10-K405 1 FORM 10-K FOR FISCAL YEAR END 12/31/94 1 FORM 10-K 405 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, 1994 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: 0-14906 JONES CABLE INCOME FUND 1-B, LTD. (Exact name of registrant as specified in its charter) Colorado 84-1010417 (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. x --- DOCUMENTS INCORPORATED BY REFERENCE: None 2 PART I. ITEM 1. BUSINESS THE PARTNERSHIP. Jones Cable Income Fund 1-B, Ltd. (the "Partnership") is a Colorado limited partnership that was formed pursuant to the public offering of limited partnership interests in the Jones Cable Income Fund 1 Limited Partnership Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the "General Partner"). Jones Cable Income Fund 1-A, Ltd. and Jones Cable Income Fund 1-C, Ltd. ("Fund 1-C") are the other partnerships that were formed pursuant to the Program. The Partnership and Fund 1-C formed a general partnership known as Jones Cable Income Fund 1-B/C Venture (the "Venture") in which the Partnership owns a 40 percent interest and Fund 1-C owns a 60 percent interest. The Partnership and the Venture were formed for the purpose of acquiring and operating cable television systems. The Partnership directly owns the cable television system serving the community of Orangeburg, South Carolina (the "Orangeburg System"). The Venture owns the cable television systems serving the communities of Brighton and Broomfield and portions of Boulder County, Colorado (the "Brighton/Broomfield System"), Clearlake Oaks, California (the "Clearlake Oaks System"), Canyonville, Myrtle Creek, Riddle and Winston, Oregon (the "Myrtle Creek System"), South Sioux City, Nebraska (the "South Sioux City System") and Three Rivers, Schoolcraft/Vicksburg, Constantine/White Pigeon, Dowagiac, Watervliet and Vandalia, Michigan (the "Southwestern Michigan System"). The Orangeburg System, Brighton/Broomfield System, Clearlake Oaks System, Myrtle Creek System, South Sioux City System and the Southwestern Michigan System may hereinafter collectively be referred to as the "Systems." One of the primary objectives of the Partnership is to provide quarterly cash distributions to the partners. Such cash returns are primarily from cash generated through the operating activities of the Partnership and from the distributions made to the Partnership from the Venture. Because the Partnership's credit facility was at the maximum amount available in 1994, the Partnership utilized cash generated from operations to fund capital expenditures. In addition, the Venture's credit facility has a maximum amount available of $45,000,000, of which $42,100,000 was outstanding at December 31, 1994, which limits the amount of borrowings available to the Venture to fund capital expenditures; therefore, the Venture did not declare any distributions in 1994. Due to these conditions, the Partnership did not declare any distributions for 1994. Distributions for the years ended December 31, 1993 and 1992 were $1,735,352 and $1,642,928, respectively. The General Partner has agreed to defer its portion of any cash flow distributions until the Partnership is liquidated. The Venture is not expected to reinstate distributions in the near term. In January 1995, the Partnership completed negotiations for a new revolving credit agreement that will provide liquidity to fund capital expenditures. The Partnership will attempt to provide some level of distributions from cash generated from operations in 1995. No determination has been made regarding the level of future distributions. The level of distributions, if any, will be determined on a quarter-by-quarter basis. A determination of the level of distributions, if any, will be made on a quarter by quarter basis. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 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, 2 3 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. In addition, advertising sales are becoming a significant source of revenue for the Systems. As a result of the adoption by the FCC of new rules under the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), and several rate regulation orders, the Systems' rate structures for cable programming services and equipment have been revised. See Regulation and Legislation. At December 31, 1994, the Systems' monthly basic service rates ranged from $6.72 to $15.96, monthly basic and tier ("basic plus") service rates ranged from $17.83 to $22.39 and monthly premium services ranged from $3.40 to $12.95 per premium service. Charges for additional outlets have been eliminated, and charges for remote controls and converters have been "unbundled" from the programming service rates. In addition, pay-per-view programs and advertising fees generate revenues. Related charges may include a nonrecurring installation fee that ranges from $4.95 to $45.00; 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, 1994, of the total fees received by the Systems, basic service and tier service fees accounted for approximately 69% of total revenues, premium service fees accounted for approximately 18% of total revenues, pay-per-view fees were approximately 1% of total revenues, advertising fees were approximately 3% of total revenues and the remaining 9% of total revenues came principally from equipment rentals, installation fees and program guide sales. The Partnership is dependent upon the timely receipt of service fees to provide for maintenance and replacement of plant and equipment, current operating expenses and other costs of the Systems. The Partnership's business consists of providing cable television services to a large number of customers, the loss of any one of which would have no material effect on the Partnership's business. 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. The Partnership does not depend to any material extent on the availability of raw materials; it carries no significant amounts of inventory and it has no material backlog of customer orders. The Partnership has no 3 4 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 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. 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. The Systems' franchises require that franchise fees ranging from $25.00 per year to 7% of gross revenues of the cable system be paid to the governmental authority that granted the franchise, that certain channels be dedicated to municipal use, that municipal facilities, hospitals and schools be provided cable service free of charge and that any new cable plant be substantially constructed within specific periods. (See Item 2 for a range of franchise expiration dates of the Systems.) The responsibility for franchising of cable television systems generally is left to state and local authorities. There are, however, several provisions in the Communications Act of 1934, as amended, that govern the terms and conditions under which cable television systems provide service, including the standards applicable to cable television operators seeking renewal of a cable television franchise. In addition, the 1992 Cable Act also made several procedural changes to the process under which a cable operator seeks to enforce its renewal rights which could make it easier in some cases for a franchising authority to deny 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 franchise, has not provided reasonable service in light of the community's needs, does not have the financial, legal and 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. The General Partner and its affiliates recently have experienced lengthy negotiations with some franchising authorities for the granting of franchise renewals and transfers. Some of the issues involved in recent renewal negotiations include rate reregulation, customer service standards, cable plant upgrade or replacement and shorter terms of franchise agreements. The inability of the Partnership to renew a franchise, or lengthy negotiations or litigation involving the renewal process could have an adverse impact on the business of the Partnership. COMPETITION. Cable television systems currently experience competition from several sources, but two technologies, Multichannel Multipoint Distribution Service ("MMDS") systems, commonly called wireless cable systems, and Direct Broadcast Satellite ("DBS") systems, which distribute programming to home satellite dishes, currently pose the greatest potential threat to the cable television industry. MMDS systems will likely focus on providing service to residents of rural areas that are not served by cable television systems, but providers of programming via MMDS systems will generally have the potential to compete directly with cable television systems in urban areas as well, and in some areas of the country, MMDS systems are now in direct competition with cable television systems. To date, the Partnership has not lost a significant number of subscribers, nor a significant amount of revenue, to MMDS operators competing with its cable television systems. DBS operators deliver premium channel services and specialized programming to subscribers by high-powered DBS satellites on a wide-scale basis, and two major companies began operations in 1994. Subscribers are able to receive DBS services virtually anywhere in the United States with a rooftop or wall-mounted antenna. In some instances, DBS systems may serve as a complement to cable television operations by enabling cable television operators to offer additional channels of programming without the construction of additional cable plant. DBS companies use video compression technology to increase the channel capacity of their satellite systems to provide a wide variety of program services that are competitive with those of cable television systems. 4 5 Cable television systems also compete with broadcast television, private cable television systems known as Master Antenna Television ("MATV"), Satellite Master Antenna Television ("SMATV") and Television Receive-Only Earth Stations ("TVRO"). MATV and SMATV generally serve multi-unit dwellings such as condominiums, apartment complexes and private residential communities, and TVROs are satellite receiving antenna dishes that are used by "backyard users." There is also potential competition from an emerging technology, Local Multipoint Distribution Service ("LMDS"). When it is authorized for service, the LMDS, sometimes referred to as cellular television, could have the capability of delivering approximately 50 channels, or if two systems were combined 100 channels, of video programming to a subscriber's home, which capacity could be increased by using video compression technology. The General Partner believes that there are not any current fully operational LMDS systems. Although the Systems have not yet encountered competition from a telephone company entering into the business of providing video services to subscribers, the Systems could potentially face competition from telephone companies doing so. A Federal cross-ownership restriction has historically limited entry into the cable television business by potentially strong competitors such as telephone companies. This restriction, which is contained in the 1984 Cable Act, has generally prohibited telephone companies from owning or operating cable television systems within their own telephone service areas, but several recent court decisions have eliminated this restriction. In addition, the FCC is authorizing telephone companies to provide video dialtone service within their service areas. Legislation is also pending in Congress that would permit telephone companies to provide video programming through separate subsidiaries. The General Partner cannot predict at this time to what extent current restrictions will be modified to permit telephone companies to provide cable television services within their own service areas in competition with cable television systems. See Regulation and Legislation, Ownership and Market Structure for a description of the potential participation of the telephone industry in the delivery of cable television services. Entry into the market by telephone companies as direct competitors of the Systems could adversely impact the profitability of the Systems. If a telephone company were to become a direct competitor of the Partnership or Venture in an area served by a Partnership or Venture System, the Partnership or Venture could be at a competitive disadvantage because of the relative financial strength of a telephone company compared to the Partnership or Venture. Depending on a number of factors, such competition could also result in cable television systems providing the same types of services now provided by the telephone industry. The FCC has established a new wireless telecommunications service known as Personal Communications Service ("PCS"). It is envisioned that PCS would provide portable non-vehicular mobile communications services similar to that available from cellular telephone companies, but at a lower cost. PCS would be delivered by placing numerous microcells in a particular area to be covered, accessible to both residential and business customers. Because of the need to link the many microcells necessary to deliver this service economically, many parties are investigating integration of PCS with cable television operations. Several cable television multiple systems operators and others, including affiliates of the General Partner hold or have requested experimental licenses from the FCC to test PCS technology. The FCC has established spectrum auctioning procedures for PCS licenses and the licenses are being auctioned in a series of auction events. Cable television franchises are not exclusive, so that more than one cable television system may be built in the same area (known as an "overbuild"), with potential loss of revenues to the operator of the original cable television system. The Systems currently face no direct competition from other cable television operators. COMPETITION FOR SUBSCRIBERS IN THE SYSTEMS. Following is a summary of competition from DBS, MMDS, SMATV and TVRO operators in the Systems' franchise areas: 5 6 Brighton/Broomfield System There is one MMDS operator in the service area but it does not provide significant competition. DBS operators continue to strongly market their services in the Denver area; however, to date the system has not experienced any significant loss of customers. Clearlake Oaks System There are seven TVRO dealers that primarily serve rural or remote areas which are not served by the Clearlake Oaks System. There is an unaffiliated entity marketing five broadcast channels and four satellite-type channels to subscribers in the service area. However, due to the expensive initial cost for the converters and the lack of customer service, this entity has presented little competition. Myrtle Creek System There are a few TVRO dealers that provide minimal competition. The competition from DBS services is minimal at this time. Orangeburg System There are TVRO dealers that do not provide significant competition. South Sioux City System There is one MMDS dealer near the South Sioux City System's service area; however, this dealer has focused primarily on rural and outlying areas that are not located in the South Sioux City System's service area. There are six TVRO dealers that market primarily to rural or remote areas that are not served by the South Sioux City System. Southwestern Michigan System There are two TVRO operators that provide minimal competition. There is a DBS operator that currently provides minimal competition. REGULATION AND LEGISLATION. The cable television industry is regulated through a combination of the Federal Communications Commission ("FCC"), some state governments, and most local governments. In addition, the Copyright Act of 1976 imposes copyright liability on all cable television systems. Cable television operations are subject to local regulation insofar as systems operate under franchises granted by local authorities. Cable Television Consumer Protection and Competition Act of 1992. On October 5, 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. This legislation has caused significant changes to the regulatory environment in which the cable television industry operates. The 1992 Cable Act generally allows for 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, are subject to rate regulation of basic cable services. In addition, the 1992 Cable Act allows 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 reduced rates charged for certain regulated services effective September 1, 1993. These reductions resulted in some decrease in revenues and operating income before depreciation and amortization; however, the decrease was not as severe as originally anticipated. The 6 7 General Partner has undertaken actions to mitigate a portion of these reductions primarily through (a) new service offerings in some systems, (b) product re-marketing and re-packaging and (c) marketing efforts directed at non-subscribers. 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 require rate reductions, absent a successful cost-of-service showing, of 17% of September 30, 1992 rates, adjusted for inflation, channel modifications, equipment costs, and increases in programming costs. However, the FCC held rate reductions in abeyance in certain systems. The new regulations became effective on May 15, 1994, but operators could elect to defer rate reductions to July 14, 1994, so long as they made no changes in their rates and did not restructure service offerings between May 15 and July 14. On February 22, 1994, the FCC also adopted interim cost-of-service regulations. Rate reductions will not be required where it is successfully demonstrated that rates for basic and other regulated programming services are justified and reasonable using cost-of-service standards. The FCC established an interim industry-wide 11.25% permitted rate of return, and requested comments on whether this standard and other interim cost-of-service standards should be made permanent. The FCC also established a presumption that acquisition costs above a system's book value should be excluded from the rate base, but the FCC will consider individual showings to rebut this presumption. The need for special rate relief will also be considered by the FCC if an operator demonstrates that the rates set by a cost-of-service proceeding would constitute confiscation of investment, and that, absent a higher rate, the return necessary to operate and to attract investment could not be maintained. The FCC will establish a uniform system of accounts for operators that elect cost-of-service rate regulation, and the FCC has adopted affiliate transaction regulations. After a rate has been set pursuant to a cost-of-service showing, rate increases for regulated services will be indexed for inflation, and operators will also be permitted to increase rates in response to increases in costs beyond their control, such as taxes and increased programming costs. After analyzing the effects of the two methods of rate regulation, the Partnership elected to file cost-of-service showings for its Orangeburg System, and the Venture elected to file cost-of-service showings for its Brighton/Broomfield System, Myrtle Creek System, South Sioux City System and Southwestern Michigan System. The General Partner thus anticipates no further reduction in revenues or operating income before depreciation and amortization in these systems resulting from the FCC's rate regulations. At this time, however, the regulatory authorities have not approved the cost-of-service showings, and there can be no assurance that the Partnership's or the Venture's cost-of-service showings will prevent further rate reductions in these systems until such final approval is received. The Venture complied with the new benchmark regulations and further reduced rates in its Clearlake Oaks System in July 1994. The Venture will continue its efforts to mitigate the effect of such rate reductions. Among other issues addressed by the FCC in its February 1994 rate orders was the treatment of packages of a la carte channels. The FCC in its rate regulations adopted April 1, 1993, exempted from rate regulation the price of packages of a la carte channels upon the fulfillment of certain conditions. On November 10, 1994, the FCC reversed its policy regarding rate regulation of packages of a la carte services. A la carte services that are offered in a package will now be subject to rate regulation by the FCC, although the FCC indicated that it cannot envision circumstances in which any price for a collective offering of premium channels that have traditionally been offered on a per-channel basis would be found to be unreasonable. 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, 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 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 8 7.5% 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% 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 this tier 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. There have been several lawsuits filed by cable operators and programmers in Federal court challenging various aspects of the 1992 Cable Act, including 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. The Supreme Court's majority determined that the must-carry rules were content neutral, but that it was not yet proven that the rules were needed to preserve the economic health of the broadcasting industry. In the interim, the must-carry rules will remain in place during the pendency of the proceedings in district court. In 1993, a Federal district court for the District of Columbia 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. In November 1993, the United States Court of Appeals for the District of Columbia held that the FCC's regulations implemented pursuant to Section 10 of the 1992 Cable Act, which permit cable operators to ban indecent programming on public, educational or governmental access channels or leased access channels, were unconstitutional, but the court has agreed to reconsider its decision. All of these decisions construing provisions of the 1992 Cable Act and the FCC's implementing regulations have been or are expected to be appealed. Ownership and Market Structure. The FCC rules and Federal law generally prohibit the direct or indirect common ownership, operation, control or interest in a cable television system, on the one hand, and a local television broadcast station whose television signal reaches any portion of the community served by the cable television system, on the other hand. The FCC recently lifted its ban on the cross-ownership of cable television systems by broadcast networks. The FCC revised its regulations to permit broadcast networks to acquire cable television systems serving up to 10% of the homes passed in the nation, and up to 50% of the homes passed in a local market. Neither the Partnership nor the General Partner has any direct or indirect ownership, operation, control or interest in a television broadcast station, or a telephone company, and they are thus presently unaffected by the cross-ownership rules. The Cable Communications Policy Act of 1984 (the "1984 Cable Act") and FCC regulations generally prohibit the common operation of a cable television system and a telephone company within the same service area. Until recently, a provision of a Federal court antitrust consent decree also prohibited the regional Bell operating companies ("RBOCs") from engaging in cable television operations. This prohibition was recently removed when the court retaining jurisdiction over the consent decree ruled that the RBOCs could provide information services over their facilities. This decision permits the RBOCs to acquire or construct cable television systems outside of their own service areas. The 1984 Cable Act prohibited local exchange carriers, including the RBOCs, from providing video programming directly to subscribers within their local exchange telephone service areas, except in rural areas or by specific waiver of FCC rules. Several Federal district courts have struck down the 1984 Cable Act's telco/cross-ownership provision as facially invalid and inconsistent with the First Amendment. The United States Courts of Appeals for the Fourth and the Ninth Circuits have upheld the appeals of two of these district court 8 9 decisions, and the United States Justice Department is expected to request the United States Supreme Court to review these two decisions. This Federal cross-ownership rule is particularly important to the cable industry since these telephone companies already own certain facilities needed for cable television operation, such as poles, ducts and associated rights-of-way. The FCC amended its rules in 1992 to permit local telephone companies to offer "video dialtone" service for video programmers, including channel capacity for the carriage of video programming and certain noncommon carrier activities such as video processing, billing and collection and joint marketing arrangements. In its video dialtone order, which was part of a comprehensive proceeding examining whether and under what circumstances telephone companies should be allowed to provide cable television services, including video programming to their customers, the FCC concluded that neither the 1984 Cable Act nor its rules apply to prohibit the interexchange carriers (i.e., long distance telephone companies such as AT&T) from providing such services to their customers. Additionally, the FCC also concluded that where a local exchange carrier ("LEC") makes its facilities available on a common carrier basis for the provision of video programming to the public, the 1984 Cable Act does not require the LEC or its programmer customers to obtain a franchise to provide such service. This aspect of the FCC's video dialtone order was upheld on appeal by the United States Court of Appeals for the D.C. Circuit. The FCC recently issued an order reaffirming its initial decision, and this order has been appealed. Because cable operators are required to bear the costs of complying with local franchise requirements, including the payment of franchise fees, the FCC's decision could place cable operators at a competitive disadvantage vis-a-vis services offered on a common carrier basis over local telephone company provided facilities. In its Reconsideration Order, the FCC, among other actions, refused to require telephone companies to justify cost allocations prior to the construction of video dialtone facilities, and indicated that it would provide guidance on costs that must be included in proposed video dialtone tariffs. The FCC also established dual Federal/state jurisdiction over video dialtone services based on the origination point of the video dialtone programming service. In a separate proceeding, the FCC has proposed to increase the numerical limit on the population of areas qualifying as "rural" and in which LECs can provide cable service without a FCC waiver. On January 12, 1995, the FCC adopted a Fourth Further Notice of Proposed Rulemaking in its video dialtone docket. The FCC tentatively concluded that it should not ban telephone companies from providing their own video programming over their video dialtone platforms in those areas in which the cable/telephone cross-ownership rules have been found unconstitutional. The FCC requested comments on this issue and on further refinements of its video dialtone regulatory framework concerning, among other issues, telephone programmer affiliation standards, the establishment of structural safeguards to prevent cross-subsidization of video dialtone and programming activities, and the continuation of the FCC's ban prohibiting telephone companies from acquiring cable systems within their telephone service areas for the provision of video dialtone services. The FCC will also consider whether a LEC offering video dialtone service must secure a local franchise if that LEC also engages in the provision of video programming carried on its video dialtone platform. The FCC has also proposed to broadly interpret its authority to waive the cable/telephone cross-ownership ban upon a showing by telephone companies that they comply with the safeguards which the FCC establishes as a condition of providing video programming. A number of bills that would have permitted telephone companies to provide cable television service within their own service areas were considered during the last Congress, but none were adopted. These bills would have permitted the provision of cable television service by telephone companies in their own service areas conditioned on the establishment of safeguards to prevent cross-subsidization between telephone and cable television operations and the provision of telecommunication services by cable television systems. Similar legislation is expected to be considered by Congress during its current session. The outcome of these FCC, legislative or court proceedings and proposals or the effect of such outcome on cable system operations cannot be predicted. 9 10 ITEM 2. PROPERTIES The cable television systems owned by the Partnership and the Venture at December 31, 1994 are described below:
SYSTEM ACQUISITION DATE ------ ---------------- Orangeburg System November 1986 Brighton/Broomfield System Brighton System December 1987 Broomfield System January 1988 Myrtle Creek System December 1987 Clearlake Oaks System December 1987 South Sioux City System February 1988 Southwestern Michigan System September 1988
The following sets forth (i) the monthly basic plus service rates charged to subscribers, (ii) the number of basic subscribers and pay units and (iii) the range of franchise expiration dates 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. While the charge for basic plus service may have increased in some cases in 1993 as a result of the FCC's rate regulations, overall revenues may have decreased due to the elimination of charges for additional outlets and certain equipment. 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, 1994, the Partnership's Orangeburg System operated approximately 350 miles of cable plant, passing approximately 17,000 homes, representing an approximate 72% penetration rate, and the Venture's systems operated approximately 2,200 miles of cable plant, passing approximately 132,000 homes, representing an approximate 65% 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.
ORANGEBURG, SOUTH CAROLINA At December 31, -------------------------- --------------- 1994 1993 1992 ---- ---- ---- Monthly basic plus service rate $17.82 $17.83 $17.20 Basic subscribers 11,935 11,463 11,017 Pay units 9,324 7,944 7,896
Franchise expiration dates range from May 1995 to March 1998. The City of Orangeburg franchise expires in May 1995. The Partnership and the franchising authorities continue to negotiate the terms of a new franchise with a longer term.
CLEARLAKE OAKS, CALIFORNIA At December 31, -------------------------- --------------- 1994 1993 1992 ---- ---- ---- Monthly basic plus service rate $20.05 $20.73 $21.00 Basic subscribers 17,267 15,566 14,550 Pay units 5,859 5,376 5,844
Franchise expiration dates range from October 1997 to February 2008.
At December 31, --------------- BROOMFIELD/BOULDER/BRIGHTON, CO 1994 1993 1992 ------------------------------- ---- ---- ---- Monthly basic plus service rate $22.39 $22.39 $19.00 Basic subscribers 17,345 16,357 15,504 Pay units 18,106 17,973 17,146
10 11 The franchise expiration dates range from April 1996 to June 2013. There is no franchise expiration date for Brighton.
SOUTHWESTERN MICHIGAN At December 31, --------------------- --------------- 1994 1993 1992 ---- ---- ---- Monthly basic plus service rate $21.69 $21.69 $21.00 Basic subscribers 15,832 15,087 14,377 Pay units 10,328 9,053 9,605
Franchise expiration dates range from April 1996 to August 2014.
SOUTH SIOUX CITY, NEBRASKA At December 31, -------------------------- --------------- 1994 1993 1992 ---- ---- ---- Monthly basic plus service rate $21.56 $20.87 $20.65 Basic subscribers 5,730 5,392 4,868 Pay units 3,699 3,555 3,571
Franchise expiration dates range from June 1998 to July 2004.
At December 31, --------------- MYRTLE CREEK, OREGON 1994 1993 1992 -------------------- ---- ---- ---- Monthly basic plus service rate $18.93 $19.55 $19.55 Basic subscribers 6,293 6,034 5,854 Pay units 4,014 3,314 3,042
Franchise expiration dates range from February 2001 to February 2009. PROGRAMMING SERVICES Programming services provided by the Systems include local affiliates of the national broadcast networks, local independent broadcast channels, the traditional satellite services (e.g., American Movie Classics, Arts & Entertainment, Black Entertainment Network, C-SPAN, The Discovery Channel, Lifetime, Entertainment Sports Network, Home Shopping Network, Mind Extension University, Music Television, Nickelodeon, Turner Network Television, The Nashville Network, Video Hits One, and superstations WOR, WGN and TBS. The Partnership's Systems also provide a selection, which varies by system, of premium channel programming (e.g., Cinemax, Encore, Home Box Office, Showtime and The Movie Channel). ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 11 12 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, 1995, the approximate number of equity security holders in the Partnership was 4,470. 12 13 Item 6. Selected Financial Data
For the Year Ended December 31, ------------------------------------------------------------------------------------------- Jones Cable Income Fund 1-B 1994 1993 1992 1991 1990 --------------------------- ---------------- ---------------- --------------- --------------- ---------------- Revenues $4,484,892 $4,341,380 $4,163,690 $ 3,889,600 $ 3,439,220 Depreciation and Amortization 1,367,809 1,691,043 1,931,255 1,824,402 1,701,416 Operating Loss (184,959) (446,056) (696,084) (498,040) (477,213) Equity in net loss of cable television joint venture (1,949,794) (1,753,583) (1,639,873) (1,927,535) (1,947,990) Net Loss (2,592,181) (2,623,378) (3,032,014) (3,075,861) (2,731,131) Net Loss per Limited Partnership Unit (30.59) (30.96) (35.78) (36.30) (32.23) Distributions per Limited Partnership Unit - 20.48 19.39 18.86 21.72 Weighted Average Number of Limited Partnership Units Outstanding 83,844 83,884 83,884 83,884 83,884 General Partner's Deficit (276,772) (250,850) (207,264) (160,516) (113,779) Limited Partners' Capital 5,962,555 8,528,814 12,843,958 17,472,152 22,099,129 Total Assets 11,874,378 14,590,808 19,020,685 22,831,585 26,507,971 Debt 3,544,000 3,547,767 3,525,945 3,539,282 3,363,397 General Partner Advances 2,162,870 1,944,230 1,994,401 1,268,955 379,141 For the Year Ended December 31, ------------------------------------------------------------------------------------------- Jones Cable Income Fund 1-B/C Venture 1994 1993 1992 1991 1990 ------------------------------------- ---------------- ---------------- --------------- --------------- ---------------- Revenues $21,121,787 $ 20,350,776 $18,848,345 $17,065,348 $15,398,182 Depreciation and Amortization 8,632,481 8,787,240 9,131,442 8,666,224 8,073,425 Operating Loss (2,243,001) (2,397,832) (2,216,442) (2,513,496) (2,353,738) Net Loss (4,902,676) (4,409,310) (4,123,392) (4,846,706) (4,898,139) Partner's Capital 10,286,146 15,188,822 23,918,132 32,131,524 40,428,230 Total Assets 54,545,774 58,148,834 62,614,638 67,366,941 71,885,757 Debt 42,383,339 36,298,318 35,635,061 32,335,496 28,684,216 Advances from Jones Intercable, Inc. 66,224 4,068,472 602,765 585,943 573,873
13 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations JONES CABLE INCOME FUND 1-B Results of Operations 1994 Compared to 1993- Revenues of Jones Cable Income Fund 1-B, Ltd. (the "Partnership") increased $143,512, or approximately 3 percent, from $4,341,380 in 1993 to $4,484,892 in 1994. The Partnership's Orangeburg, South Carolina cable television system (the "Orangeburg System") added 472 basic subscribers during 1994, an increase of 4 percent. Such expansion of the subscriber base was primarily responsible for the increase in revenues. The increase in revenues would have been greater but for the reduction in certain rates charged due to basic rate regulations issued by the FCC in April 1993 with which the Partnership complied effective September 1993. See Item 1. No other factor significantly affected the increase in revenues. Operating, general and administrative expenses increased $170,728, or approximately 7 percent, from $2,550,022 in 1993 to $2,720,750 in 1994. Operating, general and administrative expenses represented 59 percent of revenue in 1993, compared to 61 percent in 1994. The increase in operating, general and administrative expenses was due primarily to increases in programming fees. No other factor significantly affected the increase in operating, general and administrative expenses. Management fees and allocated overhead from the General Partner increased $25,921, or approximately 5 percent, from $546,371 in 1993 to $572,292 in 1994. This increase is due to the increase in revenues, upon which such fees and allocations are based, and an increase in expenses allocated from the General Partner. The General Partner has experienced increases in expenses, including personnel costs and reregulation costs, a portion of which are allocable to the Partnership. Depreciation and amortization expense decreased $314,234, or approximately 19 percent, from $1,691,043 in 1993 to $1,376,809 in 1994. This decrease is due to a reduction in amortization expense, due to the maturation of the Partnership's intangible asset base and was offset, in part, by an increase in depreciation expense due to capital additions in 1993 and 1994. Operating loss decreased $261,097, or approximately 59 percent, from $446,056 in 1993 to $184,959 in 1994. This decrease was due to the increase in revenues and the decrease in depreciation and amortization exceeding the increases in operating, general and administrative expense and management fees and allocated overhead from the General Partner. Operating income before depreciation and amortization decreased $53,137, or approximately 4 percent, from $1,244,987 in 1993 to $1,191,850 in 1994, due to the increase in revenues exceeding the increases in operating, general and administrative expense and management fees and allocated overhead from the General Partner. The decrease in operating income before depreciation and amortization reflects the current operating environment of the cable television industry. The FCC rate regulations under the 1992 Cable Act have caused revenues to increase more slowly than otherwise would have been the case. In turn, this has caused certain expenses which are a function of revenue, such as franchise fees, copyright fees and management fees, to increase more slowly than in prior years. However, other operating costs such as programming fees, salaries and benefits, and marketing costs as well as other costs incurred by the General Partner, which are allocated to the Partnership, continue to increase at historical rates. This situation has led to reductions in operating income before depreciation and amortization as a percent of revenue ("Operating Margin"). Such reductions in Operating Margins may continue in the near term as the Partnership and the General Partner incur cost increases due to, among other things, increases in programming fees, compliance costs associated with reregulation and competition, that exceed increases in revenue. The General Partner will attempt to mitigate a portion of these reductions through (a) new service offerings, (b) product re-marketing and re-packaging and (c) marketing efforts targeted at non-subscribers. Interest expense increased $15,359, or approximately 4 percent, from $376,224 in 1993 to $391,583 in 1994 due to higher effective rates on interest bearing obligations. Loss before equity in net loss of cable television joint venture decreased $227,408, or approximately 26 percent, from $869,795 in 1993 to $642,387 in 1994. This decrease was due to the factors discussed above and are expected to continue. 14 15 In addition to its wholly owned Orangeburg System, the Partnership owns an approximate 40 percent interest in Jones Cable Income Fund 1-B/C Venture (the "Venture"). The Partnership's share of the Venture's loss increased from $1,753,583 in 1993 to $1,949,794 in 1994. The Venture's operations are significant to the Partnership and should be reviewed in conjunction with this analysis. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for the Venture for details pertaining to the Venture's operations. 1993 Compared to 1992- Revenues of the Partnership's Orangeburg System increased $177,690, or approximately 4 percent, from $4,163,690 in 1992 to $4,341,380 in 1993. During 1993, the Orangeburg System added 446 basic subscribers, an increase of 4 percent. Such expansion of the subscriber base was primarily responsible for the increase in revenues. The increase in revenue would have been greater but for the reduction in certain rates charged due to basic rate regulations issued by the FCC in April 1993 with which the Partnership complied effective September 1993. No other individual factor significantly affected the increase in revenues. Operating, general and administrative expense increased $140,975 or approximately 6 percent, from $2,409,047 in 1992 to $2,550,022 in 1993. Operating, general and administrative expense consumed 59 percent of revenue in 1993 compared to 58 percent in 1992. The increase in operating, general and administrative expense was due primarily to increases in programming fees. Management fees and allocated overhead from the General Partner increased $26,899, or approximately 5 percent, from $519,472 in 1992 to $546,371 in 1993. Such increase was due to the increase in revenue, upon which such fees and allocations are based, and an increase in costs allocated from the General Partner. Depreciation and amortization decreased $240,212, or approximately 12 percent, from $1,931,255 in 1992 to $1,691,043 in 1993. This decrease was due to a reduction in amortization expense, due to the maturation of the Partnership's intangible asset base and was offset, in part by an increase in depreciation expense due to capital additions in 1992 and 1993. Operating loss decreased $250,028, or approximately 36 percent, from $696,084 in 1992 to $446,056 in 1993. This decrease is due to the increase in revenues and the decreases in depreciation and amortization exceeding the increases in operating, general and administrative expense and management fees and allocated overhead from the General Partner. Operating income before depreciation and amortization increased $9,816, or approximately 1 percent, from $1,235,171 in 1992 to $1,244,987 in 1993, due to the increase in revenues exceeding the increases in operating, general, and administrative expense and management fees and allocated overhead from the General Partner. Interest expense decreased $27,908, or approximately 7 percent, from $404,132 in 1992 to $376,224 in 1993 due to lower effective rates on interest bearing obligations. Other expense decreased $244,410, or approximately 84 percent, from $291,925 in 1992 to $47,515 in 1993. This decrease was due to a reduction in costs associated with the potential overbuild in the Orangeburg system. Loss before equity in net loss of cable television joint venture decreased $522,345, or approximately 38 percent, from $1,392,141 in 1992 to $869,795 in 1993. This decrease was due to the factors discussed above. Financial Condition The Partnership expended approximately $901,000 for capital additions during 1994. The construction of service drops to subscribers homes accounted for approximately 27 percent of the capital expenditures. Construction of cable television plant extensions accounted for approximately 22 percent of the expenditures. The purchase of converters accounted for approximately 17 percent of the expenditures. The remaining expenditures were for various enhancements in the Orangeburg System. Funding for these expenditures was provided by cash generated from operations and advances from the General Partner. Anticipated capital expenditures for 1995 are approximately $2,216,000. The construction of service drops to subscribers' homes is expected to account for 33 percent of the expenditures. The purchase of converters and advertising equipment are expected to account for approximately 24 percent and 15 percent, respectively, of the expenditures. The remainder of the expenditures is expected to relate to various enhancements in the Orangeburg System.Funding for these expenditures is expected to be provided by cash generated from operations and borrowings under the Partnership's new revolving credit facility as discussed below. 15 16 As of December 31, 1994, the full amount of the Partnership's $3,500,000 credit facility was outstanding. In January 1995, the General Partner completed negotiations for a new revolving credit facility with a maximum amount available of $8,500,000. The Partnership borrowed $5,800,000 to repay the amounts outstanding under the prior credit facility and to repay the General Partner its advances, leaving $2,700,000 of borrowings available. The revolving credit facility converts to a term loan on December 31, 1997 at which time the then-outstanding loan balance will be due in 20 consecutive quarterly installments beginning March 31, 1998. Interest on the revolving credit facility is at the Partnership's option of the Prime rate plus 1/4 percent, the CD rate plus 1 3/8 percent, or the London Interbank Offered Rate plus 1 1/2 percent. Since the balance on the the Partnership's former credit facility was at the maximum available, the General Partner had advanced funds necessary for capital expenditures. Interest on such advances was calculated at the General Partner's weighted average cost of borrowing. At December 31, 1994, such advances totalled $2,162,870. Such advances were repaid in January 1995 with proceeds from borrowings under the new revolving credit facility. The Partnership's approximate 40 percent interest in the Venture is accounted for under the equity method. When compared to the December 31, 1993 balance, the investment has decreased by $1,949,794. This decrease represents the Partnership's share of Venture losses. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for the Venture for details pertaining to the Venture's financial condition. One of the primary objectives of the Partnership is to provide quarterly cash distributions to the partners. Such cash returns are primarily from cash generated through the operating activities of the Partnership and from the distributions made to the Partnership from the Venture. Because the Partnership's credit facility was at the maximum amount available in 1994, the Partnership utilized cash generated from operations to fund capital expenditures. In addition, the Venture's credit facility has a maximum amount available of $45,000,000, of which $42,100,000 was outstanding at December 31, 1994, which limits the amount of borrowings available to the Venture to fund capital expenditures; therefore, the Venture did not declare any distributions in 1994. Due to these conditions, the Partnership did not declare any distributions for 1994. Distributions for the years ended December 31, 1993 and 1992 were $1,735,352 and $1,642,928, respectively. The General Partner has agreed to defer its portion of the distributions from cash flows until the Partnership is liquidated. The Venture is not expected to reinstate distributions in the near term. In January 1995, the Partnership completed negotiations for a new revolving credit agreement that will provide liquidity to fund capital expenditures. The Partnership will attempt to provide some level of distributions from cash generated from operations in 1995. No determination has been made regarding the level of future distributions. The level of distributions, if any, will be determined on a quarter-by-quarter basis. Regulation and Legislation On October 5, 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. In April 1993, the FCC adopted regulations governing rates for basic and non-basic services. These regulations became effective on September 1, 1993. Such regulations caused reductions in rates for certain regulated services. On February 22, 1994, the FCC adopted several additional rate orders including an order which revised its earlier-announced regulatory scheme with respect to rates. The Partnership has filed a cost-of-service showing for its Orangeburg System and therefore anticipates no further reductions in rates. The cost-of-service showing has not yet received final approval from franchising authorities, however, and there can be no assurance that the Partnership's cost-of-service showing will prevent further rate reductions until such final approval is received. See Item 1 for further discussion of the provisions of the 1992 Cable Act and the FCC regulations promulgated thereunder. 16 17 JONES CABLE INCOME FUND 1-B/C VENTURE Results of Operations 1994 Compared to 1993- Revenues of Jones Cable Income Fund 1-B/C Venture (the "Venture") increased $771,011, or approximately 4 percent, from $20,350,776 in 1993 to $21,121,787 in 1994. An increase in subscribers accounted for approximately 41 percent of the increase in revenues. Increases in premium service revenue and advertising sales revenue accounted for approximately 28 percent and 26 percent, respectively, of the increase in revenues. The increase in revenues would have been greater but for the reduction in certain rates charged due to basic rate regulations issued by the FCC in April 1993 with which the Venture complied effective September 1, 1993. Operating, general and administrative expenses increased $645,813, or approximately 6 percent, from $11,371,695 in 1993 to $12,017,508 in 1994. Operating, general and administrative expenses represented 56 percent of revenue in 1993 compared to 57 percent in 1994. The increase in operating, general and administrative expense was due to increases in programming fees, personnel related costs, and advertising sales costs. No other individual factor was significant to the increase in operating, general and administrative expenses. Management fees and allocated overhead from Jones Intercable, Inc. increased $125,126, or approximately 5 percent, from $2,589,673 in 1993 to $2,714,799 in 1994, due primarily to the increase in revenues, upon which such fees and allocations are calculated, and an increase in expenses allocated from Jones Intercable, Inc. The General Partner has experienced increases in expenses, including personnel costs and reregulation costs, a portion of which are allocated to the Venture. Depreciation and amortization expense decreased $154,759, or approximately 2 percent, from $8,787,240 in 1993 to $8,632,481 in 1994. This decrease is due to the maturation of the Venture's depreciable asset base. Operating loss decreased $154,831, or approximately 7 percent, from $2,397,832 in 1993 to $2,243,001 in 1994. This decrease is a result of the increase in revenues and the decrease in depreciation and amortization exceeding the increase in operating, general and administrative expenses, management fees and allocated overhead from Jones Intercable, Inc. Operating income before depreciation and amortization increased less than 1 percent, from $6,389,408 in 1993 to $6,389,480 in 1994. Interest expense increased $745,019, or approximately 37 percent, from $2,016,390 in 1993 to $2,761,409 in 1994. This increase was due to higher effective interest rates on interest bearing obligations. Net loss increased $434,366, or approximately 11 percent, from $4,409,310 in 1993 to $4,902,676 in 1994. These losses are due to the factors discussed above and are expected to continue in the future. 1993 Compared to 1992- Revenues of the Venture increased $1,502,431, or approximately 8 percent, from $18,848,345 in 1992 to $20,350,776 in 1993. An increase in subscribers accounted for approximately 36 percent of the increase in revenues and basic rate adjustments accounted for approximately 42 percent of the increase in revenues. Increases in advertising sales revenue accounted for approximately 11 percent of the increase in revenues. The increase in revenue would have been greater but for the reduction in certain rates charged due to new basic rate regulations issued by the FCC in April 1993 with which the Venture complied effective September 1, 1993. Operating, general and administrative expenses increased $1,809,113, or approximately 19 percent, from $9,562,582 in 1992 to $11,371,695 in 1993. Operating, general and administrative expenses represented 56 percent of revenue in 1993 compared to 51 percent in 1992. The increase in operating, general and administrative expense was due to increases in programming fees, personnel related costs, and plant related costs. No other individual factor was significant to the increase in operating, general and administrative expenses. Management fees and allocated overhead from Jones Intercable, Inc. increased $218,910, or approximately 9 percent, from $2,370,763 in 1992 to $2,589,673 in 1993, due primarily to the increase in revenues, upon which such fees and allocations are calculated, and an increase in expenses allocated from Jones Intercable, Inc. 17 18 Depreciation and amortization expense decreased $344,202, or approximately 4 percent, from $9,131,442 in 1992 to $8,787,240 in 1993. This decrease was due to the maturation of the Venture's depreciable asset base. Operating loss increased $181,390, or approximately 8 percent, from $2,216,442 in 1992 to $2,397,832 in 1993. This increase was a result of the increase in operating, general and administrative expenses, management fees and allocated overhead from Jones Intercable, Inc. exceeding the growth in revenues and the decrease in depreciation and amortization expense. Interest expense increased $100,445, or approximately 5 percent, from $1,915,945 in 1992 to $2,016,390 in 1993. This increase was due to higher outstanding balances on interest bearing obligations. Net loss increased $285,918, or approximately 7 percent, from $4,123,392 in 1992 to $4,409,310 in 1993. Financial Condition During 1994, capital improvements within the Venture's operating systems totaled approximately $4,602,000. Approximately 25 percent were for the construction of service drops to subscribers' homes. Approximately 23 percent of these expenditures were for rebuilds and upgrades in the Venture's cable television systems and approximately 15 percent was for the construction of new cable plant. The remainder of these expenditures related to various system enhancements and improvements in all of the Venture's systems. Funding for these expenditures was provided by borrowings under the Venture's credit facility and cash generated from operations. Anticipated capital expenditures for 1995 are approximately $5,000,000. Construction of service drops to homes and the construction of new cable plant will account for approximately 24 percent and 23 percent, respectively, of the anticipated expenditures. Expenditures for pay security equipment will account for approximately 12 percent, with the remainder of the expenditures relating to other various enhancements in all of the Venture's systems. Funding for these expenditures is expected to come from cash generated from operations and borrowings under the Venture's credit facility. In May 1994, the Venture completed renegotiation of its credit facility to increase the maximum amount available to $45,000,000 and to extend the revolving credit period to June 30, 1997, at which time the outstanding balance is payable in full. At December 31, 1994, $42,100,000 was outstanding on the Venture's credit facility leaving $2,900,000 of available borrowings. Interest on outstanding principal is calculated at the Venture's option of the Prime rate plus 1/2 percent, or LIBOR plus 1-1/2 percent. On January 12, 1993, the Venture entered into an interest rate cap agreement covering outstanding debt obligations of $15,000,000. The agreement protects the Venture for LIBOR interest rates that exceed 7 percent for three years from the date of the agreement. The Venture paid a fee of $145,500. One of the primary objectives of the Venture is to provide quarterly cash distributions to the Venture partners. Such cash returns are primarily from cash generated through operating activities of the Venture. The Venture's credit facility has a maximum amount available of $45,000,000, of which $42,100,000 was outstanding on December 31, 1994, which limits the amount of borrowings available to the Venture to fund capital expenditures; therefore, the Venture did not declare any distributions in 1994. During 1993 and 1992, the Venture declared and paid distributions to the Venture partners totaling $4,320,000 and $4,090,000, respectively. Due to the borrowing limitations discussed above, the Venture will need to use cash generated from operations to fund capital expenditures and thus the Venture does not anticipate the resumption of distributions to the Venture partners in the near term. The General Partner believes that the Venture has sufficient sources of capital to meet its presently anticipated needs. Regulatory and Legislation On October 5, 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. In April 1993, the FCC adopted regulations governing rates for basic and non-basic services. These regulations became effective on September 1, 1993. Such regulations caused reductions in rates for certain regulated services. On February 22, 1994, the FCC adopted several additional rate orders including an order which revised its earlier-announced regulatory scheme with respect to rates. The Venture has filed cost-of-service showings for its Brighton, Broomfield and Boulder County, Colorado; Myrtle Creek, Oregon; South Sioux City, 18 19 Nebraska; and Three Rivers and Watervliet, Michigan systems and thus anticipates no further reductions in rates in these systems. The cost-of-service showings have not yet received final approval from franchising authorities, however, and there can be no assurance that the Venture's cost-of-service showings will prevent further rate reductions until such final approvals are received. The Venture complied with the February 1994 benchmark regulations and further reduced rates in its Clearlake Oaks system effective July 1994. See Item 1 for further discussion of the provisions of the 1992 Cable Act and the FCC regulations promulgated thereunder. 19 20 Item 8. Financial Statements JONES CABLE INCOME FUND 1-B FINANCIAL STATEMENTS AS OF DECEMBER 31, 1994 AND 1993 INDEX
Page ----- 1-B 1-B/C --- ----- Report of Independent Public Accountants 21 32 Balance Sheets 22 33 Statements of Operations 24 35 Statements of Partners' Capital (Deficit) 25 36 Statements of Cash Flows 26 37 Notes to Financial Statements 27 38
20 21 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Jones Cable Income Fund 1-B: We have audited the accompanying balance sheets of JONES CABLE INCOME FUND 1-B (a Colorado limited partnership) as of December 31, 1994 and 1993, and the related statements of operations, partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1994. 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 Jones Cable Income Fund 1-B as of December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Denver, Colorado, March 8, 1995. 21 22 JONES CABLE INCOME FUND 1-B (A Limited Partnership) BALANCE SHEETS
December 31, ---------------------------- ASSETS 1994 1993 ------ ----------- ----------- CASH $ 116,839 $ 44,489 RECEIVABLES: Trade receivables, less allowance for doubtful receivables of $14,323 and $12,624 at December 31, 1994 and 1993, respectively 167,587 118,799 Distribution receivable from cable television joint venture - 429,500 INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment, at cost 10,801,551 9,900,099 Less- accumulated depreciation (4,948,058) (4,044,575) ----------- ----------- 5,853,493 5,855,524 Franchise costs, net of accumulated amortization of $4,671,001 and $4,585,011 at December 31, 1994 and 1993, respectively - 85,990 Subscriber lists, net of accumulated amortization of $3,024,266 and $2,650,130 at December 31, 1994 and 1993, respectively 1,527,734 1,901,870 Favorable leaseholds, net of accumulated amortization of $96,806 and $84,830 at December 31, 1994 and 1993, respectively 60,894 72,870 Costs in excess of interests in net assets purchased, net of accumulated amortization of $9,894 and $8,670 at December 31, 1994 and 1993, respectively 39,006 40,230 Investment in cable television joint venture 4,086,463 6,036,257 ----------- ----------- Total investment in cable television properties 11,567,590 13,992,741 DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 22,362 5,279 ----------- ----------- Total assets $11,874,378 $14,590,808 =========== ===========
The accompanying notes to financial statements are an integral part of these balance sheets. 22 23 JONES CABLE INCOME FUND 1-B (A Limited Partnership) BALANCE SHEETS
December 31, ------------------------------ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1994 1993 ------------------------------------------- ------------ ------------ LIABILITIES: Debt $ 3,544,000 $ 3,547,767 Accounts payable- Trade 5,046 5,101 General Partner 2,162,870 1,944,230 Accrued liabilities 433,865 340,275 Accrued distribution to limited partners - 429,500 Subscriber prepayments 42,814 45,971 ------------ ------------ Total liabilities 6,188,595 6,312,844 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Note 8) PARTNERS' CAPITAL (DEFICIT): General Partner- Contributed capital 1,000 1,000 Accumulated deficit (177,653) (151,731) Distributions (100,119) (100,119) ------------ ------------ (276,772) (250,850) ------------ ------------ Limited Partners- Net contributed capital (83,884 units outstanding at December 31, 1994 and 1993) 34,449,671 34,449,671 Accumulated deficit (17,469,410) (14,903,151) Distributions (11,017,706) (11,017,706) ------------ ------------ 5,962,555 8,528,814 ------------ ------------ Total liabilities and partners' capital (deficit) $ 11,874,378 $ 14,590,808 ============ ============
The accompanying notes to financial statements are an integral part of these balance sheets. 23 24 JONES CABLE INCOME FUND 1-B (A Limited Partnership) STATEMENTS OF OPERATIONS
Year Ended December 31, ----------------------------------------------------- 1994 1993 1992 ----------- ----------- ----------- REVENUES $ 4,484,892 $ 4,341,380 $ 4,163,690 COSTS AND EXPENSES: Operating, general and administrative 2,720,750 2,550,022 2,409,047 Management fees and allocated overhead from General Partner 572,292 546,371 519,472 Depreciation and amortization 1,376,809 1,691,043 1,931,255 ----------- ----------- ----------- OPERATING LOSS (184,959) (446,056) (696,084) ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (391,583) (376,224) (404,132) Other, net (65,845) (47,515) (291,925) ----------- ----------- ----------- Total other income (expense) (457,428) (423,739) (696,057) ----------- ----------- ----------- LOSS BEFORE EQUITY IN NET LOSS OF CABLE TELEVISION JOINT VENTURE (642,387) (869,795) (1,392,141) EQUITY IN NET LOSS OF CABLE TELEVISION JOINT VENTURE (1,949,794) (1,753,583) (1,639,873) ----------- ----------- ----------- NET LOSS $(2,592,181) $(2,623,378) $(3,032,014) =========== =========== =========== ALLOCATION OF NET LOSS: General Partner $ (25,922) $ (26,234) $ (30,320) =========== =========== =========== Limited Partners $(2,566,259) $(2,597,144) $(3,001,694) =========== =========== =========== NET LOSS PER LIMITED PARTNERSHIP UNIT $ (30.59) $ (30.96) $ (35.78) =========== =========== =========== WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 83,884 83,884 83,884 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 24 25 JONES CABLE INCOME FUND 1-B (A Limited Partnership) STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
Year Ended December 31, ---------------------------------------------- 1994 1993 1992 ----------- ------------ ----------- GENERAL PARTNER: Balance, beginning of year $ (250,850) $ (207,264) $ (160,516) Distributions - (17,352) (16,428) Net loss for year (25,922) (26,234) (30,320) ----------- ------------ ----------- Balance, end of year $ (276,772) $ (250,850) $ (207,264) =========== ============ =========== LIMITED PARTNERS: Balance, beginning of year $ 8,528,814 $12,843,958 $17,472,152 Distributions - (1,718,000) (1,626,500) Net loss for year (2,566,259) (2,597,144) (3,001,694) ----------- ------------ ----------- Balance, end of year $ 5,962,555 $ 8,528,814 $12,843,958 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 25 26 JONES CABLE INCOME FUND 1-B (A Limited Partnership) STATEMENTS OF CASH FLOWS
Year Ended December 31, ---------------------------------------------- 1994 1993 1992 ----------- ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(2,592,181) $(2,623,378) $(3,032,014) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,376,809 1,691,043 1,931,255 Equity in net loss of cable television joint venture 1,949,794 1,753,583 1,639,873 Decrease (increase) in trade receivables (48,788) (12,430) 3,506 Decrease (increase) in deposits, prepaid expenses and (17,083) 47,477 (82,170) deferred charges Increase (decrease) in trade accounts payable, accrued liabilities and subscriber prepayments 90,378 (60,150) 83,805 ----------- ------------- ------------ Net cash provided by operating activities 758,929 796,145 544,255 ----------- ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment, net (901,452) (806,938) (1,220,551) Distributions from cable television joint venture - 1,718,000 1,626,500 Decrease (increase) in receivable from joint venture 429,500 - (51,700) ----------- ------------- ------------ Net cash provided by (used in) investing activities (471,952) 911,062 354,249 ----------- ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 16,830 30,000 23,600 Repayment of debt (20,597) (8,178) (36,937) Distributions to limited partners - (1,718,000) (1,626,500) Increase (decrease) in accrued distributions to limited partners (429,500) - 51,700 Increase (decrease) in advances from General Partner 218,640 (50,171) 725,446 ----------- ------------- ------------ Net cash used in financing activities (214,627) (1,746,349) (862,691) ----------- ------------- ------------ Increase (decrease) in cash 72,350 (39,142) 35,813 Cash, beginning of year 44,489 83,631 47,818 ----------- ------------- ------------ Cash, end of year $ 116,839 $ 44,489 $ 83,631 =========== ============ ============ SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 360,569 $ 396,938 $ 387,532 =========== ============= ===========
The accompanying notes to financial statements are an integral part of these statements. 26 27 JONES CABLE INCOME FUND 1-B (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS (1) ORGANIZATION AND PARTNERS' INTERESTS Formation and Business Jones Cable Income Fund 1-B, Ltd. (the "Partnership"), a Colorado limited partnership, was formed on August 14, l986, under a public program sponsored by Jones Intercable, Inc. ("Intercable"). The Partnership was formed to acquire, develop and operate cable television systems. Intercable is the "General Partner" and manager of the Partnership. The General Partner 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 other affiliated entities. Contributed Capital The capitalization of the Partnership is set forth in the accompanying statements of partners' capital (deficit). No limited partner is obligated to make any additional contribution to partnership capital. The General Partner 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 the General Partner, 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. Cable Television System Acquisition The Partnership's acquisition of the cable television system serving the community of Orangeburg, South Carolina (the "Orangeburg System") was accounted for as a purchase with the purchase price allocated as follows: first, to the fair value of net tangible assets acquired; second, to the value of a subscriber list, franchise costs and favorable leaseholds; and third to costs in excess of interests in net assets purchased. Brokerage fees paid to a subsidiary of the General Partner were allocated to intangible assets based upon the relative value of these assets at acquisition. Other system acquisition costs were capitalized and included in the cost of distribution systems. The Partnership owns the Orangeburg System and also owns an approximate 40 percent interest in Jones Cable Income Fund 1-B/C Venture (the "Venture"), through a capital contribution made to the Venture in November 1987 of $24,220,000. The Venture acquired cable television systems in Colorado, Oregon and California on December 31, 1987 and in Colorado, Nebraska and Michigan during 1988. The Venture incurred losses of $4,902,676 , $4,409,310 and $4,123,392 in 1994, 1993, and 1992, respectively, of which $1,949,794, $1,753,583 and $1,639,873, respectively, was allocated to the Partnership. (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. 27 28 Investment in Cable Television Joint Venture The Partnership's investment in the Venture is accounted for under the equity method. The operations of the Venture are significant to the Partnership and should be reviewed in conjunction with these financial statements. Reference is made to the accompanying financial statements of the Venture on pages 32 to 42. Property, Plant and Equipment Depreciation of property, plant and equipment is provided primarily using the straight-line method over the following estimated service lives: Cable distribution systems 5 - 15 years Equipment and tools 5 years Office furniture and equipment 5 - 15 years Buildings 10 - 20 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 subscriber lists, favorable leaseholds and costs in excess of interests in net assets purchased are being amortized using the straight-line method over the following remaining estimated useful lives: Subscriber lists 4 years Favorable leaseholds 5 years Costs in excess of interests in net assets purchased 32 years
Revenue Recognition Subscriber prepayments are initially deferred and recognized as revenue when earned. (3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES Management Fees, Distribution Ratios and Reimbursement The General Partner manages the Partnership and receives a fee for its services equal to 5 percent of the gross revenues of the Partnership, excluding revenues from the sale of cable television systems or franchises. Management fees charged during the years ended December 31, 1994, 1993 and 1992 were $224,245, $217,069 and $208,185, 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 the General Partner. Distributions resulting from the sale or refinancing of a 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, other than those made regularly from cash flow, will equal their initial capital contribution; second, payment to the limited partners of a liquidation preference equal to a 10 percent cumulative return on their initial capital contribution, reduced by all prior distributions from cash flow; and the balance, 75 percent to the limited partners and 25 percent to the General Partner. The Partnership reimburses the General Partner for certain allocated overhead and administrative expenses. These expenses represent salaries and benefits paid to corporate personnel, rent, data processing and other corporate facilities costs. Such personnel provide engineering, marketing, administrative accounting, legal, and investor relations services to the Partnership. Allocations of personnel costs are based primarily on actual time spent by employees of the General Partner with respect to each partnership managed. Remaining overhead costs are allocated based on 28 29 revenues and/or assets managed for the partnership. Effective December 1, 1993 the allocation method was changed to be based only on revenue, which the General Partner believes provides a more accurate method of allocation. Systems owned by the General Partner 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. Amounts allocated to the Partnership by the General Partner for overhead and administrative expenses during the years ended December 31, 1994, 1993 and 1992 were $348,047, $329,302 and $311,287, respectively. The Partnership was charged interest during 1994 at an average interest rate of 10 percent on the amounts due to the General Partner, which approximated the General Partner's weighted average cost of borrowing. Total interest charged by the General Partner during the years ended December 31, 1994, 1993 and 1992 was $176,867, $217,249 and $214,682, respectively. Payments to/from Affiliates for Programming Services The Partnership receives programming from Product Information Network, Superaudio and The Mind Extension University, affiliates of the General Partner. Payments to Superaudio totaled $7,193, $7,243 and $7,012 in 1994, 1993 and 1992, respectively. Payments to The Mind Extension University totaled $6,517, $4,212 and $4,017 in 1994, 1993 and 1992, respectively. The Partnership receives a commission from Product Information Network based on a percentage of advertising revenues and number of subscribers. Product Information Network, which initiated service in 1994, paid commissions to the Partnership totalling $321 in 1994. (4) DISTRIBUTIONS FROM CASH FLOW One of the primary objectives of the Partnership is to provide quarterly cash distributions to the partners. Such cash returns are primarily from cash generated through the operating activities of the Partnership and from the distributions made to the Partnership from the Venture. Because the Partnership's credit facility was at the maximum amount available in 1994, the Partnership utilized cash generated from operations to fund capital expenditures. In addition, the Venture's credit facility has a maximum amount available of $45,000,000, of which $42,100,000 was outstanding at December 31, 1994, which limits the amount of borrowings available to the Venture to fund capital expenditures; therefore, the Venture did not declare any distributions in 1994. Due to these conditions, the Partnership did not declare any distributions for 1994. Distributions for the years ended December 31, 1993 and 1992 were $1,735,352 and $1,642,928, respectively. The General Partner has agreed to defer its portion of the distributions from cash flows until the Partnership is liquidated. The Venture is not expected to reinstate distributions in the near term. In January 1995, the Partnership completed negotiations for a new revolving credit agreement that will provide liquidity to fund capital expenditures. The Partnership will attempt to provide some level of distributions from cash generated from operations in 1995. No determination has been made regarding the level of future distributions. The level of distributions, if any, will be determined on a quarter-by-quarter basis. (5) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of December 31, 1994 and 1993, consisted of the following:
December 31, ----------------------------- 1994 1993 ------------ ------------ Cable distribution systems $10,052,951 $ 9,214,361 Equipment and tools 309,773 285,431 Office furniture and equipment 110,323 105,629 Buildings 36,333 36,000 Vehicles 289,539 256,046 Land 2,632 2,632 ------------ ------------ 10,801,551 9,900,099 Less-accumulated depreciation (4,948,058) (4,044,575) ------------ ------------ $ 5,853,493 $ 5,855,524 ============ ============
29 30 (6) DEBT
Debt consists of the following: December 31, ----------------------------- 1994 1993 ---------- ----------- Lending institutions- Revolving credit agreement $3,500,000 $3,500,000 Capital lease obligations 44,000 47,767 ---------- ----------- $3,544,000 $3,547,767 ========== ==========
As of December 31, 1994, the full amount of the Partnership's $3,500,000 credit facility was outstanding. In January 1995, the General Partner completed negotiations for a new revolving credit facility with a maximum amount available of $8,500,000. The Partnership borrowed $5,800,000 to repay the amounts outstanding under the prior credit facility and to repay the General Partner its advances, leaving $2,700,000 of borrowings available. The revolving credit facility converts to a term loan on December 31, 1997 at which time the then-outstanding loan balance will be due in 20 consecutive quarterly installments beginning March 31, 1998. Interest on the revolving credit facility is at the Partnership's option of the Prime rate plus 1/4 percent, the CD rate plus 1 3/8 percent, or the London Interbank Offered Rate plus 1 1/2 percent. The effective interest rates on outstanding obligations were 8.63 percent and 4.31 percent, respectively, at December 31, 1994 and 1993. Installments due on debt principal for the five years ending December 31, 1999 and thereafter, respectively, are $13,200, $13,200, $13,200, $167,150, $572,250 and $2,765,000. At December 31, 1994, substantially all of the Partnership assets secured the above indebtedness. (7) INCOME TAXES Income taxes have not been recorded in the accompanying financial statements because they accrue directly to the partners. The Federal and state income tax returns of the Partnership are prepared and filed by the General Partner. The Partnership'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 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 loss reported to the partners is different from that reported in the statements of operations due to the difference in depreciation recognized under generally accepted accounting principles and the expense allowed for tax purposes under the Modified Accelerated Cost Recovery System (MACRS). There are no other significant differences between taxable loss and the net loss reported in the statements of operations. (8) COMMITMENTS AND CONTINGENCIES On October 5, 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. In April 1993, the FCC adopted regulations governing rates for basic and non-basic services. These regulations became effective on September 1, 1993. Such regulations caused reductions in rates for certain regulated services. On February 22, 1994, the FCC adopted several additional rate orders including an order which revised its earlier-announced regulatory scheme with respect to rates. The Partnership has filed a cost-of-service showing for its Orangeburg System and therefore anticipates no further reductions in rates. The cost-of-service showing has not yet received final approval from franchising authorities, however, 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. See Item 1 for further discussion of the provisions of the 1992 Cable Act and the FCC regulations promulgated thereunder. 30 31 The Partnership rents office and other facilities under various long-term lease arrangements. Rent paid under such lease agreements totaled $26,875, $27,112, and $27,555, respectively, for the years ended December 31, 1994, 1993 and 1992. Minimum commitments under operating leases for each of the five years in the period ending December 31, 1999, and thereafter are as follows: 1995 $ 27,200 1996 27,200 1997 27,200 1998 27,200 1999 24,000 Thereafter - -------- $132,800 ========
(9) SUPPLEMENTARY PROFIT AND LOSS INFORMATION Supplementary profit and loss information for the respective years is presented below:
Year Ended December 31, ----------------------------------------- 1994 1993 1992 --------- --------- ----------- Maintenance and repairs $ 45,139 $ 61,553 $ 47,624 ========= ========= =========== Taxes, other than income and payroll taxes $ 57,742 $ 56,847 $ 57,185 ========= ========= =========== Advertising $ 57,444 $ 51,188 $ 56,647 ========= ========= =========== Depreciation of property, plant and equipment $ 903,483 $ 971,896 $ 844,763 ========= ========= =========== Amortization of intangible assets $ 473,326 $ 719,147 $1,086,492 ========= ========= ===========
31 32 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Jones Cable Income Fund 1-B/C Venture: We have audited the accompanying balance sheets of JONES CABLE INCOME FUND 1-B/C Venture (a Colorado general partnership) as of December 31, 1994 and 1993, and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1994. 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 Jones Cable Income Fund 1-B/C Venture as of December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Denver, Colorado, March 8, 1995. 32 33 JONES CABLE INCOME FUND 1-B/C VENTURE (A General Partnership) BALANCE SHEETS
December 31, ------------------------------------- ASSETS 1994 1993 ------ --------------- -------------- CASH $ 309,848 $ 118,807 TRADE RECEIVABLES, less allowance for doubtful receivables of $37,534 and $42,088 at December 31, 1994 and 1993, respectively 459,412 432,048 INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment, at cost 57,707,174 53,105,367 Less- accumulated depreciation (24,802,632) (20,804,731) ------------- ------------ 32,904,542 32,300,636 Franchise costs, net of accumulated amortization of $23,207,609 and $19,814,129 at December 31, 1994 and 1993, respectively 13,386,181 16,779,661 Subscriber lists, net of accumulated amortization of $6,464,742 and $5,506,482 at December 31, 1994 and 1993, respectively 909,418 1,867,678 Cost in excess of interests in net assets purchased, net of accumulated amortization of $1,219,184 and $1,039,340 at December 31, 1994 and 1993, respectively 5,972,836 6,152,680 Noncompete agreement, net of accumulated amortization of $230,224 and $201,388 at December 31, 1994 and 1993, respectively 108,076 136,912 ------------- ------------ Total investment in cable television properties 53,281,053 57,237,567 DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 495,461 360,412 ------------- ------------ Total assets $ 54,545,774 $ 58,148,834 ============= ============
The accompanying notes to financial statements are an integral part of these balance sheets. 33 34 JONES CABLE INCOME FUND 1-B/C VENTURE (A General Partnership) BALANCE SHEETS
December 31, ----------------------------------- LIABILITIES AND PARTNERS' CAPITAL 1994 1993 --------------------------------- -------------- -------------- LIABILITIES: Debt $ 42,383,339 $ 36,298,318 Accounts payable- Trade 16,153 36,832 Jones Intercable, Inc. 66,224 4,068,472 Accrued liabilities 1,523,073 1,210,801 Accrued distribution to partners - 1,080,000 Subscriber prepayments 270,839 265,589 ------------ ------------ Total liabilities 44,259,628 42,960,012 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Note 8) PARTNERS' CAPITAL: Contributed capital 60,036,950 60,036,950 Accumulated deficit (29,217,862) (24,315,186) Distributions (20,532,942) (20,532,942) ------------ ------------ 10,286,146 15,188,822 ------------ ------------ Total liabilities and partners' capital $ 54,545,774 $ 58,148,834 ============ ============
The accompanying notes to financial statements are an integral part of these balance sheets. 34 35 JONES CABLE INCOME FUND 1-B/C VENTURE (A General Partnership) STATEMENTS OF OPERATIONS
Year Ended December 31, --------------------------------------------------------- 1994 1993 1992 -------------- -------------- -------------- REVENUES $21,121,787 $20,350,776 $18,848,345 COSTS AND EXPENSES: Operating, general and administrative 12,017,508 11,371,695 9,562,582 Management fees and allocated overhead from Jones Intercable, Inc. 2,714,799 2,589,673 2,370,763 Depreciation and amortization 8,632,481 8,787,240 9,131,442 ----------- ----------- ----------- OPERATING LOSS (2,243,001) (2,397,832) (2,216,442) ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (2,761,409) (2,016,390) (1,915,945) Other, net 101,734 4,912 8,995 ----------- ----------- ----------- Total other income (expense) (2,659,675) (2,011,478) (1,906,950) ----------- ----------- ----------- NET LOSS $(4,902,676) $(4,409,310) $(4,123,392) =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 35 36 JONES CABLE INCOME FUND 1-B/C VENTURE (A General Partnership) STATEMENTS OF PARTNERS' CAPITAL
Year Ended December 31, ---------------------------------------------------------- 1994 1993 1992 -------------- -------------- -------------- Jones Cable Income Fund 1-B: Balance, beginning of year $ 6,036,257 $ 9,507,840 $12,774,213 Distributions - (1,718,000) (1,626,500) Net loss for year (1,949,794) (1,753,583) (1,639,873) ----------- ----------- ----------- Balance, end of year $ 4,086,463 $ 6,036,257 $ 9,507,840 =========== =========== =========== Jones Cable Income Fund 1-C: Balance, beginning of year $ 9,152,565 $14,410,292 $19,357,311 Distributions - (2,602,000) (2,463,500) Net loss for year (2,952,882) (2,655,727) (2,483,519) ----------- ----------- ----------- Balance, end of year $ 6,199,683 $ 9,152,565 $14,410,292 =========== =========== =========== Total: Balance, beginning of year $15,188,822 $23,918,132 $32,131,524 Distributions - (4,320,000) (4,090,000) Net loss for year (4,902,676) (4,409,310) (4,123,392) ----------- ----------- ----------- Balance, end of year $10,286,146 $15,188,822 $23,918,132 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 36 37 JONES CABLE INCOME FUND 1-B/C VENTURE (A General Partnership) STATEMENTS OF CASH FLOWS
Year Ended December 31, ------------------------------------------------- 1994 1993 1992 -------------- -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(4,902,676) $(4,409,310) $(4,123,392) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 8,632,481 8,787,240 9,131,442 Amortization of interest rate protection contract 48,500 48,501 - Increase in trade receivables (27,364) (161,826) (22,724) Increase in deposits, prepaid expenses and deferred charges (257,709) (53,521) (94,772) Increase in accounts payable, accrued liabilities and subscriber prepayments 296,843 134,542 14,702 Increase (decrease) in amount due Jones Intercable Inc. (4,002,248) 3,465,707 16,822 ----------- ----------- ----------- Net cash provided by (used in) operating activities (212,173) 7,811,333 4,922,078 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment, net (4,601,807) (4,125,320) (4,095,453) ----------- ----------- ---------- Net cash used in investing activities (4,601,807) (4,125,320) (4,095,453) ----------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 6,552,832 794,914 3,674,961 Repayment of debt (467,811) (131,657) (375,396) Distributions to general partners - (4,320,000) (4,090,000) Increase (decrease) in accrued distributions to partners (1,080,000) - 130,000 Purchase of interest rate protection contract - (145,500) - ----------- ----------- ----------- Net cash provided by (used in) financing activities 5,005,021 (3,802,243) (660,435) ----------- ----------- ----------- Increase (decrease) in cash 191,041 (116,230) 166,190 Cash, beginning of year 118,807 235,037 68,847 ----------- ----------- ----------- Cash, end of year $ 309,848 $ 118,807 $ 235,037 =========== =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 2,536,991 $ 1,962,699 $ 1,895,997 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 37 38 JONES CABLE INCOME FUND 1-B/C VENTURE (A General Partnership) NOTES TO FINANCIAL STATEMENTS (1) ORGANIZATION AND PARTNERS' INTERESTS Formation and Business On October 21, 1987, Jones Cable Income Fund 1-B, Ltd. ("Fund 1-B") and Jones Cable Income Fund 1-C, Ltd. ("Fund 1-C") formed a Colorado general partnership known as Jones Cable Income Fund 1-B/C Venture (the "Venture") by making capital contributions of $24,220,000 and $36,681,000, respectively (approximately 40 and 60 percent, respectively). The Venture was formed to acquire, develop and operate cable television systems. During 1988 and 1987, the Venture acquired various cable television systems serving the areas in and around Brighton, Broomfield and Boulder County, Colorado; Lake County, California; Myrtle Creek, Oregon; South Sioux City, Nebraska; and Three Rivers and Watervliet, Michigan. Jones Intercable, Inc. ("Intercable"), the general partner of Fund 1-B and Fund 1-C, manages the Venture. 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. Contributed Capital The capitalization of the Venture is set forth in the accompanying statements of partners' capital. All Venture distributions, including those made from cash flow, from the sale or refinancing of Venture property and on dissolution of the Venture, shall be made to Fund 1-B and Fund 1-C in proportion to their interests in the Venture. Cable Television System Acquisition Venture acquisitions were accounted for as purchases with the purchase prices allocated as follows: first, to the fair value of net tangible assets acquired; second, to the value of subscriber lists, franchise costs and a noncompete agreement; and third, to cost in excess of interests in net assets purchased. Brokerage fees paid to a subsidiary of Intercable's parent were allocated to intangible assets based upon the relative value of these assets at acquisition. Other system acquisition costs were capitalized and included in the cost of distribution systems. (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 Venture's tax returns are also prepared on the accrual basis. Property, Plant and Equipment Depreciation of property, plant and equipment is provided primarily using the straight-line method over the following estimated service lives: Cable distribution systems 5 - 15 years Equipment and tools 5 years Office furniture and equipment 5 - 15 years Buildings 10 - 20 years Vehicles 3 years
Replacements, renewals and improvements are capitalized and maintenance and repairs are charged to expense as incurred. 38 39 Intangible Assets Costs assigned to franchises, subscriber lists, a noncompete agreement and costs in excess of interests in net assets purchased are amortized using the straight-line method over the following remaining estimated useful lives: Franchise costs 1 - 16 years Subscriber costs 1 - 2 years Noncompete agreement 1 - 4 years Costs in excess of interests in net assets purchased 34 years
Revenue Recognition Subscriber prepayments are initially deferred and recognized as revenue when earned. Reclassifications Certain prior year amounts have been reclassified to conform to the 1994 presentation. (3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES Management Fees and Reimbursements Intercable manages the Venture and receives a fee for its services equal to 5 percent of the gross revenues of the Venture, excluding revenues from the sale of cable television systems or franchises. Management fees paid to Intercable by the Venture during the years ended December 31, 1994, 1993 and 1992 were $1,056,089, $1,017,539 and $942,417, respectively. The Venture reimburses Intercable for certain allocated overhead and administrative expenses. These expenses represent the salaries and related benefits paid for corporate personnel, rent, data processing services and other corporate facilities costs. Such personnel provide engineering, marketing, administrative, accounting, legal and investor relations services to the Venture. Allocations of personnel costs are based primarily on actual time spent by employees of Intercable with respect to each entity managed. Remaining overhead costs are allocated based on revenue and/or assets managed for the partnership. Effective December 1, 1993, the allocation method was changed to be based only on revenue, which the General Partner believes provides a more accurate method of allocation. 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 of allocating overhead and administrative expenses is reasonable. Overhead and administrative expenses allocated to the Venture by Intercable during the years ended December 31, 1994, 1993 and 1992 were $1,658,710, $1,572,134 and $1,428,346, respectively. The Venture was charged interest during 1994 at an average interest rate of 10 percent on the amounts due Intercable, which approximated Intercable's weighted average cost of borrowing. Total interest charged the Venture by Intercable was $180,316, $187,959 and $67,841 during 1994, 1993 and 1992, respectively. Payments to/from Affiliates for Programming Services The Venture receives programming from Product Information Network, Superaudio, The Mind Extension University and Jones Computer Network, affiliates of Intercable. Payments to Superaudio totaled $25,189, $26,541 and $33,913 in 1994, 1993 and 1992, respectively. Payments to The Mind Extension University totaled $33,199, $20,832 and $20,053 in 1994, 1993 and 1992, respectively. Payments to Jones Computer Network, which initiated service in 1994, totaled $13,218 in 1994. The Venture receives a commission from Product Information Network based on a percentage of advertising revenues and number of subscribers. Product Information Network, which initiated service in 1994, paid commissions to the Venture totalling $15,283 in 1994. 39 40 (4) DISTRIBUTIONS FROM CASH FLOW One of the primary objectives of the Venture is to provide quarterly cash distributions to the Venture partners. Such cash returns are primarily from cash generated through operating activities of the Venture. The Venture's credit facility has a maximum amount available of $45,000,000, of which $42,100,000 was outstanding on December 31, 1994, which limits the amount of borrowings available to the Venture to fund capital expenditures; therefore, the Venture did not declare any distributions in 1994. During 1993 and 1992, the Venture declared and paid distributions to the Venture partners totaling $4,320,000 and $4,090,000, respectively. Due to the borrowing limitations discussed above, the Venture will need to use cash generated from operations to fund capital expenditures and thus the Venture does not anticipate the resumption of distributions to the Venture partners in the near term. (5) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of December 31, 1994 and 1993, consisted of the following:
December 31, ----------------------------------- 1994 1993 ---------------- ----------------- Cable distribution systems $ 52,889,029 $ 48,816,164 Equipment and tools 2,062,435 1,795,192 Office furniture and equipment 673,528 589,766 Buildings 452,428 450,155 Vehicles 1,460,112 1,284,446 Land 169,642 169,642 ------------ ------------ 57,707,174 53,105,367 Less- accumulated depreciation (24,802,632) (20,804,731) $ 32,904,542 $ 32,300,636 ============ ============
(6) DEBT
Debt consists of the following: December 31, ----------------------------- 1994 1993 -------------- ------------ Lending institutions- Revolving credit agreement $42,100,000 $36,000,000 Capital lease obligations 283,339 298,318 ----------- ----------- $42,383,339 $36,298,318 =========== ===========
In May 1994, the Venture completed negotiation of its credit facility to increase the maximum amount available to $45,000,000 and to extend the revolving credit period to June 30, 1997, at which time the then-outstanding balance is payable in full. At December 31, 1994, $42,100,000 was outstanding on the Venture's credit facility leaving $2,900,000 of available borrowings. Interest on outstanding principal is calculated at the Venture's option of the Prime rate plus 1/2 percent, or LIBOR plus 1-1/2 percent. The effective interest rates on amounts outstanding on the Venture's credit facility as of December 31, 1994 and 1993 were 7.36 percent and 4.67 percent, respectively. On January 12, 1993, the Venture entered into an interest rate cap agreement covering outstanding debt obligations of $15,000,000. The Venture paid a fee of $145,500. The agreement protects the Venture for LIBOR interest rates that exceed 7 percent for three years from the date of the agreement. Installments due on debt principal for each of the five years in the period ending December 31, 1999, respectively, are $85,002, $85,002, $42,185,001, $28,334 and $-0-. As of December 31, 1994, substantially all of the Venture's assets secured the above indebtedness. 40 41 (7) INCOME TAXES Income taxes have not been recorded in the accompanying financial statements because they accrue directly to Fund 1-B and Fund 1-C. The Federal and state income tax returns of the Venture are prepared and filed by Intercable. The Venture's tax returns, the qualification of the Venture as such for tax purposes, and the amount of distributable Venture income or loss are subject to examination by Federal and state taxing authorities. If such examinations result in changes with respect to the Venture's qualification as such, or in changes with respect to the Venture's recorded income or loss, the tax liability of Fund 1-B and Fund 1-C would likely be changed accordingly. Taxable loss reported to Fund 1-B and Fund 1-C is different from that reported in the statements of operations due to the difference in depreciation recognized under generally accepted accounting principles and the expense allowed for tax purposes under the Modified Accelerated Cost Recovery System (MACRS). There are no other significant differences between taxable income or loss and the net income or loss reported in the statements of operations. (8) COMMITMENTS AND CONTINGENCIES On October 5, 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. In April 1993, the Federal Communications Commission (the "FCC") adopted regulations governing rates for basic and non-basic services. These regulations became effective on September 1, 1993. Such regulations caused reductions in rates for certain regulated services. On February 22, 1994, the FCC adopted several additional rate orders including an order which revised its earlier-announced regulatory scheme with respect to rates. The Venture has filed cost-of-service showings for its Brighton, Broomfield and Boulder County, Colorado; Myrtle Creek, Oregon; South Sioux City, Nebraska; and Three Rivers and Watervliet, Michigan systems and thus anticipates no further reductions in rates in these systems. The cost-of-service showings have not yet received final approval from franchising authorities, however, and there can be no assurance that the Venture's cost-of-service showings will prevent further rate reductions until such final approvals are received. The Venture complied with the February 1994 benchmark regulations and further reduced rates in its Clearlake Oaks system effective July 1994. The Venture rents office and other facilities under various long-term lease arrangements. Rent paid under such lease arrangements totaled $82,204 , $78,616 and $88,074, respectively, for the years ended December 31, 1994, 1993 and 1992. Minimum commitments under operating leases for each of the five years in the period ending December 31, 1999, and thereafter are as follows: 1995 $ 74,284 1996 29,038 1997 21,338 1998 21,248 1999 21,248 Thereafter 161,814 -------- $328,970 ========
41 42 (9) SUPPLEMENTARY PROFIT AND LOSS INFORMATION Supplementary profit and loss information for the respective years is presented below:
Year Ended December 31, ------------------------------------------- 1994 1993 1992 ------------ ------------ ------------ Maintenance and repairs $ 203,987 $ 226,863 $ 221,292 ========== ========== ========== Taxes, other than income and payroll taxes $ 455,044 $ 674,649 $ 621,901 ========== ========== ========== Advertising $ 353,212 $ 381,096 $ 375,173 ========== ========== ========== Depreciation of property, plant and equipment $4,072,061 $4,225,967 $4,561,026 ========== ========== ========== Amortization of intangible assets $4,560,420 $4,561,273 $4,570,416 ========== ========== ==========
42 43 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.
Name Age Positions with the General Partner ---- --- ---------------------------------- Glenn R. Jones 65 Chairman of the Board and Chief Executive Officer Derek H. Burney 55 Vice Chairman of the Board James B. O'Brien 45 President, Chief Operating Officer and Director Ruth E. Warren 45 Group Vice President/Operations Kevin P. Coyle 43 Group Vice President/Finance Christopher J. Bowick 40 Group Vice President/Technology Timothy J. Burke 44 Group Vice President/Taxation/Administration Raymond L. Vigil 48 Group Vice President/Human Resources and Director Cynthia A. Winning 43 Group Vice President/Marketing Elizabeth M. Steele 43 Vice President/General Counsel/Secretary Larry W. Kaschinske 35 Controller James J. Krejci 53 Director Christine Jones Marocco 39 Director Daniel E. Somers 47 Director Robert S. Zinn 58 Director David K. Zonker 41 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 was elected a member of the Executive Committee of the Board of Directors in April 1985. 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 of the National Cable Television Association, and is a former member of its Executive Committee. 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; and the Women in Cable Accolade in 1990 in recognition of support of this organization. Mr. Jones is also a founding member of the James Madison Council of the Library of Congress and is on the Board of Governors of the American Society of Training and Development. Mr. Derek H. Burney was appointed a Director of the General Partner in December 1994 and Vice Chairman of the Board of Directors in January 1995. He is also a member of the Executive Committee of the Board of Directors. 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 43 44 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 also President and a Director of Jones Cable Group, Ltd., Jones Global Funds, Inc. and Jones Global Management, Inc., all affiliates of 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 any ethnic minority group 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. 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 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. 44 45 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. 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 a Group Vice President of the General Partner. Prior to May 1994, he also served as Group Vice President of Jones Futurex, Inc., an affiliate 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, which is engaged in the provision of telecommunications services. Mr. Krejci has been a Director of the General Partner since August 1987. Ms. Christine Jones Marocco was appointed a Director of the General Partner in December 1994. She is the daughter of Glenn R. Jones. Ms. Marocco is also a director of Jones International, Ltd. Mr. Daniel E. Somers was appointed a Director of the General Partner in December 1994 and also serves on the General Partner's Audit Committee. 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. 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. Robert S. Zinn was appointed a Director of the General Partner in December 1994. Mr. Zinn joined the General Partner in January 1991 and is a member of its Legal Department. He is also Vice President/Legal Affairs of Jones International, Ltd. Prior to joining the General Partner, Mr. Zinn was in private law practice in Denver, Colorado for over 25 years. Mr. David K. Zonker was appointed a Director of the General Partner in December 1994. Mr. Zonker has been the President of Jones International Securities, Ltd., a subsidiary of Jones International, Ltd. since January 1984 and he has been its Chief Executive Officer since January 1988. From October 1980 until joining Jones International Securities, Ltd. in January 1984, Mr. Zonker was employed by the General Partner. Mr. Zonker is a member of the Board of Directors of various affiliates of the General Partner, including Jones International Securities, Ltd. Mr. Zonker is licensed by the National Association of Securities Dealers, Inc. and he is a past chairman of the Investment Program Association, a trade organization based in Washington, D.C. that promotes direct investments. He is a member of the Board of Trustees of Graceland College, Lamoni, Iowa; the International Association of Financial Planners and the American and Colorado Institutes of Certified Public Accountants. ITEM 11. EXECUTIVE COMPENSATION The Partnership has no employees; however, various personnel are required to operate the cable television systems owned by the Partnership. Such personnel are employed by the General Partner and, pursuant to the terms of the limited partnership agreement of the Partnership, the cost of such employment is charged by the General Partner to the Partnership as a direct reimbursement item. See Item 13. 45 46 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 as contemplated by the limited partnership agreement of the Partnership. The General Partner believes that the terms of such transactions are generally as favorable as could be obtained by the Partnership and 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 the for certain allocated overhead and administrative expenses. These expenses consist primarily of salaries and benefits paid to corporate personnel, rent, data processing services and other facilities costs. Such personnel provide engineering, marketing, administrative, accounting, legal and investor relations services. Allocations of personnel costs are based primarily on actual time spent by employees of the General Partner. Remaining overhead costs are allocated based on revenues and/or the costs of assets managed. 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 two-thirds and one-third between PIN and the Partnership or the Venture. During the year ended December 31, 1994, the Partnership received revenues from PIN of $321, and the Venture received revenues from PIN of $15,283. The charges to the Partnership and to the Venture for related party transactions are as follows for the periods indicated:
Jones Cable Income Fund 1-B At December 31, --------------------------- --------------- 1994 1993 1992 ---- ---- ---- Management fees $ 224,245 $ 217,069 $ 208,185 Allocation of expenses 348,047 329,302 311,287 Interest expense 176,867 217,249 214,682 Amount of notes and advances outstanding 2,162,870 1,944,230 1,994,401 Highest amount of notes and advances outstanding 2,162,870 2,037,483 1,994,401 Programming fees: Superaudio 7,193 7,243 7,012 Mind Extension University 6,517 4,212 4,017
46 47
At December 31, --------------- Jones Cable Income Fund 1-B/C 1994 1993 1992 ----------------------------- ---- ---- ---- Management fees $ 1,056,089 $ 1,017,539 $ 942,417 Allocation of expenses 1,658,710 1,572,134 1,428,346 Interest expense 180,316 187,959 67,841 Amount of notes and advances outstanding 66,224 4,068,472 602,765 Highest amount of notes and advances outstanding 5,126,872 4,068,472 1,935,501 Programming fees: Superaudio 25,189 26,541 33,913 Mind Extension University 33,199 20,832 20,053 Jones Computer Network 13,218 -0- -0-
47 48 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)1. See index to financial statements for a list of financial statements and exhibits thereto filed as a part of this report. 3. The following exhibits are filed herewith: 4.1 Limited Partnership Agreement of Jones Cable Income Fund 1-B, Ltd. (1) 4.2 Joint Venture Agreement of Jones Cable Income Fund 1-B/C Venture. (1) 10.1.1 Copy of a franchise and related documents thereto granting a community antenna television franchise for the City of Clearlake, California. (1) 10.1.2 Copy of a franchise and related documents thereto granting a community antenna television franchise for Lake County, California. (1) 10.1.3 Copy of Resolution 91-31 amending the Lake County, California franchise. (2) 10.1.4 Copy of a franchise and related documents thereto granting a community antenna television franchise for the City of Lakeport, California. (1) 10.1.5 Copy of a franchise and related documents thereto granting a community antenna television franchise for Adams County, Colorado. (1) 10.1.6 Copies of Utility/Construction Permits for Boulder County, Colorado. (1) 10.1.7 Copy of a franchise and related documents thereto granting a community antenna television franchise for the City of Brighton, Colorado. (1) 10.1.8 Copy of a franchise and related documents thereto granting a community antenna television franchise for the City of Broomfield, Colorado. (2) 10.1.9 Copy of a franchise and related documents thereto granting a community antenna television system franchise for Weld County, Colorado. (Fund 1-B/C) (1) 10.1.9 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Brady, Michigan. (3) 10.1.10 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Calvin, Michigan. (4) 10.1.11 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Centreville, Michigan. (5) 10.1.12 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Coloma, Michigan. (5) 10.1.13 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Coloma, Michigan. (2)
48 49 10.1.14 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Constantine, Michigan. (5) 10.1.15 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Constantine, Michigan. (5) 10.1.16 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Dowagiac, Michigan. (5) 10.1.17 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the County of Elkhart, Michigan. (5) 10.1.18 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Fabius, Michigan. (5) 10.1.19 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Flowerfield, Michigan. (Fund 1-B/C). (5) 10.1.20 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Hagar, Michigan. (Fund 1-B/C) (3) 10.1.21 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Hartford, Michigan. (Fund 1-B/C) (4) 10.1.22 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the County of LaGrange, Michigan. (Fund 1-B/C) (3) 10.1.23 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Lockport, Michigan. (Fund 1-B/C) (3) 10.1.24 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Mendon, Michigan. (Fund 1-B/C) (3) 10.1.25 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Mottville, Michigan. (Fund 1-B/C) (3) 10.1.26 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Newberg, Michigan. (4) 10.1.27 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Nottawa, Michigan. (5) 10.1.28 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Park, Michigan. (5) 10.1.29 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Pavillion, Michigan. (5) 10.1.30 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Penn, Michigan. (6) 10.1.31 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Pipestone, Michigan. (4)
49 50 10.1.32 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Pokagon, Michigan. (4) 10.1.33 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Porter, Michigan. (6) 10.1.34 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Schoolcraft, Michigan. (4) 10.1.35 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Sherman, Michigan. (6) 10.1.36 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Silvercreek, Michigan. (5) 10.1.37 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Three Rivers, Michigan. (5) 10.1.38 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Vandalia, Michigan. (2) 10.1.39 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Vicksburg, Michigan. (5) 10.1.40 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Watervliet, Michigan. (5) 10.1.41 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Watervliet, Michigan. (5) 10.1.42 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Wayne, Michigan. (5) 10.1.43 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of White Pigeon, Michigan. (5) 10.1.44 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of White Pigeon, Michigan. (5) 10.1.45 Copy of a franchise and related documents thereto granting a community antenna television system franchise for Dakota City, Nebraska. (1) 10.1.46 Copy of Service Permit granted by Dakota County, Nebraska Board of County Commissioners. (1) 10.1.47 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Homer, Nebraska. (1) 10.1.48 Copy of a franchise and related documents thereto granting a community antenna television system franchise for South Sioux City, Nebraska. (1) 10.1.49 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Walthill, Nebraska. (2)
50 51 10.1.50 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Walthill, Nebraska. (1) 10.1.51 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Canyonville, Oregon. (1) 10.1.52 Copy of resolution amending the franchise for the City of Canyonville, Oregon. (2) 10.1.53 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Myrtle Creek, Oregon. (1) 10.1.59 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Riddle, Oregon. (2) 10.1.60 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Winston, Oregon. (1) 10.1.61 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Cordova, South Carolina. (7) 10.1.62 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Orangeburg, South Carolina. (7) 10.1.63 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the County of Orangeburg, South Carolina. (7) 10.2.1 Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2) 10.2.2 Amendment No. 1 dated 7/21/89 to Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2) 10.2.3 Amendment No. 2 dated 10/15/90 to Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2) 10.2.3 Amendment No. 3 dated 6/30/92 to Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2) 10.2.4 Amended and Restated Revolving Credit Agreement dated September 30, 1994 between Jones Cable Income Fund 1-B/C Venture, Corestates Bank, N.A., First National Bank of Maryland, Dresdner Bank AG and Continental Bank. 10.2.5 Revolving Credit and Term Loan Agreement dated as of January 19, 1995 between Jones Cable Income Fund 1-B and Colorado National Bank. 27 Financial Data Schedule
------------------- (1) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1987. (2) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992. 51 52 (3) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1993. (4) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990. (5) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1988. (6) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1989. (7) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1986. 52 53 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JONES CABLE INCOME FUND 1-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 27, 1995 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 27, 1995 (Principal Executive Officer) By: /s/ Kevin P. Coyle --------------------------- Kevin P. Coyle Group Vice President/Finance Dated: March 27, 1995 (Principal Financial Officer) By: /s/ Larry Kaschinske --------------------------- Larry Kaschinske Controller Dated: March 27, 1995 (Principal Accounting Officer) By: /s/ James B. O'Brien --------------------------- James B. O'Brien Dated: March 27, 1995 President and Director By: /s/ Raymond L. Vigil --------------------------- Raymond L. Vigil Dated: March 27, 1995 Group Vice President and Director By: /s/ Robert S. Zinn --------------------------- Robert S. Zinn Dated: March 27, 1995 Director 53 54 By: /s/ David K. Zonker --------------------------- David K. Zonker Dated: March 27, 1995 Director By: --------------------------- Derek H. Burney Dated: Director By: --------------------------- James J. Krejci Dated: Director By: --------------------------- Christine Jones Marocco Dated: Director By: --------------------------- Daniel E. Somers Dated: Director 54 55 EXHIBIT INDEX
Exhibit Page ------- ---- 4.1 Limited Partnership Agreement of Jones Cable Income Fund 1-B, Ltd. (1) 4.2 Joint Venture Agreement of Jones Cable Income Fund 1-B/C Venture. (1) 10.1.1 Copy of a franchise and related documents thereto granting a community antenna television franchise for the City of Clearlake, California. (1) 10.1.2 Copy of a franchise and related documents thereto granting a community antenna television franchise for Lake County, California. (1) 10.1.3 Copy of Resolution 91-31 amending the Lake County, California franchise. (2) 10.1.4 Copy of a franchise and related documents thereto granting a community antenna television franchise for the City of Lakeport, California. (1) 10.1.5 Copy of a franchise and related documents thereto granting a community antenna television franchise for Adams County, Colorado. (1) 10.1.6 Copies of Utility/Construction Permits for Boulder County, Colorado. (1) 10.1.7 Copy of a franchise and related documents thereto granting a community antenna television franchise for the City of Brighton, Colorado. (1) 10.1.8 Copy of a franchise and related documents thereto granting a community antenna television franchise for the City of Broomfield, Colorado. (2) 10.1.9 Copy of a franchise and related documents thereto granting a community antenna television system franchise for Weld County, Colorado. (Fund 1-B/C) (1) 10.1.9 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Brady, Michigan. (3) 10.1.10 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Calvin, Michigan. (4) 10.1.11 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Centreville, Michigan. (5) 10.1.12 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Coloma, Michigan. (5) 10.1.13 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Coloma, Michigan. (2)
56
Exhibit Page ------- ---- 10.1.14 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Constantine, Michigan. (5) 10.1.15 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Constantine, Michigan. (5) 10.1.16 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Dowagiac, Michigan. (5) 10.1.17 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the County of Elkhart, Michigan. (5) 10.1.18 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Fabius, Michigan. (5) 10.1.19 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Flowerfield, Michigan. (Fund 1-B/C). (5) 10.1.20 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Hagar, Michigan. (Fund 1-B/C) (3) 10.1.21 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Hartford, Michigan. (Fund 1-B/C) (4) 10.1.22 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the County of LaGrange, Michigan. (Fund 1-B/C) (3) 10.1.23 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Lockport, Michigan. (Fund 1-B/C) (3) 10.1.24 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Mendon, Michigan. (Fund 1-B/C) (3) 10.1.25 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Mottville, Michigan. (Fund 1-B/C) (3) 10.1.26 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Newberg, Michigan. (4) 10.1.27 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Nottawa, Michigan. (5) 10.1.28 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Park, Michigan. (5) 10.1.29 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Pavillion, Michigan. (5) 10.1.30 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Penn, Michigan. (6) 10.1.31 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Pipestone, Michigan. (4)
57
Exhibit Page ------- ---- 10.1.32 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Pokagon, Michigan. (4) 10.1.33 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Porter, Michigan. (6) 10.1.34 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Schoolcraft, Michigan. (4) 10.1.35 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Sherman, Michigan. (6) 10.1.36 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Silvercreek, Michigan. (5) 10.1.37 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Three Rivers, Michigan. (5) 10.1.38 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Vandalia, Michigan. (2) 10.1.39 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Vicksburg, Michigan. (5) 10.1.40 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Watervliet, Michigan. (5) 10.1.41 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Watervliet, Michigan. (5) 10.1.42 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of Wayne, Michigan. (5) 10.1.43 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Township of White Pigeon, Michigan. (5) 10.1.44 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of White Pigeon, Michigan. (5) 10.1.45 Copy of a franchise and related documents thereto granting a community antenna television system franchise for Dakota City, Nebraska. (1) 10.1.46 Copy of Service Permit granted by Dakota County, Nebraska Board of County Commissioners. (1) 10.1.47 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Homer, Nebraska. (1) 10.1.48 Copy of a franchise and related documents thereto granting a community antenna television system franchise for South Sioux City, Nebraska. (1) 10.1.49 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Walthill, Nebraska. (2)
58
Exhibit Page ------- ---- 10.1.50 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Village of Walthill, Nebraska. (1) 10.1.51 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Canyonville, Oregon. (1) 10.1.52 Copy of resolution amending the franchise for the City of Canyonville, Oregon. (2) 10.1.53 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Myrtle Creek, Oregon. (1) 10.1.59 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Riddle, Oregon. (2) 10.1.60 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Winston, Oregon. (1) 10.1.61 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the Town of Cordova, South Carolina. (7) 10.1.62 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Orangeburg, South Carolina. (7) 10.1.63 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the County of Orangeburg, South Carolina. (7) 10.2.1 Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2) 10.2.2 Amendment No. 1 dated 7/21/89 to Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2) 10.2.3 Amendment No. 2 dated 10/15/90 to Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2) 10.2.3 Amendment No. 3 dated 6/30/92 to Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2) 10.2.4 Amended and Restated Revolving Credit Agreement dated September 30, 1994 between Jones Cable Income Fund 1-B/C Venture, Corestates Bank, N.A., First National Bank of Maryland, Dresdner Bank AG and Continental Bank. 10.2.5 Revolving Credit and Term Loan Agreement dated as of January 19, 1995 between Jones Cable Income Fund 1-B and Colorado National Bank. 27 Financial Data Schedule
------------------- (1) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1987. (2) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992. 59 (3) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1993. (4) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990. (5) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1988. (6) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1989. (7) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1986. EX-10.2.4 2 AMENDED & RESTATED REVOLVING CREDIT AGRMT 9/30/94 1 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Agreement") is made this 30th day of September, 1994, by and among JONES CABLE INCOME FUND 1-B/C VENTURE, a Colorado general partnership (the "Company"); CORESTATES BANK, N.A.(1), a national banking association with offices at 1500 Market Street, Philadelphia, PA 19101 ("CoreStates" and in its capacity as agent for the Banks, "Agent"); FIRST NATIONAL BANK OF MARYLAND, a national banking association with offices at 25 South Charles Street, Baltimore, MD 21201 ("First Maryland"); DRESDNER BANK AG, a bank organized under the laws of Germany acting through its branch office at 75 Wall Street, New York, NY 10005-2889 ("Dresdner"); and CONTINENTAL BANK, a Pennsylvania banking corporation with offices at 1500 Market Street, Philadelphia, PA 19102 ("Continental") (CoreStates, First Maryland, Dresdner and Continental each individually a "Bank" and collectively the "Banks"). W I T N E S S E T H: WHEREAS, the Company is a Colorado joint venture general partnership in which Jones Cable Income Fund 1-B, Ltd. and Jones Cable Income Fund 1-C, Ltd., each a Colorado limited partnership (the "Partnerships"), are the sole partners, and Jones Intercable, Inc., a Colorado corporation ("JII"), is the sole general partner of each of the Partnerships; and WHEREAS, the Company, Agent and Banks are parties to that certain Revolving Credit Agreement dated September 29, 1988, as amended by Amendment No. 1 to Loan Agreement dated November 12, 1990 ("Amendment No. 1"), Amendment No. 2 to Revolving Credit Agreement and Amendment No. 2 to Security Agreement dated May 29, 1992 ("Amendment No. 2"), Amendment No. 3 to Revolving Credit Agreement and Amendment No. 1 to Intercreditor Agreement dated July 9, 1992 ("Amendment No. 3"), Amendment No. 4 to Revolving Credit Agreement dated May 13, 1993 and accepted and agreed to on May 17, 1993 ("Amendment No. 4"), Amendment No. 5 to Revolving Credit Agreement dated September 30, 1993 ("Amendment No. 5") and Amendment No. 6 to Revolving Credit Agreement dated May 31, 1994 ("Amendment No. 6") (as amended prior to the date hereof, the "Existing Credit Agreement"); and WHEREAS, the Company, CoreStates, First Maryland, Dresdner and Continental have agreed, pursuant to Paragraph 25 of ____________________ (1) CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank. 2 Amendment No. 6 to the Existing Agreement, to restate the Existing Agreement in a single document with such modifications as such parties shall approve; and WHEREAS, the amendment and restatement of the Existing Credit Agreement hereunder, and the amendment and restatement of related documents in connection herewith, are not intended by the parties to constitute a novation, discharge or satisfaction of the indebtedness of the Company under the Existing Credit Agreement or any collateral security therefor, all of which indebtedness and collateral security shall remain outstanding under this Agreement and documents executed in connection herewith. NOW, THEREFORE, in consideration of the premises and the agreements herein set forth and intending to be legally bound hereby, the parties hereby amend and restate the Existing Credit Agreement in its entirety as follows: ARTICLE I LOANS AND NOTE 1.1. Revolvinq Credit Facility. (a) Loans. Subject to the requirements of Article III hereof, from time to time prior to the earlier of (i) June 30, 1997 or (ii) the termination in full of the Commitments (in either case the "Termination Date"), the Company may obtain Loans from the Banks, on a pro rata basis, up to the amount of such Bank's outstanding Commitment as set forth in subsection (b) below, repay such Loans and reborrow hereunder. Each Loan from each Bank shall be in a minimum amount of One Hundred Thousand Dollars ($100,000). (b) Banks' Several Commitments. The amount of each Bank's several Commitment is set forth next to its name below:
Banks Commitment Amount ----- ----------------- CoreStates $15,000,000 First Maryland $10,000,000 Dresdner $10,000,000 Continental $10,000,000 =========== TOTAL $45,000,000
-2- 3 (c) Notes. (i) All Loans are, and shall continue to be, evidenced by the Company's Fourth Amended and Restated Revolving Credit Promissory Note (Limited Recourse) in favor of CoreStates, the Company's Revolving Credit Promissory Note (Limited Recourse) in favor of First Maryland, the Company's Revolving Credit Promissory Note (Limited Recourse) in favor of Dresdner and the Company's Revolving Credit Promissory Note (Limited Recourse) in favor of Continental, each dated May 31, 1994 and issued in connection with Amendment No. 6 (individually a "Note", and collectively the "Notes"). (ii) The Company's indebtedness under the Existing Credit Agreement was originally evidenced by the notes dated September 29, 1988 issued in favor of CoreStates and First Wisconsin National Bank of Milwaukee ("Firstar") in connection with the Existing Credit Agreement and thereafter evidenced, without novation, by the notes dated November 12, 1990 issued in favor of CoreStates and Firstar in connection with Amendment No. 1, the Amended and Restated Revolving Credit Promissory Note (Limited Recourse) dated May 29, 1992 issued in favor of CoreStates in connection with Amendment No. 2, the Second Amended and Restated Note and the Amended and Restated Note, each dated July 9, 1992, issued in favor of CoreStates and Firstar, respectively, in connection with Amendment No. 3, the Third Amended and Restated Note and the Second Amended and Restated Note, each dated September 30, 1993, issued in favor of CoreStates and Firstar, respectively, in connection with Amendment No. 5. The execution and delivery of the Notes in connection with Amendment No. 6 did not, and the continuation of such Notes hereunder does not, constitute a novation and did not and does not terminate, extinguish or discharge the indebtedness of the Company under the Existing Credit Agreement or the collateral security therefor, all of which indebtedness and collateral security shall continue as obligations of the Company to the Banks under and governed by this Agreement, the Security Agreement and the other Collateral Documents required hereunder. (iii) Although the Notes are payable in the full amounts specified above, the Company shall be obligated to pay only the amounts actually disbursed to or for the account of the Company, together with interest on the unpaid balance of sums so disbursed which remains outstanding from time to time, at the rates and on the dates specified in the Notes and in Section 1.6 hereof, together with the fees and expenses provided herein. The Company agrees that, if the Banks, in their sole discretion, agree to extend the Termination Date or increase the Commitment, the Company will execute and deliver such amended, restated or revised notes or other instruments and documents, and take such other action, as the Banks may deem necessary or appropriate in -3- 4 connection with any such extension of the Termination Date or increase in the Commitment. (d) Maturity. The Company hereby agrees that on the Termination Date the entire outstanding balance under the Credit Agreement, principal, interest, fees and expenses, shall be due and payable in full and the Company hereby agrees to make such payment on such date. 1.2. Use of Proceeds. The Company represents, warrants and agrees that: (a) The proceeds of the Loans made to the Company hereunder have been or shall be used by the Company solely for (i) acquisition of the cable television (CATV) systems serving the communities originally listed on Schedule I to the Existing Credit Agreement (the "Acquired Systems"), pursuant to a Purchase and Sale Agreement dated as of June 17, 1988 (the "Purchase Agreement") by and between Omega of Michigan Cable Co., Cable TV of Constantine and White Pigeon Co., Diamond Lake Area Cable TV Co. and Paw Lake Area Cable TV Co. ("Sellers") and the Company, (ii) capital expenditures for the improvement of the Acquired Systems and other CATV systems owned by the Company from time to time (all such CATV systems which are owned or hereafter acquired by the Company are hereinafter referred to as the "CATV Systems"), (iii) general working capital requirements of the Company, and (iv) payment to JII of Management Fees and Home Office Allocations incurred in the ordinary course of business, to the extent permitted hereunder. (b) No part of the proceeds of any Loan made hereunder will be used to "purchase" or "carry" any "margin stock" or to extend credit to others for the purpose of "purchasing" or "carrying" any "margin stock" (as such terms are defined in the Regulation U of the Board of Governors of the Federal Reserve System), and the assets of the Company do not include, and the Company has no present intention of acquiring, any such security. 1.3. Commitment Fee. The Company shall pay to each Bank a commitment fee computed at the rate of 1/2% per annum on the difference existing from time to time between (a) the amount of such Bank's Commitment (as it may be reduced pursuant to section 1.4), and (b) the outstanding unpaid principal balance of sums disbursed to the Company by such Bank hereunder. Such commitment fees shall accrue for the period from the date of this Agreement to and including the Termination Date, and shall be payable in arrears on the last day of March, June, September and December of each year, commencing December 31, 1988. 1.4. Termination or Reduction of the Commitment. The Company shall have the right, upon five Business Days' prior -4- 5 written notice to Agent, to ratably reduce in part the Commitments at any time, provided, however, that each partial reduction of the Commitment of each Bank shall be in a minimum amount of $100,000, and provided, further, that no reduction shall reduce the Commitment of any Bank to an amount less than the aggregate amount of the Loans of such Bank outstanding hereunder at the time. The entire Commitments of the Banks may be terminated in whole at any time upon five Business Days' prior written notice to Agent. In addition, the Company shall be required to reduce the Commitments on a pro rata basis (and the foregoing $100,000 minimum reduction shall not be applicable thereto), (i) in connection with any contribution to the Company's capital by the Partnerships, or any other equity contribution in any form, in an amount equal to the amount of such contribution, and (ii) in connection with any sale of a CATV System, in the amount determined pursuant to Section 5.6 hereof. 1.5. Prepayment. Subject to the provisions of Section 1.8 of this Agreement, the Company may prepay the Loans in whole or in part at any time without premium or penalty; and the prepayments prior to the Termination Date shall not reduce the Commitments and may be reborrowed. All prepayments shall be made and applied pro rata against the Notes then outstanding. Prepayments of the Note of each Bank shall be not less than $100,000. The Company shall notify each Bank at least one (1) Business Day in advance of any such prepayments on a Prime Rate Loan and at least two (2) Business Days in advance of any such prepayment of a Eurodollar Loan. In addition to the foregoing, the Company shall be required to make a payment (and the foregoing $100,000 minimum reduction shall not be applicable thereto), (i) in connection with any contribution to the Company's capital by the Partnerships, or any other equity contribution in any form, in an amount equal to the amount of such contribution, and (ii) in connection with any sale of a CATV System, in the amount determined pursuant to Section 5.6 hereof. 1.6. Rate of Interest. The Company shall pay interest on the unpaid principal amount of each Loan from the date of such Loan until the date the principal balance of such Loan is paid in full at the following rates: (a) Prime Rate Loans: During the periods that such Loan is a Prime Rate Loan, a rate equal to the Base Rate plus the Applicable Margin per annum, with such interest rate changing when and as the Base Rate changes and when and as the Applicable Margin changes; (b) Eurodollar Loans: During each Interest Period of a Eurodollar Loan, a rate equal to LIBO Rate for the Interest Period plus the Applicable Margin per annum, with such rate to change when and as the Applicable Margin changes; -5- 6 provided, that, in each case, the unpaid principal balance of a Loan shall bear interest upon the occurrence and during the continuance of an Event of Default at a rate equal to two percent (2%) per annum plus the Base Rate, with such rate changing when and as such Base Rate changes. 1.7. Interest Periods. If and for so long as any Loan shall be maintained as a Eurodollar Loan, the period commencing on the date of such Loan and ending on the date of payment in full shall be divided into "Interest Periods" The initial Interest Period shall be selected by the Company in the applicable notice required by section 2.1. The Company may select a subsequent Interest Period for each Loan by notifying the Agent thereof at least one (1) Business Day (in the case of a Prime Rate Loan) and two (2) Business Days (in the case of a Eurodollar Loan) prior to the first day of the new Interest Period. Within 5 Business Days after the commencement of each Interest Period, the Company shall deliver to the Agent written confirmation of the interest rate applicable to the Eurodollar Loan to which such Interest Period relates and the term of such Interest Period. If the Company fails to select a subsequent Interest Period at the termination of an applicable Interest Period for any Eurodollar Loan in accordance with the preceding sentence, such Loan shall be a Prime Rate Loan thereafter, until such time that an Interest Period is selected. The selection of Interest Periods is subject to the following provisions: (a) Each Interest Period for a Eurodollar Loan shall be for thirty, sixty, ninety, one hundred twenty or one hundred eighty days or, if reasonably available, such longer period requested by the Company and made available by the Banks; provided that, anything herein to the contrary notwithstanding, each Eurodollar Loan of each Bank in an amount of less than $1,000,000 shall have an Interest Period of one hundred eighty days or less. (b) If the last day of any Interest Period would occur on a day other than a Business Day, the last day of that Interest Period shall occur on the next succeeding Business Day. (c) No Interest Period for a Loan may extend beyond the Termination Date. (d) No more than four separate Interest Periods may be in effect at any one time. 1.8. Funding Costs. In connection with any prepayment or repayment of a Eurodollar Loan made on other than the last day of the applicable Interest Period, whether such prepayment or repayment is voluntary, mandatory, by demand, acceleration or otherwise, and in connection with any failure by the Company to fulfill on or before the date specified in a request for an -6- 7 advance of a Eurodollar Loan the applicable conditions as set forth in this Agreement, the Company shall pay to Banks all funding costs which may arise in connection with such prepayment or repayment of failure to fund, as calculated by Agent in accordance with Exhibit A. 1.9. Other Increased Costs. If, as a result of any (a) change in any law or regulation, or in the interpretation thereof by any court or administrative or governmental authority, (b) charge generally imposed on banks which are similarly situated to the Banks which affects any Bank in its dealings in the London Interbank market, (c) violation by the Company of the terms of this Agreement, or (d) the adoption of or change in any law, rule, regulation or guideline affecting capital adequacy or compliance by a Bank (or any lending office of such Bank) or such Bank's holding company with any request or directive regarding capital adequacy of any court, administrative or governmental authority, or central bank: (i) the basis of taxation of payments to any Bank of the principal of or interest on any Loan or any other amounts payable under this Agreement (other than taxes imposed on the overall net income of such Bank) is changed; (ii) any reserve (including, without limitation, the Certificate Reserve Percentage), special deposit or similar requirement relating to any extension of credit or other asset of, or any deposits with or other liabilities of any Bank which affects the making or maintaining by such Bank of Loans hereunder is imposed, modified or deemed applicable; (iii) any other condition or cost affecting this Agreement or the making or maintaining by any Bank of Loans made hereunder is imposed on such Bank by law or regulation; or (iv) the rate of return on any Bank's capital or on the capital of such Bank's holding company, if any, as a consequence of this Agreement, the Commitments or the Loans is or would be reduced and such Bank reasonably determines that, by reason thereof, the cost to it of making or maintaining any Loan hereunder is increased, or any amount receivable by it hereunder in respect to any such Loan is reduced, then the Bank so affected shall notify the Company thereof within a reasonable time and the Company shall pay to such Bank, upon written request (which request shall describe the occurrence and include a calculation of such additional cost or reduction), such additional amount or amounts -7- 8 as will, in the reasonable determination of such Bank, compensate such Bank for such additional costs or reduction; provided, however, that the Company's liability for additional amounts computed in accordance with this section shall neither be changed nor waived by a failure of such Bank to give such notice. 1.10. Payments. Interest on Prime Rate Loans shall be due and payable quarterly on the last day of each March, June, September, and December, commencing on the first of such days to occur after the date thereof; interest on Eurodollar Loans shall be due and payable on the expiration date of each applicable Interest Period and, if the Interest Period is longer than 90 days, on the last day of each March, June, September and December commencing on the first of such days to occur after the commencement of such Interest Period. In addition, interest shall be due and payable on the Termination Date. The Agent shall give the Company telephonic advice of the amount of each scheduled principal and interest payment which shall be due on the Notes and shall thereafter mail a bill to the Company therefor, but failure of the Agent to give such telephonic advice or to mail any such bill shall not relieve the Company of its obligations to make timely payments of principal and interest on the Notes. 1.11. HLT Classification. If, after the date hereof, Agent is advised by any Bank that such Bank has received notice from any governmental authority, central bank or comparable agency having jurisdiction over such Bank that the Loans are or any of them is classified as a "highly leveraged transaction" or the Company is classified as an "HLT Borrower" (in each case an "HLT Classification"), or if Agent reasonably determines that the Loans or any of them or the Company is subject to an HLT Classification, the Agent shall promptly give notice of such HLT Classification to the Company and the other Banks. From and after the date of such notice to the Company and Banks of an HLT Classification, and continuing until such HLT Classification is removed, all then outstanding or thereafter advanced Loans shall bear interest at the applicable rates selected by the Company pursuant to Paragraph 1.6 hereof (including the then-applicable margin) plus one-half of one percent (1/2%) per annum. 1.12. Special Provisions Applicable to Eurodollar Loans. (a) Chanqe of LIBO Rate. The LIBO Rate may be automatically adjusted by Agent on a prospective basis to take into account the additional or increased cost of maintaining any necessary reserves for Eurodollar deposits or increased costs due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including but not limited to changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the -8- 9 reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor) that increase the cost to Banks of funding any Eurodollar Loan; provided, however, that each Bank shall use reasonable efforts to minimize such costs, subject, in any event, to such Bank's sole discretion. Agent shall give the Company notice of such a determination and adjustment, which determination and adjustment made in good faith shall be prima facie evidence of the correctness of the fact and the amount of such adjustment. The Company may, by notice to Agent, (A) request Agent to furnish to the Company a statement setting forth the basis for adjusting such LIBO Rate and the method for determining the amount of such adjustment; and/or (B) repay the Eurodollar Loan with respect to which such adjustment is made pursuant to the requirements of Sections 1.5 and 1.8 hereof. (b) Unavailability of Eurodollar Funds. In the event that the Company shall have requested a Eurodollar Loan in accordance with Section 1.6 hereof and any Bank shall have reasonably determined that Eurodollar deposits equal to the principal amount of such Eurodollar Loan and for the Interest Period specified are unavailable or that the LIBO Rate will not adequately and fairly reflect the cost of making or maintaining the principal amount of such Eurodollar Loan during the Interest Period specified or that by reason of circumstances affecting Eurodollar markets, adequate and reasonable means do not enlist for ascertaining the LIBO Rate applicable to the specified Interest Period, Agent on behalf of such Bank shall promptly give notice of such determination to the Company that the LIBO Rate is not available. A determination by Agent hereunder made in good faith shall be prima facie evidence of the correctness of such fact. Upon such a determination, (i) the obligation to advance or maintain Eurodollar Loans shall be suspended until Agent shall have notified the Company and Banks that such conditions shall have ceased to exist, and (ii) the Company shall elect the Prime Rate to be applicable to such Loan in accordance with Section 1.6 hereof. 1.13. Interest Rate Protection. Commencing within one (1) year of May 31, 1994 and continuing for three (3) years from the date of any such agreement, the Company shall maintain not less than fifty percent (50%) of the outstanding principal amount of the Loans subject to interest rate protection agreements in form and substance satisfactory to Agent, and the Company's obligations thereunder shall be secured by the collateral granted pursuant to the Security Agreement, and shall have the benefit of the subordination provisions set forth in the Subordination Agreement. 1.14. Taxes. Any and all payments by the Company to the Banks hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, -9- 10 imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding in the case of each Bank, (i) taxes assessed solely on the income of such Bank, (ii) taxes arising solely from a connection between such Bank and the jurisdiction imposing such tax, other than a connection arising from the activities of such Bank solely in connection with this Agreement, and (iii) United States withholding tax payable with respect to payments hereunder under laws (including, without limitation, any statute, treaty, ruling, determination or regulation) in effect on the Initial Date (as hereinafter defined) for such Bank, provided that any United States withholding tax payable as a result of any changes in such laws occurring after the Initial Date shall not be excluded (all such non-excluded taxes, levies, imposts, deductions, charges, withholding and liabilities being hereinafter referred to as "Taxes"). For purposes of this Paragraph 1.14, the term "Initial Date" shall mean, in the case of each Bank, the date of May 31, 1994 and, in the case of each assignee (for purposes of this Paragraph 1.14, "Assignee"), the date of the applicable assignment of the Loan. If any Taxes shall be required by law to be deducted from or in respect of any sum payable hereunder or under any Note to any Bank or Assignee, (i) the sum payable by the Company shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Paragraph 1.14) such Bank or Assignee (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, but shall be decreased to take into account any credit, deduction or offset available in any other jurisdiction as a result of such payment, and (ii) the Company shall make such deductions and pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. The Company shall not, however, be required to pay any amounts pursuant to clause (i) of the preceding sentence to any Bank organized under the laws of a jurisdiction outside of the United States, unless such Bank has provided to the Company either (x) a facially complete Internal Revenue Service Form 4224 or Form 1001 or other applicable form, certificate or document prescribed by the United States Internal Revenue Service certifying as to such Bank's entitlement to an exemption from, or reduction of, United States withholding tax on payments to be made hereunder or under the Notes or (y) a letter stating that such Bank is unable lawfully to provide a properly completed and executed Form 4224 or Form 1001 or (z) other facially complete documents satisfactory to the Agent and the Company indicating that all payments that will be made to such Bank are exempt from or subject to a reduced rate of United States withholding tax. The Company hereby agrees to pay each Bank the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Paragraph 1.14) paid by such Bank decreased to take into account the effect of any -10- 11 credit, deduction or offset, as determined and certified by such Bank's tax or accounting department to Company in good faith, available in any other jurisdiction on account of the payment of Taxes, and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto. Each Bank subject to Taxes agrees either, at its option, to contest the payment of Taxes or to pay or permit the Company to pay such Taxes when due and payable and, if any such Bank receives a rebate, refund or other return of Taxes paid by the Company, such Bank will turn over to the Company the amount rebated, refunded or returned. Payment under this provision shall be made within thirty (30) days from the date such Bank makes written demand therefor. Within (30) days after the date of any payment of Taxes, the Company will furnish to the Agent or the applicable Bank the original or a certified copy of a receipt or other documents reasonably acceptable to the Agent evidencing payment thereof. Any Bank or Assignee organized under the laws of a jurisdiction other than the United States (or any political subdivision thereof) shall provide from time to time if requested by the Company and the Agent or required by the Internal Revenue Service of the United States, (i) a facially complete Internal Revenue Service Form 4224 (or any successor form) certifying that all payments made to such Bank are effectively connected with its conduct of trade or business in the United States and will be includable in its gross income or (ii) a facially complete Internal Revenue Service Form 1001 (or any successor form) certifying as to its status for purposes of determining the applicability of a reduced rate of United States withholding taxes with respect to all payments to be made hereunder to such Bank pursuant to a double tax treaty obligation of the United States, or (iii) other facially complete documents satisfactory to the Agent and Company indicating that all payments that will be made to such Bank are exempt from or subject to a reduced rate of United States withholding tax. Unless the Company and Agent have received such forms of such documents validly indicating that payments hereunder are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable double tax treaty, the Company or the Agent shall withhold taxes from such payments to such Bank at the applicable statutory rate. Notwithstanding any other provision contained herein to the contrary, the Company and the Agent shall be entitled to deduct and withhold United States withholding taxes with respect to all payments to be made hereunder to or for any Bank or Assignee as may be required by United States law due to an assignment and such Bank or Assignee shall indemnify and hold harmless the Company and the Agent from and against any tax, interest, penalty or other expense that the Company and the Agent may incur as a -11- 12 consequence of any failure to withhold United States taxes applicable because of any assignment that is not disclosed to them. ARTICLE II ADMINISTRATION OF CREDIT 2.1. Borrowing Procedure. Loans hereunder shall be made at the principal banking office of the Agent located in Philadelphia, Pennsylvania (or, in the case of a successor Agent, the office identified by such successor Agent), upon telephonic notice from the Company to the Agent specifying (i) the date, which must be a Business Day, of the proposed borrowing (hereinafter referred to as a "Funding Date") (ii) the principal amount and type of the proposed Loan and (iii) in the case of a Eurodollar Loan, the initial Interest Period for such Loan. Such telephonic notice shall be given to the Agent not later than 11:00 a.m., Agent's local time on the first (1st) Business Day prior to the Funding Date, in the case of Prime Rate Loans, and not later than 11:00 a.m., Agent's local time on the second (2nd) Business Day prior to the Funding Date in the case of Eurodollar Loans. Upon its receipt of such telephonic notice from the Company, the Agent shall promptly give telephonic notice to each other Bank, and each such Bank shall have its portion of the Loans available to the Agent in Agent's principal banking office in immediately available funds on the Funding Date. Out of the funds received from the Banks for the making of the Loans hereunder, the Agent will make a Loan to the Company in such amount on behalf of such Bank. The failure of any of the Banks to lend in accordance with its Commitment shall not relieve the other Banks of their several obligations hereunder, but no Bank shall be liable in respect to the obligation of any other Bank hereunder or be obligated in any event to lend in excess of its Commitment. Documents delivered to the Agent for the account of each Bank shall be promptly delivered to such Bank, or in accordance with instructions received from it, together with copies of such other documents received in connection with the borrowing as such Bank shall request. Within five (5) Business Days after each Funding Date, the Company shall deliver to the Agent a written certification, dated as of the Funding Date in the form of Exhibit B attached hereto confirming the matters set forth in clauses (i) through (iii) of this Section 2.1. 2.2. Computations; Non-Business Days. All interest payable on Eurodollar Loans shall be computed for the actual number of days elapsed using a daily rate determined by dividing the annual rate by 360, and all interest payable on Prime Rate Loans and the commitment fees under Section 1.3 hereof shall be computed on the basis of a year of 365 or 366 days, as appropriate, for the actual number of days elapsed. Whenever any -12- 13 payment to be made hereunder or under any Note shall be stated to be due on a Saturday, Sunday or a public holiday under the laws of the Commonwealth of Pennsylvania, such payment may be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest under the Notes, or commitment fees hereunder, as the case may be. 2.3. Application of Payments. All payments and prepayments of principal, interest and fees under this Agreement and the Notes shall be made to the Agent at 1500 Market Street, Philadelphia, Pennsylvania 19101 no later than 1:00 p.m. Philadelphia, Pennsylvania time on the due date thereof in immediately available funds, for the ratable account of the Banks. The Agent shall promptly distribute to each such Bank, pro rata, the amount of principal, interest or fees received by the Agent for the account of such Bank. Any payment to the Agent for the account of a Bank or a holder of a Note under this Agreement shall constitute a payment by the Company to such Bank or holder of the amount so paid to the Agent, and any Notes or portions thereof so paid shall not be considered outstanding for any purpose after the date of such payment to the Agent. 2.4. Pro Rata Treatment. All payments or prepayments of principal, interest or fees shall be made pro rata in accordance with the amounts of the Notes then outstanding. In the event that any Bank shall receive from the Company or any other source (other than the sale of a participation to another commercial lender in the ordinary course of business) any payment of, on account of, or for any obligation of the Company hereunder or under the Notes (whether pursuant to the exercise of any right of set off, banker's lien, realization upon any security held for or appropriated to such obligation, counterclaim or otherwise) other than as above provided, then such Bank shall immediately purchase, without recourse and for cash, an interest in the obligations of the same nature held by the other Bank so that each Bank shall thereafter have a percentage interest in all of such obligations equal to the percentage interest which such Bank held in the Notes outstanding immediately before such payment; provided, that if any payment so received shall be recovered in whole or in part from such purchasing Bank, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. The Company specifically acknowledges and consents to the preceding sentence. 2.5. Deposits; Set Off. The Company grants each Bank, as security for the Note of such Bank, a lien and security interest in any and all monies, balances, accounts and deposits of the undersigned at such Bank now or at any time hereafter. If any Event of Default occurs hereunder or any attachment of any balance of the Company occurs, such Bank may offset and apply any such security toward the payment of the Note held by such Bank (subject to the requirements of Section 2.4 hereof), whether or -13- 14 not such Note or any part thereof, shall then be due. Promptly upon its charging any account of the Company pursuant to this section, the Bank shall give the Company notice thereof. ARTICLE III CONDITIONS OF BORROWING Without limiting any of the other terms of this Agreement, the Banks shall not be required to make any Loan to the Company hereunder unless the requirements of Section 3.1 below are satisfied on the Funding Date for such Loan. This Amended and Restated Revolving Credit Agreement shall become effective when executed by the Company, Agent and each Bank and when the conditions set forth in Sections 3.1 to 3.6, inclusive, below are satisfied. 3.1. Representations. On the date hereof and on the date of each Loan, the representations and warranties contained in Article IV hereof and in Section 3 of the Security Agreement (hereinafter defined) continue to be true and correct; no Default or Event of Default hereunder shall have occurred and be continuing; and the Agent shall have received a telephonic request therefor at the times and containing the information required under Section 2.1 above. Each such telephonic request for a Loan shall constitute a certification by the Company that the matters set forth in clauses (a), (b) and (c) of Exhibit B hereto are true as of the date thereof. If no Interest Period is specified by the Company, the Loan request shall be deemed a request for a Prime Rate Loan. 3.2. Subordination. The Partnerships and JII shall have executed and delivered to Agent an amended and restated version of the subordination agreement executed in connection with the Existing Credit Agreement (as so amended and restated and as amended, modified or restated from time to time hereafter, the "Subordination Agreement"). An integrated composite of the Subordination Agreement is attached hereto as Exhibit C. 3.3. Security Aqreement. The Company shall have executed and delivered to Agent (i) a confirmation of the security agreement executed in connection with the Existing Credit Agreement (as amended prior to the date hereof and from time to time hereafter, the "Security Agreement") covering all tangible and intangible personal property of the Company comprising, relating to or arising from the CATV Systems of the Company, and (ii) to the extent not already filed, financing statements, in form satisfactory to the Agent, covering the collateral described in the Security Agreement. An integrated composite of the Security Agreement is attached hereto as Exhibit D. -14- 15 3.4. Insurance Certificate. Agent shall have received evidence satisfactory to it that the Company maintains hazard insurance coverage reasonably satisfactory to Banks. 3.5. Counsel Opinion. Each Bank shall have received from counsel for the Company and JII, satisfactory opinions as to such matters relating to the Company and JII, the validity and enforceability of this Agreement, the Loans made and to be made hereunder and the other documents required by this Article III and Federal Communications Commission ("FCC"), U.S. Copyright Office and franchise matters as Banks shall reasonably require. Banks acknowledge that the opinions delivered in connection with the Existing Credit Agreement and various of the Amnendments satisfy this requirement. The Company shall execute and/or deliver to each Bank or its counsel such documents concerning its partnership status and the authorization of such transactions as may be reasonably requested. 3.6. Proceedinqs Satisfactory. All proceedings taken in connection with the transactions contemplated by this Agreement, and all instruments, authorizations and other documents applicable thereto, shall be satisfactory in form and substance to each Bank and its counsel. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce the Banks to enter into this Agreement and to make the Loans as provided herein, the Company represents and warrants to each of the Banks as follows: 4.1. Orqanization. The Company is a joint venture partnership duly formed and validly existing under the laws of the State of Colorado and has all requisite partnership power and authority to conduct its business and to own its properties. The Company has no subsidiaries or investments in or loans to any other individuals or business entities other than loans and investments permitted by Section 5.05. The Partnerships are the sole joint venturers or partners with an ownership interest in the Company, and JII is the sole general partner of each of the Partnerships. The Company, the Partnerships and JII are each duly licensed or qualified to do business in the States of Michigan, California, Colorado, Nebraska, Oregon and Indiana and all other jurisdictions in which the nature of their activities or the character of their properties requires such qualification, and failure to so qualify would have a material adverse effect on the property, financial condition or business operations of the Company. All joint venture and partnership interests in the Company are validly existing and the creation and sale thereof are in compliance with all applicable federal and state -15- 16 securities laws and other applicable laws in all material respects. 4.2. Authority. The execution, delivery and performance of the Existing Credit Agreement, Amendment No. 1 through Amendment No. 6 and the Notes were, and the execution, delivery and performance of this Agreement and the documents required by Article III (the "Collateral Documents") are, within the partnership powers of the Company, were and have been duly authorized by all necessary partnership action and did not, do not and will not (i) require any consent or approval of the joint venture partners of the Company which has not been obtained (and evidence thereof delivered to the Banks), (ii) violate any provision of the Joint Venture Agreement of the Company dated October 21, 1987 (as amended, the "Joint Venture Agreement") or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Company; (iii) except as set forth in Exhibit E hereto, require the consent or approval of, or filing or registration with, any governmental body, agency or authority; or (iv) result in a material breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of the Company pursuant to, any indenture or other material agreement or instrument under which the Company is a party or by which it or its properties may be bound or affected, except for Permitted Liens. This Agreement constitutes, and the Notes and each of the documents required by Article III when executed and delivered hereunder will constitute, legal, valid and binding obligations of the Company or other signatory enforceable in accordance with its respective terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors' rights generally. 4.3. Investment Company Act of 1940. The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4.4. Employee Retirement Income Security Act. The Company does not presently maintain, nor is the Company required to contribute to, any Plan on behalf of any of its employees. 4.5. Financial Statements. The balance sheet of the Company as of December 31, 1993, and the income statement of the Company for the year ended on such date, as prepared.by Arthur Andersen & Co. and heretofore furnished to the Banks, are correct and complete and fairly represent the financial condition and the results of its operations for the fiscal year ended on such date. Other than as described in Exhibit E attached hereto, since such date there has been no material adverse change in the property, -16- 17 business, financial condition or operations of the Company or the CATV Systems. 4.6. [Intentionally Left Blank] 4.7. Liens. The Company has good and marketable title to all of its assets, real and personal, free and clear of all liens, security interests, mortgages and encumbrances of any kind, except Permitted Liens. All owned and leased buildings and equipment of the Company are in good condition, repair and working order in all material respects and, to the best of the Company's knowledge and belief, conform in all material respects to all applicable laws, regulations and ordinances. 4.8. Continqent Liabilities. The Company has no guarantees or other contingent liabilities outstanding (including, without limitation, liabilities by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss), except those permitted by Section 5.8 hereof. 4.9. Partnership Tax Matters. (a) Except as set forth on Exhibit E, the Company has duly and timely filed all information and tax returns and reports with any federal, state, local or foreign governmental taxing authority, body or agency, and all taxes, including without limitation income, gross receipt, sales, use, excise and any other taxes, and any governmental charges, penalties, interest or fines with respect thereto, due and payable by the Company, have been paid, withheld or reserved for in accordance with GAAP or, to the extent they relate to periods on or prior to the date of the financial statements referenced in Section 4.5 hereof (the "Financial Statements"), are reflected as a liability on the Financial Statements in accordance with GAAP. (b) As of the date of this Agreement, none of the Company's federal income tax information returns have been audited. Except as set forth on Exhibit E, the Company has not entered into any agreements for the extension of time for the assessment of any tax or tax delinquency, and the Company has received no outstanding and unresolved notices from the Internal Revenue Service or other state, local or foreign taxing authority, agency or body of any proposed examination or of any proposed change in reported information which may result in a deficiency or assessment against the Company or any partner in the Company and there are no suits, actions, claims, investigations, inquiries or proceedings now pending against the Company in respect of taxes, governmental charges or assessments. -17- 18 4.10. Absence of Litiqation. Except as set forth in Exhibit E hereto, neither the Company, JII nor any Partnership is a party to any litigation or administrative proceeding, nor so far as is known by the Company is any litigation or administrative proceeding threatened against any of them, (i) which relates to the execution, delivery or performance of this Agreement, the Notes or any other document required hereunder, or (ii) which could, if adversely determined, cause any material adverse change in the property, financial condition or business operations of the Company. 4.11. Absence of Default. No event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give any creditor of the Company the right to accelerate the maturity of any indebtedness of the Company for borrowed money. The Company is not in default under any other material lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination or award, non-compliance with which could materially adversely affect its property, financial condition or business operations. 4.12. Material Agreements. The Company is not a party to any agreement, instrument or undertaking, or subject to any other restriction, (i) which materially adversely affects or may in the future so affect the property, financial condition or business operations of the Company, or (ii) under or pursuant to which the Company is or will be required to place (or under which any other person may place) a lien upon any of its properties securing indebtedness either upon demand or upon the happening of a condition, with or without such demand (other than the Collateral Documents required by this Agreement). 4.13. Partnerships; Joint Ventures. The Company is not a member of any partnership or joint venture. 4.14. Full Disclosure. No information, exhibit or report furnished by Company or JII to any Bank in connection with the negotiation or execution of this Agreement contained any material misstatement of fact as of the date when made or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading as of the date when made. 4.15. Fiscal Year. The fiscal year of the Company ends on December 31 of each year. 4.16. Franchises, Licenses, etc.. (a) On the date hereof the Company holds, and at all times hereafter it will continue to hold all licenses, franchises, permits and approvals of, governmental authorities and agencies, including FCC licenses and local municipal -18- 19 licenses, permits and franchises and rights with respect thereto (herein collectively called "CATV Licenses"), and has made all necessary filings with and given all necessary notices to governmental authorities and agencies, including the U.S. Copyright Office, required or necessary for the ownership and operation of its CATV Systems. The Company is in compliance in all material respects with such CATV Licenses, without any known conflict with the rights of others which might result in a material adverse effect on the Company, and in each case subject to no mortgage, pledge, lien, lease encumbrance or option except Permitted Liens. Attached hereto as Exhibit F is a complete and accurate list of all CATV Licenses held by the Company (copies of such CATV Licenses having been delivered to the Banks) the name of the municipality or other entity granting the same, the expiration date thereof and the date such CATV License was issued or transferred to the Company. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such CATV License, or which would materially adversely affect the rights of the Company thereunder. (b) On the date hereof and at all times hereafter, the Company will own or be a party to all pole attachment and conduit use agreements necessary for the operation of its CATV Systems and all agreements with public utilities and with microwave transmission companies that are required in connection with the conduct of its business, and will duly perform and observe in all material respects the terms and conditions thereof, and no revocation, suspension or termination of any such agreement shall have occurred which would have a material adverse affect on the Company, its business or operations. The Company shall deliver to each Bank at its request, complete and correct copies of all said agreements. 4.17. CATV Systems. The Company owns the CATV Systems described in Exhibit G attached hereto, which sets forth a description of the franchises (including the expiration dates thereof), locations and Basic Subscriber counts of such CATV Systems as of April 30, 1994 and a description of the headend and office facilities, and the record owners of such locations and descriptions of any leases covering the Company's lease of any of such facilities from others. 4.18. Hazardous Wastes, Substances and Petroleum Products. (a) The Company has received all permits and filed all notifications necessary to carry on its business(es) under, and is in compliance in all material respects with, all Environmental Control Statutes. -19- 20 (b) The Company has not given any written or oral notice to the Environmental Protection Agency ("EPA") or any state or local agency with regard to any actual or imminently threatened removal, spill, release or discharge of hazardous or toxic wastes, substances or petroleum products on properties owned or leased by the Company or in connection with the conduct of its business and operations. (c) The Company has not received notice that it is potentially responsible for costs of cleanup of any actual or imminently threatened spill, release or discharge of hazardous or toxic wastes or substances or petroleum products pursuant to any Environmental Control Statute. 4.19. Compliance. The Company is in compliance in all material respects with all applicable laws and regulations, federal, state and local (including without limitation those administered by the FCC and all state and local authorities regulating the Company's CATV Systems), material to the conduct of its business and operations; the Company has properly withheld all amounts required by law to be withheld for income taxes and unemployment taxes including without limitation, all amounts required with respect to social security and unemployment compensation, relating to its employees, and has remitted such withheld amounts in a timely manner to the appropriate taxing authority, agency or body; the Company possesses all the franchises, permits, licenses, certificates of compliance and approval and grants of authority necessary or required in the conduct of its business and the same are valid, binding, enforceable and subsisting without any material defaults thereunder and are not subject to any proceedings or claims opposing the issuance, development or use thereof or contesting the validity thereof. 4.20. Perfection of Security Interests. Borrower has no knowledge of any further action, including any filing or recording of any documents, which would be necessary in order to establish, perfect and maintain the first priority security interest of Banks in the personal property assets of the Company covered by the Security Agreement, except for the periodic filing of continuation statements with respect to financing statements filed under the Uniform Commercial Code of applicable jurisdictions. ARTICLE V NEGATIVE COVENANTS For so long as the Commitments of the Banks (or any Bank) to the Company under this Agreement remain available and while any part of the principal of or interest on the Loans -20- 21 remains unpaid, the Company shall not do any of the following without the prior written consent of Required Banks: 5.1. Restriction of Indebtedness. Create, incur, assume or have outstanding any indebtedness for borrowed money or for the deferred purchase price of any asset (including obligations under Capitalized Leases), except trade indebtedness in the normal and ordinary course of business for value received, and (i) the Notes, (ii) indebtedness and obligations incurred to purchase or lease fixed or capital assets; provided, however, that payments on such indebtedness and obligations shall not exceed $100,000 in the aggregate during any fiscal year and the aggregate outstanding principal amount thereof shall not exceed $1,000,000 at any time, and (iii) indebtedness to JII and the Partnerships for Management Fees, Home Office Allocations and other advances subordinated to all indebtedness of the Company to the Banks pursuant to the Subordination Agreement and subject to Sections 5.10 and 5.11 hereof and (iv) indebtedness existing on the date of the Existing Credit Agreement and listed on Exhibit H hereto. 5.2. Amendments and Prepayments. Agree to any amendment, modification or supplement, or obtain any waiver or consent in respect of compliance with any of the terms of, or call or redeem, or make any purchase or prepayment of or with respect to, any instrument or agreement evidencing or relating to any indebtedness for borrowed money or for the deferred purchase price of any asset, including Capitalized Leases, if such action would have a material adverse effect on the Company or its financial condition or business operations. 5.3. Restriction on Liens. Create or permit to be created or allow to exist any mortgage, pledge, encumbrance or other lien upon or security interest in any property or asset now owned or hereafter acquired by the Company (including, without limitation, assets comprising the CATV Systems), except Permitted Liens, or agree or covenant with or promise any person or entity other than the Banks that it will not pledge its assets or properties or otherwise grant any liens, security interests or encumbrances on its property on terms similar to those set forth in this Section 5.3. 5.4. Sale and Leaseback. Enter into any agreement providing for the leasing by the Company of property which has been or is to be sold or transferred by the Company to the lessor thereof, or which is substantially similar in purpose to property so sold or transferred. 5.5. Acquisitions, Loans and Investments. Acquire any other business or any CATV System (or interest therein) not owned on the date of the Existing Credit Agreement, or make any loan, advance or extension of credit to, or investment in, any other -21- 22 person, corporation or other entity, including investments acquired in exchange for partnership interests or other securities or obligations of any nature of the Company, or create or participate in the creation of any Subsidiary or joint venture, except: (a) investments in commercial paper maturing in 180 days or less from the date of issuance which is rated A1 or better by Standard & Poor's Corporation or P1 or better by Moody's Investors Services, Inc.; investments in direct obligations of the United States of America or obligations of any agency thereof which are guaranteed by the United States of America, provided that such obligations mature within twelve (12) months of the date of acquisition thereof; and investments in certificates of deposit maturing within one (1) year from the date of acquisition thereof issued by a Bank or bank or trust company organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $500,000,000 and the long-term indebtedness of which is rated A+ or better by Moody's Investors Services, Inc. or equivalent by Standard & Poor's Corporation; (b) loans and advances made to employees, subcontractors and suppliers in the ordinary course of business not to exceed $25,000 in the aggregate principal amount outstanding at any time; and (c) if no Default or Event of Default exists at the time thereof, or would be caused as a result thereof, acquisitions of assets related to the operation of CATV Systems, not to exceed One Million Dollars ($1,000,000) in the aggregate from May 31, 1994 (the Amendment No. 6 Effective Date) to the Termination Date. 5.6. Liquidation; Merger; Disposition of Assets. Liquidate or dissolve or discontinue any substantial part of its operations or business; or merge with or into or consolidate with or into any other corporation, partnership or other entity; or sell, lease, transfer or otherwise dispose of all or any material part of its property, assets or business (other than sales made in the ordinary course of business for value received), or any stock or capital interest in any Subsidiary; provided, however, that the Company may sell or dispose of any CATV System for fair value if (a) the Company gives the Agent written notice of such sale or disposition at least 15 days prior to the date thereof, (b) prior to and after giving effect to the proposed sale or disposition of such CATV System (and any required reduction of the Commitments and payment on the Notes with the proceeds of such sale or disposition pursuant to Sections 1.4 and 1.5 hereof) (i) no Default or Event of Default under this Agreement is continuing, (ii) the ratio of the Company's Total Debt to Operating Cash Flow after giving effect to such sale or -22- 23 disposition is no greater than such ratio immediately prior to such sale or disposition and (iii) the Company is otherwise in compliance with the terms, provisions and covenants of this Agreement in all material respects, and (c) commencing with the fourth (4th) sale or disposition of a CATV System identified on Exhibit G hereto, the Company shall use the net proceeds of any such sale or disposition to pay Loans on a pro rata basis pursuant to Section 1.5 hereof to the extent necessary to cause the Company's ratio of Total Debt to Operating Cash Flow (based on the most recently delivered financial statements and excluding Operating Cash Flow attributable to the sold CATV System(s)) to be equal to or less than 3.0 to 1, and shall permanently reduce the Commitments pursuant to Sections 1.4 of the Credit Agreement on a pro rata basis in the amount of such payment; provided, however, that (i) if the Lochbuie, Colorado System is one of the first three CATV Systems sold, then such payment requirement shall commence on the fifth (5th) sale or disposition of a CATV System, and (ii) if the Boulder, Colorado System is sold in connection with a sale of the Broomfield, Colorado System, then such aggregate sale shall be treated as a sale of one (1) CATV System for purposes of this clause (c). 5.7. Accounts Receivable. Except in connection with the sale of the accounts receivable of a CATV System as part of a sale by the Company of such CATV System which is otherwise permitted under Section 5.6 hereof, discount or sell with recourse, or sell for less than the face amount thereof, any of its notes or accounts receivable, whether now owned or hereafter acquired. 5.8. Contingent Liabilities. Guarantee or become a surety or otherwise contingency liable (including, without limitation, liable by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss) for any obligations of others, except pursuant to the deposit and collection of checks and similar terms in the ordinary course of business. 5.9. Affiliates. Suffer or permit any transaction with any Affiliate, except on terms not less favorable to the Company than would be usual and customary in similar transactions with non-affiliated persons; provided that this Section 5.9 shall not prohibit the payment of (i) Home Office Allocations and Management Fees in accordance with the Joint Venture Agreement except as the same may be restricted by the terms hereof and under the Subordination Agreement and (ii) commissions to The Jones Group, Ltd. as described in Paragraph 2 of Article XII of the Joint Venture Agreement. -23- 24 5.10. Management Fees and Home Office Allocations. Pay, or obligate or legally bind itself to pay, Management Fees or Home Office Allocations; provided, however, that in the absence of a Default or an Event of Default (and if such payment, together with any payments made pursuant to this Section 5.10 and Section 5.11 hereof will not create a Default or an Event of Default) the Company may: (i) pay Management Fees for any fiscal quarter of the Company not to exceed five percent (5%) of the Gross Operating Revenues of the Company for such quarter (excluding revenues from the sale of any CATV Systems or CATV Licenses) and (ii) pay Home Office Allocations in amounts not to exceed reasonable levels for such payments based on JII's and the Company's historic practices, taking into account inflation and fluctuations in the cost of the items comprising Home Office Allocations. Management Fees and Home Office Allocations accrued but unpaid for any fiscal quarter shall be deferred and subordinated to indebtedness of the Company to the Banks pursuant to the Subordination Agreement; provided, however, that so long as there exists no Default or Event of Default under this Agreement (and such payment, together with any payments made pursuant to this Section 5.10 and Section 5.11 hereof, will not create a Default or Event of Default), (i) such deferred Management Fees and Home Office Allocations may be paid in any subsequent fiscal quarter to the extent of Adjusted Cash Flow for the preceding quarter and (ii) the Company may pay accrued interest on deferred Management Fees and Home Office Allocations at a rate not to exceed JII's cost of capital. 5.11. Restricted Payments. Make any Restricted Payments; provided, however that the Company may, in the absence of a Default or Event of Default under this Agreement (and if such payment, together with any payments permitted to be made pursuant to Section 5.10 hereof, will not create a Default or Event of Default), (i) make distributions to its joint venture partners consistent with distributions contemplated by the Partnerships to their partners as set forth in the Prospectus dated January 10, 1986, as amended September 29, 1986 and December 19, 1986 in respect to Jones Cable Income Fund 1 previously delivered to the Banks, (ii) make interest payments to JII at a rate not to exceed JII's cost of capital on any indebtedness subordinated pursuant to the Subordination Agreement and (iii) in connection with a sale of a CATV System permitted by Section 5.6 hereof, make distributions to the Partnerships to the extent the proceeds thereof are not required thereunder to be used to make a payment of the Loans. 5.12. Partnerships; Joint Ventures; Partnership Documents. Become a member of any partnership or joint venture; or amend or permit any amendments of the Joint Venture Agreement. 5.13. Fiscal Year. Change its fiscal year. -24- 25 ARTICLE VI AFFIRMATIVE COVENANTS For so long as the Commitments of the Banks (or any Bank) to the Company under this Agreement remain available and while any part of the principal of or interest on the Loans remains unpaid, and unless waived in writing by the Banks, the Company shall: 6.1. Financial Covenants. (a) Maintain at all times during the periods set forth in the left-hand column below a ratio of the Company's Total Debt as of the date of determination to the Company's Operating Cash Flow as of the last day of the most recently ended quarter of not greater than the amount set forth in the right-hand column:
Period Maximum Ratio ------ ------------- 05/31/94 through 06/30/96 5.0 to 1 07/01/96 and at all times 4.5 to 1 thereafter
(b) Maintain at all times during the periods set forth in the left-hand column below a ratio of the Company's Operating Cash Flow as of the last day of the most recently ended quarter to Proforma Interest Expense for the period commencing on the first day of the current quarter of not less than the amount set forth in the right-hand column:
Period Minimum Ratio ------ ------------- 05/31/94 through 06/30/96 2.50 to 1 07/01/96 and at all times 3.00 to 1 thereafter
6.2. Insurance. Maintain insurance in such amounts and against such risks as is customary by companies engaged in the same or similar businesses and similarly situated under policies requiring the insurer to furnish reasonable notice to the Agent and opportunity to cure any non-payment of premiums prior to termination of coverage; and furnish each Bank with certificates of such insurance and cause Agent to be named as the lender loss payee thereof, as its interest may appear. 6.3. Partnership Existence; Obligations. Do all things necessary to: (i) maintain its partnership existence and all rights and franchises necessary or desirable for the conduct of its business (except for transactions permitted by Section 5.6); (ii) comply in all material respects with all applicable laws, rules, regulations and ordinances, and all restrictions imposed by governmental authorities, including those relating to -25- 26 environmental standards and controls; and (iii) pay, before the same become delinquent and before penalties accrue thereon, all taxes, assessments and other governmental charges against it or its property, and all of its other liabilities, except to the extent and so long as the same are being contested in good faith by appropriate proceedings in such manner as not to cause any material adverse effect upon its property, financial condition or business operations, with adequate reserves provided for such payments. 6.4. Business Activities; Manaqement. Continue to carry on its business activities in substantially the manner such activities are conducted on the date of this Agreement and not make any material change in the nature of its business. Without limiting the generality of the foregoing, the Company shall cause its CATV Systems to continue to be managed by JII in substantially the same manner and on substantially the same terms as such CATV Systems are managed by JII on the date hereof. 6.5. Properties. Keep its properties (whether owned or leased) in good condition, repair and working order, ordinary wear and tear and obsolescence excepted, and make or cause to be made from time to time all necessary repairs thereto (including external or structural repairs) and renewals and replacements thereof. 6.6. Accounting Records; Reports. Maintain a standard and modern system for accounting in accordance with generally accepted principles of accounting consistently applied throughout all accounting periods; and furnish to each Bank such information respecting the business, assets and financial condition of the Company as it may reasonably request and, without request, furnish to each Bank: (a) Within 60 days after the end of each of the first three quarters of each fiscal year of the Company (i) a balance sheet of the Company as of the close of such quarter and of the preceding fiscal year-end; and (ii) statements of income and surplus of the Company for such quarter and for that part of the fiscal year ending with such quarter; all in reasonable detail and certified as true and correct (subject to audit and normal year-end adjustments) by the chief financial officer or the Treasurer of JII; and (b) As soon as available, and in any event within 105 days after the close of each fiscal year of the Company, a copy of the audit report for such year and accompanying financial statements of the Company as prepared by independent public accountants of recognized standing selected by the Company and satisfactory to each of the Banks, which audit report shall be accompanied by an opinion of such accountants, in form satisfactory to each of the Banks, to the effect that the same -26- 27 fairly present the financial condition of the Company and the results of its operations as of the relevant dates thereof; together with copies of any management letters (or portions thereof) issued by such accountants in connection with such audit regarding matters which relate to or adversely effect the Company; and (c) As soon as available, copies of all reports or materials (in respect to matters which may have a material adverse effect on the business or financial condition of the Company) filed with the FCC, the Securities Exchange Commission or other governmental agency having regulatory authority over the Company or with any national securities exchange; the Company shall also deliver to each of the Banks a copy of all information (in respect to matters which may have a material adverse effect on the business or financial condition of the Company) sent by the Company to its joint venture partners or the limited partners of the Partnerships within ten (10) days after the date such information shall have been sent to such joint venture partners or limited partners, as the case may be; and (d) Upon request, evidence that insurance policies are in force covering all property of the Company; and (e) Promptly, and in any event within 10 days, after Company has knowledge thereof a statement of the chief financial officer or Treasurer of JII describing: (i) in detail any event which, either of itself or with the lapse of time or the giving of notice or both, would constitute a Default or an Event of Default hereunder or under any other material agreement to which the Company is a party, the period of existence thereof together with a statement of the actions which the Company has taken or proposes to take with respect thereto; and (ii) any pending or threatened litigation or administrative proceeding of the type described in section 4.10; and (f) Together with the financial statements referred to in (a) and (b) above, a Compliance Certificate signed on behalf of the Company by the chief financial officer or Treasurer of JII, demonstrating in reasonable detail compliance by the Company with the requirements of Sections 5.10, 5.11 and 6.1 hereof; and (g) Within 30 days after the end of each calendar month, a report, in form and substance satisfactory to each of the Banks, showing with respect to the CATV Systems of the Company (individually and in the aggregate) (i) the number of Basic Subscribers at the beginning and at the end of such month (not including those whose accounts are more than sixty (60) days delinquent) and (ii) any other information reasonably requested by either of the Banks. -27- 28 (h) (i) Promptly, and in any event within 30 days, after the Company knows that any Reportable Event with respect to any Plan has occurred, a statement of the chief financial officer or Treasurer of JII setting forth details as to such Reportable Event and the action which the Company proposes to take with respect thereto, together with a copy of any notice of such Reportable Event given to the Pension Benefit Guaranty Corporation if a copy of such notice is available to the Company, (ii) promptly after the filing thereof with the Internal Revenue Service, copies of each annual report with respect to each Plan administered by the Company and (iii) promptly after receipt thereof, a copy of any notice (other than a notice of general application) the Company, any Subsidiary or any member of the Controlled Group may receive from the Pension Benefit Guaranty Corporation or the Internal Revenue Service with respect to any Plan administered by the Company. The financial statements referred to in (a) and (b) above shall be accompanied by a certificate by the chief financial officer or Treasurer of JIi that, as of the close of the last period covered in such financial statements, no condition or event had occurred which constitutes an Event of Default or a Default hereunder. 6.7. Inspection of Records; Information. Permit representatives of each of the Banks to visit and inspect any of the properties and examine any of the books and records of the Company at any reasonable time and as often as may be reasonably desired on reasonable notice; and provide each of the Banks with all documents and information regarding the Company and the CATV Systems, financial or otherwise, reasonably requested by any Bank. 6.8. INTENTIONALLY LEFT BLANK 6.9. Compliance; Notification. (a) The Company, each of the Partnerships and JII (with respect to the CATV Systems) will comply in all material respects with all local, state and federal laws and regulations applicable to its business and the provisions and requirements of all franchises, permits, certificates of compliance and approval issued by regulatory authorities and other like grants of authority held by the Company; and the Company will notify Banks immediately in detail of any actual or alleged failure to comply with or perform, breach, violation or default under any such laws or regulations or under the terms of any of such franchises, licenses or grants of authority, the existence of which would be reasonably likely to have a material adverse effect on the business, operations or financial condition of the Company; or of the occurrence or existence of any facts or circumstances which with the passage of time, the giving of notice or otherwise could -28- 29 create such a breach, violation or default or could occasion the termination of any of such franchises or grants of authority. (b) Each of the Company, the Partnerships and JII will notify Banks in writing immediately of the institution of any litigation, the commencement of any administrative proceeding, the happening of any event or the assertion or threat of any claim, which relates to this Agreement, the Notes or any Collateral Document or which, if adversely determined, would be reasonably likely to have a material adverse effect on the business, operations or financial condition of the Company. (c) With respect to the Environmental Control Statutes, the Company shall notify Banks when, in connection with the conduct of the Company's business(es) or operations, any person or entity, or any federal, state or local agency provides oral or written notification to the Company, the Partnerships or JII with regard to an actual or imminently threatened removal, spill, release or discharge of hazardous or toxic wastes, substances or petroleum products; and notify Banks in detail immediately (i) upon the receipt by the Company of an assertion of liability under the Environmental Control Statutes, (ii) of any actual or alleged failure to comply with or perform, breach, violation or default under any such Environmental Control Statutes and (iii) of the occurrence or existence of any facts, events or circumstances which with the passage of time, the giving of notice, or both, could create such a breach, violation or default. ARTICLE VII DEFAULTS In the event that any one or more of the following events (each an "Event of Default") shall occur: 7.1. Default in Payment. The Company shall fail to pay (i) any interest on any Note, or any other amount payable to any Bank hereunder (other than a principal payment on any Note), within three (3) days after the same becomes due or (ii) any principal amount due on any Note when due; 7.2. Default on Certain Covenants. Default in the performance or observance of any agreement, covenant, condition, provision or term contained in Article V or Section 6.1 of this Agreement; 7.3. Default in Performance of Other Agreements. Default by the Company or JII (in the case of the Subordination Agreement) in the performance or observance of any of the agreements, covenants, conditions, provisions or terms in this -29- 30 Agreement (other than those which constitute Events of Default under Section 7.1 or 7.2 above) or any Collateral Document, continuing for a period of 20 days after written notice thereof is given to the Company by the Agent on behalf of the Banks; 7.4. Representations or Statements False. Any representation or warranty made by the Company or JII herein or in any Collateral Document or other document, certificate or agreement delivered pursuant hereto, or any financial statement delivered to either Bank hereunder, shall prove to have been false in any material respect as of the time when made or given; 7.5. Default on Other Obliqations. The Company shall fail to pay all or any part of the principal of or interest on any indebtedness of or assumed by it in excess of $100,000 as and when due and payable (whether by fixed maturity or acceleration) and such default shall not be cured within the period or periods of grace, if any, specified in the instruments governing such obligations; or default shall occur under any evidence of, or any indenture or agreement or other instrument governing, such obligation, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such indebtedness; 7.6. Judgments. Any judgment, writ, warrant, attachment or execution or similar process which, together with other outstanding judgments, writs, warrants, attachments and executions against the Company or its property, which requires payment or presents liability in excess of $500,000 (not covered by insurance) shall be entered or issued against or levied against the Company or its property and such judgment or other process shall not be satisfied, waived, discharged, settled, vacated, fully bonded or stayed within 60 days after the date of the issuance or levy thereof; 7.7. Bankruptcy; Insolvency. The Company, either of the Partnerships or JII shall (a) become insolvent; or (b) generally fail to pay its debts as they mature; or (c) make a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its property; or (d) become the subject (either voluntarily or involuntarily) of an "order for relief" within the meaning of the United States Bankruptcy Code; or (e) file an answer to a creditor's petition (admitting the material allegations thereof) for liquidation, reorganization or to effect a plan or other arrangement with creditors; or (f) apply to a court for the appointment of a receiver, trustee or custodian for any of its assets; or (g) have a receiver, trustee or custodian appointed for any of its material assets (with or without its consent); or (h) otherwise become the subject of any insolvency proceeding; -30- 31 7.8. Validity. This Agreement, any Note or any document required by Article III shall, at any time after their respective execution and delivery, and for any reason, cease to be in full force and effect or shall be declared null and void, or be revoked or terminated, or the validity or enforceability thereof or hereof shall be contested by the Company, either of the Partnerships or JII, or the Company shall deny that it has any or further liability or obligation thereunder or hereunder, as the case may be; 7.9. ERISA. Any Reportable Event, which Required Banks determine in good faith to constitute grounds for the termination of any Plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer any Plan, shall have occurred, or any Plan shall be terminated within the meaning of Title IV of ERISA, or a trustee shall be appointed by the appropriate United States District Court to administer any Plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan, and in case of any event described in the preceding provisions of this section 7.9 the Required Banks determine in good faith that the aggregate amount of the Company's liability to the Pension Benefit Guaranty Corporation under ERISA shall exceed $500,000 and such liability is not covered, for the benefit of the Company, by insurance; 7.10. Revocation of Franchise, etc. Custody or control of any substantial part of the property of the Company, either Partnership or JII shall be assumed by any governmental agency or any court of competent jurisdiction at the request of any governmental agency; if any CATV franchise of the Company shall be suspended, revoked, not renewed or otherwise terminated (including if the Company is required by any franchising authority or by court order or administrative order to halt construction or operations under any CATV franchise and such action shall continue uncorrected for thirty (30) days after the Company has received notice thereof), and such CATV franchise, together with all other CATV franchises suspended, revoked, not renewed or otherwise terminated at the time of such suspension, revocation or termination, has either singly or in the aggregate in excess of the greater of ten percent (10%) of the Basic Subscribers covered by all of the Company's CATV franchises on the last day of the most recently ended fiscal quarter of the Company; or if any governmental regulatory authority or judicial body shall make any other final non-appealable determination the effect of which would be to affect materially and adversely the operations of the Company as now conducted; 7.11. Termination or Dissolution of the Company, etc. The Partnerships shall agree to terminate or dissolve the Company; if the Company is terminated or dissolved and not -31- 32 simultaneously continued; if either Partnership shall withdraw as a partner of the Company; if JII shall cease to be the general partner of each of the Partnerships and the manager of the Company; or if the sole partners of the Company shall cease to be the Partnerships; 7.12. Environmental Matters. Any event or condition shall occur or exist with respect to any activity or substance regulated under the Environmental Control Statutes and as a result of such event or condition, the Company has incurred a liability in excess of $500,000 during any consecutive twelve (12) month period; THEN: (a) As to any Event of Default under section 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.8, 7.9, 7.10, 7.11 and 7.12 and at any time thereafter, and in each case, the Agent at the request of Required Banks may, by written notice to the Company, immediately terminate the obligation of the Banks to make Loans hereunder and/or declare the unpaid principal balance of the Notes, together with all interest accrued thereon, to be immediately due and payable; and the unpaid principal balance of and accrued interest on the Notes shall thereupon be due and payable all without presentment, demand, protest, or further notice of any kind, all of which are hereby waived, and notwithstanding anything to the contrary herein or in the Notes contained. (b) As to any Event of Default under section 7.7, the obligation of the Banks to make Loans hereunder shall immediately terminate and the unpaid principal balance of the Notes, together with all interest accrued thereon, shall immediately and forthwith be due and payable, all without presentment, demand, protest, or further notice of any kind, all of which are hereby waived, and notwithstanding anything to the contrary herein or in the Notes contained. (c) Upon the occurrence of any of said Events of Default, the rights, powers and privileges provided in this Article VII and all other remedies available to the Banks under this Agreement, the Collateral Documents or at law or in equity may be exercised by the Agent on behalf of the Banks at any time and from time to time, whether or not the indebtedness evidenced by the Notes and secured by the documents required by Article III hereof shall be due and payable, and whether or not the Agent on behalf of the Banks shall have instituted any foreclosure sure proceedings or other action for the enforcement of the Banks' rights under the Notes or any of the Collateral Documents securing the same. (d) For the purpose of carrying out the provisions and exercising the rights, powers and privileges -32- 33 granted by this Article VII and the Collateral Documents, the Company hereby irrevocably constitutes and appoints the Agent its true and lawful attorney-in-fact, with full power of substitution upon the occurrence of an Event of Default, to execute, acknowledge, endorse and deliver any instruments and do and perform any acts which are referred to in this Article VII and the Collateral Documents, in the name and behalf of the Company. The power vested in each said attorney-in-fact is, and shall be deemed to be, coupled with an interest and cannot be revoked. (e) In the event that the Notes shall be paid in whole or in part following acceleration of the maturity thereof while a Eurodollar Loan is outstanding and such payment date is not the last day of an Interest Period for such Loan, the Company shall pay to each Bank, on the date of such accelerated Note payment, the amount required pursuant to Section 1.8 hereof. ARTICLE VIII THE AGENT This Article sets forth the relative rights and duties of Agent and Banks respecting the Loans and does not confer any enforceable rights on the Company against Banks or create on the part of Banks any duties or obligations to the Company. The Banks hereby terminate the Intercreditor Agreement executed in connection with the Existing Credit Agreement. 8.1. Appointment and Powers. Each of the Banks hereby appoints CoreStates as Agent for the Banks hereunder, and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers as are specifically delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The duties of the Agent shall be entirely ministerial; the Agent shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, the Notes or any related document, or to enforce such performance, or to inspect the property (including the books and records) of the Company; and the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or the Notes or applicable law. CoreStates agrees to act as Agent upon the express terms and conditions contained in this Article VIII. 8.2. Application of Payments. Agent shall apply all payments of principal, interest, commitment fee or other amounts hereunder made to Agent by or on behalf of the Company, to Banks on the basis of their pro rata shares of the outstanding principal balance of indebtedness hereunder, except any Agent's fee paid in connection herewith which shall be paid solely to -33- 34 Agent. Such distribution of payments shall be made promptly in federal funds immediately available at the office of each Bank set forth above. 8.3. Modifications and Waivers. No modification or amendment hereof, consent hereunder or waiver of Event of Default shall be effective except by written consent of the Required Banks, provided, however, that the written consent of all Banks shall be required to modify, amend, waive, discharge, terminate or suspend compliance with any of the following provisions or matters: (i) the rate of interest, to the extent it is proposed to be decreased, (ii) the amount of the Commitments, and of each Bank's respective Commitment, (iii) the dates of payment hereunder, (iv) the commitment fee, (v) the release of any Collateral provided to the Agent on behalf of Banks pursuant to the Collateral Documents if the Collateral to be released is valued (based on the Company's good faith estimate) at Fifty Thousand Dollars ($50,000) or more, and (vi) the provisions of this Paragraph 8.3. The Banks hereby agree to execute such further documents including without limitation amendments to this Agreement and the Note(s), waivers and certificates and deliver such opinions as the Agent and its counsel shall so request to implement any modifications approved in accordance with the terms of this Section 8.3. Any amendment or waiver made pursuant to this Section 8.3 shall apply to and bind all of the Banks and any future holder of any Notes. No modification or waiver of any provision of this Agreement or any Note, nor any consent to any departure by the Company herefrom or therefrom, shall in any case be effective unless the same be in writing, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in any similar or other circumstances. 8.4. Obligations Several. The obligations of the Banks hereunder are several, and each Bank hereunder shall not be responsible for the obligations of the other Banks hereunder, nor, will the failure of one Bank to perform any of its obligations hereunder relieve the other Banks from the performance of their respective obligations hereunder. 8.5. Responsibility. The Agent (i) makes no representation or warranty to any Bank and shall not be responsible to any Bank for any oral or written recitals, reports, statements, warranties or representations made in or in connection with this Agreement or any Note; (ii) shall not be responsible for the due execution, legality, validity, enforceability, genuineness, sufficiency, collectibility or value of this Agreement or any Note or any other instrument or document furnished pursuant thereto; (iii) may treat the payee of any Note as the owner thereof until the Agent receives written notice of the assignment or transfer thereof signed by such payee and in -34- 35 form satisfactory to the Agent; (iv) may execute any of its duties under this Agreement by or through employees, agents and attorneys in fact and shall not be answerable for the default or misconduct of any such employee, agent or attorney in fact selected by it with reasonable care; (v) may (but shall not be required to) consult with legal counsel (including counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with advice of such counsel, accountants or experts; (vi) shall be entitled to rely upon any Note, notice, consent, waiver, amendment, certificate, affidavit, letter, telegram, telex, cable or other document or communication believed by it to be genuine and signed or sent by the proper party or parties, and may rely on statements contained therein without further inquiry or investigation. Neither the Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement on the Notes, except for its or their own gross negligence or willful misconduct. 8.6. Agent's Indemnification. The Banks agree to indemnify and reimburse the Agent (to the extent not reimbursed by the Company), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent as such in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Agreement in connection with the preparation, execution, administration or enforcement of, or the preservation, execution, administration or enforcement of, or the preservation of any rights under, this Agreement to the extent that the Agent is not reimbursed for such expenses by the Company. 8.7. Action on Instruction of Banks; Right to Indemnity. Agent shall in all cases be fully protected in acting or refraining from acting hereunder in accordance with written instructions to it signed by Required Banks unless the consent of all the Banks is expressly required hereunder in which case Agent shall be so protected when acting in accordance with such instructions from all the Banks. Such instructions and any action taken or failure to act pursuant thereto shall be binding on all the Banks, provided that except as otherwise provided -35- 36 herein, Agent may act hereunder in its own discretion without requesting such instructions. Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be specifically indemnified to its satisfaction by the other Banks on a pro rata basis against any and all liability and expense which it may incur by reason of taking or continuing to take any such action. 8.8. Riqhts as a Lender. With respect to its Commitment and the Note issued to it, CoreStates, in its individual capacity as a Bank, shall have, and may exercise, the same rights and powers under this Agreement and the Note payable to it as the other Bank has under this Agreement and Note, and the terms "Bank" and "Banks", unless the context otherwise requires, shall include CoreStates in its individual capacity as a Bank. CoreStates and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of banking or trust business with, the Company, any Affiliate of the Company, or any of its subsidiaries and any person, firm or corporation who may do business with or own securities of the Company, such Affiliate or any subsidiary, all as if it were not the Agent, and without any duty to account therefor to the Banks; provided, however, that Agent hereby agrees that if it agrees to make any loan to the Company (but not any Affiliate of the Company, or any subsidiary or any person, firm or corporation which may do business with or own securities of the Company), and the Company provides a security interest in its assets covered by the Collateral Documents, that any such security interest shall be junior to the security interests granted to Agent on behalf of Banks under the Collateral Documents. 8.9. Credit Investigation. Each of the Banks severally represents and warrants to the other Bank and to the Agent that it has made its own independent investigation and evaluation of the financial condition and affairs of the Company in connection with such Bank's execution and delivery of this Agreement and the making of its loans and has not relied on any information or evaluation provided by any other Bank or the Agent in connection with any of the foregoing (other than information provided by the Company to the Agent for transmittal to the Banks in connection with the foregoing); and each Bank represents and warrants to the other Bank and to the Agent that it shall continue to make its own independent investigation and evaluation of the creditworthiness of the Company while the Commitments and/or the Notes are outstanding. 8.10. Resiqnation, Removal of Aqent. (a) Agent may at any time resign its position as Agent, without affecting its position as a Bank, by giving written notice to Banks and the Company. Such resignation shall -36- 37 take effect upon the appointment of a successor agent in accordance with this Article. In the event Agent shall resign, Banks shall appoint a Bank as successor agent. If within thirty (30) days of the Agent's notice of resignation no successor agent shall have been appointed by Banks and accepted such appointment, then Agent, in its discretion may appoint any other Bank as a successor agent, subject to such Bank's acceptance of such appointment and to approval by the Company, which approval will not be unreasonably withheld. (b) All Banks other than the Agent may remove the Agent, without affecting its position as a Bank, by giving written notice signed by all such Banks to the Agent. Such removal shall take effect thirty (30) business days following Agent's receipt of notice of removal. The removal notice shall identify the successor Agent (which shall be a Bank, or shall have been approved by Company). 8.11. Successor Agent. The successor Agent appointed pursuant to Paragraph 8.10 shall execute and deliver to its predecessor and Banks an instrument in writing accepting such appointment, and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the properties, rights, duties and obligations of its predecessor Agent. The predecessor Agent shall deliver to its successor Agent forthwith all collateral security, documents and moneys held by it as Agent, if any, whereupon such predecessor Agent shall be discharged from its duties and obligations as Agent under this Agreement. 8.12. Collateral Security. Agent will hold, administer and manage any collateral security pledged from time to time hereunder either in its own name or as Agent, but each Bank shall hold a direct, undivided pro rata beneficial interest therein, by reason of and as evidenced by this Agreement. 8.13. Enforcement by Agent. All rights of action under this Agreement and under the Notes and all rights to the collateral security, if any, hereunder may be enforced by Agent and any suit or proceeding instituted by Agent in furtherance of such enforcement shall be brought in its name as Agent without the necessity of joining as plaintiffs or defendants any other Banks, and the recovery of any judgment shall be for the benefit of Banks subject to the expenses of Agent. ARTICLE IX MISCELLANEOUS 9.1. Accounting Terms; Definitions. Except as otherwise provided, all accounting terms shall be construed in -37- 38 accordance with generally accepted accounting principles consistently applied, and financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. As used herein: (a) "Adjusted Cash Flow" means, for any fiscal quarter, Cash Flow for such quarter plus Management Fees and Home Office Allocations deducted in calculating Cash Flow for such quarter, but which are deferred and not paid to JII during such quarter less Management Fees and Home Office Allocations which were deferred in a prior quarter but which are actually paid to JII in such quarter to the extent not deducted in calculating Cash Flow for such quarter. (b) "Affiliate" means any person, firm, corporation or partnership, which, directly or indirectly, controls, is controlled by, or is under common control with, the Company or a Subsidiary. (c) "Applicable Margin" shall mean (a) in the absence of a Default or Event of Default, during any quarter when the ratio of the Company's Total Debt on the last day of the most recently-ended quarter to Borrower's Operating Cash Flow as of the last day of the most recently-ended quarter is less than 3.5 to 1, (i) one quarter of percent (1/4%) per annum with respect to Prime Rate Loans and (ii) one and one quarter of one percent (1/4%) per annum with respect to Eurodollar Loans; and (b) at all other times (except upon the occurrence and during the continuation of Default or Event of Default), (i) one half of one percent (1/2%) per annum with respect to the Prime Rate Loans, and (ii) one and one half percent (1-1/2%) per annum with respect to Eurodollar Loans. The Applicable Margin shall be determined quarterly by Agent within five (5) days of the receipt by Agent of the financial statements required to be delivered by the Company pursuant to Section 6.6 (a) or (b) hereof, as applicable, and shall be effective retroactively to the first day of the quarter following the quarter by reference to which such Applicable Margin was calculated, and shall remain in effect until the next quarterly determination of the Applicable Margin by Agent. (d) "Bank" shall mean individually and "Banks" shall mean individually and collectively, the banks or other financial institutions party to this Agreement at any time of determination and their respective successors and assigns, being, CoreStates, First Maryland, Dresdner and Continental on the date hereof. (e) "Base Rate" means the higher of (a) the Federal Funds Rate plus one half of one percent (1/2%) per annum or (b) the Prime Rate. -38- 39 (f) "Basic Subscribers" means the subscribers in the CATV Systems who (a) are currently receiving cable television signals supplied by the Company; (b) have commenced payment for such signals at the standard monthly fees and charges for "basic service" (as such term is commonly understood in the cable television industry) charged by the Company, directly or indirectly, under subscriptions with the Company; and (c) are not 60 or more days delinquent in payments as determined on a contractual basis. (g) "Business Day" means a day other than (i) a Saturday, Sunday or a day on which national banks or banks located in the Commonwealth of Pennsylvania are permitted or required by law to close or (ii) in respect to any Eurodollar Loan, a day on which the London interbank market is closed. (h) "Capitalized Lease" means any lease which is capitalized on the books of the lessee, or should be so capitalized under generally accepted accounting principles. (i) "Cash Flow" means, for any fiscal quarter, total revenues of the Company for such quarter, determined and consolidated in accordance with generally accepted accounting principles less the sum of (i) operating expenses of the Company for such quarter (including but not limited to Management Fees and Home Office Allocations) and (ii) general and administrative expenses of the Company for such quarter, in each case determined and consolidated in accordance with generally accepted accounting principles. (j) "Controlled Group" means a controlled group of corporations as defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of which the Company is a part. (k) "Debt Service" for any period means all amounts which are required to be paid on indebtedness of the Company during such period, including, without limitation all payments of principal and interest and all payments under Capitalized Leases. (l) "Default" means any event or circumstance which, with the giving of notice or the passage of time or both, would constitute an Event of Default. (m) "Environmental Control Statutes" shall mean all federal, state and local laws and regulations governing the control, removal, spill, release or discharge of hazardous or toxic wastes or substances, pollutants, contaminants, or petroleum products, as in effect from time to time, including without limitation as provided in the provisions of and the regulations under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Solid Waste -39- 40 Disposal Act, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act of 1976, the Federal Water Pollution Control Act Amendments of 1972, the Hazardous Materials Transportation Act, and the Occupational Safety and Health Act, and the Occupational Safety and Health Act, and all amendments to the foregoing. (n) "ERISA" means the Employee Retirement Income Security Act of 1974, as the same may be in effect from time to time. (o) "Eurodollar Loan" means the portion of a Loan bearing interest at the rate specified in section 1.6(b). (p) "Federal Funds Rate" means, for any day, the effective rate of interest for such day, as announced from time to time by the Board of Governors of the Federal Reserve System as shown in publication H.15 as the "Federal Funds Rate." (q) "Gross Operating Revenues" means, for any period for which such sum is being computed, the sum of all payments made to the Company by subscribers in the CATV Systems, and all other revenues and receipts realized by the Company from the operation of its businesses during such period. (r) "Home Office Allocations" means, for any period for which such sum is being computed, the amount of reimbursement payable by the Company to JII for general overhead and administrative expenses of JII allocated to the Company pursuant to paragraph 4 of Article VII of the Joint Venture Agreement (computed by JII consistently with respect to all partnerships of which it or a Subsidiary or Affiliate is a general partner or with which it is otherwise affiliated and payment of which shall be subject to all the terms and provisions of this Agreement and the Subordination Agreement). (s) "LIBO Rate" means, for each Interest Period for each Eurodollar Loan, the annual rate of interest obtained by dividing (i) the average rate of interest (rounded upward, if necessary, to the nearest 1/1Oth of 1%) at which deposits in U.S. dollars are offered to prime banks in the London interbank market at 11 a.m. (London time) two Business Days prior to the commencement of the applicable Eurodollar Loan Interest Period for a term equal to such Interest Period and in an amount approximately equal to the principal amount of the applicable Eurodollar Loan, as reflected on the Telerate electronic communications terminals in Agent's money center by (ii) a percentage, expressed as a decimal, equal to 100% minus the reserve percentage applicable to Agent during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the reserve requirements for Agent with respect to Eurocurrency -40- 41 Liabilities (as defined in Regulation D) having a term equal to such Interest Period (including without limitation any marginal, supplemental, special or other reserves which Agent, in its discretion, determines must be maintained pursuant to applicable laws and regulations). (t) "Loan" means a loan made to the Company by any Bank pursuant to Article I of this Agreement. (u) "Management Fees" means, for each period for which such sum is being computed, management fees payable by the Company to JII pursuant to Article VII, Section 3 of the Joint Venture Agreement, which fees shall be calculated and payable monthly (payment of which shall be subject to all of the terms and provisions of this Agreement and the Subordination Agreement). (v) "Operating Cash Flow" means the result of (i) the sum of net income, interest expense, depreciation expense, amortization expense, losses on sales of assets, extraordinary losses, Management Fees, Home Office Allocations, and other non-cash charges to income; less (ii) interest and dividend income, gains on the sale of assets, extraordinary gains and other non-cash components of income, all for the immediately preceding fiscal quarter of the company multiplied time four (4). (w) "Permitted Liens" means: (i) liens for taxes, assessments or governmental charges, and liens incident to construction, which are either not delinquent or are being contested in good faith by the Company by appropriate proceedings which will prevent foreclosure of such liens, and against which adequate reserves have been provided; and zoning restrictions, easements, restrictions, minor title irregularities and similar matters which have no adverse effect as a practical matter upon the ownership and use of the affected property by the Company; (ii) liens or deposits in connection with worker's compensation or other insurance or to secure customs' duties, public or statutory obligations in lieu of surety, stay or appeal bonds, or to secure performance of contracts or bids (other than contracts for the payment of money borrowed), or deposits required by law or governmental regulations or by any court order, decree, judgment or rule as a condition to the transaction of business or the exercise of any right, privilege or license; or other liens or deposits of a like nature made in the ordinary course of business; (iii) liens or security interests in favor of the Banks securing the indebtedness and other obligations of the -41- 42 Company to the Banks under or in connection with this Agreement, the Notes and the Collateral Documents; (iv) purchase money liens and security interests in favor of sellers or lessors securing indebtedness or obligations incurred to acquire or lease fixed or capital assets permitted under clause (ii) of Section 5.1 of this Agreement (and extension, renewal and replacement liens upon the same property provided the principal amount secured by each such lien constituting such extension, renewal or replacement shall not exceed the principal amount secured by the liens theretofore existing), each such purchase money lien and security interest to attach only to the specific property the purchase or lease of which gives rise to the indebtedness or obligation secured thereby; (v) In the case of land in which the Company has a leasehold estate and in the case of any buildings, other structures or fixtures located on such land, the right, title and interest of the landlord under the lease creating the leasehold, and in the case of land in which the Company has a license to construct, own and operate buildings, fixtures and equipment on such land, the right of the licensor with respect to such land, provided that such landlord or licensor shall have executed fixtures disclaimers and attornment agreements if so requested by Agent; and (vi) liens securing judgments not in excess of $100,000 in the aggregate arising from legal proceedings, so long as such proceedings are being contested in good faith by appropriate proceedings diligently conducted and so long as execution is stayed on all judgments resulting from any such proceedings. (x) "Note" and "Notes" shall have the meanings set forth in Section 1.1 of the Credit Agreement. (y) "Plan" means any employee pension benefit plan subject to Title IV of ERISA maintained by the Company, any of its Subsidiaries, or any member of the Controlled Group, or any such plan to which the Company, any of its Subsidiaries, or any member of the Controlled Group is required to contribute on behalf of any of its employees. (z) "Prime Rate" means the rate of interest announced by Agent from time to time as its prime rate. (aa) "Prime Rate Loan" shall mean portion of a Loan bearing interest at the rate specified in section 1.6(a). (ab) "Proforma Interest Expense" means, for any twelve month period, Total Debt as of the first day of such -42- 43 period, multiplied by the applicable interest rate (which, in the case of the Loan, shall be calculated based upon the Base Rate or LIBO Rate or Rates in effect at the date of calculation, plus the Applicable Margin also in effect at the date of calculation). (ac) "pro rata" or "ratably" or for the "ratable" benefit of Banks throughout the Credit Agreement shall mean and be a reference to each Bank's pro rata share of the Loans on the date of determination based on the ratio of the principal amount of the Loans outstanding in favor of such Bank to the aggregate principal amount of Loans outstanding, or, if no Loans are outstanding, based on the amount of such Bank's Commitment to the aggregate amount of Commitments of all Banks. (ad) "Reportable Event" means a reportable event as that term is defined in Title IV of ERISA. (ae) "Required Banks" means Banks whose outstanding Loans equal sixty-six and two-thirds percent (66.2/3%) or more of the aggregate amount of the Loans, or, if no Loans are outstanding, Banks whose Commitments equal sixty-six and two-thirds percent (66 2/3%) or more of the Commitments. (af) "Restricted Payments" means redemptions, repurchases, dividends and distributions of any kind in respect of partnership or joint venture interests in the Company, any payments of principal and interest on indebtedness to JII subordinated to indebtedness to the Banks pursuant to the Subordination Agreement. (ag) "Security Agreement" shall mean the Security Agreement described in Section 3.3 of this Agreement, as it may be amended, restated, supplemented or modified from time to time. (ah) "Subordination Agreement" shall mean the Subordination Agreement described in Section 3.2 of this Agreement, as it may be amended, restated, supplemented or modified from time to time. (ai) "Subsidiary" means a corporation of which the Company owns, directly or through another Subsidiary, at the date of determination, more than 50% of the outstanding stock or capital interests having ordinary voting power for the election of directors, irrespective of whether or not at such time stock or capital interests of any other class or classes might have voting power by reason of the happening of any contingency. (aj) "Termination Date" shall have the meaning set forth in Section 1.1 of this Agreement. (ak) "Total Debt" means the sum of all obligations for borrowed money, all payments required under non-compete -43- 44 agreements, capital lease obligations, amounts required under installment sale purchases, all debt or other financial obligations of others guaranteed by the Company, and any amounts for which the Company is contingently liable to provide as equity or debt advances to other parties; provided, however, that Total Debt shall exclude all Management Fees and Home Office Allocations accrued but not paid and all advances made by JII to the Company, provided, however, that such Management Fees and advances are expressly subordinated to indebtedness of the Company to the Banks under the Credit Agreement pursuant to the Subordination Agreement. 9.2. Expenses and Attorneys' Fees. The Company shall be responsible for the payment of all fees and out-of-pocket disbursements incurred by the Banks in connection with the preparation, execution, delivery, administration and enforcement of this Agreement, the Collateral Documents and the Notes, including all costs of collection, and including without limitation the reasonable fees and disbursements of counsel for each of the Banks, whether or not any transaction contemplated by this Agreement is consummated. 9.3. Securities Act of 1933. Each of the Banks represents that it is acquiring the Note payable to it without any present intention of making a sale or other distribution of such Note, provided that each Bank reserves the right to sell the Note payable to it or participations therein. Notwithstanding the foregoing, each Bank agrees that it will not sell or assign the Note payable to it, its rights under this Agreement, or participations therein, in whole or in part, to any party other than one or more banks which are affiliated with such Bank by reason of their being subsidiaries of the present holding company of such Bank. 9.4. Successors. The provisions of this Agreement shall inure to the benefit of any holder of each Note, and shall inure to the benefit of and be binding upon any successor to any of the parties hereto. No delay on the part of either Bank or any holder of any Note in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein specified are cumulative and are not exclusive of any rights or remedies which the Banks or the holders of the Notes would otherwise have. 9.5. Survival. All agreements, representations and warranties made herein shall survive the execution of this Agreement, the making of the loans hereunder and the execution and delivery of the Notes. -44- 45 9.6. Pennsylvania Law; Amendment. This Agreement and the Notes issued hereunder shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania. This Agreement constitutes the entire agreement of the parties as to the subject matter hereof, and no modification, waiver or amendment shall be effective unless made in a writing signed by the appropriate officers of the parties hereto. 9.7. Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. 9.8. Notices. All communications or notices required under this Agreement shall be deemed to have been given on the date received if sent by telecopy or overnight courier service, and, if mailed, on the fifth day after deposited in the United States mail, postage prepaid, and addressed as follows (unless and until any of such parties advises the other in writing of a change in such address): (a) if to the Company, with the full name and address of the Company as shown on this Agreement below; and (b) if to a Bank with the full name and address of such Bank as shown on this Agreement below, to the attention of the officer of such Bank executing the form of acceptance of this Agreement. 9.9. Limitation on Recourse to Partners. Anything contained in this Agreement or the other Collateral Documents to the contrary notwithstanding, in any action or proceeding brought on any Note, or on any of the Collateral Documents or the indebtedness evidenced or secured thereby, no deficiency judgment shall be sought or obtained against JII, the Partnerships or any limited partner of the Partnerships or enforced against the separate assets of JII, the Partnerships or any limited partner of the Partnerships, and the liability of JII, the Partnerships and such limited partners for any amounts due under the Notes, this Agreement or under the Collateral Documents shall be limited to the interest of JII, the Partnerships or any limited partner of the Partnerships in the collateral described in the Collateral Documents and their interests in any other assets of the Company. The Banks may join any present or future partners or joint venturers of the Company, in their capacities as general partners or joint venturers, as defendants in any legal action it undertakes to enforce its rights and remedies under this Agreement, the Notes and under the Collateral Documents, but any judgment in any such action may be satisfied by recourse only to the security provided for in the Collateral Documents and the other assets of the Company, but not by recourse directly to or by execution on the separate assets of JII, the Partnerships or any limited partners of the Partnerships. Notwithstanding the foregoing, (i) nothing set forth herein shall be deemed to prohibit the Banks from taking any legal action(s) against JII or its assets arising out of JII's undertakings under the Subordination Agreement or arising by reason of any fraud or -45- 46 intentional misconduct of JII or the Partnerships and (ii) in the event that at any time the Company is not a validly existing legal entity, then the Banks shall have recourse to any and all assets (A) described in any financial statement of the Company delivered to Banks, (B) represented to Banks at any time as being owned by the Company and (C) that would have been owned by the Company if it had existed, and all proceeds of the foregoing. 9.10. Indemnification and Release Provisions. The Company hereby agrees to defend Agent and each Bank and their directors, officers, agents, employees and counsel from, and hold each of them harmless against, any and all losses, liabilities (including without limitation settlement costs and amounts, transfer taxes, documentary taxes, or assessments or charges made by any governmental authority), claims, damages, interests, judgments, costs, or expenses, including without limitation reasonable fees and disbursements of counsel, incurred by any of them arising out of or in connection with or by reason of this Agreement, the Commitments, the making of the Loans, or any Collateral Document, or any amendment, waiver or modification with respect thereto, including without limitation, any and all losses, liabilities, claims, damages, interests, judgments, costs or expenses relating to or arising under any Environmental Control Statute or the application of any such Statute to any of the Company's properties or assets except with respect to such Bank's or Agent's (as the case may be) own gross negligence or willful misconduct. The Company hereby releases Agent and each Bank and their respective directors, officers, agents, employees and counsel from any and all claims for loss, damages, costs or expenses caused or alleged to be caused by any act or omission on the part of any of them except with respect to such Bank's or Agent's (as the case may be) own gross negligence or willful misconduct. All obligations provided for in this Section 9.10 shall survive any termination of this Agreement or the Commitments and the repayment of the Loans. 9.11. Participations and Assignments. The Company hereby acknowledges and agrees that a Bank may at any time: (a) grant participations in all or any portion of its Loans or Note or of its right, title and interest therein or in or to this Agreement (collectively, "Participations") to any other lending office or to any other bank, lending institution or other entity which has the requisite sophistication to evaluate the merits and risks of investments in Participations ("Participants"); provided, however, that: (i) all amounts payable by the Company hereunder shall be determined as if such Bank had not granted such Participation; and (ii) any agreement pursuant to which any Bank may grant a Participation: (x) shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company hereunder including, without limitation, the right to approve any amendment, modification or -46- 47 waiver of any provisions of this Agreement; (y) such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement without the consent of the Participant if such modification, amendment or waiver would reduce the principal of or rate of interest on the Loans or postpone the date fixed for any payment of principal of or interest on the Loan; and (z) shall not relieve such Bank from its obligations, which shall remain absolute, to make Loans hereunder; and (b) assign, with the prior written consent of the Agent and notice to the Company, together with the payment to the Agent of a $1,500 transfer fee, up to forty-nine percent (49%) of its Loans and Commitment. IN WITNESS WHEREOF, the undersigned by their duly authorized officers, have executed this Amended and Restated Revolving Credit Agreement the day and year first written above. JONES CABLE INCOME FUND I-B/C VENTURE, a Colorado joint venture general partnership BY: Jones Cable Income Fund I-B, Ltd., a general partner BY: Jones Cable Income Fund I-C, Ltd, a general partner Attest: By: Jones Intercable, Inc., their general partner By: /s/ KATHERINE A. LEVOY By: /s/ KEVIN P. COYLE Katherine A. Levoy Kevin P. Coyle Title: Asst. Secretrary Title: Treasurer [CORPORATE SEAL] CORESTATES BANK, N.A., for itself and as Agent for the Banks By: /s/ Geoffrey M. Boyd Title: Assistant Vice President FIRST NATIONAL BANK OF MARYLAND By: /s/ John L. Brunch Title: Vice President -47- 48 DRESDNER BANK AG, NEW YORK BRANCH By: /s/ R. MATTHEW SCHERER R. Matthew Scherer Title: Vice President By: /s/ CHARLES H. HILL Charles H. Hill Title: Vice President CONTINENTAL BANK A DIVISION OF MIDLANTIC BANK, N.A. By: /s/ JOSEPH E. DONAHUE, III Joseph E. Donahue, III Title: Senior Vice President -48- EX-10.2.5 3 REVOLVING CREDIT & TERM LOAN AGRMT DATED 1/19/95 1 REVOLVING CREDIT AND TERM LOAN AGREEMENT THIS AGREEMENT, made this 19th day of January, 1995, by and between JONES CABLE INCOME FUND 1-B, LTD., a Colorado limited partnership with offices at 9697 East Mineral Avenue, Englewood, Colorado 80112 (the "Borrower"), and COLORADO NATIONAL BANK, a national banking association with offices at 918 17th Street, Denver, Colorado 80202 (the "Bank"). WITNESSETH WHEREAS, Borrower owns certain cable television franchises, related contract rights and operating cable television properties and systems in Orangeburg County, South Carolina, the Town of Cordova, South Carolina, and the City of Orangeburg, South Carolina (as defined below, the "System"); WHEREAS, Borrower desires to borrow $8,500,000 for the purpose of refinancing existing debt and obtaining working capital; and WHEREAS, Bank is willing to lend $8,500,000 to Borrower subject to the terms and conditions hereof; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereby agree as follows: 1. DEFINITIONS When used in this Agreement, the following terms shall have the meaning set forth below; financial and accounting terms used in the following definitions or elsewhere in this Agreement, except as otherwise provided herein, shall be defined in accordance with generally accepted accounting principles consistently applied. 1.1 "Advance Request Form" shall mean the certificate to be delivered by Borrower to Bank as a condition of each advance of the Loan pursuant to Paragraph 2.6 hereof and in the form of Exhibit A attached hereto. 1.2 "Agreement" shall mean this Agreement and all the exhibits hereto, as amended from time to time. 1.3 "Annualized Operation Cash Flow" as of the last day of the fiscal quarter of Borrower shall mean four (4) times Borrower's Operating Cash Flow for such fiscal quarter. 1.4 "Bank" shall mean Colorado National Bank, a national banking association and its successors and assigns. 1.5 "Basic Rate" shall mean the minimum standard monthly fees and charges for "basic service" (as such term is commonly 2 understood in the cable television industry) charged to Basic Subscribers. 1.6 "Basic Subscribers" shall mean the subscribers in the System who are (a) currently receiving cable television signals supplied by Borrower; (b) have commenced payment for such signals at the Basic Rate or the Expanded Basic Rate, directly or indirectly, under subscriptions with Borrower; and (c) are not sixty (60) or more days delinquent in payments as determined on a contractual basis. 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 services shall be counted as one subscriber. The number of subscribers in a commercial building or in a multiple residential dwelling which does obtain a reduced bulk service rate shall be obtained by dividing (a) the aggregate dollar amount of monthly subscribers' fees paid on account of such commercial building or multiple residential dwelling for basic service by (b) the applicable Basic rate for the System in which such building or dwelling is located. Except for discounts to senior citizens less than 20% of the otherwise applicable rate, residential households (other than a multiple residential dwelling) paying for services on a discounted basis or under any form of deferred payment arrangement shall not be included. 1.7 "Borrower" shall mean Jones Cable Income Fund 1-B, Ltd., a Colorado limited partnership. 1.8 "Capital Lease" shall mean capital leases and subleases as defined in the Financial Accounting Standards Board Statement of Financial Accounting Standards No.13, dated November, 1976. 1.9 "Commitment" shall mean the maximum aggregate principal amount which Bank has agreed to advance under Section 2.1 hereof. 1.10 "Communications Act" shall mean the Federal Communications Act of 1934, as amended, and the rules and regulations promulgated thereunder, as from time to time in effect. 1.11 "Copyright Act" shall mean Title 17 of the United States Code, as amended, and the rules and regulations promulgated thereunder, as from time to time in effect. 1.12 "Debt Service" shall mean, for any period for which such sum is being computed, the sum of all principal and interest payments due on Funded Debt during such period. -2- 3 1.13 "Depreciation" shall mean for any fiscal quarter of Borrower, the sum of all Borrower's depreciation and amortization expenses for such quarter, as determined in accordance with GAAP. 1.14 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder, or from time to time in effect. 1.15 "ERISA Affiliate" shall mean any employer, whether or not incorporated, which is considered a single employer with Borrower under Titles I, II, or IV of ERISA. 1.16 "Event of Default" shall have the meaning set forth in Section 7.1 below. 1.17 "Expanded Basic Rate" shall mean the minimum standard monthly fees and charges for "expanded basic service" (as such term is commonly understood in the cable television industry) charged to Basic Subscribers. 1.18 "FCC" shall mean the Federal Communications Commission. 1.19 "Funded Debt" shall mean, at any time as of which such sum is being computed, the sum of all of Borrower's principal indebtedness for (a) borrowed money other than trade indebtedness or accrued liabilities incurred in the normal and ordinary course of business for value received, (b) Capital Leases, and (c) installment purchases of real or personal property. 1.20 "GAAP" shall mean generally accepted accounting principles as from time to time in effect, consistently applied, which shall include the official interpretations thereof by the Financial Accounting Standards Board. 1.21 "Gross Operating Revenues" shall mean, for any period for which such sum is being computed, the sum of all payments made to Borrower by subscribers in the System, and all other revenues and receipts realized by Borrower from the operation of its businesses during such period. 1.22 "Home Office Allocations" shall mean, for any period for which such sum is being computed, the amount of reimbursement payable by Borrower to Jones for general overhead and administrative expenses pursuant to Section 4.2 of the Partnership Agreement during such period. 1.23 "Jones" shall mean Jones Intercable, Inc., a Colorado corporation which is the sole general partner of Borrower. 1.24 "Loan" shall mean the outstanding principal balance of indebtedness advanced under the Commitment. -3- 4 1.25 "Local Authorities" shall mean individually and collectively the South Carolina state and local authorities which govern cable television systems. 1.26 "Management Fees" shall mean for any period for which such sum is being computed the amount of management fees payable by Borrower to Jones pursuant to Section 4.1 of the Partnership Agreement. 1.27 "Net Income" shall mean for any fiscal quarter of Borrower, Borrower's net profit after taxes for such quarter, as determined in accordance with GAAP. 1.28 "Note" shall mean Borrower's promissory note evidencing Borrower's indebtedness to Bank under the Loan, in the form attached hereto as Exhibit B. 1.29 "Operating Cash Flow" shall mean, for any fiscal quarter of Borrower, the sum of the following items for such quarter: (a) Net Income, (b) income taxes, (c) Depreciation, and (d) interest expense of Borrower, less any non-cash gains or income of Borrower determined in accordance with GAAP. 1.30 "Partnership Agreement" shall mean the Certificate of Limited Partnership of Borrower dated August 14, 1986, as amended by Amendment No. 1 To The Limited Partnership Agreement of Borrower dated April 14, 1988, and as it may be amended from time to time, by and among Jones, as general partner, and certain other parties identified therein, as limited partners. 1.31 "Restricted Payments" shall mean redemptions, repurchases, dividends and distributions of any kind in respect of partnership interests in Borrower. 1.32 "Subordination Agreement" shall mean the Subordination Agreement of even date herewith executed by Jones in favor of Bank. 1.33 "Subsidiary" shall mean any corporation of which the Borrower, directly or indirectly, owns more than 50% of any class or classes of securities. 1.34 "System" shall mean collectively Borrower's cable television franchises, properties and systems in and around Orangeburg County, South Carolina, the Town of Cordova, South Carolina, and the City of Orangeburg, South Carolina, as more particularly described in Exhibit C hereto. 1.35 "Termination Date" shall mean the earlier of December 31, 1997 or the date on which the Commitment is terminated 'pursuant to Section 2.7 hereof. -4- 5 2. LOAN 2.1 The Facility. From time to time prior to the Termination Date and subject to the terms and conditions herein, Bank will loan funds to Borrower and Borrower may repay at the office of Bank specified above and reborrow under a revolving loan facility in an aggregate principal amount not to exceed at any time outstanding the sum of Eight Million Five Hundred Thousand Dollars ($8,500,000). 2.2 Promissory Note. The indebtedness of Borrower to Bank under the Loan will be evidenced by a Note executed by Borrower in favor of Bank in the form of Exhibit B hereto. The original principal amount of the Note will be the amount of the Commitment; provided, however, that notwithstanding the face amount of the Note, Borrower's liability under the Note shall be limited at all times to its actual indebtedness, principal and interest and fees, then outstanding hereunder and thereunder. 2.3 Use of Proceeds. Funds advanced under the Loan may be used for any purposes not prohibited by this Agreement. 2.4 Repayment. (a) The aggregate outstanding principal balance of the Loan on the Termination Date (the "Termination Balance") shall be due and payable in consecutive quarterly installment payments on the last day of each calendar quarter commencing March 31, 1998, and ending on December 31, 2002. The four quarterly payments due in each calendar year shall be in equal amounts and shall total the percentage of the Termination Balance set forth below for each year.
Percentage of Year Termination Balance ---- ------------------- 1998 4.65% 1999 16.35% 2000 20.35% 2001 25.25% 2002 33.40%
(b) Notwithstanding the preceding portion of this Paragraph 2.4, in the event that Bank shall have terminated the Commitment upon the occurrence of any Event of Default hereunder, the aggregate outstanding balance of the Note shall be due and payable on the date of Bank's declaration of the Event of Default and termination of the Commitment. -5- 6 2.5 Interest. The Loan shall bear interest on the outstanding principal amount thereof in accordance with the following provisions: (a) Definitions. As used herein, the following words and terms shall have the meanings specified below: (i) "Adjusted Libor Rate" shall mean the Libor Rate plus one and one-half percent (1-1/2%) per annum. (ii) "Adjusted Reference Rate" shall mean the Reference Rate, such rate to change when and as the Reference Rate changes, plus one quarter of one percent (1/4%) per annum. (iii) "Business Day" shall mean any day not a Saturday, Sunday or public holiday under the laws of the State of Colorado on which banks are open for the transaction of business. (iv) "Business Day in London" shall mean a day on which banks in London are open for the transaction of business. (v) "Interest Period" shall mean, with respect to the Adjusted Libor Rate, a period of one (1), two (2), three (3) or six (6) months' duration as Borrower may elect; provided, however, that (a) if any Interest Period would otherwise end on a day which shall not be a Business Day in London, such Interest Period shall be extended to the next succeeding Business Day in London, subject to clauses (c) and (d) below; (b) interest shall accrue from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires; (c) any Interest Period which would otherwise end on a day which is not a Business Day in London shall extend to the next succeeding Business Day in London unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day in London; and (d) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no corresponding day to the calendar month at the end of the Interest Period) shall end on the last Business Day of a calendar month. -6- 7 (vi) "Libor Rate" shall mean the rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) determined pursuant to the following formula: LIBOR Rate ---------------------- Libor Rate = 1 - Reserve Percentage For purposes hereof, "LIBOR Rate" shall mean, for any Interest Period, as applied to a Portion, the arithmetic average of the rates of interest per annum (rounded upwards, if necessary to the next 1/16 of 1%) at which Bank is offered deposits of United States dollars in the London Interbank Market on or about 9:00 a.m. Denver time two (2) Business Days prior to the commencement of such Interest Period in amounts substantially equal to such Portion of the outstanding principal amount of the Loan as to which Borrower may elect the Adjusted Libor Rate to be applicable and with a maturity of comparable duration to the Interest Period selected by Borrower. (vii) "Portion" shall mean a portion of a Loan as to which a specific interest rate and, except in the case of a Portion bearing interest at the Adjusted Reference Rate, Interest Period, has been elected by Borrower. (vii) "Reference Rate" shall mean the rate of interest which has been publicly announced by First Bank National Association in Minneapolis, Minnesota ("FNBA"), from time to time, as its "Reference Rate", which may be a rate at, above or below the rate or rates at which Bank or FNBA lends to other parties. (ix) "Reserve" shall mean for any day that reserve (expressed as a decimal) which may be applicable to Bank on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor or any other banking authority to which Bank is subject including any board or governmental or administrative agency of the United States or any other jurisdiction to which Bank is subject), for determining the maximum reserve requirement (including without limitation any basic, supplemental, marginal or emergency reserves) for (i) -7- 8 Bank's negotiable non-personal time deposits in United States dollars of $100,000 or more with maturities of comparable duration to the Interest Period elected by Borrower, (ii) deposits of United States dollars in a non-United States office or an international banking facility of Bank used to fund a Portion of the Loan subject to the Adjusted Libor Rate, (iii) any loan made with the proceeds of the deposits described in (ii) above, (iv) the principal amount of or interest on the Loan subject to the Adjusted Libor Rate, or (v) funds transferred from a non-United States office or an international banking facility of Bank to its United States office. (x) "Reserve Percentage" shall mean, for any day, that percentage (expressed as a decimal) to which Bank is subject (whether or not actually incurred by Bank) on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor or any other banking authority to which Bank is subject, including any board or governmental or administrative agency of the United States or any other jurisdiction to which Bank is subject), for determining the reserve requirement (including without limitation any basic, supplemental, marginal or emergency reserves) for Bank's negotiable, non-personal time deposits in United States dollars of $100,000 or more with maturities of comparable duration to the Interest Period selected by Borrower. The Libor Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage. (b) Interest on Loan. At Borrower's election in accordance with the provisions of Paragraph 2.5(c) below, the Loan or any Portion thereof, shall bear interest at either one of the following rates: (i) the Adjusted Libor Rate or (ii) the Adjusted Reference Rate. Any portion of the Loan for which Borrower has not made an election, pursuant to Section 2.5(c) below, shall bear interest at the Adjusted Reference Rate. (c) Procedure for Determining Interest Periods and Rates of Interest. (i) If Borrower anticipates that it may elect the Adjusted Libor Rate to be applicable to -8- 9 a new advance of the Commitment or to a Portion which was subject to such rate during an expiring Interest Period or which was subject to the Adjusted Reference Rate, Borrower must notify Bank at least two (2) Business Days prior to such new advance and/or the commencement of the proposed Interest Period of the rate(s) which Borrower anticipates it may elect to be applicable to such new advance or Portion and the duration of the proposed Interest Period(s). If Borrower anticipates that it may elect the Adjusted Libor Rate to be applicable to such new advance or Portion of the Loan, Borrower must request a quotation of such rate(s) prior to 11:00 a.m. Denver time two (2) Business Days in London as to the Adjusted Libor Rate, prior to such advance and/or the commencement of the proposed Interest Period, and if Borrower desires to elect such rate(s), Borrower must accept such quotation of the Adjusted Libor Rate no later than 1:00 p.m. Denver time on the date such quotation is given by Bank. If Borrower does not provide the applicable notice for the Adjusted Libor Rate, then Borrower shall be deemed to have requested that the Adjusted Reference Rate shall apply to any Portion which was subject to the rate of interest applicable during an expiring Interest Period and to any new advance of the Commitment until Borrower shall have given proper notice of a change in or determination of the rate of interest in accordance with this Paragraph 2.5(c). (ii) Borrower shall not request, and Bank shall not be required to provide, an indication or quotation with respect to a specified rate of interest for a Portion in an amount less than $100,000 for an Adjusted Libor Rate. Borrower shall not elect more than three (3) different Portions (other than a Portion bearing interest at the Adjusted Reference Rate) to be applicable to the Loan. (iii) Upon an election of the Adjusted Libor Rate made by Borrower pursuant to subparagraph (c) (i) above, such rate shall apply to the applicable Portion of the Loan unless Bank is unable to obtain the necessary funding for such rate, in which event Bank will so notify Borrower and interest will accrue at the Adjusted Reference Rate. -9- 10 (d) Payment and Calculation of Interest. With respect to Portions of the Loan which bear interest at the Adjusted Libor Rate, Borrower shall pay interest upon the expiration of the Interest Period for each Portion; with respect to Portions of the Loan which bear interest at the Adjusted Reference Rate, Borrower shall pay interest with respect to each outstanding Portion of the Loan on a quarterly basis on the last day of each calendar quarter, commencing with March 31, 1995 and continuing on the last day of each March, June, September and December thereafter until maturity and thereafter upon demand. If any Event of Default shall occur and be continuing, and the Loan is not paid when due, each of the Adjusted Libor Rate and the Adjusted Reference Rate shall be increased by two percent (2%) per annum (but not in excess of the maximum rate allowed by applicable law) and interest shall be payable at the relevant rate on the Loan or each Portion thereof until the Loan has been paid in full. Interest shall be calculated in accordance with the provisions of Paragraph 2.5(b) on the basis of the actual number of days elapsed over a year of, (i) with respect to Portions of the Loan bearing interest at the Adjusted Libor Rate, three hundred sixty (360) days, and (ii) with respect to Portions of the Loan bearing interest at the Adjusted Reference Rate, three hundred sixty-five (365) days, or three hundred sixty-six (366) days, as the case may be. (e) Reserves. If at any time the Loan or any Portion of the Loan outstanding hereunder is subject to the Adjusted Libor Rate, and Bank is subject to and incurs a Reserve, Borrower hereby agrees to pay within five (5) Business Days of demand thereof from time to time, as billed by Bank, such additional amount as is necessary to reimburse Bank for its costs in maintaining such Reserve. Such amount shall be computed by taking into account the cost incurred by Bank in maintaining such Reserve in an amount equal to the Portion on which such Reserve is incurred. The determination by Bank of such costs incurred shall be prima facie evidence of the correctness of the fact and amount of such additional cost. (f) Special Provisions Applicable to Adjusted Libor Rate. The following special provisions shall apply to the Adjusted Libor Rate: (i) Change of Libor Rates. The Adjusted Libor Rate may be automatically adjusted by Bank on a prospective basis to take into account -10- 11 the additional or increased cost of maintaining any necessary reserves for Eurodollar deposits or increased costs due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including but not limited to changes in tax laws (except corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor), including the Reserve Percentage but excluding the Reserve, that increase the cost to Bank of funding the Loan or a Portion thereof bearing interest at the Adjusted Libor Rate. Bank shall give Borrower notice of such a determination and adjustment and Borrower may, by notice to Bank (a) require Bank to furnish to Borrower a statement setting forth the basis for adjusting such Adjusted Libor Rate and the method for determining the amount of such adjustment; and/or (b) repay the Portion of the Loan with respect to which such adjustment is made pursuant to the requirements of Paragraph 2.8 hereof. (ii) Unavailability of Eurodollar Funds. In the event that Borrower shall have requested a quotation of the Adjusted Libor Rate in accordance with Paragraph 2.5(c) hereof and Bank shall have reasonably determined that Eurodollar deposits equal to the amount of the principal of the Loan, or a Portion thereof, and for the Interest Period specified are unavailable or that the Adjusted Libor Rate will not adequately and fairly reflect the cost of making or maintaining the principal amount of the Loan specified by Borrower during the Interest Period specified or that by reason of circumstances affecting Eurodollar markets, adequate and reasonable means do not exist for ascertaining an Adjusted Libor Rate applicable to the specified Interest Period, Bank shall promptly give notice of such determination to Borrower that the Adjusted Libor Rate is not available. A determination by Bank hereunder shall be prima facie evidence of the correctness of the fact. (iii) Illegality. In the event that it becomes unlawful for Bank to maintain Eurodollar liabilities sufficient to fund any Portion of the Loan subject to the Adjusted Libor -11- 12 Rate, then Bank shall immediately notify Borrower thereof and Bank's obligations hereunder to advance funds or maintain the Loan or a Portion thereof at the Adjusted Libor Rate shall be suspended until such time as Bank may again cause the Adjusted Libor Rate to be applicable to any Portion of the outstanding principal balance of the Loan and any portion shall then be subject to the Adjusted Reference Rate. (g) Minimizing Additional Cost. To the extent reasonably possible, Bank will use its best efforts to minimize any additional costs which may arise under either subparagraphs (e) or (f) above. 2.6 Advances. In addition to the notice required under Paragraph 2.5(c) hereof with respect to interest rate elections, Borrower shall give Bank at least one (1) Business Day's prior notice, in case of an Adjusted Reference Note advance, and two (2) Business Days' prior notice, in case of an Adjusted Libor Rate advance, of each requested new advance under the Commitment, such request to be confirmed in writing and received by Bank within five (5) Business Days after the date of the advance by delivering to Bank an Advance Request Form certified by the President, Group Vice president/Finance or Treasurer of Jones, in the form attached hereto as Exhibit A, containing the following information and representations, which must be true and correct as of the date of the requested advance: (a) the aggregate amount of the requested advance, which shall be in multiples of $25,000 or, if less, the unborrowed balance of the Commitment for a portion subject to the Adjusted Reference Rate, and of not less than $100,000, for a Portion subject to the Adjusted Libor Rate; (b) confirming the interest rate(s) Borrower has elected to apply to the new advance and, if more than one interest rate has been elected, the amount of the Portion as to which each interest rate shall apply; and (c) representations that (i) the representations and warranties set forth in Section 3 hereof are true and correct; (ii) no Event of Default hereunder, or event which with the passage of time or the giving Of notice or both would constitute an Event of Default hereunder, has occurred and is then continuing; and (iii) there has been no material adverse change in Borrower's financial condition or business since the date hereof. -12- 13 2.7 Reduction and Termination of Commitment. Borrower shall have the right at any time and from time to time, upon three (3) Business Days' prior written notice to Bank, to reduce the amount of the Commitment in whole or in part without penalty or premium, provided that on the effective date of such reduction, Borrower shall make a prepayment of the Loan in an amount, if any, by which the aggregate outstanding principal balance of the Loan exceeds the amount of the Commitment as then so reduced, together with accrued interest on the amount so prepaid; provided that in the event of such a prepayment of a Portion of the Loan upon which interest is determined by reference to the Adjusted Libor Rate prior to the end of the applicable Interest Period, Borrower shall reimburse Bank for any costs and expenses incurred by Bank on account of such prepayment, including but not limited to funding costs. Bank shall have the right to terminate the Commitment at any time, in its discretion and upon notice to Borrower, upon the occurrence of any Event of Default hereunder. Any termination or reduction of the Commitment shall be permanent, and the Commitment cannot thereafter be restored or increased without the written consent of Bank. 2.8 Prepayment. (a) Subject to the provision of subsection (b) below, Borrower may prepay the outstanding principal balance under the Loan at any time without premium or penalty, and prepayments prior to the Termination Date shall not reduce the Commitment and may be reborrowed. Prepayments made on or after the Termination Date may not be reborrowed and shall be applied to the payments due in the inverse order of maturities. To the extent applied to principal, partial prepayments shall be applied first to any Portion bearing interest at the Adjusted Reference Rate, with any remaining amounts of the prepayment to then be applied to any Portion(s) bearing interest at the Adjusted Libor Rate. Except for a prepayment required to be made by Borrower pursuant to paragraph 2.8 (b) hereof, prepayments shall be in multiples of $25,000, but not less than $100,000 if subject to the Adjusted Libor Rate. Borrower shall notify Bank at least one (1) Business Day in advance of such prepayment. (b) If a Portion of the Loan upon which interest is determined by reference to the Adjusted Libor Rate is repaid or prepaid other than at the end of the applicable Interest Period (including repayment or prepayment by reason of acceleration or otherwise), Borrower shall reimburse Bank for any costs and expenses incurred by Bank on account of such -13- 14 repayment or prepayment, including but not limited to funding costs. 2.9 Payments in Available Funds. All payments and prepayments shall be made by Borrower at the offices of Bank specified above no later than 2:00 p.m. Denver time and in immediately available funds. 2.10 Commitment Fee. Borrower shall pay Bank a commitment fee of $31,875 upon execution of this Agreement; provided, however, that if Borrower's request to release the Guaranty pursuant to Section 4.9 of this Agreement is denied and as a result Borrower terminates the Commitment and repays the Loan in full on or before one year from the date of this Agreement, then Bank shall refund $21,250 of the commitment fee to Borrower. 2.11 Collateral. The repayment of all of Borrower's indebtedness to Bank shall be secured by first priority security interests (the "Security Interests") in all real estate, fixtures, accounts, equipment, inventory and general intangibles (such terms having the meanings given them in the Colorado Uniform Commercial Code) including all of the cable television franchises relating to the System, now owned or hereafter acquired by Borrower, and in all proceeds thereof (the "Collateral"), excluding Borrower's general partnership interest in Jones Cable Income Fund 1-B/C Venture. The Security Interests shall be created and perfected by mortgages, deeds of trust, collateral assignments, security agreements, UCC financing statements, and any other collateral documents deemed necessary or advisable by Bank in its sole discretion, each in form satisfactory to Bank, duly executed by Borrower (the "Collateral Documents"). Hereafter, Borrower shall from time to time execute and deliver to Bank such other documents in form and substance satisfactory Bank, and perform such other acts, as Bank may reasonably request, to perfect and maintain valid Security Interests in the Collateral. 3. REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as follows: 3.1 Organization and Good Standing. Borrower is a limited partnership duly formed and validly existing under the laws of the State of Colorado; and Borrower has the partnership power and authority to carry on its business as now conducted and is qualified to do business in South Carolina and in all other states in which the nature of its activities or the character of its properties requires such qualification; provided, however, that Borrower shall not be required to qualify in those jurisdictions where -14- 15 the failure to so qualify would not have a material adverse effect on Borrower or its assets. 3.2 Power and Authority; Validity of Agreement. Borrower has the partnership power and authority under Colorado law and under its Partnership Agreement to enter into and perform this Agreement, the Note and all other agreements, documents and actions required hereunder; and all actions (partnership, corporate or otherwise) necessary or appropriate for the execution and performance by Borrower of this Agreement, the Note and all other agreements, documents and actions required hereunder have been taken, and, upon their execution, the same will constitute the valid and binding obligations of Borrower to the extent it is a party thereto, enforceable in accordance with their terms, and the Collateral Documents will create first priority security interests in the Collateral contemplated in Paragraph 2.11 hereof in favor of Bank. 3.3 No Violation of Laws or Agreements. The making and performance of this Agreement, the Note and the other documents, agreements and actions required of Borrower hereunder will not violate any provisions of any law or regulation, federal, state or local, or the Partnership Agreement or result in any breach or violation of, or constitute a default under, any material agreement by which Borrower or its property may be bound, other than those agreements shown on Exhibit C as requiring consent for the granting of a security interest for which consent has not yet been obtained. 3.4 System. Borrower owns the System described in Exhibit C attached hereto, which sets forth a description of the franchises, locations and Basic Subscriber counts of the System on the date hereof and as supplemented by reports delivered to Bank pursuant to Paragraph 5.4 hereof, a general description of the property and assets comprising the System, including any property leased from others and including the locations of all such property and assets, including, without limitation, headend and office facilities, and the record owners of such locations and descriptions of any leases covering Borrower's lease of any of such property, assets or locations from others. 3.5 Material Contracts. Borrower is neither a party to nor in any manner obligated under any contracts material to its business except the franchise and other agreements identified on Exhibit C hereto, and there exists no material default under any of such contracts. 3.6 Compliance. Borrower is in compliance in all material respects with all applicable laws and regulations, federal, state and local (including without limitation those administered by the Local Authorities and the FCC), -15- 16 material to the conduct of its business and operations; Borrower possesses all the franchises, permits, licenses, certificates of compliance and approval and grants of authority described on Exhibit C hereto, necessary or required in the conduct of its business, and the same are valid, binding, enforceable and subsisting without any material defaults thereunder and are not subject to any proceedings or claims opposing the issuance, development or use thereof or contesting the validity thereof; and no approvals, waivers or consents, governmental (federal, state or local), or non-governmental, other than the consents set forth on Exhibit C, under the terms of contracts or otherwise, are required by reason of or in connection with its execution and performance of this Agreement, the Note and all other agreements, documents and actions required hereunder. 3.7 Litigation. There are no actions, suits, proceedings or claims which are pending or, to the best of its knowledge or information, threatened against Borrower which, if adversely resolved, would materially adversely affect either of its financial condition or business. 3.8 Title to Assets. Borrower has good and marketable title to all of its properties and assets free and clear of any liens and encumbrances except as described on Exhibit C hereto, and all such assets are in good order and repair, ordinary wear and tear excepted, and fully covered by the insurance required under Paragraph 5.6. 3.9 Partnership Interests. The percentage of general partnership interest in Borrower is accurately set forth on Exhibit C attached hereto; all partnership interests in Borrower are validly existing and the creation and sale thereof are in compliance with all applicable federal and state securities and other applicable laws; and Jones is the sole general partner of Borrower. 3.10 Financial Information. All information furnished to Bank concerning the financial condition of Borrower, including Borrower's annual financial statement for the period ended December 31, 1993, and Borrower's unaudited statement for the period ended September 30, 1994, copies of which have been furnished to Bank, have been prepared in accordance with GAAP and fairly present the financial condition of Borrower as of the dates and for the period covered and include all liabilities of any kind of Borrower and there have been no material adverse changes in the financial condition or business of Borrower from the date of such statements to the date hereof. 3.11 Taxes and Assessments. Borrower has filed all required tax returns or has filed for extensions of time for the filing thereof, and has paid all applicable federal, state -16- 17 and local taxes, other than taxes not yet due or which may be paid hereafter without penalty, and has no knowledge of any deficiency or additional assessment in connection therewith not provided for in the financial statements required hereunder. 3.12 Indebtedness. Other than trade indebtedness and accrued liabilities incurred in the normal and ordinary course of business for value received, Borrower has no presently outstanding indebtedness or obligations including contingent obligations and obligations under leases of property from others, except the indebtedness and obligations described in Exhibit C hereto and in Borrower's financial statements which have been furnished to Bank. 3.13 Management Agreements. Borrower is a party to no management or consulting agreements for the provision of services to Borrower. 3.14 Investments. Borrower has no Subsidiaries or investments in or loans to any other individuals or business entities, except for a general partnership interest in Jones Cable Income Fund 1-B/C Venture. 3.15 ERISA. Neither Borrower nor any ERISA Affiliate has established or maintained, or has ever made or been obligated to make contributions to, any pension or employee benefit plan (a "Plan") covered by ERISA or any multi-employer plan as defined in Section 4001 of ERISA. 3.16 Fees and Commissions. Borrower owes no fees or commissions of any kind, and knows of no claim for any fees or commissions, in connection with Borrower's obtaining the Commitment or the Loan from Bank, excepting those provided herein. 3.17 No Extension of Credit for Securities. Neither Borrower nor Jones is now, nor at any time has it been engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any securities. 3.18 Hazardous Wastes, Substances and Petroleum Products. (a) Borrower (i) has received all permits and filed all notifications necessary to carry on its businesses under, and (ii) is otherwise in compliance in all material respects with, all federal, state or local laws and regulations governing the control, removal, spill, release or discharge of hazardous or toxic wastes, substances and petroleum products, including without limitation as provided in the provisions of the regulations under the Comprehensive -17- 18 Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Federal Water Pollution Control Act Amendments of 1972 (all of the foregoing enumerated and non-enumerated statutes, including without limitation any applicable state or local statutes, collectively the "Environmental Control Statutes"). (b) Borrower has not given any written or oral notice to the Environmental Protection Agency ("EPA") or any state or local agency with regard to any actual or imminently threatened removal, spill, release or discharge of hazardous or toxic wastes, substances or petroleum products on properties owned or leased by Borrower or in connection with the conduct of its business and operations (an "Event"). (c) Borrower has not received notice that it is potentially responsible for costs of clean-up of any actual or imminently threatened spill, release or discharge of hazardous or toxic wastes or substances or petroleum products pursuant to any Environmental Control Statute. 4. CONDITIONS The obligation of Bank to make the advances of the Loan shall be subject to Bank's receipt of the following documents, each in form and substance satisfactory to Bank: 4.1 Promissory Note and Collateral Documents. The Note and such Collateral Documents as may be specified by Bank under Paragraph 2.11, each duly executed by Borrower. 4.2 Authorization Documents. A certified copy of the resolution of the Board of Directors of Jones authorizing Borrower's execution and full performance of this Agreement, the Note and all other documents and actions required hereunder, and an incumbency certificate setting forth the officers of Jones. 4.3 Opinion Of Counsel. Opinion letters from counsel for Borrower and Jones covering, with such exceptions and qualifications as may be satisfactory to Bank, the representations and warranties set forth in Section 3 hereof. 4.4 Insurance. Certificates of insurance and evidence showing Bank as an additional insured with respect to all of Borrower's fire, casualty, liability and other insurance covering its respective property and business. -18- 19 4.5 Franchises and Approvals. Copies of all Borrower's franchises, certificates of compliance and approvals and material related contracts, licenses and permits necessary or required in connection with the System. 4.6 Subordination Agreement. A Subordination Agreement executed by Jones, in form acceptable to Bank, with appropriate certified board resolutions and legal opinions as required by Bank. 4.7 Advance Request. As a condition to the first advance and each subsequent advance of any of the Loan, the Advance Request Form required under Paragraph 2.6 hereof, and any other documents or information reasonably required by Bank in connection therewith. 4.8 Partnership Agreement. A copy of the Partnership Agreement, as amended to the date hereof. 4.9 Guaranty. A Guaranty Agreement executed by Jones, in form satisfactory to Bank, pursuant to which Jones agrees to pay the Loan in full at any time that Borrower, for any reason, ceases to hold a cable television franchise for the City of Orangeburg, South Carolina (the "City Franchise"). Bank agrees to release the Guaranty Agreement if: (a) The City Franchise is renewed for a term of not less than five years from the date of renewal on terms which Bank determines, in the good faith exercise of its sole discretion after consultation with counsel: (i) will allow Borrower to realize sufficient cash flow from the System to repay the Loan in accordance with its terms, (ii) provide Bank with a margin of collateral value for the Loan which satisfies its underwriting guidelines, (iii) do not impair Bank's ability to realize upon its collateral upon the occurrence of an Event of Default, and (iv) do not pose any unreasonable risk of revocation, cancellation or termination; and (b) either, (i) the term of the renewed City Franchise ends on or later than December 31, 2002, or (ii) the term of the renewed City Franchise ends earlier than December 31, 2002, and Borrower executes such documents as Bank may reasonably request to amend this Agreement and the Note to provide for a maturity date not later than 90 days before the end of the term of the renewed City Franchise. Bank shall make the determination described in Section 4.9(a) within 30 days after Borrower submits the renewed City Franchise to Bank along with a written request for a -19- 20 release of the Guaranty. If Bank has not notified Borrower of its determination prior to the expiration of such thirty-day period, Bank shall be deemed to have determined that the conditions of Section 4.9(a) (i) through (iv) have been met, and the Guaranty Agreement shall be deemed released upon the fulfillment of the conditions of Section 4.9(b)(i) or (ii). The written request for a release of the Guaranty must quote the immediately preceding two sentences or the provisions of such sentences shall not apply. 4.10 Interest Rate Protection. Borrower shall have obtained an interest rate protection product covering not less than $2,550,000 of the principal balance of the Loan for a period of not less than two years, and shall have collaterally assigned to Bank its interest therein. 4.11 Other Documents. Such additional documents as Bank may reasonably request. 5. AFFIRMATIVE COVENANTS Borrower covenants and agrees that so long as the Commitment of Bank to Borrower or any indebtedness of Borrower to Bank is outstanding: 5.1 Existence and Good Standing. Borrower will preserve and maintain its existence as a Colorado limited partnership and its good standing in Colorado, South Carolina and all other states in which the nature of its activities and the character of its properties requires such qualifications; provided, however, that Borrower shall not be required to qualify in those jurisdictions where the failure to so qualify would not have a material adverse effect on Borrower or its assets. Borrower will preserve the validity of all its franchises, licenses, permits, certificates of compliance or grants of authority material to the conduct of its business. 5.2 Quarterly Financial Statements and Subscriber Reports. Borrower will furnish Bank within seventy-five (75) days of the end of each quarterly fiscal period hereafter (a) unaudited quarterly financial statements, including a balance sheet, an income statement, a statement of cash flow, and the information required to apply the criteria prescribed in Paragraphs 5.13, 5.14 and 5.15 hereof, prepared in accordance with GAAP, together with a certificate executed by the President, Group Vice President/Finance or Treasurer of Jones stating that the financial statements fairly present the financial condition of Borrower as of the date and for the periods covered and that as of the date of such certificate there has not been any violation of any provision of this Agreement or the happening of any Event of Default or any event which with the giving of notice or the passage of -20- 21 time, or both, would constitute an Event of Default hereunder; and (b) a report, in form and substance satisfactory to Bank, covering the System and showing (i) the number of Basic Subscribers at the beginning and at the end of such quarter, and (ii) any other information reasonably requested by Bank. 5.3 Annual Financial Statements. Borrower will furnish Bank within one hundred and thirty-five (135) days after the close of each fiscal year commencing with fiscal 1994 with audited annual financial statements, including the financial statements and information required under Paragraph 5.2 hereof, which financial statements shall be prepared in accordance with GAAP and shall be fully certified by a nationally recognized independent certified public accounting firm. 5.4 Disclosures to Partners. To the extent not already provided for in Paragraphs 5.2 and 5.3 above, Borrower will furnish to Bank a copy of all information material to Borrower or its financial condition sent to Borrower's limited partners from time to time, within ten (10) days after the date any such information is sent to the limited partners. 5.5 Books and Records. Borrower will keep and maintain satisfactory and adequate books and records of account in accordance with generally accepted accounting practices and principles consistently applied and make or cause the same to be made available to Bank or its agents or nominees at any reasonable time upon reasonable notice for inspection and to make extracts thereof. 5.6 Insurance. Borrower will keep and maintain all of its property and assets in good order and repair, ordinary wear and tear excepted, and fully covered by insurance with reputable and financially sound insurance companies against such hazards and in such amounts as is customary in the industry, under policies requiring the insurer to furnish reasonable notice to Bank and opportunity to cure any non-payment of premiums prior to termination of coverage; and, as required above, furnish Bank with certificates of such insurance and cause Bank to be named as an additional insured thereof. 5.7 Litigation. Borrower will notify Bank in writing immediately of the institution of any litigation, the commencement of any administrative proceedings, the happening of any event or the assertion or threat of any claim which could materially or adversely affect its business, operations or financial condition, or the occurrence of any Event of Default hereunder or an event which with the passage of time or the giving of notice or both would constitute an Event of Default hereunder. -21- 22 5.8 Taxes. Borrower will pay and discharge all taxes, assessments or other governmental charges or levies imposed on it or any of its property or assets prior to the date on which any penalty for non-payment or late payment is incurred, unless the same are currently being contested in good faith by appropriate proceedings. 5.9 Costs and Expenses. Borrower will pay or reimburse Bank for all out-of-pocket costs and expenses including all reasonable attorneys' fees and disbursements relating to the filing of any Collateral Documents to create and perfect the Security Interests or which Bank may pay or incur in connection with the preparation and review of this Agreement, all waivers, consents and amendments in connection therewith and all other documentation related there to and the making of the Loan hereunder; and Borrower will pay or reimburse Bank for all costs and expenses which Bank may pay or incur in connection with the collection or enforcement of the same. 5.10 Compliance. Borrower will comply in all material respects with all local, state and federal laws and regulations applicable to its business including, without limitation, Environmental Control Statutes, the Communications Act and all laws and regulations of the FCC and the Local Authorities, the provisions and requirements of all franchises, permits, certificates of compliance and approval issued by regulatory authorities and other like grants of authority held by Borrower, and the requirements of the Copyright Act; and Borrower will notify Bank immediately in detail of any actual or alleged material failure to comply with or perform, or any actual or alleged material breach, violation or default under, any such laws or regulations or under the terms of any of such franchises or grants of authority, or of the occurrence or existence of any facts or circumstances which with the passage of time, the giving of notice or otherwise could create such a breach, violation or default or could occasion the termination of any of such franchises or grants of authority. 5.11 ERISA. Borrower will comply in all respects with the provisions of ERISA to the extent applicable to any employee benefit plan. Borrower will comply in all respects with the provisions of ERISA to the extent applicable to any Plan maintained for any of Borrower's or a Subsidiary's employees; not incur any accumulated funding deficiency (within the meaning of ERISA and the regulations thereunder) or any liability to the Pension Benefit Guaranty Corporation ("PBGC"); not permit any "reportable event" (as defined in ERISA) or other event to occur which may indicate that its Plans are not sound or which may be the basis for PBGC to assert a liability against it or which may result in the imposition of a lien -22- 23 on its properties or assets; and notify Bank in writing promptly after it has come to the attention of Borrower of the assertion or threat of any "reportable event," the existence of any "reportable threat" or other event which may indicate that a Plan is not sound or may be the basis for PBGC to assert a liability against it or impose a lien on Borrower's properties or assets. 5.12 Other Information. Borrower will provide Bank with any other documents and information, financial or otherwise, reasonably requested by Bank from time to time. 5.13 Funded Debt to Annualized Operating Cash Flow. Borrower will maintain as of the last day of each fiscal quarter of Borrower a ratio of Funded Debt to Annualized Operating Cash Flow plus Management Fees and Home Office Allocations at the last day of such fiscal quarter not to exceed 4.0:1 through December 31, 1997, 3.5:1 from March 31, 1998 through December 31, 1998, and 3.0:1 thereafter. 5.14 Interest Coverage Ratio. From the date of this Agreement through December 31, 1997, Borrower will maintain as of the last day of each fiscal quarter of Borrower a ratio of (a) Operating Cash Flow for such quarter to (b) interest due on Funded Debt for such quarter, which will not be less than 2.00:1 at all times. 5.15 Debt Service Coverage Ratio. Commencing with the fiscal quarter ending on March 31, 1998, Borrower will maintain as of the last day of each fiscal quarter of Borrower a ratio of (a) Operating Cash Flow for such quarter to (b) Debt Service for such quarter, which will not be less than 1.50:1 from March 31, 1998 through December 31, 1998, and not less than 1.25:1 at all times thereafter. 6. NEGATIVE COVENANTS So long as the Commitment or any indebtedness of Borrower to Bank remains outstanding hereunder, Borrower covenants and agrees that without Bank's prior written consent, Borrower will not: 6.1 Borrowings. Borrow any monies except borrowings from Bank hereunder, borrowings permitted by Paragraph 6.2 and subordinated debt subordinated to the Loan pursuant to the Subordination Agreement. 6.2 Additional Indebtedness. Create any additional indebtedness other than (a) trade indebtedness in the normal and ordinary course of business for value received, (b) indebtedness to Jones for Management Fees and Home Office Allocations or loans or advances subordinated to the Loan pursuant to the Subordination Agreement, and (c) other indebtedness, not exceeding, in the aggregate, $250,000, pursuant to capital leases, purchase money -23- 24 obligations and other obligations incurred in the normal course of Borrower's business. 6.3 Guaranties. Guarantee or assume or agree to become liable in any way for, either directly or indirectly, any additional indebtedness or liability of others except (a) to endorse checks or drafts in the ordinary course of business and (b) to perform its indemnification obligations pursuant to Section 9.6 of the Partnership Agreement. 6.4 Loans. Make any loans or advances to others except Borrower may make loans and advances to employees, subcontractors and suppliers in the ordinary course of business not to exceed $100,000 in the aggregate principal amount outstanding at any time. 6.5 Liens and Encumbrances. Create, permit or suffer the creation of any liens, security interests, or any other encumbrances on any of its property, real or personal, except (a) liens arising in favor of sellers or lessors for indebtedness and obligations incurred to purchase or lease fixed or capital assets permitted under Paragraph 6.2(b) hereof, provided, however, that such liens are limited to the indebtedness and obligations created thereunder and the assets purchased or leased pursuant thereto; (b) liens for taxes, assessments or other governmental charges, federal, state or local, which are then being currently contested in good faith by appropriate proceedings, (c) pledges or deposits to secure obligations under workmen's compensation, unemployment insurance or social security laws or similar legislation, (d) deposits to secure performance or payment bonds, bids, tenders, contracts, leases, franchises or public and statutory obligations required in the ordinary course of business, (e) deposits to secure surety, appeal or custom bonds required in the ordinary course of business, (f) liens to secure judgments not in excess of $250,000 so long as they are being currently contested in good faith by appropriate proceedings and execution thereon has been stayed, and (g) liens in favor of Bank. 6.6 Restricted Payments. Make any Restricted Payments, provided, however, that, so long as there exists no Event of Default under this Agreement and Borrower is otherwise in compliance with the terms and covenants of this Agreement (and such payment, together with any payments permitted to be made pursuant to Paragraph 6.9 hereof, will not create an Event of Default), Borrower may make distributions to partners not exceeding in the aggregate $903,000 in 1995, $968,000 in 1996 and $1,064,000 in 1997. Thereafter, no distributions shall be made. -24- 25 6.7 Transfer of Assets; Liquidation. Sell, lease, transfer or otherwise dispose of any part or amount of its assets, real or personal, or discontinue or liquidate any substantial part of its operations or business, other than (a) any such transaction in the normal and ordinary course of business for value received, and (b) any sale of an asset related to or used in connection with operation of the System, provided that in connection with such sale, Borrower repays that portion of the outstanding principal balance of the Loan which bears the same ratio to $8,500,000 as the fair market value of the asset being sold bears to the total fair market value of the System, and all accrued and outstanding interest attributable to the principal being repaid. The Commitment shall be permanently reduced by the amount of any principal payment made pursuant to Section 6.7(b). The determination of fair market value shall be made by the Bank in its sole discretion. 6.8 Acquisitions and Investments. Purchase or otherwise acquire any part or amount of the capital stock or assets of, or make any investments in, any other firm or corporation; or enter into any new business activities or ventures not directly related to its present business; or merge or consolidate with or into any other firm or corporation; or create any subsidiary corporations; except Borrower may invest in or purchase readily marketable direct obligations of the United States of America, certificates of deposit issued by commercial banks of recognized standing operating in the United States of America and prime commercial paper. 6.9 Management Fees and Home Office Allocations. Make any payments of or accrue (a) Management Fees for any fiscal quarter of Borrower in an amount greater than five percent (5%) of Borrower's Gross Operating Revenues for such quarter, or (b) Home Office Allocations for any fiscal quarter of Borrower which are not either (i) overhead and administrative expenses directly attributable to the management or operation of the Borrower by Jones or (ii) Borrower's proportionate share of general overhead and administrative expenses incurred by Jones in the management of all of the partnerships of which Jones is the manager; provided, however, that prior to December 31, 1998, so long as there exists no Event of Default under this Agreement and Borrower is otherwise in compliance with the terms and covenants of this Agreement (and such payment, together with any payments made pursuant to this Paragraph 6.9 and Paragraph 6.6 hereof, will not create an Event of Default), deferred Management Fees and Home Office Allocations (including any interest related thereto, at an interest rate not to exceed Jones' weighted average cost of borrowing) may be paid in any fiscal quarter. After December 31, 1998, Borrower shall not make -25- 26 any payments of Management Fees or Home Office Allocations to Jones, but may accrue such amounts to the extent permitted by the first sentence of this Section 6.9. Any Management Fees and Home Office Allocations accrued but unpaid for any fiscal quarter shall be deferred and subordinated to Bank pursuant to the Subordination Agreement. 6.10 Use of Proceeds. Use any of the proceeds of the Loan, directly or indirectly, to purchase or carry margin securities within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; or engage as its principal business in the extension of credit for purchasing or carrying such securities. 6.11 Partnership Documents. Amend or permit any amendments to the Partnership Agreement after the date hereof except Jones may make certain routine amendments as permitted by Section 6.1 of the Partnership Agreement. 7. DEFAULT 7.1 Events of Default. Each of the following events shall be an "Event of Default" hereunder: (a) If Borrower shall fail to pay when due any installment of principal or any other sum payable to Bank hereunder or otherwise or, within three (3) days after the date when due, any payment of interest; or (b) If any representation or warranty made herein or in connection herewith or in any statement, certificate or other document furnished hereunder is or proves false or misleading in any material respect; or (c) If Borrower shall default in the payment or performance of any obligation or indebtedness to another in excess of $100,000, whether now or hereafter incurred; or (d) If Borrower shall default in the performance of any other agreement or covenant contained herein or in any document executed or delivered in connection herewith and such default shall continue uncured for thirty (30) days after notice thereof to Borrower given by Bank; or (e) If Jones shall cease to be the sole general partner of Borrower and the manager of Borrower; or (f) If custody or control of any substantial part of the property of Borrower shall be assumed by any -26- 27 governmental agency or any court of competent jurisdiction at the instance of any governmental agency; if any franchise shall be suspended, revoked or otherwise terminated, or if Borrower is required by any franchising authority or by court order or administrative order to halt operations under the franchise and such action shall continue unstayed or uncorrected for thirty (30) days after Borrower has received notice thereof or the action of any such authority has not been stayed within such thirty day period; or if any governmental regulatory authority or judicial body shall make any other final nonappealable determination the effect of which would be to affect materially and adversely the operations of Borrower as now conducted; or (g) If Borrower or Jones shall become insolvent, bankrupt or generally fail to pay its debts as such debts become due; or if Borrower or Jones admits in writing its inability to pay its debts; or if Borrower or Jones shall suffer a receiver or trustee for it or substantially all of its property to be appointed and if appointed without its consent, not be discharged within sixty (60) days; or if Borrower or Jones makes an assignment for the benefit of creditors; or if Borrower or Jones suffers proceedings under any law related to bankruptcy or insolvency or the reorganization or the release of debtors to be instituted against it and if contested by it, not dismissed or stayed within sixty (60) days; or if proceedings under any law related to bankruptcy or insolvency or the reorganization or the release of debtors is instituted or commenced by Borrower or Jones; or (h) If any judgment, writ, warrant or attachment or execution or similar process which calls for payment or presents liability in excess of $250,000 (not covered by insurance) shall be rendered or issued against or levied against Borrower or its property and such process shall not be paid, waived, stayed, vacated, discharged, settled, satisfied or fully bonded within sixty (60) days after its issuance or levy. 7.2 Remedies. Upon the happening of any Event of Default and at any time thereafter, at the election of Bank, and by notice by Bank to Borrower (except if an Event of Default described in Paragraph 7.1(g) shall occur in which case acceleration shall occur automatically without notice): (a) Bank may declare the entire unpaid balance, principal and interest, of all indebtedness or Borrower to Bank, hereunder or otherwise, to be immediately due and payable and shall have the immediate right to enforce or realize -27- 28 on any collateral security granted therefor in any manner or order it deems expedient without regard to any equitable principles of marshalling or otherwise; and (b) in addition or in the alternative Bank may terminate its obligation to lend hereunder and the Commitment shall immediately and automatically terminate and Bank shall have no further obligation to make any advances. In addition to any rights granted hereunder or in any documents delivered in connection herewith, Bank shall have all the rights and remedies granted by any applicable law, all of which shall be cumulative in nature. 8.2 MISCELLANEOUS 8.1 Non-Recourse. Anything contained in this Agreement to the contrary notwithstanding, in any action or proceeding brought on the Note, this Agreement, or the indebtedness evidenced or secured thereby, no deficiency judgment shall be sought or obtained against Jones or any limited partner of Borrower or enforced against the separate assets of Jones or any limited partner of Borrower, and the liability of Jones or any limited partner of Borrower for any amounts due under the Note or this Agreement, shall be limited to the interest of Jones or any limited partner of Borrower in the assets of Borrower. Bank may join Jones in its capacity as general partner as defendant in any legal action it undertakes to enforce its rights and remedies under the Note or this Agreement, but any judgment in any such action may be satisfied by recourse only to the assets of Borrower, but not by recourse directly to or by execution on Jones's separate assets. Notwithstanding the foregoing, nothing set forth herein shall be deemed to limit the liability of Jones or prohibit Bank from taking any legal action against Jones or its assets for (a) any fraud or intentional misconduct of Jones or (b) Jones' undertakings under the Subordination Agreement or the Agreement described in Section 4.10 above. 8.2 Set Offs. As collateral for the payment of any and all of Borrower's indebtedness and obligations to Bank, whether matured or unmatured, now existing or hereafter incurred or created hereunder or otherwise, Borrower hereby grants to Bank a security interest in and lien upon all funds, balances or other property of any kind of Borrower, or in which Borrower has an interest, limited to the interest of Borrower therein, at any time in the possession, custody or control of Bank. 8.3 Binding and Governing Law. This Agreement and all documents executed hereunder shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed as -28- 29 to their validity, interpretation and effect by the laws of the State of Colorado. 8.4 Survival. All agreements, representations, warranties and covenants of Borrower contained herein or in any documentation required hereunder shall survive the execution of this Agreement and the making of the Loan hereunder and will continue in full force and effect as long as any indebtedness hereunder of Borrower to Bank remains outstanding. 8.5 No Waiver; Delay. If Bank shall waive any power, right or remedy arising hereunder or under any applicable law, such waiver shall not be deemed to be a waiver upon the later occurrence or recurrence of any of said events. No delay by Bank in the exercise of any power, right or remedy shall, under any circumstances, constitute or be deemed to be a waiver, express or implied, of the same and no course of dealing between the parties hereto shall constitute a waiver of Bank's powers, rights or remedies. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 8.6 Modification. Except as otherwise provided in this Agreement, no modification or amendment hereof shall be effective unless made in a writing signed by appropriate officers of the parties hereto. 8.7 Headings. The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof. 8.8 Notices. Any notice, request or consent required hereunder or in connection herewith shall be deemed satisfactorily given if in writing and delivered by hand or by facsimile transmission or mailed (registered or certified mail) to the parties at their respective addresses set forth in the beginning of this Agreement or their facsimile number set forth hereafter or such other addresses or facsimile numbers as may be given by either party to the other in writing, if to Borrower or Jones to the attention of the Treasurer (Facsimile No. 790-7324), with a copy to the General Counsel (Facsimile No. 799-1644), and if to Bank, to the attention of Leslie Kelly, Vice President (Facsimile No. 623-3750). 8.9 Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding business day, provided however that such extension of time shall be included in the computation of interest due in conjunction with such payment or other fees due hereunder, as the case may be. -29- 30 8.10 Time of Day. All time of day restrictions imposed herein shall be calculated using Bank's local time. 8.11 Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or enforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 8.12 Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all the signatures on such counterparts appeared on one document, and each such counterpart shall be deemed to be an original. IN WITNESS WHEREOF, the undersigned, by their duly authorized partners or officers, have executed this Agreement the day and year first above written. ATTEST: JONES CABLE INCOME FUND 1-B, LTD., a Colorado limited partnership By: /s/ KATHERINE A. LEVOY Title: Ass't Secretary By: JONES INTERCABLE, INC., a Colorado corporation Its General Partner [CORPORATE SEAL] By: /s/ J. ROY POTTLE Title: Treasurer COLORADO NATIONAL BANK, a national banking association By: /s/ LESLIE M. KELLY Title: Vice President -30- EX-27 4 FINANCIAL DATA SCHEDULE
5 1 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 116,839 0 167,839 (14,323) 0 0 10,801,551 (4,948,058) 11,874,378 2,644,595 3,544,000 0 0 0 5,685,783 11,874,378 0 4,484,892 0 4,669,851 2,015,639 0 391,583 (2,592,181) 0 (2,592,181) 0 0 0 (2,592,181) (30.59) (30.59)