Fund 11-B, LTD., a Colorado limited partnership doing business as Jones Intercable Inc., (hereinafter called "Franchisee"). WHEREAS Franchisee wishes to construct, maintain and operate a cable television system in Orchard Park; and WHEREAS the construction, maintenance and operation of said cable television system involves the use and occupation by Franchisee of the streets, thoroughfares and other public rights-of-way belonging to Orchard Park; and WHEREAS the technical ability, financial condition and character of Franchisee and its principals have been considered and approved by the Town Board of Orchard Park and the Village Board of Orchard Park in full public proceedings affording due process; and WHEREAS, by resolution of the Town Board dated May 17, 1995, Orchard Park has granted a renewal of the non-exclusive cable television franchise to Franchisee and authorized the Town Supervisor or other designated representative of the Town Board to execute the instant FRANCHISE AGREEMENT with Franchisee upon the terms hereinafter set forth; and WHEREAS, by resolution of the Village Board dated May 17, 1995, Orchard Park has granted a renewal of the non-exclusive cable television franchise to Franchisee and authorized the Village Mayor or other designated representative of the Village Board to execute the instant FRANCHISE AGREEMENT with Franchisee upon the terms hereinafter set forth; and WHEREAS, the instant FRANCHISE AGREEMENT complies with the franchise standards required by the New York State Commission of Cable Television and the Federal Communications Commission; 2 3 NOW, THEREFORE, in consideration of the mutual conditions and covenants contained herein: IT IS MUTUALLY AGREED AS FOLLOWS: 1. Grant Orchard Park hereby grants to Franchisee, its successors and assigns the nonexclusive right and privilege to erect and place in Orchard Park and to construct, maintain and operate in, over or under the present and future streets, sidewalks, alleys, public land and places and highways in or of Orchard Park, towers, poles, lines, cables, necessary wiring and other apparatus for the purpose of transmitting, receiving, amplifying and distributing telephone, telegraph, television, data, radio signals and other video and aural programming and communications services within said Orchard Park and to the inhabitants thereof. Any and all towers intended to be erected shall be subject to the prior approval of Orchard Park. No antennas nor poles shall exceed the height of existing utility poles without the prior approval of Orchard Park. All installations shall comply with Orchard Park ordinances and federal, state and local laws and regulations. 2. Term The term of this Agreement shall be for a period of ten (10) years from May 28, 1995. 3. Franchise Area The franchise rights and obligations set forth in this Agreement shall be applicable to the present territorial limits of the Town of Orchard Park and the Village of Orchard Park and to any area added thereto during the term of this Agreement. 4. Construction (a) Franchisee shall construct and maintain its cable system in a safe and reliable manner. 3 4 (b) The population density shall be established at a minimum of 25 dwelling units per aerial mile of cable for years 1 thru 5 of this franchise. During years 6 - 10 of this franchise the population density shall be established at 20 dwelling units per aerial mile of cable. Areas adjoining existing cable plant meeting the above density requirements shall be cabled without a contribution in aid of construction by subscribers. Areas not immediately adjoining the cable plant and whose population density is less than the number of dwelling units per lineal mile of aerial cable established above, shall be considered to be located in a line extension area. Subscribers residing in such an area and who are willing to contribute to the cost of construction shall be entitled to services in accordance with the following formula C/LE-CA/P = SC. C = The actual cost of new construction in the line extension area; CA = The average cost of construction per mile in the primary service area; P = The minimum number of dwelling units per mile which would require the franchisee to provide service in the primary service area. This is determined by taking the minimum number, or the average (which is determined by dividing the number of dwelling units in the primary service area by the number of lineal miles of cable in the same area) whichever of the two numbers is lower; LE = The number of dwelling units requesting service in the line extension area; SC = Subscriber contribution in aid of construction in the line extension area. (c) Franchisee shall construct its cable system using materials of good and durable quality, and all work involved in construction, installation, maintenance, and repair of the cable system shall be performed in a safe, thorough, and reliable manner. (d) New subdivisions where cable facilities have been installed in joint trench with power and/or telephone that are located within cabled areas shall have service activated when the number of occupied homes equals 25% of the planned lots in the subdivision. The calculation of the percentage occupied will be determined based on the area where cable facilities have been placed in joint trench rather than including future phases of the subdivision in the lots calculation. 5. Subscriber Rates (a) The Franchisee may make such charges for services provided to subscribers as are permitted by Federal, State, or Local law. Under this sub-section, neither party surrenders any other rights or obligations due them under any other Federal, State, or Local statute rule or regulation. 4 5 (b) Any subscriber over 65 years of age who is the principal resident of the service dwelling will be entitled to a discount of 10% on basic cable television service including initial installation. This discount will be extended to the Basic Plus customer. Franchisee shall establish a procedure for subscribers to apply for this discount. (c) The Town Hall, Town Library, Fire Stations, Senior Center, and all public schools within Orchard Park which are in areas meeting the density requirements of section 4(b) will receive one free outlet and free Basic Plus Service. (d) Franchisee agrees to construct a two way capable plant to the Orchard Park High School to enable the School to cable cast programming on the Educational access channel. Franchisee has sole responsibility for scheduling air time for access programming. 6. Complaints (a) Franchisee shall maintain an office with a listed telephone number within the Orchard Park for the purpose of receiving and responding to cable television subscriber complaints. (b) All subscriber complaints or trouble calls shall receive investigative action on the same day such complaint or call is received at the local office, if possible, but in no case later than the following business day. Subscriber complaints and trouble calls shall be processed in compliance with the standards set forth in Section 596.8 of the rules and regulations of the New York State Commission on Cable Television. (c) Franchisee shall provide notice to each subscriber, at intervals of not more than one year, of the procedure for reporting and resolving subscriber complaints. (Such notice may be written or by such other means as the State Commission on Cable Television may from time to time approve.) 7. Prohibition of Abandonment Franchisee shall provide continuous cable television service during the term of this agreement and shall at no time during the term of this agreement abandon or cease to operate its cable system. 5 6 8. Indemnification and Insurance (a) Franchisee shall indemnify and save Orchard Park harmless from all losses sustained by Orchard Park on account of any suit, judgment, execution, claim, damage, or demand whatsoever occasioned by or arising out of the construction, erection, maintenance, repair, or operation of Franchisee's cable television system or the exercise by Orchard Park of the franchise rights granted herein. For this purpose, Franchisee shall obtain and carry property damage and personal liability insurance written by an insurance company or companies qualified to do business in the State of New York. The amounts of such insurance shall be not less than $250,000 for liability due to damage to property, no less than $5,000,000 for liability due to injury or death of any person, and not less than $5,000,000 for liability due to any one accident. Orchard Park shall notify Franchisee within thirty (30) days after the presentation of any claim or demand, either by suit or otherwise, made against Orchard Park on account of any negligence or other conduct on the part of Franchisee. (b) Franchisee specifically agrees that it will pay all expenses incurred by Orchard Park to defend itself in regard to any matter mentioned in paragraph (a), above. These expenses shall include out-of pocket expenses, such as reasonable attorney's fees, and shall include the reasonable value of any service rendered by Orchard Park's attorneys or their assistants or any other employees of Orchard Park. (c) A certificate evidencing the insurance coverage required by paragraph (a), above, shall be delivered by Franchisee to the Town Clerk within 60 days of the date of this franchise. 9. Repair of Property Any property of the Town of Orchard Park or the Village of Orchard Park damaged or destroyed by reason of any activity undertaken pursuant to this Agreement shall be repaired or replaced, or Franchisee shall commence such repair or replacement, within 48 hours from the time Franchisee receives notice of the damage. Franchisee shall restore any such damage property to serviceable condition. All openings or obstructions in public ways will be protected by fencing or other protective devices at the sole expense of Franchisee. At its own expense Franchisee will disconnect or relocate any of its equipment in public rights-of-way as may be required by the Town or Village by reason of street construction and public safety. If requested by a private party holding an appropriate permit issued by the Town or Village, Franchisee will temporarily raise or lower its lines to enable the moving of any building or structure if expenses related thereto are paid by the requesting party. Franchisee will restore or commence to restore any damage to private property resulting from the installation and operation of its cable television system within thirty (30) days of notice from such property owner. 6 7 10. Equal Employment Franchisee shall not refuse to hire or employ, nor bar or discharge from employment, nor discriminate against any person in compensation or in terms, conditions, or privileges of employment because of age, race, creed, color, national origin, or sex. 11. Additional Regulations Orchard Park reserves the right to adopt such additional regulations as it shall find necessary in the exercise of its police power, provided such regulations are reasonable and not materially in conflict with the rights and privileges granted in this Agreement. 12. Municipal Inspection Orchard Park reserves the right to inspect all pertinent books, records, maps, plans, financial statements, and other like materials of Franchisee upon reasonable notice during normal business hours. 13. Responsible Municipal Officer The Town Board and the Village Board shall be responsible for the continuing administration of this Agreement. 14. Material Provisions and Severability Should any provision of this Agreement be held invalid by any court or regulatory agency of competent jurisdiction, the remaining provisions of this Agreement shall remain in full force and effect. 15. Approval and Amendment of Provisions (a) The terms and provisions of this Agreement are subject to the approval of the New York State Commission on Cable Television. 7 8 (b) Should the Federal Communications Commission or the New York State Commission on Cable Television make such modifications of the provisions of its rules and regulations that would require the amendment of this Agreement, such amendment is hereby agreed upon and such necessary provisions or changes are incorporated herein by reference. Necessary amendments will be made within one year or upon the expiration of this Agreement, whichever occurs first. 16. Franchise Fees and Reporting Franchisee agrees to pay to Orchard Park for the rights and privileges enjoyed hereunder, a sum equal to three percent (3%) of Franchisee's gross annual receipts attributable to providing the services contemplated in this Franchise Agreement. Such sum shall be paid in semiannual installments within 90 days of the end of each fiscal half year of Franchisee. In addition to the above described franchise fee, Franchisee shall be responsible for all applicable local, state, and federal property, sales, income, and franchise and other taxes or assessments. Franchisee shall provide a financial statement to Orchard Park annually, within 90 days of the close of its fiscal year. Such financial reports will be prepared in accordance with generally accepted accounting principals and shall be audited by a public accountant or certified by a senior financial officer of Franchisee. 17. Future Technology Initiative (a) The Franchisee and Orchard Park recognize that during the period of this Agreement that technology changes in the Cable industry may make new products and services available that may benefit Orchard Park and its residents. Both parties agree to evaluate these products and services as they become available. Nothing in this section will require either party to offer a specific service or to purchase it if made available. 8 9 The parties have duly executed this agreement as of the date first written above. TOWN OF ORCHARD PARK By: /s/ DENNIS J. MILL ------------------------------------ Title: Supervisor --------------------------------- VILLAGE OF ORCHARD PARK By: /s/ PATRICIA A. SCLIMAN ------------------------------------ Title: Mayor --------------------------------- CABLE TV FUND 11-B, LTD By: Jones Intercable Inc. its General Partner By: /s/ RUTH E. WARREN ------------------------------------ Ruth E. Warren Group Vice President/Operations 9 EX-10.2.1 6 CREDIT AGREEMENT 2/28/95 1 $25,000,000 CREDIT AGREEMENT DATED AS OF FEBRUARY 28, 1995 AMONG CABLE TV FUND 11-B, LTD. AS THE BORROWER AND VARIOUS FINANCIAL INSTITUTIONS AS THE LENDERS, AND SHAWMUT BANK CONNECTICUT, N.A., AS AGENT FOR THE LENDERS 2 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of February 28, 1995, is made among CABLE TV FUND 11-B, LTD., a Colorado limited Partnership (the "Borrower"), the various financial institutions as are or may become parties hereto (collectively, the "LENDERS"), and SHAWMUT BANK CONNECTICUT, N.A. ("SHAWMUT"), as agent for the Lenders (in such capacity, the "AGENT"). W I T N E S S E T H: WHEREAS, the Borrower is currently the obligor under that certain $25,000,000 Loan Agreement, dated as of March 31, 1992 (as amended, restated or otherwise modified prior hereto, the "EXISTING CREDIT AGREEMENT"), between the Borrower and Shawmut. WHEREAS, the Borrower desires to obtain Loans from the Lenders to: (i) repay, in full, all of the loans outstanding under the Existing Credit Agreement; (ii) finance certain working capital requirements of the Borrower; and (iii) subject to Section 7.2.7 and the Subordination Agreement, from time to time to repay advances made by the General Partner to the Borrower; and WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth, to extend such Loans to the Borrower. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. DEFINED TERMS. The following terms when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "AFFILIATE" means, with respect to any Person, any other Person which, directly or indirectly, controls, is controlled by or is under common control with, such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to "control" another Person if such Person possesses, directly or indirectly, the power 3 (a) to vote 10% or more of the securities of such other Person (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners or (b) to direct or cause the direction of the management and policies of such other Person whether by contract or otherwise. "AGENT" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Agent pursuant to Section 9.4. "AGENT'S FEE LETTER" means that certain confidential fee letter, dated of even date herewith, from Shawmut to the Borrower relating to the payment of Agent fees in connection with this Agreement. "AGREEMENT" means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, restated or otherwise modified and in effect on such date. "ALLOCATED OVERHEAD" means, for any period, the fees payable (without regard to the Borrower's right to defer or limit actual payment) to the General Partner to compensate the General Partner for that portion of its general overhead and administrative expenses, including all of its direct and indirect expenses, allocable to the operation of the Borrower's business, including, but not limited to, home office rent, supplies, telephone, travel and copying charges, and salaries of full and part-time employees. "ALTERNATE BASE RATE" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of (a) the rate of interest most recently established by the Agent at its Domestic Office as its base rate for Dollar loans and (b) the Federal Funds Rate most recently determined by the Agent plus 1/2 of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Agent in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Agent will give notice promptly to the Borrower and the Lenders of changes in the Alternate Base Rate. "ANNUALIZED CASH FLOW" means, at any time, Cash Flow for the immediately preceding Fiscal Quarter times four. -2- 4 "APPLICABLE MARGIN" means, at any time during which the Borrower's Leverage Ratio falls within the ranges set forth below, the amounts set forth below opposite such ranges for each type of Loans:
Applicable Margin LIBO Leverage Ratio Base Rate Loans Rate Loans -------------- --------------- ---------- 4.00:1 or greater 0.50% 1.375% 3.00:1 or greater but less than 4.00:1 0.25% 1.125% less than 3.00:1 0.00% 1.00%
"ASSIGNEE LENDERS" is defined in Section 10.11.1. "AUTHORIZED OFFICER" means those officers of the General Partner whose signatures and incumbency shall have been certified to the Agent and the Lenders pursuant to Section 5.1.1. "BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "BASIC PENETRATION RATE" means, at any time, a percentage derived from a fraction, the numerator of which is the number of Basic Subscribers at such time, and the denominator of which is the number of Homes Passed at such time. "BASIC SUBSCRIBER RATE" means the minimum standard monthly fees and charges for "basic service" (as such term is commonly understood in the cable television industry) charged to customers of the Cable Systems. "BASIC SUBSCRIBERS" means, at any time, the total number of subscribers subscribing to the Cable Systems (excluding "second connections" as such term is commonly understood in the cable television industry) who (i) pay the Basic Subscriber Rate for service, and (ii) are not more than 60 days past due in payment. In the case of commercial buildings, such as hotels or motels, or in the case of multiple residential dwellings, such as apartment houses and multifamily homes, which do not obtain reduced bulk service rates, each separate guest unit or dwelling unit receiving such services shall be counted as one subscriber. The number of subscribers in a commercial building or in a multiple residential dwelling which obtains a reduced bulk service rate shall be obtained by dividing (x) the aggregate dollar amount of monthly subscribers' fees paid on account of such commercial building or multiple residential dwelling for basic service by (y) the Basic Subscriber Rate. Except for (Discounts to senior citizens less than 20% of the otherwise -3- 5 applicable rate, residential households (other than in a multiple residential dwelling) paying the Basic Subscriber Rate on a discounted basis or under any form of deferred payment arrangement shall not be included. "BORROWER" is defined in the Preamble. "BORROWING" means the Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period, made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.3. "BORROWING REQUEST" means a loan request and certificate duly executed by an Authorized Officer, substantially in the form of Exhibit B hereto. "BUSINESS DAY" means (a) any day which is not a Saturday, a Sunday or a day on which banks are authorized or required by law to be closed in New York City, New York or Hartford, Connecticut; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market. "CABLE FRANCHISES" is defined in Section 6.15. "CABLE SCHEDULE" means the Cable Schedule attached hereto as Schedule II, as it may be amended, supplemented or otherwise modified from time to time by the Borrower with the written consent of the Agent. "CABLE SYSTEM" means the assets constituting a CATV or SMATV system (including, without limitation, all related licenses, franchises and permits issued under federal, state or local laws from time to time, and all agreements with public utilities and microwave transmission companies, pole attachment, use, access or rental agreements, conduit occupancy rights, utility easements and all other property owned or used in connection with the services provided pursuant to, and all other interests of the holder thereof to receive revenues from, or pursuant to, said licenses, franchises and permits) listed on the Cable Schedule and all assets constituting such a system hereafter acquired by the Borrower serving subscribers within a geographical area covered by one or more Franchises from the same Head End facility or by two or more related Head End facilities. "CAPITAL EXPENDITURES" means, for any period, the sum of -4- 6 (a) the aggregate amount of all expenditures of the Borrower and its Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures; and (b) the aggregate amount of all Capitalized Lease Liabilities incurred during such period. "CAPITALIZED LEASE LIABILITIES" means all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "CASH EQUIVALENT INVESTMENT" means, at any time: (a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government; (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by: (i) a corporation (other than an Affiliate of the Borrower) organized under the laws of any state of the United States or of the District of Columbia and whose long-term debt is rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.; or (ii) any Lender (or its holding company); (c) any certificate of deposit or bankers acceptance maturing not more than one year after such time, which is issued by either: (i) a commercial banking institution that is a member of the Federal Reserve System and has combined capital, surplus and undivided profits of not less than $1,000,000,000; or (ii) any Lender; or -5- 7 (d) any repurchase agreement entered into with any Lender (or any other commercial banking institution of the stature referred to in clause (c) (i)) which: (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c); and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder. "CASH FLOW" means, for any period, total consolidated operating revenues of the Borrower for such period, less the sum of (i) consolidated operating expenses of the Borrower for such period and (ii) general and administrative expenses of the Borrower for such period (excluding Management Fees and Allocated Overhead for such period, if any, included in clauses (i) and (ii)). "CATV" means community antenna television. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CHANGE IN CONTROL" means the occurrence of either or both of the following: (a) the failure of Jones Intercable to own, free and clear of all Liens or other encumbrances, 100% of the outstanding general partnership interests in the Borrower other than the Liens described in Section 6.l(e) or similar Liens which would be incurred in any refinancing of Jones Intercable's debt; or (b) the failure of Jones Intercable to be the sole general partner of the Borrower; provided, however, that if Jones Intercable ceases to be the sole general partner of the Borrower but within ninety (90) days thereafter a replacement general partner acceptable to the Required Lenders in their sole discretion shall have been appointed, then no Change in Control shall be deemed to have occurred. "CLOSING DATE CERTIFICATE" means a certificate of the General Partner, substantially in the form of Exhibit L hereto. "CODE" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. -6- 8 "COMMITMENT" means, relative to any Lender, such Lender's obligation to make Revolving Loans pursuant to Section 2.1.1. "COMMITMENT AMOUNT" means an amount equal to $25,000,000, as such amount may be reduced from time to time, pursuant to Section 2.2. "COMMITMENT TERMINATION DATE" means the earliest of: (a) the Conversion Date; (b) the date on which the Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (c) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (b) or (c), the Commitments shall terminate automatically and without any further action. "COMMITMENT TERMINATION EVENT" means: (a) the occurrence of any Default described in clauses (a) through (d) of Section 8.1.8 with respect to the Borrower or any Subsidiary of the Borrower; or (b) the occurrence and continuance of any other Event of Default and either: (i) the declaration of the Loans to be due and payable pursuant to Section 8.3; or (ii) in the absence of such declaration, the giving of notice by the Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated. "COMMUNICATIONS ACT" means the Communications Act of 1934 and the rules and regulations issued thereunder, as amended, reformed or otherwise modified from time to time. "COMPLIANCE CERTIFICATE" means a certificate duly executed by an Authorized Officer, substantially in the form of Exhibit K hereto. "CONTINGENT LIABILITY" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, -7- 9 or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) any indebtedness, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the securities or other equity interests of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby. "CONTINUATION\CONVERSION NOTICE" means a notice and certificate duly executed by an Authorized Officer, substantially in the form of Exhibit C hereto. "CONTROLLED GROUP" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "CONVERSION DATE" means January 1, 1997. "CONVERSION DATE AMOUNT" is defined in Section 3.1. "DEBT SERVICE" means, for any period, the amount of principal and Interest Expense, together with fees associated therewith of the Borrower and its Subsidiaries in respect of Indebtedness paid or scheduled to be paid during such period. For purposes of this definition "principal" shall include the principal component of payments for such period in respect of Capitalized Lease Liabilities. "DEFAULT" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented or otherwise modified from time to time by the Borrower with the written consent of the Agent. "DOLLAR" and the sign "$" mean lawful money of the United States. "DOMESTIC OFFICE" means, relative to any Lender, the office of such Lender designated as such below its signature hereto or, if applicable, designated in such Lender's Lender Assignment Agreement, or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such -8- 10 Lender, as the case may be, to the Borrower and the Agent. A Lender may have separate Domestic Offices for purposes of making, maintaining or continuing, as the case may be, Base Rate Loans. "EFFECTIVE DATE" means the date this Agreement becomes effective pursuant to Section 10.8. "ENVIRONMENTAL LAWS" is defined in Section 6.12. "ERISA" means the Employee Retirement Income Security Act of 1974, and the rules and regulations issued thereunder, as amended, reformed or otherwise modified from time to time. References to sections of ERISA also refer to any successor sections. "EVENT OF DEFAULT" is defined in Section 8.l. "EXCESS CASH FLOW" means, for any period, an amount (if positive) equal to (a) Cash Flow for such period less (b) cash payments for all taxes paid by the Borrower during such period, less (c) Capital Expenditures made during such period, less (d) scheduled payments of principal of Indebtedness during such period, less (e) all Interest Expense paid during such period, less (f) any General Partner Advances repaid by the Borrower in cash during such period and which are permitted under the terms of this Agreement and the other Loan Documents.. "EXISTING CREDIT AGREEMENT" is defined in the first recital. "FCC" means the Federal Communications Commission or any successor agency thereto performing functions similar to those performed by the Federal Communications Commission on the date hereof. "FCC LICENSE" means any license or permit issued by the FCC, including, without limitation, licenses issued in connection with the operation of CATV or SMATV systems, community antenna relay systems, microwave systems, earth stations and business and other two-way radios. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to: (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York; or -9- 11 (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. "FEE LETTER" means that certain fee letter, dated of even date herewith from Shawmut to the Borrower relating to the payment of facility fees in connection with this Agreement. "FISCAL QUARTER" means any quarter of a Fiscal Year. "FISCAL YEAR" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "1994 Fiscal Year") refer to the Fiscal Year ending on the December 31 occurring during such calendar year. "FIXED CHARGE COVERAGE RATIO" means, at any time of determination, the ratio, computed on a consolidated basis of: (a) the sum of: (i) cash on the consolidated balance sheet of the Borrower at the beginning of the immediately preceding Fiscal Quarter; plus (ii) Annualized Cash Flow; to (b) the sum for the twelve calendar month period ending on the last day of the immediately preceding Fiscal Quarter of: (i) Interest Expense; plus (ii) all scheduled payments of principal of Indebtedness of the Borrower and its Subsidiaries whether or not paid; plus (iii) Capital Expenditures; plus (iv) all state, local and federal income taxes paid or payable in cash. "FRANCHISE" means any franchise, permit, license or other authorization granted by any Official Body, including all laws, regulations and ordinances relating thereto, for the construction, operation and maintenance of a CATV or SMATV system and the reception and transmission of signals by microwave, and shall include, without -10- 12 limitation, all FCC Licenses and all certificates of compliance and cable television registration statements which are required to be issued by or filed with the FCC. "FRANCHISE AGREEMENT" means any ordinance, agreement, contract or other document stating the terms and conditions of any Franchise, including, without limitation, all exhibits and schedules thereto, all amendments thereof and consents, waivers and extensions issued thereunder, any documents incorporated therein by reference and the application from which such Franchise was granted. "F.R.S. BOARD" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in Section 1.4. "GENERAL PARTNER" means Jones Intercable until such time as Jones Intercable is replaced in accordance with the terms of this Agreement by another Person as the general partner of the Borrower, at which time, "General Partner" shall mean such other Person. Whenever the term "General Partner" is used herein, such term shall mean any such Person in its capacity as the general partner of the Borrower. "GENERAL PARTNER ADVANCES" means (i) all amounts representing deferred Management Fees and deferred Allocated Overhead, (ii) all amounts representing the Borrower's obligation to repay cash advances or loans made to the Borrower or any of its Subsidiaries by the General Partner or any previous general partner of the Borrower actually used and accounted for by the Borrower for the purpose of paying the Borrower's Indebtedness, Capital Expenditures or other obligations, (iii) reimbursements to the General Partner for documented expenses incurred by the General Partner for the account of the Borrower on a month-to-month basis in the ordinary course of Borrower's business and consistent with past practices (and not for borrowed money), and (iv) any interest accrued on any of the foregoing amounts. "HAZARDOUS MATERIALS" is defined in Section 6.12(b). "HEAD END" means the antenna site, the tower and the antenna, the microwave communications equipment, the earth station and the head end facilities, equipment, leaseholds or other real estate and leasehold improvements relating thereto. "HEDGING OBLIGATIONS" means, with respect to any Person, all liabilities of such Person under interest rate swap, interest rate cap, and interest rate collar agreements, and all other agreements or arrangements -11- 13 designed to protect such Person against fluctuations in interest rates or currency exchange rates. "HEREIN", "HEREOF', "HERETO", "HEREUNDER" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "HOMES PASSED" means the actual number of residential dwellings which can be connected to a Cable System by a single drop line from existing trunk and distribution lines, which lines are energized and capable of carrying cable television signals to subscribers and are connected to an existing Head End facility. In the case of commercial buildings, such as hotels or motels, or in the case of multiple residential dwellings, such as apartment houses and multifamily homes, which do not and are not reasonably anticipated to obtain a reduced bulk service rate, each separate guest unit or dwelling unit shall be counted as one residential dwelling. The number of dwelling units in a commercial building or in a multiple residential building which does or is reasonably anticipated to obtain a reduced bulk service rate shall be obtained by dividing (a) the aggregate dollar amount of monthly subscriber fees obtained or reasonably anticipated to be obtained on account of such commercial building or multiple residential building for basic service by (b) the applicable Basic Subscriber Rate. Except for discounts to senior citizens less than 20% of the otherwise applicable rate, residential households (other than a multiple residential dwelling) paying for or reasonably expected to be paying for services on a discounted basis or under any form of deferred payment arrangement shall not be included. "IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or certification of any independent public accountant as to any financial statement of the Borrower, any qualification or exception to such opinion or certification: (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the Borrower to be in default of any of its obligations under Section 7.2.4. -12- 14 "INCLUDING" means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "INDEBTEDNESS" of any Person means, without duplication: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all Contingent Liabilities of such Person; (e) net liabilities of such Person under all Hedging Obligations; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (g) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person (including any footnotes thereto) as of the date at which Indebtedness is to be determined. "INDEMNIFIED LIABILITIES" is defined in Section 10.4. "INDEMNIFIED PARTIES" is defined in Section 10.4. "INTEREST COVERAGE RATIO" means, at any time of determination, the ratio, computed on a consolidated basis, of: -13- 15 (a) Cash Flow for the immediately preceding Fiscal Quarter; to (b) Interest Expense for such Fiscal Quarter. "INTEREST EXPENSE" means, for any period, the interest expense of the Borrower for such period, including, (whether or not includable under GAAP) all net amounts payable with respect to Hedging Obligations, commitment fees owed with respect to the Commitments and the portion of any Capitalized Lease Liabilities of the Borrower allocable to interest expense, in each case paid or payable during such period, but excluding interest due on General Partner Advances. "INTEREST PERIOD" means, relative to any LIBO Rate Loan, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4 and ending on (but excluding) the day which numerically corresponds to such date one, two, three, six or, if the Agent determines that a twelve month rate is available, twelve months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in each case as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however, that: (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than six different dates; (b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (c) if any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day immediately preceding such numerically corresponding day; and (d) no Interest Period may end later than the Stated Maturity Date. "INVESTMENT" means relative to any Person: (a) any loan or advance made by such Person to any other Person (excluding (i) commission, travel and similar advances to officers and employees made in the ordinary course of business and -14- 16 (ii) trade credit made available to or loans or advances made to subcontractors or suppliers on customary terms and in the ordinary course of the Borrower's business); (b) any Contingent Liability of such Person; and (c) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. "JONES INTERCABLE" means Jones Intercable, Inc., a Colorado corporation. "LENDER ASSIGNMENT AGREEMENT" means a Lender Assignment Agreement substantially in the form of Exhibit D hereto. "LENDERS" is defined in the preamble. "LEVERAGE RATIO" means, at any time of determination, the ratio, computed on a consolidated basis, of: (a) Total Debt at such time; to (b) Annualized Cash Flow. "LIBO RATE" is defined in Section 3.3.l. "LIBO RATE LOAN" means a Loan bearing interest at all times during an Interest Period applicable to such Loan, at a rate of interest determined by reference to the LIBO Rate (Reserve Adjusted). "LIBO RATE (RESERVE ADJUSTED)" is defined in Section 3.3.l. "LIBOR OFFICE" means, relative to any Lender, the office of such Lender designated as such below its signature hereto or, if applicable, designated in such Lender's Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) as designated from time to time by notice from such Lender to the Borrower and the Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder. "LIBOR RESERVE PERCENTAGE" is defined in Section 3.3.l. -15- 17 "LIEN" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever. "LOAN" means, as the context may require, either a Revolving Loan or a Term Loan of any type. "LOAN DOCUMENT" means this Agreement, the Notes, the Security Agreement, the Subordination Agreement, the Fee Letter, each agreement evidencing Hedging Obligations of the Borrower, and each other agreement, document or instrument delivered in connection herewith or therewith. "MANAGEMENT FEES" means, for any period, the management fees payable by the Borrower to the General Partner during such period for management services provided to the Borrower pursuant to the Partnership Agreement. "MATERIAL ACQUISITION" means a purchase by the Borrower of all or substantially all of the assets constituting a CATV and SMATV system or all or substantially all of the assets of another Person, or the acquisition by the Borrower of another Person through merger, if, in any case, the total consideration to be paid by the Borrower in respect thereof (x) exceeds $500,000, or (y) when added together with the total consideration paid by the Borrower in respect of all other similar transactions during the term of this Agreement, exceeds $2,000,000 in the aggregate. "MATERIAL AGREEMENT" is defined in Section 8.1.12. "NON-EXCLUDED TAXES" is defined in Section 4.6. "NOTE" means a promissory note of the Borrower payable to the order of any Lender, in the form of Exhibit A hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing (i) prior to the Conversion Date, the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Revolving Loans, and (ii) on and after the Conversion Date, the principal amount of such Lender's Term Loan, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "OBLIGATIONS" means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement, the Notes and each other Loan Document. -16- 18 "OFFICIAL BODY" means any Federal, state or local government or political subdivision or any agency, authority, bureau, central bank commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "ORGANIC DOCUMENT" means, relative to any Person, as applicable, its certificate of incorporation and its by-laws or its certificate of partnership and partnership agreement, and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock or partnership interests, as the case may be. "PARTICIPANT" is defined in Section 10.11.2. "PARTNERSHIP AGREEMENT" means the Limited Partnership Agreement of the Borrower, dated as of June 17, 1983 (as the same may be amended, restated or otherwise modified from time to time). "PAY TO BASIC RATIO" means, at any time, a percentage derived from a fraction, the numerator of which is the number of Pay Units at such time, and the denominator of which is the number of Basic Subscribers at such time. "PAY UNIT" means a cable programming service subscribed to by any subscriber of a Cable System at an additional charge in excess of the amount paid by any such subscriber for basic or expanded basic service, which subscription is not more than 60 days past due. The number of Pay Units in the case of subscribers receiving a reduced bulk pay programming service rate shall be determined by dividing (x) the aggregate dollar amount of monthly subscribers' fees paid on account of such services by (y) the standard rate for the pay programming services received. "PENSION PLAN" means a "PENSION PLAN", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multi-employer plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "PERCENTAGE" means, relative to any Lender, the percentage set forth opposite its signature hereto or, if applicable, set forth in such Lender's Lender Assignment Agreement, as such percentage may be -17- 19 adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11.1. "PERSON" means any natural person, corporation, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "PLAN" means any Pension Plan or Welfare Plan. "POLE AGREEMENT" means any conduit occupancy rights, pole agreement, pole rental, pole use, access or similar agreement with any telephone company, public authority, public utility or other entity pursuant to which the coaxial, fiber optic or other type of sale and local distribution units of a cable television system are extended. "PRO FORMA DEBT SERVICE" means, as of any date of determination, Debt Service for the next succeeding complete four Fiscal-Quarter period following such date, after giving effect to any then existing Hedging Obligations. For purposes of this definition, where interest payments of Indebtedness for such four quarter period are not fixed (pursuant to the terms of such Indebtedness or by way of Hedging Obligations), interest shall be calculated on such Indebtedness for the portion of such period for which interest payments are not so fixed at the rate of interest on a LIBO Rate Loan having an Interest Period of three (3) months, plus the Applicable Margin, in effect on the date of determination. "PRO FORMA DEBT SERVICE RATIO" means, at any date of determination, the ratio, computed on a consolidated basis of: (a) Annualized Cash Flow; to (b) Pro Forma Debt Service. "QUARTERLY PAYMENT DATE" means the last day of each March, June, September, and December or, if any such day is not a Business Day, the next succeeding Business Day. "RELEASE" means a "RELEASE", as such term is defined in CERCLA. "REQUIRED LENDERS" means, at any time, Lenders holding at least 66 and 2/3% of the then aggregate outstanding principal amount of the Notes then held by the Lenders, or, if no such principal amount is then outstanding, Lenders having at least 66 and 2/3% of the Commitments. "RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., and the -18- 20 rules and regulations issued thereunder, as amended, reformed or otherwise modified from time to time. "REVOLVING LOAN" is defined in Section 2.1.1. "SECURITY AGREEMENT" means the Security Agreement executed and delivered pursuant to Section 5.1.4, substantially in the form of Exhibit E hereto (as the same may be amended, restated or otherwise modified from time to time). "SHAWMUT" is defined in the Preamble. "SMATV" means satellite master antenna television. "STATED MATURITY DATE" means December 31, 2002. "SUBORDINATION AGREEMENT" means the Subordination Agreement executed and delivered pursuant to Section 5.1.5, substantially in the form of Exhibit F hereto (as the same may be amended, restated or otherwise modified from time to time. "SUBSIDIARY" means any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock. "TAXES" is defined in Section 4.6. "TAX TRANSFEREE" is defined in Section 4.6. "TERM LOAN" is defined in Section 3.l. "TOTAL DEBT" means all Indebtedness of the Borrower other than Indebtedness of the type described in clauses (e) and (h) of Section 7.2.2. "TYPE" means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan. "UNITED STATES" or "U.S." means the United States of America, its fifty states and the District of Columbia. "VOTING STOCK" means stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency. -19- 21 "WELFARE PLAN" means a "WELFARE PLAN", as such term is defined in Section 3(l) of ERISA. SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and in each Note, Borrowing Request, Continuation/Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles in the United States ("GAAP") applied in the preparation of the financial statements referred to in Section 6.5. ARTICLE 2. COMMITMENTS, BORROWING PROCEDURES AND NOTES SECTION 2.1. COMMITMENTS. On the terms and subject to the conditions of this Agreement, each Lender severally agrees to make Loans pursuant to the Commitment described in this Section 2.l. SECTION 2.1.1. REVOLVING LOAN COMMITMENT. From time to time on any Business Day occurring prior to the Commitment Termination Date, each Lender will make loans (relative to such Lender, its "REVOLVING LOANS") to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of Revolving Loans requested by the Borrower to be made on such day. The Commitment of each Lender described in this Section 2.1.1 is herein referred to as its "COMMITMENT." On the terms and subject to the conditions hereof, the Borrower may, from time to time, prior to the Commitment Termination Date borrow, repay and reborrow the Revolving Loans. -20- 22 SECTION 2.1.2. LENDERS NOT PERMITTED OR REQUIRED TO MAKE REVOLVING LOANS. No Lender shall be permitted or required to make any Revolving Loan if, after giving effect thereto, the aggregate outstanding principal amount of all Revolving Loans: (i) of all the Lenders would exceed the Commitment Amount; or (ii) of such Lender would exceed such Lender's Percentage of the Commitment Amount. SECTION 2.2. REDUCTION OF COMMITMENT AMOUNT. The Borrower may, from time to time, on any Business Day occurring after the Effective Date, voluntarily reduce the Commitment Amount; provided, however, that all such reductions shall require at least three Business Days' prior notice to the Agent and shall be permanent, and any partial reduction of the Commitment Amount shall be in a minimum amount of $500,000 and in an integral multiple of $100,000. If after giving effect to any such reduction of the Commitment Amount, the sum of the Loans then outstanding are in excess of the reduced Commitment Amount, the Borrower shall immediately prepay to the Agent, in accordance with Section 3.1, the amount necessary for the sum of the Loans then outstanding to be equal to or less than the reduced Commitment Amount. SECTION 2.3. BORROWING PROCEDURE. By delivering a Borrowing Request to the Agent on or before 12:00 noon, Hartford, Connecticut time, on a Business Day, the Borrower may from time to time irrevocably request, in the case of LIBO Rate Loans, on not less than three nor more than five Business Days' notice, or, in the case of Base Rate Loans, on not less than one nor more than five Business Days' notice, that a Borrowing be made in a minimum amount of $500,000 and an integral multiple of $100,000, or in the unused amount of the then applicable Commitment Amount. Upon receipt of a Borrowing Request, the Agent shall promptly notify the other Lenders on the same day of the Borrowing requested thereby. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. On or before 2:00 p.m., Hartford, Connecticut time, on such Business Day, each Lender shall deposit with the Agent same day funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to -21- 23 make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.4. CONTINUATION AND CONVERSION ELECTIONS. By delivering a Continuation/Conversion Notice to the Agent on or before 12:00 noon, Hartford, Connecticut time, on a Business Day, the Borrower may from time to time irrevocably elect, on not less than three nor more than five Business Days' notice, that all, or any portion in an aggregate minimum amount of $500,000 and an integral multiple of $100,000, of any Loans be, in the case of Base Rate Loans, converted into LIBO Rate Loans or in the case of LIBO Rate Loans, be converted into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert into a Base Rate Loan); provided, however, that (x) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders, and (y) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default has occurred and is continuing. Upon receipt of a Continuation/Conversion Notice, the Agent shall promptly notify the other Lenders on the same day of the continuation or conversion requested thereby. Notwithstanding the foregoing, in the case of the conversion of a LIBO Rate Loan into a Base Rate Loan, the Borrower may make such election on not less than one nor more than five Business Days' notice. SECTION 2.5. FUNDING. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made under Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing, as the case may be, Dollar certificates of deposit in the U.S. or Dollar deposits in its LIBOR Office's interbank eurodollar market. SECTION 2.6. NOTES. Each Lender's Loans shall be evidenced by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender's Percentage of the original applicable Commitment Amount. The Borrower hereby irrevocably authorizes each -22- 24 Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Note (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to, the Loans evidenced thereby. Such notations shall be conclusive and binding on the Borrower absent manifest error; provided, however, that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of the Borrower. ARTICLE 3. CONVERSION, REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. CONVERSION, REPAYMENTS AND PREPAYMENTS. On the Conversion Date, the aggregate outstanding principal amount of each Lender's Revolving Loans (with respect to each Lender, the "CONVERSION DATE AMOUNT") shall automatically convert into a term loan (with respect to each Lender, its "TERM LOAN"). Thereafter, the Borrower shall repay the outstanding principal amount of each Lender's Term Loan in successive quarterly installments on each Quarterly Payment Date beginning with March 31, 1997 and ending on the Stated Maturity Date. The amount of each installment in each calendar year shall be equal, and the aggregate principal amount of all installments made in each calendar year shall be equal to an amount that, when subtracted from the Conversion Date Amount of each Lender's Term Loan, shall result in the Conversion Date Amount at the end of such calendar year being reduced by a percentage at least equal to the percentage set forth below opposite such year:
PERCENTAGE (%) OF CONVERSION DATE AMOUNT CALENDAR YEAR TO BE REPAID AT END OF CALENDAR YEAR ------------- ------------------------------------ 1997 12.00% 1998 15.00% 1999 16.00% 2000 18.00% 2001 19.00% 2002 20.00%
The remaining unpaid principal amount of all Term Loans shall be repaid by the Borrower on the Stated Maturity Date. Prior to the Stated Maturity Date, the Borrower: (a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Term Loans; provided, however, that: -23- 25 (i) any such prepayment shall be made pro rata among Loans of the same type and, if applicable, having the same Interest Period of all Lenders; (ii) no such prepayment of any LIBO Rate Loan may be made on any day other than the last day of the Interest Period for such Loan unless the Borrower shall have paid directly to any Lender any amounts required under Section 4.4; (iii) all such voluntary prepayments shall require at least three but no more than five Business Days' prior notice to the Agent in the case of LIBO Rate Loans, and at least one but no more than five Business Days' prior notice to the Agent in the case of Base Rate Loans; and (iv) all such voluntary partial prepayments shall be in an aggregate minimum amount of $500,000 and an integral multiple of $100,000; (b) shall, on each date when any reduction in the Commitment Amount shall become effective, including pursuant to Section 2.2, make a mandatory prepayment of all Revolving Loans equal to the excess, if any, of the aggregate outstanding principal amount of all Revolving Loans over the Commitment Amount as so reduced; and (c) shall, immediately upon any acceleration of any Loans pursuant to Section 8.2 or Section 8.3, repay all Loans, unless, pursuant to Section 8.3, only a portion of all Loans is so accelerated. Each voluntary prepayment of Term Loans made pursuant to clause (a) shall be applied, to the extent of such prepayment, in the inverse order of the scheduled repayments of Term Loans set forth in this Section 3.1. Each prepayment of any Term Loans made pursuant to this Section shall be (i) without premium or penalty and (ii) made together with any amounts required to be paid under Section 4.4. No voluntary prepayment of principal of any Revolving Loans shall cause a reduction in the Commitment Amount. SECTION 3.2. EXCESS CASH FLOW RECAPTURE. In addition to any and all scheduled repayments of the Term Loans as set forth in Section 3.1 above, the Borrower shall, within one hundred twenty (120) days after the end of each Fiscal Year of the Borrower, commencing with the end of the 1996 Fiscal Year, pay to the Agent an amount equal to seventy-five percent (75%) of Excess Cash Flow of the Borrower for the immediately preceding Fiscal Year. Such prepayments of Excess Cash -24- 26 Flow shall be applied to the payment of installments of the outstanding principal amount of each Lender's Term Loans (including, without limitation, the installment due and payable on the Stated Maturity Date) due and payable hereunder in inverse order of maturity. SECTION 3.3. INTEREST PROVISIONS. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.3. SECTION 3.3.1. RATES. Pursuant to an appropriately completed and delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (a) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin; and (b) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin. The Applicable Margin for each type of Loan shall change automatically on the date a Compliance Certificate is delivered in accordance with Section 7.1.1 (b) and (c) indicating a change in the then existing Leverage Ratio mandating a change in such margins; provided, however, that if such Compliance Certificate is not delivered within the time required by such Section, such change in such margins shall, upon ultimate delivery of such Compliance Certificate, be deemed nevertheless to have been effective on and as of the date on which such Compliance Certificate was required to be delivered pursuant to such Section. The "LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula: LIBOR = LIBO Rate --------- (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and -25- 27 received by the Agent from Shawmut, two Business Days before the first day of such Interest Period. "LIBO RATE" means, relative to any Interest Period for LIBO Rate Loans, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in immediately available funds are offered to Shawmut's LIBOR Office in the London interbank market as at or about 11:00 a.m. London time two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of Shawmut's LIBO Rate Loan and for a period approximately equal to such Interest Period. "LIBOR RESERVE PERCENTAGE" means for any day the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "EUROCURRENCY LIABILITIES", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period by reference to the interest rate determined as applicable to such LIBO Rate Loans. SECTION 3.3.2.. POST-MATURITY RATES. After the date any principal amount of any Loan is due and payable (whether on the Stated Maturity Date, in connection with any mandatory reduction of the Commitment Amount or mandatory prepayment hereunder, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent not prohibited by applicable law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the Alternate Base Rate plus 2.0%. SECTION 3.3.3. PAYMENT DATES. Interest accrued on each Loan shall be payable without duplication: (a) on the Conversion Date with respect to Revolving Loans, and on the Stated Maturity Date with respect to Term Loans; -26- 28 (b) on the date of any optional or required payment or prepayment, in whole or in part, of principal outstanding on such Loan; (c) with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the Effective Date; (d) with respect to any LIBO Rate Loans, on the last day of each applicable Interest Period (and, if such Interest Period shall exceed 3 months, on the last calendar day of the 3rd month of such Interest Period and the last calendar day of each subsequent 3rd month of such Interest Period thereafter); (e) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and (f) on that portion of any Loans which is accelerated pursuant to Section 8.2 or Section 8.3 immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, in connection with any mandatory reduction of the Commitment Amount or mandatory prepayment hereunder, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.4. FEES. The Borrower agrees to pay the fees set forth in this Section 3.4. All such fees shall be nonrefundable. SECTION 3.4.1. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the account of each Lender, for the period (including any portion thereof when any of such Lender's Commitments are suspended by reason of the Borrower's inability to satisfy any condition of Article V) commencing on the Effective Date and continuing through the Commitment Termination Date, a commitment fee at the rate of 3/8 of 1% per annum on such Lender's Percentage of the sum of the average daily unused portion of the Commitment Amount. Such commitment fee shall be payable by the Borrower in arrears on each Quarterly Payment Date, commencing with the first such day following the Effective Date, and on the Commitment Termination Date. -27- 29 SECTION 3.4.2. AGENT'S FEE. The Borrower agrees to timely pay to the Agent, for the Agent's own account, the fees provided for in the Agent's Fee Letter. SECTION 3.4.3. FACILITY FEE. The Borrower agrees to pay to the Agent on the Effective Date, for the accounts of the Lenders and in accordance with each Lender's Commitment, a nonrefundable facility fee as set forth in the Fee Letter. ARTICLE 4. CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1. LIBO RATE LENDING UNLAWFUL. If any Lender shall determine (which determination shall, upon notice thereof to the Borrower and the other Lenders, be conclusive and binding on the Borrower) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of all Lenders to make, continue, maintain or convert into any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Agent that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion. SECTION 4.2. DEPOSITS UNAVAILABLE. If the Agent shall have determined, or shall be informed by a Lender, that (a) Dollar certificates of deposit or Dollar deposits, as the case may be, in the relevant amount and for the relevant Interest Period are not available to Shawmut or such Lender in its relevant market; or (b) by reason of circumstances affecting such relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from the Agent to the Borrower and the Lenders of such fact, the obligations of all Lenders under Sections 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Agent shall determine, or be informed, that and, in either case, shall give notice to the Borrower and the other Lenders that, the circumstances causing such suspension no longer exist. -28- 30 SECTION 4.3. INCREASED LIBO RATE LOAN COSTS, ETC. The Borrower agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum, receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans. Such Lender shall, within ninety (90) days of its actual knowledge of such event, notify the Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within five days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION 4.4. FUNDING LOSSES. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of: (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; (b) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor, then, upon the written notice of such Lender to the Borrower (with a copy to the Agent), the Borrower shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION 4.5. INCREASED CAPITAL COSTS. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, -29- 31 regulator or other governmental authority affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such Lender determines (in its sole and absolute discretion) that the rate of return on its or such controlling Person's capital as a consequence of its Commitments or the Loans made by such Lender is reduced to a level below that which such Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower, the Borrower shall, within five (5) days after receipt of such notice, pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. In determining such amount, such Lender may use any reasonable method of averaging and attribution that it shall deem applicable. SECTION 4.6. TAXES. All payments by the Borrower of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority ("TAXES"), but excluding (i) Taxes imposed on any Lender's net income (including, without limitation, any Taxes imposed on branch profits) and franchise Taxes imposed on any Lender by the jurisdiction under the laws of which such Lender is organized or any political subdivision thereof or by the jurisdiction of such Lender's lending office, (ii) any Taxes that are in effect and that would apply to a payment to such Lender as of the Effective Date, (iii) if any Person acquires any interest in this Agreement or any Note pursuant to the provisions hereof, including without limitation a participation (whether or not by operation of law), or a foreign Lender changes the office in which its Loan is made, accounted for or booked (any such Person or such foreign Lender in that event being referred to as a "TAX TRANSFEREE"), any Taxes to the extent that they are in effect and would apply to a payment to such Tax Transferee as of the date of the acquisition of such interest or change in office, as the case may be, and (iv) Taxes which are otherwise included in any amounts otherwise payable by the Borrower pursuant to any other provision of this Agreement (all such non-excluded Taxes being hereinafter referred to as "NON-EXCLUDED TAXES"). In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Non-Excluded Taxes pursuant to any applicable law, rule or regulation, then the Borrower will: -30- 32 (a) pay directly to the relevant authority the full amount required to be so withheld or deducted; (b) promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and (c) pay to the Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. Moreover, if any Non-Excluded Taxes are directly asserted against the Agent or any Lender with respect to any payment received by the Agent or such Lender hereunder, the Agent or such Lender may, but is not obligated to, pay such Non-Excluded Taxes and the Borrower will promptly pay such additional amount (including any penalties, interest or expenses) as is necessary in order that the net amount received by such Person after the payment of such Non-Excluded Taxes (including any Non-Excluded Taxes on such additional amount) shall equal the amount such Person would have received had not such Non-Excluded Taxes been asserted. Within 30 days after the date that any Lender or any Tax Transferee receives a refund of any Non-Excluded Taxes which the Borrower has paid to the relevant taxing authority or for which such Lender has been paid by the Borrower pursuant to the indemnification provisions of this Section, such Lender or Tax Transferee, as the case may be, shall pay to the Borrower such refund of Non-Excluded Taxes along with any interest received with respect thereto. If the Borrower fails to pay any Non-Excluded Taxes, when due to the appropriate taxing authority or fails to remit to the Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders for any incremental Non-Excluded Taxes, interest or penalties that may become payable by any Lender as a result of any such failure. For purposes of this Section 4.6, a disbursement hereunder by the Agent or any Lender to or for the account of any Lender shall be deemed a Borrowing by the Borrower. Upon the request of the Borrower and/or the Agent, each Lender that is organized under the laws of a jurisdiction other than the United States shall, prior to the due date of any payments under the Notes, execute and deliver to the Borrower and/or the Agent on or about the first scheduled payment date in each Fiscal Year, one or more (as the Borrower or the Agent, may reasonably request) United States Internal Revenue -31- 33 Service Forms 4224 or Forms 1001 or such other forms or documents (or successor forms or documents), appropriately completed, as may be applicable to establish the extent, if any, to which a payment to such Lender is exempt from withholding or deduction of Non-Excluded Taxes. SECTION 4.7. PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly provided, all payments by the Borrower pursuant to this Agreement, the Notes or any other Loan Document shall be made by the Borrower to the Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 noon, Hartford, Connecticut time, on the date due, in same day or immediately available funds, to such account as the Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Agent on the next succeeding Business Day. The Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Agent for the account of such Lender (provided, that, any such funds remitted after the date received shall be remitted with interest accrued thereon at the Federal Funds Rate). All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan (other then when such interest is calculated with respect to the Federal Funds Rate), 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clauses (c) or (d) of the definition of the term "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 4.8. SHARING OF PAYMENTS. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Sections 4.3, 4.4, 4.5 and 4.6) in excess of its pro rata share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, of that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to -32- 34 the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender; to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 4.9. SETOFF. Each Lender shall, upon the occurrence of any Default described in clauses (a) through (d) of Section 8.1.8 or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) the Borrower hereby grants to each Leader a continuing security interest in, any and all balances, credits, deposits accounts or moneys of the Borrower then or thereafter maintained with or otherwise held by such Lender; Provided, however, that any such appropriation and application shall be subject to the provisions of Section 4.8. Each Lender agrees promptly to notify the Borrower and the Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. ARTICLE 5. CONDITIONS TO BORROWING SECTION 5.1. INITIAL BORROWING. The obligations of the Lenders to fund the initial Borrowing shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.l. SECTION 5.1.1. GENERAL PARTNER'S CERTIFICATE. The Agent shall have received from the General Partner, a certificate of the Secretary or an Assistant Secretary of the General Partner, dated the date of the initial Borrowing: -33- 35 (a) with respect to the Borrower's Organic Documents, that the copies thereof attached are true and correct and in full force and effect on the date of the initial Borrowing, together with a certificate of good standing for the Borrower issued by the jurisdiction in which it is organized, and dated as of a date reasonably close to the date of the initial Borrowing; (b) with respect to the General Partner's Organic Documents, that the copies thereof attached are true and correct and in full force and effect on the date of the initial Borrowing, copies of which shall be attached thereto, together with a certificate of good standing for the General Partner issued by the jurisdiction in which it is organized, and dated as of a date reasonably close to the date of the initial Borrowing; (c) all action necessary for the execution, delivery and performance of this Agreement, the Note, and each other Loan Document by the General Partner, as the general partner of the Borrower, together with copies of all resolutions to such effect attached thereto; and (d) the incumbency and signatures of those officers of the General Partner authorized to act on behalf of and bind the General Partner, in its capacity as the general partner of the Borrower, with respect to this Agreement, the Note and each other Loan Document. Each Lender may conclusively rely upon each certificate referenced above until it shall have received a further certificate from the General Partner canceling or amending such prior certificates. SECTION 5.1.2. DELIVERY OF NOTES. The Agent shall have received each Lender's Note, in each case, duly executed and delivered by the Borrower. SECTION 5.1.3. PAYMENT OF OUTSTANDING INDEBTEDNESS, ETC. All Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule, together with all interest, prepayment premiums and other amounts due and payable with respect thereto, shall have been paid in full (including, to the extent necessary, from proceeds of the initial Borrowing); all Liens securing payment of any such Indebtedness shall have been released; and the Agent shall have received all Uniform Commercial Code Form UCC-3 termination Statements or other instruments as -34- 36 may be necessary or appropriate to release such Liens (including the Lien held by Shawmut under the Existing Credit Agreement), in each case, duly executed and completed by the holders of such Liens and in a form suitable for filing. SECTION 5.1.4. SECURITY AGREEMENT. The Agent shall have received executed counterparts of the Security Agreement, dated as of the date hereof, duly executed by the Borrower, together with (a) acknowledgment copies of properly filed Uniform Commercial Code financing statements (Form UCC-1), or such other evidence of filing as may be acceptable to the Agent, naming the Borrower as the debtor and the Agent as the secured party, as agent and for the benefit of the Lenders, or other similar instruments or documents, as may be necessary or, in the opinion of the Agent, desirable to perfect the security interest of the Agent pursuant to the Security Agreement. (b) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person in any collateral described the Security Agreement previously granted by any Person (other than with respect to collateral subject to Capitalized Leases and purchase money Liens permitted hereunder) together with such other Uniform Commercial Code Form UCC-3 termination statements as the Agent may reasonably request; and (c) certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Agent, dated a date reasonably near to the date of the initial Borrowing, listing all effective financing statements which name the Borrower (under its present name and any previous names) as the debtor and which are filed in the jurisdictions in which filings were made pursuant to clause (a) above, together with copies of such financing statements (none of which (other than those described in clause (a)) if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements described in clause (a)) shall cover any collateral described in the Security Agreement other than assets subject to Capitalized Leases or purchase money Liens, in each case as permitted hereunder). -35- 37 SECTION 5.1.5. SUBORDINATION AGREEMENT. The Agent shall have received duly executed counterparts of the Subordination Agreement, dated as of the date hereof, executed and delivered by the Borrower and Jones Intercable. SECTION 5.1.6. OPINIONS OF COUNSEL. The Agent shall have received opinions, dated the date of the initial Borrowing and addressed to the Agent and all Lenders, from: (a) Elizabeth M. Steele, general counsel to Jones Intercable, substantially in the form of Exhibit G hereto; and (b) Cohen, Dax, Koenig & Wiles, regulatory counsel to the Borrower in the State of New York, substantially in the form of Exhibit H hereto; (c) Dow, Lohnes & Albertson, FCC counsel to the Borrower, substantially in the form of Exhibit I hereto; and (d) Phillips, Lytle, Hitchcock, Blaine & Huber, New York counsel to the Borrower, substantially in the form of Exhibit J hereto. SECTION 5.1.7. CLOSING DATE CERTIFICATE. The Agent shall have received a Closing Date Certificate, dated the date of the initial borrowing, and duly executed and completed by the Borrower. SECTION 5.1.8. PAYOFF LETTER; DISBURSEMENT INSTRUCTIONS. The Agent shall have received a payoff letter from Shawmut, indicating the amount of the loan obligations of the Borrower to Shawmut to be discharged on the Effective Date and an acknowledgment by Shawmut that upon receipt of such funds it will forthwith execute and deliver to the Agent for filing all termination statements and take such other actions as may be necessary to discharge all mortgages, deeds of trust and security interests granted by the Borrower or any of its Subsidiaries in favor of Shawmut. SECTION 5.1.9. CLOSING FEES, EXPENSES. (a) The Borrower shall have paid to the Agent all of the fees then due and owing under the Fee Letter; (b) The Agent shall have received for its own account, or for the account of each Lender, as the case may -36- 38 be, all fees, costs and expenses due and payable pursuant to Sections 3.4 and 10.3, if then invoiced. SECTION 5.1.10. COMPLIANCE CERTIFICATE. The Agent shall have received a Compliance Certificate, duly executed and completed by the Borrower, with any calculations being made with respect to the debt as of the Effective Date and any calculations being made with respect to cash flow as of the end of the immediately preceding Fiscal Quarter. SECTION 5.2. ALL BORROWINGS. The obligation of each Lender to fund any Loan on the occasion of any Borrowing (including the initial Borrowing) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.2. SECTION 5.2.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before and after giving effect to any Borrowing (but, if any Default of the nature referred to in Section 8.1.5 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds thereof) the following statements shall be true and correct: (a) the representations and warranties set forth in Article VI shall be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); (b) except as disclosed by the Borrower to the Agent and the Lenders pursuant to Section 6.7: (i) no labor controversy, litigation, arbitration or governmental investigation or proceeding shall be pending or, to the knowledge of the Borrower, threatened against the Borrower, any of its Subsidiaries or the General Partner which, if adversely determined, is reasonably likely to materially adversely affect the Borrower's consolidated business, operations, assets, revenue, properties or prospects (with respect to the Borrower's ability to pay or repay the Obligations) or which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document; and (ii) no development shall have occurred in any labor controversy, litigation, arbitration or -37- 39 governmental investigation or proceeding disclosed pursuant to Section 6.7 which, if adversely determined, is reasonably likely to materially adversely affect the Borrower's consolidated business, operations, assets, revenues, properties or prospects (with respect to the Borrower's ability to pay or repay the Obligations); and (c) no Default shall have then occurred and be continuing, and neither the Borrower, nor any of its Subsidiaries are in material violation of any law or governmental regulation or court order or decree. SECTION 5.2.2. BORROWING REQUEST. The Agent shall have received a Borrowing Request for such Borrowing. Each of the delivery of a Borrowing Request and the acceptance by the Borrower or the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct. SECTION 5.2.3. SATISFACTORY LEGAL FORM. All documents executed or submitted pursuant hereto by or on behalf of the Borrower or any of its Subsidiaries shall be satisfactory in form and substance to the Agent and its counsel; the Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Agent or its counsel may reasonably request. ARTICLE 6. REPRESENTATIONS AND WARRANTIES In order to induce the Lenders and the Agent to enter into this Agreement and to make Loans hereunder, each of the Borrower and the General Partner represents and warrants to the Agent and each Lender as set forth in this Article VI on the date hereof and as of the date of each Loan made hereunder. SECTION 6.1. ORGANIZATION, ETC. (a) The Borrower is a limited partnership duly organized and validly existing under the laws of the State of Colorado and is duly qualified to do business in the States of Colorado and New York, the only other jurisdiction(s) in which the conduct or contemplated conduct of its business or the ownership or lease of its assets requires such qualification (except where the failure to do so would not have a material adverse effect on the business, operations or financial condition of the Borrower). No other filing, recording, publishing or other act with an Official Body is necessary or appropriate in connection with the existence or -38- 40 the business of the Borrower other than those which have been made or done. (b) Each Subsidiary of the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of incorporation, and is duly qualified to do business in each jurisdiction in which the conduct of its business or the ownership or lease of its assets would require such qualification. (c) The General Partner is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado. The General Partner is duly qualified and in good standing in all jurisdictions in which the conduct of its business or the ownership or lease of its assets requires such qualification (except where the failure to do so would not have a material adverse effect on the business, operations or financial condition of the General Partner). (d) The Borrower and the General Partner, and each of the Borrower's Subsidiaries, has full partnership or corporate power and authority, respectively, and holds all requisite governmental licenses, permits and other approvals to enter into and perform its respective Obligations under this Agreement, the Notes and each other Loan Document to which it is a party and holds all requisite material governmental licenses, permits and other approvals to own and hold under lease its property and to conduct its business substantially as currently conducted by it. (e) The General Partner is the sole general partner of the Borrower and owns 100% of the outstanding general partnership interests in the Borrower, free and clear of all Liens or other encumbrances other than those interests which represent the rights to receive certain distributions from the Borrower to Jones Intercable and which are pledged to NationsBank of Texas, N.A., as Collateral Agent for certain secured parties, pursuant to that certain Security Agreement dated as of December 8, 1992 between Jones Intercable and NationsBank of Texas, N.A. SECTION 6.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution, delivery and performance by and on behalf of the Borrower of this Agreement, the Notes and each other Loan Document are within the Borrower's and the General Partner's powers, have been duly authorized by all necessary action, and do not (i) contravene the Borrower's or the General Partner's Organic Documents; -39- 41 (ii) contravene (x) any law or governmental regulation or court decree or order binding on or affecting the Borrower or the General Partner or (y) any contractual restriction binding on or affecting the General Partner or the Borrower which contravention is reasonably likely to have a material adverse effect on the Borrower's consolidated business, operations, assets, revenues, properties or prospects (with respect to the Borrower's ability to pay or repay the Obligations); or (iii) result in, or require the creation or imposition of, any Lien on any of the Borrower's or the General Partner's properties (other than the Lien of the Security Agreement. SECTION 6.3. GOVERNMENT APPROVAL, REGULATION, ETC. Other than as set forth in Item 6.3 of the Disclosure Schedule or those which have been obtained and are in full force and effect, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the General Partner of its Subordination Agreement or by the Borrower of this Agreement, the Notes or any other Loan Document. Neither the Borrower nor any of its Subsidiaries is an "INVESTMENT COMPANY" within the meaning of the Investment Company Act of 1940, as amended, or a "HOLDING COMPANY", or a "SUBSIDIARY COMPANY" of a "HOLDING COMPANY", or an "AFFILIATE" of a "HOLDING COMPANY" or of a "SUBSIDIARY COMPANY" of a "HOLDING COMPANY", within the meaning of the Public Utility Holding Company Act Of 1935, as amended. SECTION 6.4. VALIDITY, ETC. This Agreement constitutes, and the Notes and each other Loan Document executed by the Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms. The Partnership Agreement and the Subordination Agreement constitute the legal, valid and binding obligations of the General Partner enforceable in accordance with their respective terms. SECTION 6.5. FINANCIAL INFORMATION. The balance sheet of the Borrower as at September 30, 1994, and the related statements of operations, cash flow and partners' capital, copies of which have been furnished to the Agent and each Lender, have been prepared in accordance with GAAP consistently applied, and present fairly the financial condition of the Borrower as at the dates thereof and the results of its operations for the periods then ended. -40- 42 SECTION 6.6. NO MATERIAL ADVERSE CHANGES. Since the date of the financial statements described in Section 6.5, there has been no material adverse change in the Borrower's business, assets, properties, revenue, financial condition, operations or prospects (with respect to the Borrower's ability to pay or repay the Obligations). SECTION 6.7. LITIGATION, LABOR CONTROVERSIES, ETC. Except as disclosed in Item 6.7 ("LITIGATION") of the Disclosure Schedule, there is no pending or, to the knowledge of the Borrower, threatened litigation, action, proceeding, or labor controversy affecting the Borrower, any of its Subsidiaries or the General Partner which, if adversely determined, is reasonably likely to materially adversely affect the business, assets, properties, revenue, financial condition, operations or prospects (with respect to the Borrower's ability to pay or repay the Obligations) of the Borrower, or any Subsidiary, or which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document. SECTION 6.8. SUBSIDIARIES. The Borrower has no Subsidiaries except those Subsidiaries, if any, which the Required Lenders have permitted the Borrower to acquire after the Effective Date. SECTION 6.9. OWNERSHIP OF PROPERTIES. The Borrower and each of its Subsidiaries owns good and marketable title to all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.2.3. SECTION 6.10. TAXES. Each of the Borrower and its Subsidiaries has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 6.11. PENSION AND WELFARE PLANS. Neither the Borrower, nor any Subsidiary of the Borrower, nor any member of a Controlled Group has established or maintained, has ever made or been obligated to make contributions to, or is obligated to make contributions to, any Plan or multiemployer Plan. SECTION 6.12. ENVIRONMENTAL WARRANTIES. To the best of the Borrower's knowledge, all facilities and property (including underlying -41- 43 groundwater) owned or leased by the Borrower and its Subsidiaries, have been, and continue to be, owned or leased by the Borrower and its Subsidiaries, in material compliance with all Environmental Laws. SECTION 6.13. REGULATIONS G, U AND X. The Borrower is not engaged in the business or extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulations G, U or X. Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 6.14. ACCURACY OF INFORMATION. (a) All factual information heretofore or contemporaneously furnished by or on behalf of the Borrower or the General Partner in writing to the Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information hereafter furnished by or on behalf of the Borrower or the General Partner in writing to the Agent or any Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified and as of the date of execution and delivery of this Agreement by the Agent and such Lender, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading. (b) All of the information set forth in the Disclosure Schedule and the Cable Schedule is true and accurate in every material respect as of the Effective Date. SECTION 6.15. CABLE AUTHORIZATIONS. The Cable Schedule accurately and completely lists all CATV and SMATV systems currently owned by the Borrower, and all Franchises issued or granted to the Borrower (such Franchises, together with all renewals and extensions thereof, are referred to collectively as the "CABLE FRANCHISES"). The Cable Franchises constitute the only material Franchises required or advisable in connection with the conduct by the Borrower of its business as presently conducted. All of the Cable Franchises are duly issued in the name of the Borrower (or are issued in some other name but have been duly and validly assigned to the Borrower), the Borrower has full power and authority to operate thereunder, and each such Cable Franchise will expire on the date set forth for such Cable Franchise in the Cable Schedule. All assets of the Cable Systems and all Cable Franchises, -42- 44 contracts, agreements and other things necessary or advisable in connection with the present or proposed operation of the Cable Systems shall at all times be owned (or leased on terms and conditions permitted hereunder) and held by the Borrower. The Cable Schedule accurately and completely lists all agreements, if any, which are presently in effect with public utilities for the use of public utility facilities in connection with the Cable Systems. The Borrower has the right and authority (contractual, by law or otherwise) to provide pay television and related services to subscribers. The Cable Schedule accurately and completely lists (i) all deeds, leases, leaseholds and other interests in real property held by the Borrower, together with accurate legal descriptions of all such real property owned or leased by the Borrower, and (ii) all Pole Agreements and wire line crossing agreements to which the Borrower is a party. Other than the Cable Franchises, no Franchise has been granted with respect to the territory covered by the Cable Franchises, nor, to the best of the Borrower's knowledge, is any application for any such Franchise pending. As of the date of this Agreement, there is no overbuilding of any territory covered by the Cable Systems. SECTION 6.16. FCC REGISTRATION AND REGULATORY COMPLIANCE. With respect to each of the Cable Systems, there is a registration statement on file with the FCC which fully complies with all applicable requirements of 47 C.F.R. Part 76, Subpart B. The Borrower is the holder of each of the FCC Licenses listed on the Cable Schedule, each of which has the effective and expiration dates noted on the Cable Schedule, and is, to the best of the Borrower's knowledge, lawfully issued (and continues to exist) pursuant to the rules and regulations of the FCC. The Borrower is presently in compliance in all material respects with all terms and conditions of all FCC Licenses covering the Cable Systems, all Federal, state and local laws, all rules, regulations and administrative orders of the FCC (other than with respect to compliance with regulations promulgated by the FCC regarding rates and codified at,47 C.F.R. Sections 76.922-76.924, with which, to the Borrower's knowledge, it is in compliance in all material respects) and all state and local commissions or authorities which are applicable to the Borrower or the operation of the Cable Systems (including, without limitation, those regarding signal leakage), and the foregoing permit any contemplated and continued operation of the Cable Systems without the obtaining of any further approvals, covenants, modifications or the taking of any other action of any kind or nature whatsoever. The Borrower has received no notice that any fact or any past, present or threatened occurrence would preclude or impair its ability to obtain any FCC License or other Franchise necessary for the operation of the Cable Systems as currently operated or as contemplated to be operated in any projections furnished to the Agent. -43- 45 SECTION 6.17. FRANCHISES, COPYRIGHTS AND LICENSES. The Borrower possesses, or has the right to use, all FCC Licenses and all other Franchises, all copyrights, all licenses (including all cable television or broadcast licenses), all rights under agreements with public utilities and microwave transmission companies, Pole Agreements, and all utility easements and other rights, the absence of which is reasonably likely to have a material adverse effect on the business, properties, operations or conditions, financial or otherwise, or prospects (with respect to the Borrower's ability to pay or repay the Obligations) of the Borrower, each of which is in full force and effect and with which the Borrower is in compliance in all material respects, with no known conflict with the rights of others which could affect or impair in any material manner the businesses, properties, operations or condition, financial or otherwise, or prospects (with respect to the Borrower's ability to pay or repay the Obligations) of the Borrower. The General Partner or any other Affiliate of the Borrower providing services to the Borrower, has obtained all licenses, permits, authorizations and Franchises necessary for the ownership of its properties used in providing services to the Cable Systems, the conduct of its businesses in connection with the Cable Systems as currently operated or as contemplated to be operated (as described in any written projections furnished to the Agent or the Lenders on or prior to the Effective Date), in all instances in which the failure to have obtained such licenses, permits, authorizations and Franchises could have a material adverse impact on the businesses, properties, operations or condition, financial or otherwise, of the Borrower. To the best of the Borrower's knowledge, no event has occurred which permits, or after the giving of notice or the lapse of time, or both, would permit, the revocation or termination of any Cable Franchise, or any copyright, license, permit, authorization or other right of the FCC so as to adversely affect in any material manner the businesses, properties, operations or condition, financial or otherwise, or prospects (with respect to the Borrower's ability to pay or repay the Obligations) of the Borrower. SECTION 6.18. COMMUNICATIONS ACT FILINGS. The Borrower has duly and timely filed all cable television registration statements and other filings which are required to be filed under the Communications Act, and has complied in all other material respects with the Communications Act (other than with respect to compliance with regulations promulgated by the FCC regarding rates and codified at 47 C.F.R. Sections 76.922-76.924, with which, to the best of Borrower's knowledge, it is in compliance in all material respects), including, without limitation, the rules and regulations of the FCC relating to the carriage of television signals. The Borrower has recorded or deposited with and paid to the United States Copyright Office, the Register of Copyrights and the Copyright Royalty Tribunal, all notices, statements of account, royalty fees and other documents, instruments and amounts required under the Copyright Act, -44- 46 and is not liable to any person for copyright infringement under the Copyright Act. SECTION 6.19. PARTNERSHIP AGREEMENT. The Partnership Agreement is in full force and effect and no default or event which, with the passage of time or notice or both, would constitute a default has occurred and is continuing thereunder. SECTION 6.20. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. SECTION 6.21. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to Liens permitted hereunder, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest in, any assets or property of the Borrower or any of its Subsidiaries or any rights relating thereto. SECTION 6.22. MANAGEMENT FEES, ALLOCATED OVERHEAD AND GENERAL PARTNER ADVANCES. Except as set forth in Item 6.22 of the Disclosure Schedule, there are no Management Fees, Allocated Overhead and/or General Partner Advances outstanding as of September 30, 1994. ARTICLE 7. COVENANTS SECTION 7.1. AFFIRMATIVE COVENANTS. The Borrower agrees with the Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 7.1. SECTION 7.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The Borrower will furnish, or will cause to be furnished, to the Agent (for further transmission to the Lenders) copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and consolidated statements of operations or income (as appropriate), partners' equity or stockholder's equity (as appropriate), and cash flow of the Borrower and its Subsidiaries for such Fiscal Quarter and for the period -45- 47 commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by the president, chief financial Authorized Officer or Treasurer of the General Partner; (b) as soon as available and in any event within 105 days after the end of each Fiscal Year of the Borrower, a copy of the annual audit report for such Fiscal Year for the Borrower and its Subsidiaries, including therein consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of operations or income (as appropriate), partners' equity, or stockholders' equity (as appropriate), and cash flow of the Borrower and its Subsidiaries for such Fiscal Year, in each case certified (without any Impermissible Qualification) by an independent public accounting firm acceptable to the Agent and the Required Lenders and accompanied by a Compliance Certificate, executed by the General Partner, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Agent) compliance with the financial covenants set forth in Section 7.2.4 and the resulting Applicable Margin; (c) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, a Compliance Certificate executed by the General Partner, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Agent) compliance with the financial covenants set forth in Section 7.2.4 and the resulting Applicable Margin; (d) prior to the payment of any General Partner Advances, a Compliance Certificate, executed by the General Partner, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Agent) compliance, both before the payment of such General Partner Advance and after giving effect thereto, with the financial covenants set forth in Section 7.2.4 and the resulting Applicable Margin; (e) as soon as possible and in any event within three days after the occurrence of each Default, a statement of the General Partner, setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto; -46- 48 (f) as soon as possible and in any event within three days after (x) becoming aware of the occurrence of any adverse development with respect to any litigation, action, proceeding, or labor controversy described in Section 6.7 or (y) becoming aware of the commencement of any labor controversy, litigation, action, proceeding of the type described in Section 6.7, notice thereof and copies of all documentation relating thereto; (g) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to the General Partner, and all quarterly reports on Form 10-Q and annual reports on Form 10-K which the General Partner files with the Securities and Exchange Commission or any national securities exchange; (h) as soon as practicable, and in any event within 60 days after the end of each Fiscal Quarter, a subscriber report setting forth for each Cable System as of the end of such Fiscal Quarter (i) the number of Basic Subscribers and Pay Units as of the end of such Fiscal Quarter, (ii) the Basic Subscriber Rate charged to subscribers during such Fiscal Quarter, (iii) the number of Homes Passed, the Basic Penetration Rate and Pay to Basic Ratio as of the end of such Fiscal Quarter, (iv) upon request of the Agent or any Lender, the number of subscribers initiating and terminating Cable Systems service during such Fiscal Quarter and (v) upon request by the Agent or any Lender, an aging of the Borrower's accounts receivable as of the end of such Fiscal Quarter, which report shall also include a description of any Cable Systems sold during such Fiscal Quarter and the consideration received therefor; (i) promptly after the occurrence of (i) any lapse or other termination of any Franchise issued to the Borrower or any of its Subsidiaries, which lapse or termination may have a material adverse effect on the business, operations, financial condition or prospects (with respect to the Borrower's ability to pay or repay the Obligations) of the Borrower or any of its Subsidiaries, (ii) any refusal by any Official Body to renew or extend any such Franchise, or (iii) any dispute between the Borrower or any of its Subsidiaries and any Official Body which, if adversely determined, is reasonably likely to have a material adverse effect on the business, operations, financial condition or prospects (with respect to the Borrower's ability to pay or repay the -47- 49 Obligations) of the Borrower or any of its Subsidiaries, notice thereof; (j) promptly upon their becoming available to the Borrower, copies of (i) any periodic or special report filed by the Borrower or any of its Subsidiaries with the FCC or with any other Official Body regulating the Cable Systems if (A) such report indicates any material adverse changes in the business, operations, financial condition or prospects (with respect to the Borrower's ability to pay or repay the Obligations) of the Borrower or any of its Subsidiaries, or (B) a copy thereof is requested by any Lender, and (ii) any material notice or other material communication from the FCC or from any other Official Body regulating cable systems which specifically relates to the operation of the Cable Systems; and (k) such other information respecting the condition or operations, financial or otherwise, of the Borrower, any of its Subsidiaries or the General Partner, as any Lender through the Agent may from time to time reasonably request. SECTION 7.1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include (without limitation): (a) the maintenance and preservation of its existence and qualification as a foreign corporation or foreign limited partnership, as the case may be; (b) the maintenance in full force and effect of all material Cable Franchises, consents, approvals, exemptions and other actions by, and all registrations, qualifications, designations and declarations and other filings with, each Official Body necessary or advisable in connection with the execution, delivery and performance of this Agreement, the Notes and the other Loan Documents and the ownership and operation of the Cable Systems; and (c) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. -48- 50 SECTION 7.1.3. MAINTENANCE OF PROPERTIES. The Borrower will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep its properties in good repair, working order and condition (ordinary wear and tear excepted), and to make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless the Borrower determines in good faith that the continued maintenance of any of its properties is no longer economically desirable. SECTION 7.1.4. INSURANCE. The Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies insurance with respect to its properties and business (including business interruption insurance) against such casualties and contingencies and of such types and in such amounts as is customary in the case of partnerships or other entities engaged in similar businesses and will, upon request of the Agent, furnish to each Lender at reasonable intervals (and at least annually) a certificate of insurance with respect to all insurance maintained by the Borrower and its Subsidiaries in accordance with this Section. SECTION 7.1.5. BOOKS AND RECORDS. The Borrower will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Agent and each Lender or any of their respective representatives, at reasonable times and intervals and upon reasonable notice, to visit all of its offices, to discuss its financial matters with its officers and independent public accountants (and the Borrower hereby authorizes such independent public accountant to discuss the Borrower's financial matters with each Lender or its representatives with or without a representative of the Borrower being present so long as the Borrower has been given a reasonable opportunity to have a representative present) and to examine (and, at the expense of the Borrower, photocopy extracts from) any of its books or other corporate records. The Borrower shall pay any fees of such independent public accountants incurred in connection with the Agent's or, during any period that a Default has occurred and is continuing, any Lender's exercise of its rights pursuant to this Section. SECTION 7.1.6. ENVIRONMENTAL COVENANTS. The Borrower will, and will cause each of its Subsidiaries to, (a) use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all -49- 51 necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws; (b) immediately notify the Agent and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to the condition of its facilities and properties or compliance with Environmental Laws, and shall timely defend any actions and proceedings relating to compliance with Environmental Laws; and (c) provide such information and certifications the Agent may reasonably request from time to time to evidence compliance with this Section 7.1.6. SECTION 7.1.7. COPYRIGHT ACT FILINGS. The Borrower will timely from time to time in accordance with applicable law record or deposit with and pay to the United States Copyright Office, the Register of Copyrights and/or the Copyright Royalty Tribunal all notices, statements of account, royalty fees and other documents, instruments and amounts required under the Copyright Act of the United States. SECTION 7.1.8. USE OF PROCEEDS. The Borrower shall use the proceeds of the initial Borrowing first to repay, in full, all amounts outstanding under the Existing Credit Agreement, and, second, for such general corporate purposes as the Borrower may determine appropriate (including payments of General Partner Advances permitted under Section 7.2.7). Thereafter, the Borrower shall use the proceeds of all additional Borrowings, if any, for such general corporate purposes as the Borrower may determine appropriate. No proceeds of any Borrowing will be used to purchase or carry any "MARGIN STOCK", as defined in F.R.S. Board Regulation U. SECTION 7.2. NEGATIVE COVENANTS. The Borrower agrees with the Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will comply with the obligations set forth in this Section 7.2. SECTION 7.2.1. BUSINESS ACTIVITIES. The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business activity, except for the ownership and operation of the -50- 52 Cable Systems and such activities as may be incidental or related thereto. SECTION 7.2.2. INDEBTEDNESS. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Loans and other Obligations; (b) until the date of the initial Borrowing, the Indebtedness identified in Item 7.2.2(b) ("INDEBTEDNESS TO BE PAID") of the Disclosure Schedule; (c) Indebtedness existing as of the Effective Date which is identified in Item 7.2.2(c) ("ONGOING INDEBTEDNESS") of the Disclosure Schedule; (d) Indebtedness incurred by the Borrower or any of its Subsidiaries to a vendor of any assets to finance its acquisition of such assets which, when added to the aggregate principal amount of Indebtedness permitted pursuant to clause (f) of this Section 7.2.2, does not exceed $1,000,000; (e) unsecured Indebtedness incurred in the ordinary course of business (including open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services, but excluding any Indebtedness incurred through the borrowing of money or in the form of Contingent Liabilities); (f) Indebtedness in respect of Capitalized Lease Liabilities which, when added to the aggregate principal amount of Indebtedness permitted pursuant to clause (d) of this Section 7.2.2, does not exceed $1,000,000; (g) Indebtedness of the Borrower in respect of Hedging Obligations arising under agreements entered into with the Agent or any other Lender; and (h) Indebtedness in the form of General Partner Advances which are at all times subordinate to the Loans and all other amounts due to the Lenders hereunder pursuant to the terms of the Subordination Agreement; -51- 53 provided, however, no Indebtedness otherwise permitted by clause (d), (j) or (g) shall be incurred if, before or after giving effect to the incurrence thereof, any Default shall have occurred and be continuing. SECTION 7.2.3. LIENS. The Borrower will not, and will not permit any of its Subsidiary to, incur, assume or suffer to permit subsidiaries to, exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations, granted pursuant to any Loan Document; (b) Until the date of the initial Borrowing, Liens securing payment of the Indebtedness of the type permitted and described in clause (b) of Section 7.2.2; (c) Liens described in Item 7.2.3(c) of the Disclosure Schedule which were granted prior to the Effective Date to secure payment of the Indebtedness of the type permitted and described in clause (c) of Section 7.2.2; (d) Liens granted to secure payment of the Indebtedness of the type permitted and described in clause (d) of Section 7.2.2 and covering only those assets acquired with the proceeds of such Indebtedness; (e) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (f) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (g) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; and -52- 54 (h) Judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies. SECTION 7.2.4. FINANCIAL CONDITION. The Borrower will not permit: (a) Its Leverage Ratio at any time during the periods set forth below to be greater than the ratio set forth opposite such periods:
Period Maximum Leverage Ratio ------ ---------------------- Effective Date - 12/31/96 4.50:1 1/1/97 - 09/30/98 4.00:1 10/1/98 and thereafter 3.50:1
(b) Its Interest Coverage Ratio at any time to be less than 2.00:1. (c) Its Pro-Forma Debt Service Ratio at any time beginning on the Effective Date and continuing through December 31, 1997 to be less than 1.25:1, and will not permit the Pro-Forma Debt Service Ratio at any time thereafter to be less than 1.50:1. SECTION 7.2.5. INVESTMENTS. The Borrower will not, and will not permit any of its Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except (without duplication): (a) the Investments existing on the Effective Date and described in Item 7.2.5(a) ("ONGOING INVESTMENTS") of the Disclosure Schedule; (b) Investments permitted as Capital Expenditures; and (c) Cash Equivalent Investments; provided, however, that any Investment which when made complies with the requirements of the definition of the term "CASH EQUIVALENT INVESTMENT" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements. -53- 55 SECTION 7.2.6. RESTRICTED PAYMENTS, ETC. On and at all times after the Effective Date: (a) the Borrower will not, and will not permit any of its Subsidiaries to, declare, pay or make any dividend or distribution (in cash, property or obligations) with respect to any partnership interest of the Borrower or stock of the Subsidiaries or on account of the purchase, redemption, retirement or acquisition of any partnership interest of the Borrower or stock of the Subsidiaries; and (b) the Borrower will not, and will not permit any of its Subsidiaries to, make any deposit for any of the foregoing purposes. SECTION 7.2.7. MANAGEMENT FEES, ALLOCATED OVERHEAD AND GENERAL PARTNER ADVANCES. The Borrower will not, and will not permit any of its Subsidiaries to, pay any amounts with respect to Management Fees, Allocated Expenses or General Partner Advances if, either before or after giving effect to such payments, a Default shall have occurred and be continuing, or if such payments violate the terms of the Subordination Agreement. SECTION 7.2.8. CONSOLIDATION, MERGER, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except: (a) any such Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any other Subsidiary, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary; and (b) so long as no Default has occurred and is continuing or would occur after giving effect thereto, the Borrower or any of its Subsidiaries may purchase all or substantially all of the assets of any Person, or acquire such Person by merger, provided that such purchase or acquisition (i) is not a Material Acquisition, and (ii) involves a Person or assets of a Person engaged in the CATV or SMATV business. SECTION 7.2.9. ASSET DISPOSITIONS, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer, -54- 56 lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or any portion of its assets (including accounts receivable and capital stock of any Subsidiaries) to any Person, unless after giving effect to such transactions, individually or in the aggregate, the number of Basic Subscribers would not decrease by 25% or more from the number of Basic Subscribers immediately prior to such transaction and no Default or Event of Default exists or would exist after giving effect to such transactions. SECTION 7.2.10. MODIFICATION OF CERTAIN AGREEMENTS. The Borrower will not consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to, its Partnership Agreement or the Subordination Agreement. SECTION 7.2.11. TRANSACTIONS WITH AFFILIATES. Except for Management Fees, Allocated Overhead and General Partner Advances, payable in accordance with Section 7.2.7 and the terms of the Subordination Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its Affiliates other than those permitted by Section 2.2(n) of the Partnership Agreement, and any arrangement or contract which is fair and equitable to the Borrower or such Subsidiary and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower or such Subsidiary with a Person which is not one of its Affiliates. SECTION 7.2.12. NEGATIVE PLEDGES, RESTRICTIVE AGREEMENTS, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement, any other Loan Document and any agreement governing any Indebtedness permitted by clause (d) of Section 7.2.2 as to the assets financed with the proceeds of such Indebtedness) prohibiting: (a) the creation or assumption of any Lien upon properties, revenues or assets, whether now owned or hereafter acquired, or the ability of the Borrower to amend or otherwise modify this Agreement or any other Loan Document; or (b) the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrower by way of dividends, advances, repayments of loans or advances, -55- 57 reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower. SECTION 7.2.13. NO CREATION OF PENSION PLANS. The Borrower will not, and will not permit any of its Subsidiaries to, establish or maintain or become obligated to make contributions to any Plan or multiemployer Plan. SECTION 7.2.14. ACQUISITION OF REAL PROPERTY INTERESTS. At any time on or after the Effective Date, the Borrower will not, and will not permit its Subsidiaries to, acquire (i) any fee or leasehold interest in real property (other than any such interest owned by the Borrower as of the Effective Date) with a fair market value in excess of $1,000,000, or (ii) any fee or leasehold interest in real property (other than any such interest owned by the Borrower as of the Effective Date) if the fair market value of such interest when added together with the fair market value of all other such interests, would exceed $1,000,000; unless prior to or contemporaneous with such acquisition, the Borrower, at his own cost and expense, takes all steps necessary to grant the Agent, for the benefit of the Lenders, a first priority mortgage Lien thereon and, in the case of real property, the Borrower also obtains title insurance coverage in an amount, containing such terms and exceptions and issued by an insurance company, acceptable to the Agent in the Agent's reasonable discretion, with respect to such property and such legal opinions with respect thereto as the Agent may reasonably request. ARTICLE 8. EVENTS OF DEFAULT SECTION 8.1. LISTING OF EVENTS OF DEFAULT. Each of the following events or occurrences described in this Section 8.1 shall constitute an "EVENT OF DEFAULT". SECTION 8.1.1. NON-PAYMENT OF OBLIGATIONS. The Borrower shall default in the payment or prepayment when due of any principal of any Loan, or the Borrower shall default (and such default shall continue unremedied for a period of three Business Days or more) in the payment when due of any interest on any Loan, or the Borrower shall default (and such default shall continue unremedied for a period of five days or more) in the payment when due of any commitment fee or any other Obligation. -56- 58 SECTION 8.1.2. BREACH OF WARRANTY. Any representation or warranty of the Borrower made or deemed to be made hereunder or in any other Loan Document or any other writing or certificate furnished by or on behalf of the Borrower to the Agent or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article V) or any representation or warranty made by the General Partner in the Subordination Agreement is or shall be incorrect when made in any material respect. SECTION 8.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. The Borrower shall default in the due performance and observance of any of its obligations under Section 7.1.2(a) (with respect only to maintenance and preservation of partnership existence) or Section 7.2 or the Borrower or the General Partner shall default in the due performance and observance of their respective obligations under the Subordination Agreement or Section 4.1 of the Security Agreement. SECTION 8.1.4. NON-PERFORMANCE OF THE OTHER COVENANTS AND OBLIGATIONS. The Borrower shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrower by the Agent or any Lender. SECTION 8.1.5. DEFAULT ON OTHER INDEBTEDNESS. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness described in Section 8.1.1) having, individually or in the aggregate, a principal amount in excess of $250,000 of the Borrower or any of its Subsidiaries, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity. SECTION 8.1.6. JUDGMENTS. Any judgment or order for the payment of money in excess of $100,000 (unless fully covered by insurance (subject to a reasonable and customary deductible) where liability has been admitted by the applicable insurance carrier) -57- 59 shall be rendered against the Borrower or any of its Subsidiaries and either: (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (b) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. SECTION 8.1.7. CHANGE IN CONTROL. Any Change in Control shall occur. SECTION 8.1.8. BANKRUPTCY, INSOLVENCY, ETC. The Borrower, any of its Subsidiaries or the General Partner shall: (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower, any of its Subsidiaries or the General Partner or any property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower, any of its Subsidiaries or the General Partner or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that the Borrower, each Subsidiary and the General Partner hereby expressly authorize the Agent and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower, any of its Subsidiaries or the General Partner, and, if any such cage or proceeding is not commenced by the Borrower, such Subsidiary or the General Partner, -58- 60 such case or proceeding shall be consented to or acquiesced in by the Borrower, such Subsidiary or the General Partner or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that the Borrower, each Subsidiary and the General Partner hereby expressly authorizes the Agent and each Lender to appear in any court conducting any such case or proceeding during such 60 day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any partnership or corporate action authorizing, or in furtherance of, any of the foregoing. SECTION 8.1.9. PARTNERSHIP AGREEMENT. There shall occur any default under the Partnership Agreement. SECTION 8.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document (or, in the case of the General Partner, the Subordination Agreement), or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of the Borrower (or, in the case of the Subordination Agreement, the General Partner), the Borrower, the General Partner or any other party shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability, or any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document. SECTION 8.1.11. FAILURE TO OBTAIN OR CESSATION OF AUTHORIZATION, ETC. Any consent, approval, exemption, registration, qualification, designation, declaration, filing, or other action or undertaking now or hereafter obtained in connection with this Agreement (other than matters referred to in Section 8.1.12 hereof), the Notes or the other Loan Documents or any such action or undertaking now or hereafter necessary or advisable to make this Agreement, the Notes or the other Loan Documents legal, valid, enforceable and admissible in evidence is not obtained or shall have ceased to be in full force and effect or shall have been modified or amended or shall have been held to be illegal or invalid and the Borrower shall have been unsuccessful in curing such illegality or invalidity within a reasonable time and the Required Lenders shall have determined in good faith (which determination shall be conclusive) that such event or occurrence may have a material adverse effect on the Agent's or the Lenders' rights under this Agreement, any Note or any other Loan Document. -59- 61 SECTION 8.1.12. FRANCHISE AGREEMENT. Any Franchise Agreement(s) pursuant to which the Borrower serves more than 5% of the Basic Subscribers or any other license, permit, lease, easement, conduit occupancy right, Pole Agreement, certificate, consent, approval, authorization or agreement granted by the FCC or by any other Official Body with jurisdiction over the Cable Systems or by any public utility or third party lessor, whether presently existing or hereafter granted to or obtained by the Borrower, the cancellation or termination of which would have a material adverse effect on the Borrower or the continued operation of the Cable Systems viewed as a whole (collectively, for purposes of this Section 8.1.12, "MATERIAL AGREEMENT"), shall expire without renewal or shall be suspended or revoked, and shall not be replaced, or the Borrower shall become subject to any injunction or other order with respect to, such Franchise Agreement or Material Agreement that materially adversely affects or which is reasonably likely to materially adversely affect (both in the sole reasonable judgment of the Required Lenders) the business, operations, financial condition or prospects (with respect to the Borrower's ability to pay or repay the Obligations) of the Borrower. SECTION 8.2. ACTION IF BANKRUPTCY. If any Event of Default described in clauses (a) through (d) of Section 8.1.8 shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default (other than any Event of Default described in clauses (a) through (d) of Section 8.1.8) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate. ARTICLE 9. THE AGENT SECTION 9.1. ACTIONS. Each Lender hereby appoints Shawmut as it its Agent under and for purposes of this Agreement, the Notes and each -60- 62 other Loan Document. Each Lender authorizes the Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Agent (with respect to which the Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) the Agent, pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document, including reasonable attorneys' fees; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the Agent's gross negligence or willful misconduct. The Agent shall not be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Agent shall be or become, in the Agent's determination, inadequate, the Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION 9.2. FUNDING RELIANCE, ETC. Unless the Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., Hartford, Connecticut time, on the day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Agent may assume that such Lender has made such amount available to the Agent and, in reliance upon such assumption, may make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Agent, such Lender and the Borrower severally agree to repay the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Agent made such amount available to the Borrower to the date such amount is repaid to the Agent, in the case of the Borrower, at the rate of interest then applicable for Base Rate Loans, and in the case of any Lender, at the Federal Funds Rate. -61- 63 SECTION 9.3. EXCULPATION. Neither the Agent nor any of its directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrower of its obligations hereunder or under any other Loan Document. Any such inquiry which may be made by the Agent shall not obligate it to make any further inquiry or to take any action. The Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Agent believes to be genuine and to have been presented by a proper Person. SECTION 9.4. SUCCESSOR. The Agent may resign as such at any time. If the Agent at any time shall resign, the Borrower may appoint another Lender as a successor Agent which shall thereupon become the Agent hereunder, provided, however, that the appointment of any Lender which was not a Lender on the Effective Date shall be subject to the prior written approval of the Required Lenders, which approval shall not be unreasonably withheld. If no successor Agent shall have been so appointed by the Borrower, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Borrower, appoint a successor Agent, which shall be one of the Lenders or a commercial banking institution organized or licensed under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having combined capital, surplus and undivided profits of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as the Agent, the provisions of (a) this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement; and -62- 64 (b) Section 10.3 and Section 10.4 shall continue to inure to its benefit. SECTION 9.5. LOANS BY SHAWMUT. Shawmut shall have the same rights and powers with respect to (x) the Loans made by it or any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Agent. Shawmut and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with, the Borrower or any Subsidiary or Affiliate of the Borrower as if Shawmut were not the Agent hereunder. SECTION 9.6. CREDIT DECISIONS. Each Lender acknowledges that it has, independently of the Agent and each other Lender, and based on such Lender's review of the financial information of the Borrower, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any timer continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document SECTION 9.7. DEFAULTING LENDERS. Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Agent its pro rata share of any Loan or (ii) to comply with the provisions of Section 4.8 with respect to making dispositions and arrangements with the other Lenders, where such Lender's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a "DELINQUENT LENDER") and shall be deemed a Delinquent Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans. The Delinquent Lender hereby authorizes the Agent to distribute such payments to the nondelinquent Lenders in proportion to their respective pro rata shares of all outstanding Loans. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the -63- 65 assigned payments to all outstanding Loans of the nondelinquent Lenders, the Lenders' respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. SECTION 9.8. HOLDERS OF NOTES. The Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. SECTION 9.9. DISCLOSURE. The Borrower agrees that in addition to disclosures made in accordance with standard and customary banking practices any Lender may disclose information obtained by such Lender pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (a) to treat in confidence such information unless such information otherwise becomes public knowledge, (b) not to disclose such information to a third party, except as required by law or legal process and (c) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation. SECTION 9.10. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any assignee Lender is an Affiliate of the Borrower, then any such assignee Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Agent pursuant to Section 8.3, and the determination of the Required Lenders shall for all purposes of this Agreement and the other Loan Documents be made without regard to such assignee Lender's interest in any of the Loans. If any Lender sells a participating interest in any of the Loans to a participant, and such participant is the Borrower or an Affiliate of the Borrower, then such transferor Lender shall promptly notify the Agent of the sale of such participation. A transferor Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Agent pursuant to Section 8.3 to the extent that such participation is beneficially owned by the Borrower or any Affiliate of the Borrower, and the determination of the Required Lenders shall for all purposes of this Agreement and the other Loan Documents be made without regard to the interest of such transferor Lender in the Loans to the extent of such participation. -64- 66 SECTION 9.11. COPIES, ETC. The Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower). The Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Agent from the Borrower for distribution to the Lenders by the Agent in accordance with the terms of this Agreement. ARTICLE 10. MISCELLANEOUS PROVISIONS SECTION 10.1. WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided, however, that no such amendment, modification or waiver which would: (a) modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender; (b) modify this Section 10.1, change the definition of "REQUIRED LENDERS", increase any Commitment Amount or change the Percentage of any Lender, reduce any fees described in Article III, release any collateral security, except as otherwise specifically provided in any Loan Document or extend any Commitment Termination Date shall be made without the consent of each Lender and each holder of a Note; (c) extend the due date for, or reduce or forgive the amount of, any scheduled reduction of the Commitment Amount or any scheduled repayment or prepayment of principal of or interest on any Loan (or reduce the principal amount of or rate of interest on any Loan) shall be made without the consent of the holder of that Note evidencing such Loan; or (d) affect adversely the interests, rights or obligations of the Agent qua the Agent shall be made without consent of the Agent No failure or delay on the part of the Agent, any Lender or the holder of any Note in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the -65- 67 Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Agent, any Lender or the holder of any Note under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 10.2. NOTICES. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by Telex or by facsimile and addressed, delivered or transmitted to such party at its address, Telex or facsimile number set forth below its signature hereto or, if applicable, set forth in such Lender's Lender Assignment Agreement or at such other address, Telex or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by prepaid courier service, shall be deemed given when received; any notice, if transmitted by Telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of Telexes). SECTION 10.3. PAYMENT OF COSTS AND EXPENSES. The Borrower agrees to pay on demand all reasonable expenses of the Agent (including the fees and reasonable out-of-pocket expenses of counsel to the Agent and of local counsel) in connection with: (a) the negotiation, preparation, syndication, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; (b) the filing, recording, refiling or rerecording of the Security Agreement and any Uniform Commercial Code financing statements relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of the Security Agreement; and (c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. -66- 68 The Borrower further agrees to pay, and to save the Agent and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or any other Loan Documents. The Borrower also agrees to reimburse the Agent and each Lender upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys' fees and disbursements) incurred by the Agent or such Lender in connection with (x) the negotiation of any restructuring or "WORK-OUT", whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. SECTION 10.4. INDEMNIFICATION. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower hereby indemnifies, exonerates and holds the Agent and each Lender and each of their respective officers, directors, employees and agents (collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to: (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan; (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article V not to fund any Borrowing); (c) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by the Borrower or any of its Subsidiaries of any Hazardous Materials; or (d) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower or any of its Subsidiaries of any Hazardous Materials (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the Borrower or such Subsidiaries, -67- 69 except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party solely by reason of the relevant Indemnified Party's gross negligence or willful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 10.5. SURVIVAL. The Obligations of the Borrower under Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under Section 9 shall in each case survive any termination of this Agreement, the payment in full of all of the Obligations and the termination of all of the Commitments. The representations and warranties made by the Borrower and the General Partner in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 10.6. SEVERABILITY. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 10.7. HEADINGS. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 10.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS. This Agreement may be executed by the parties hereto in several counterparts, by hand or facsimile signatures, each of Which shall be deemed to be an original and all of which, when taken together, shall constitute one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower, the General Partner and each Lender (or notice thereof satisfactory to the Agent) shall have been received by the Agent and notice thereof shall have been given by the Agent to the Borrower, the General Partner and each Lender. SECTION 10.9. GOVERNING IN LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CONNECTICUT WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PROVISIONS THEREOF. This Agreement, the Notes and the other -68- 70 Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 10.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns provided, however, that: (a) the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Agent and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11. SECTION 10.11. SALE AND TRANSFER OF LOANS AND NOTES; PARTICIPATION IN LOANS AND NOTES. Each Lender may assign, or sell participations in, its Loans and Commitments to one or more other Persons in accordance with this Section 10.11. SECTION 10.11.1. ASSIGNMENTS. Any Lender may at any time assign and delegate to one or more commercial banks or other financial institutions (each Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "ASSIGNEE LENDER"), a percentage of such Lender's total Loans and Commitments (which assignment and delegation shall be of a constant, and not a varying, percentage of the assigning Lender's Loans and Commitments); provided, that, (i) the aggregate principal amount of Loans and Commitments to be assigned at any one time is at least equal to $5,000,000.00, (ii) after giving effect to any such assignment, in the case of Shawmut, Shawmut shall continue to be the registered holder of an aggregate principal amount of Loans and Commitments at least equal to $12,500,000.00 multiplied by a fraction the numerator of which is equal to $25,000,000 minus the aggregate principal amount of scheduled repayments of Loans made by the Borrower as, of the time of the assignment and the denominator of which is $25,000,000, (iii) Shawmut (or any subsequent Lender who is Agent) shall never hold an aggregate principal amount of Loans and Commitments which is less than any other lender holds and (iv), in the case of a Lender, such Lender shall continue to be the registered holder of at least fifty percent (50%) of the aggregate principal amount of Loans and Commitments originally held by such Lender. Each Assignee Lender must furnish if applicable, the withholding tax exemption forms required under Section 4.6. Additionally, the Borrower and the Agent shall be entitled to continue to deal solely and directly -69- 71 with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until: (a) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower and the Agent by such Lender and such Assignee Lender; (b) such Assignee Lender shall have executed and delivered to the Borrower and the Agent a Lender Assignment Agreement, accepted by the Agent; and (c) the processing fees described below shall have been paid. From and after the date that the Agent accepts a Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents; and (y) the assigning Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Within five Business Days after its receipt of notice that the Agent has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver to the Agent (for delivery to the relevant Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and Commitments and, if the assigning Lender has retained Loans and Commitments hereunder, replacement Notes in the principal amount of the Loans and Commitments retained by the assigning Lender hereunder (such Notes to be in exchange for, but not in payment of, those Notes then held by the assigning Lender). Each such Note shall be dated the date of the predecessor Notes. The assigning Lender shall mark the predecessor Notes "EXCHANGED" and deliver them to the Borrower. Accrued interest on that part of the predecessor Notes evidenced by the new Notes, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the predecessor Notes evidenced by the replacement Notes shall be paid to the assigning Lender. Accrued interest and accrued fees shall be paid at the same time or time provided in the predecessor Notes and in this Agreement. The assigning Lender or the Assignee Lender must also pay a processing fee to the Agent upon delivery of any Lender Assignment Agreement in the amount of $2,500. Any attempted assignment and delegation not made in accordance with this Section 10.11.1 shall be null and void. Nothing in this Section 10.11.1 shall prevent or prohibit any Lender from pledging its rights (but not its obligations -70- 72 to make Loans) under this Agreement and/or its Loans and/or its Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank. SECTION 10.11.2. PARTICIPATIONS. Any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "PARTICIPANT") participating interests in any of the Loans, Commitments, or other interests of such Lender hereunder; provided, however, that: (a) no participation contemplated in this Section 10.11.2 shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document; (b) such Lender shall remain solely responsible for the performance or its Commitments and such other obligations; (c) the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents; (d) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any action of the type described in clause (b) or (c) of Section 10.1; and (e) the Borrower shall not be required to pay any amount under Section 4.6 that is greater, than the amount which it would have been required to pay had no participating interest been sold. The Borrower acknowledges and agrees that each Participant, for purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a Lender SECTION 10.12. OTHER TRANSACTIONS. Nothing contained herein shall preclude the Agent or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which -71- 73 the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 10.13. NONRECOURSE OBLIGATIONS. Anything contained in this Agreement, the Notes or the other Loan Documents to the contrary notwithstanding, in any action or proceeding brought on this Agreement, the Notes, the other Loan Documents or the Indebtedness evidenced by the Notes, no deficiency judgment shall be enforced against the separate assets of the General Partner (other than distributions to the General Partner made in violation of Section 7.2.6 or 7.2.7 hereof), and the liability of the General Partner for any amounts due under this Agreement, the Notes and the other Loan Documents shall be limited to the interest of the General Partner in the collateral described in the Loan Documents, its interest in any other assets of the Borrower and any distributions made in violation of Section 7.2.6 or 7.2.7. Subject to the preceding sentence, the Agent may join any present or future general partners of the Borrower in their capacities as general partners, as defendants in any legal action it undertakes to enforce the Agent's and the Lenders' rights and remedies under this Agreement, the Notes and the other Loan Documents. Notwithstanding the foregoing, nothing set forth herein shall be deemed to prohibit the Agent and the Lenders from taking legal action(s) and enforcing any judgment arising therefrom against a present or future general partner of the Borrower arising by reason of any fraud or intentional misconduct of such general partner. SECTION 10.14. CONSENT TO JURISDICTION. THE BORROWER HEREBY AGREES THAT ANY LITIGATION BROUGHT BY THE AGENT OR THE LENDERS AND BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS, THE GENERAL PARTNER OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF CONNECTICUT OR IN THE UNITED STATES DISTRICT COURT FOR CONNECTICUT; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT AND OF THE UNITED STATES DISTRICT COURT FOR CONNECTICUT FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. -72- 74 THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE TO THE BORROWER'S ADDRESS PROVIDED HEREIN. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 10.15. WAIVER OF JURY TRIAL, ETC. THE AGENT, THE LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS, THE GENERAL PARTNER OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. EXCEPT AS PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE FIRST SENTENCE OF THIS SECTION 10.15 ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES IN THE ABSENCE OF A COURT OF COMPETENT JURISDICTION'S FINAL NON-APPEALABLE FINDING THAT SUCH CLAIM AROSE SOLELY AS A DIRECT RESULT OF THE AGENT'S AND/OR LENDERS' NEGLIGENCE OR WILLFUL MISCONDUCT AND, IN THE CASE OF SUCH A FINDING, THE AGENT OR LENDERS, AS THE CASE MAY BE, SHALL PAY ALL REASONABLE ATTORNEY'S -73- 75 FEES AND COSTS INCURRED BY THE BORROWER IN CONNECTION WITH SUCH FINDINGS. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR THE LENDERS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR THE LENDERS WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE A PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. SECTION 10.16. PREJUDGMENT REMEDY WAIVER. THE BORROWER ACKNOWLEDGES THAT THE FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE BORROWER HEREBY WAIVES ITS RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDERED UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE AGENT AND/OR LENDERS MAY EMPLOY TO ENFORCE THEIR RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY, THE BORROWER ACKNOWLEDGES THAT THE AGENT'S AND/OR LENDERS' ATTORNEY MAY, PURSUANT TO CONNECTICUT GENERAL STATUTES SECTION 52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. THE BORROWER ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE AGENT AND LENDERS ACKNOWLEDGES BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT. [Remainder of page intentionally left blank] -74- 76 IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed on the day and year first above written. Signed, Sealed and Delivered In the Presence Of: CABLE TV FUND 11-B, LTD. By: Jones Intercable, Inc., Its General Partner /s/ KATHERINE A. LEVOY By: /s/ J. ROY POTTLE - ---------------------------- -------------------------- Name: J. Roy Pottle Title: Treasurer /s/ DOLORES M. GILLESPIE Address: 9697 East Mineral Avenue - ---------------------------- Englewood, CO 80112 Facsimile: (303) 790-7324 SHAWMUT BANK CONNECTICUT, N.A., Individually and as Agent By: /s/ ROBERT F. WEST - ---------------------------- -------------------------- Name: Robert F. West Title: Director Address: 777 Main Street - ---------------------------- Hartford, CT 06115 Facsimile: (203) 986-5367 Lender's Percentage: 50% CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: /s/ JAMES E. MORRIS - ---------------------------- -------------------------- Name: James E. Morris Title: Authorized Signature Address: c/o Credit Lyonnais New York - ---------------------------- Branch 1301 Avenue of the Americas New York, NY 10019 Facsimile: (212) 261-3421 Lender's Percentage: 50% -75- EX-27 7 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 325,270 0 554,478 (65,516) 0 0 45,527,837 (19,238,591) 28,153,665 1,589,760 23,807,849 0 0 0 2,756,056 28,153,665 0 14,366,359 0 12,836,493 (49,831) 0 1,773,876 (158,865) 0 (158,865) 0 0 0 (158,865) (4.14) (4.14)
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