-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LQn+76rXGPk01QzbzYjMWRCPn2+kbbfSNcmEDiWE8T7lmk9+BH807Y+KQUfot1Om DiPBr1eaYuYwUSOPqn+ySA== 0000927356-97-000321.txt : 19970329 0000927356-97-000321.hdr.sgml : 19970329 ACCESSION NUMBER: 0000927356-97-000321 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS JONES GROWTH PARTNERS 87-A LTD/CO/ CENTRAL INDEX KEY: 0000857488 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 841060544 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-12473-01 FILM NUMBER: 97567850 BUSINESS ADDRESS: STREET 1: 9697 EAST MINERAL AVE STREET 2: P O BOX 3309 CITY: ENGLEWOOD STATE: CO ZIP: 80155-3309 BUSINESS PHONE: 3037923111 MAIL ADDRESS: STREET 1: C/O JONES INTERCABLE INC STREET 2: 9697 E MINERAL AVE PO BOX 3309 CITY: ENGLEWOOD STATE: CO ZIP: 80155-3309 10-K 1 IDS/JONES GROWTH PARTNERS 87-A FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1996 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: 0-16183 IDS/JONES GROWTH PARTNERS 87-A, LTD. ------------------------------------ (Exact name of registrant as specified in its charter) Colorado 84-1060544 -------- ---------- 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 registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- State the aggregate market value of the voting stock held by non-affiliates of the registrant: N/A Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S)229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- DOCUMENTS INCORPORATED BY REFERENCE: None Information contained in this Form 10-K Report contains "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-K Report that address activities, events or developments that the Partnership or the Managing General Partner expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements are based upon certain assumptions and are subject to a number of risks and uncertainties. Actual results could differ materially from the results predicted by these forward-looking statements. PART I. ------- ITEM 1. BUSINESS ----------------- THE PARTNERSHIP. IDS/Jones Growth Partners 87-A, Ltd. (the "Partnership") is a Colorado limited partnership that was formed to acquire, own and operate cable television systems in the United States. Jones Cable Corporation, a Colorado corporation, is the managing general partner (the "Managing General Partner") and IDS Cable Corporation, a Minnesota corporation, is the supervising general partner (the "Supervising General Partner") of the Partnership. The Managing General Partner is a wholly owned subsidiary of Jones Intercable, Inc. ("Intercable"), which is also a Colorado corporation and one of the largest cable television system operators in the nation. The Supervising General Partner is a wholly owned subsidiary of IDS Management Corporation, a Minnesota corporation, which in turn is a wholly owned subsidiary of American Express Financial Corporation, a Delaware corporation. The Partnership was formed for the purpose of acquiring and operating cable television systems. The Partnership originally owned two cable television systems. In February 1996, the Partnership disposed of its cable television system serving areas in and around Carmel, Indiana (the "Carmel System"), and in October 1996, the Partnership entered into an agreement providing for the sale of its remaining cable television system serving the areas in and around the City of Roseville and neighboring portions of unincorporated Placer County, all in the State of California (the "Roseville System"). See Disposition of Cable Television System and Proposed Disposition of Cable Television System below. DISPOSITION OF CABLE TELEVISION SYSTEM. On February 28, 1996, the Partnership sold the Carmel System to Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary of Intercable, for a sales price of $44,235,333. This price represented the average of three separate, independent appraisals of the fair market value of the Carmel System. A portion of the proceeds, $14,235,333, was used to reduce Partnership debt, and the remainder of the proceeds, $30,000,000, was distributed to the limited partners in April 1996. This distribution gave the Partnership's limited partners an approximate return of $183 per $250 interest or $731 per $1,000 invested in the Partnership. No vote of the limited partners of the Partnership was required in connection with this transaction because the assets of the Carmel System did not constitute all or substantially all of the Partnership's assets. The Supervising General Partner consented to the timing of the transaction and participated in the selection of appraisers. On February 29, 1996, JCH consummated an agreement with Time Warner Entertainment-Advance/Newhouse Partnership ("TWEAN"), an unaffiliated cable television system operator, pursuant to which JCH conveyed the Carmel System, along with certain other cable television systems owned by JCH, and cash in the amount of $3,500,000 to TWEAN in exchange for the cable television systems serving Andrews Air Force Base, Capitol Heights, Cheltenham, District Heights, Fairmount Heights, Forest Heights, Morningside, Seat Pleasant, Upper Marlboro, and portions of Prince George's County, all in Maryland, and a portion of Fairfax County, Virginia. PROPOSED DISPOSITION OF CABLE TELEVISION SYSTEM. On October 14, 1996, the Partnership entered into an asset purchase agreement providing for the sale by the Partnership to an unaffiliated party of the Roseville System. The sales price is $30,900,000, subject to customary closing adjustments. Closing of the sale is expected to occur during the second calendar quarter of 1997 and is subject to a number of conditions, including 2 the approval of the transaction by the holders of a majority of the Partnership's limited partnership interests. The General Partner, on behalf of the Partnership, is preparing proxy solicitation materials and intends to conduct a vote of the limited partners of the Partnership by mail during the second quarter of 1997. The obligations of the Partnership and the purchaser also are conditioned upon the approval by the City of Roseville and the County of Placer to the transfer to the purchaser of the respective cable television franchises granted by such governmental entities to the Partnership. The County of Placer granted its consent to the transfer of the county franchise in December 1996 and the City of Roseville granted its consent to the transfer of the city franchise during March 1997. In addition, the obligations of the Partnership and the purchaser to consummate the transaction are conditioned upon the expiration or termination of the waiting period specified in the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("Hart-Scott-Rodino") and the rules and regulations thereunder. In response to their Hart-Scott-Rodino filings, the Partnership and the purchaser have received a second request for information about the proposed sale of the Roseville System from the United States Department of Justice. The Partnership and the purchaser will have to satisfy certain concerns of the Department of Justice about the potential anti-competitive effects of the transaction before the Partnership will be permitted to close the sale of the Roseville System to the purchaser. The Partnership cannot predict if or when the concerns of the Department of Justice will be satisfied. In addition, because the purchaser is affiliated with the company that provides telephone services in the geographical area in which the Roseville System provides cable television services, a waiver from the Federal Communications Commission of Section 652 of the Telecommunications Act of 1996, which prohibits the acquisition by a telephone company and its affiliates of cable systems in the telephone company's service area, is necessary to permit the purchaser to consummate the purchase of the Roseville System. The Partnership cannot predict if or when the waiver from the Federal Communications Commission will be received. If all conditions precedent to the purchaser's obligation to close are not satisfied or waived by June 30, 1997, either party may terminate the asset purchase agreement and its obligations thereunder by giving notice thereof to the other party. Upon the consummation of the proposed sale of the Roseville System, the Partnership will pay all of its indebtedness, which totaled approximately $9,850,000 at December 31, 1996, and brokerage fees totaling $772,500 to affiliates of the general partners, and then the Partnership will distribute the net sale proceeds to its limited partners of record as of April 30, 1997. Because $1,550,000 of the sale proceeds will remain in escrow for one year following the closing date, this portion of the net sale proceeds, net of claims against such escrow, will not be distributed to limited partners until 1998. Because limited partners will receive total distributions that are less than 125 percent of the capital initially contributed to the Partnership by the limited partners, the general partners of the Partnership will not receive any of the proceeds from the Roseville System's sale. The Partnership will distribute the approximate $18,727,500 remaining net proceeds to its limited partners. This distribution will give the Partnership's limited partners an approximate return of $456 per $1,000 invested in the Partnership. Taking into account the distribution made on the sale of the Carmel System and the anticipated distribution to be made on the sale of the Roseville System in 1997, the limited partners will have received a total of $1,187 for each $1,000 invested in the Partnership. Upon the completion of the escrow period in 1998, the Partnership will distribute the remaining proceeds to limited partners, which, if no claims are made against the escrow, would total approximately $38 for each $1,000 invested in the Partnership, and then the Partnership will be liquidated and dissolved. CABLE TELEVISION SERVICES. The Roseville System offers to its subscribers various types of programming, which include basic service, tier service, premium service, pay-per-view programs and packages including several of these services at combined rates. Basic cable television service usually consists of signals of all four national television networks, various independent and educational television stations (both VHF and UHF) and certain signals received from satellites. Basic service also usually includes programs originated locally by the system, which may consist of music, news, weather reports, stock market and financial information and live or videotaped programs of a public service or entertainment nature. FM radio signals are also frequently distributed to subscribers as part of the basic service. 3 The Roseville System offers tier services on an optional basis to their subscribers. A tier generally includes most of the cable networks such as Entertainment and Sports Programming Network (ESPN), Cable News Network (CNN), Turner Network Television (TNT), Family Channel, Discovery and others, and the cable television operators buy tier programming from these networks. The Roseville System also offers a package that includes the basic service channels and the tier services. The Roseville System also offers 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 Roseville System also offers to subscribers pay-per-view programming. Pay-per-view is a service that allows subscribers to receive single programs, frequently consisting of motion pictures that have recently completed their theatrical exhibitions and major sporting events, and to pay for such service on a program-by-program basis. REVENUES. Monthly service fees for basic, tier and premium services constitute the major source of revenue for the Roseville System. At December 31, 1996, the Roseville System's monthly basic service rate was $5.60, monthly basic and tier ("basic plus") service rate was $24.30 and monthly premium services ranged from $4.95 to $10.25 per premium service. In addition, the Partnership earns revenues from the Roseville System's pay-per-view programs and advertising fees. Related charges may include a nonrecurring installation fee that ranges from $5.00 to $42.00; however, from time to time the Roseville System has followed the common industry practice of reducing or waiving the installation fee during promotional periods. Commercial subscribers such as hotels, motels and hospitals are charged a nonrecurring connection fee that usually covers the cost of installation. Except under the terms of certain contracts with commercial subscribers and residential apartment and condominium complexes, the subscribers are free to discontinue the service at any time without penalty. For the year ended December 31, 1996, of the total fees received by the Roseville System, basic service and tier service fees accounted for approximately 68% of total revenues, premium service fees accounted for approximately 14% of total revenues, pay-per-view fees were approximately 2% of total revenues, advertising fees were approximately 9%of total revenues and the remaining 7% 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 Roseville System. FRANCHISES. The Roseville System is constructed and operated under non-exclusive, fixed-term franchises or other types of operating authorities (referred to collectively herein as "franchises") granted by local governmental authorities. The Roseville System's franchises require that franchise fees generally based on gross revenues of the cable system be paid to the governmental authority that granted the franchise, that certain channels be dedicated to municipal use, that municipal facilities, hospitals and schools be provided cable service free of charge and that any new cable plant be substantially constructed within specific periods. The Partnership holds 2 franchises relating to the Roseville System. The 1984 Cable Act prohibits franchising authorities from imposing annual franchise fees in excess of 5% of gross revenues and also permits the cable television system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances. The Partnership has never had a franchise revoked. The Partnership's franchise expiration dates are December 1999 and November 2000. It is anticipated that the Roseville System will be sold before these franchises must be renewed. 4 COMPETITION. Cable television systems currently experience competition from several sources. Broadcast Television. Cable television systems have traditionally --------------------- competed with broadcast television, which consists of television signals that the viewer is able to receive directly on his television without charge using an "off-air" antenna. The extent of such competition is dependent in part upon the quality and quantity of signals available by such antenna reception as compared to the services provided by the local cable system. Accordingly, it has generally been less difficult for cable operators to obtain higher penetration rates in rural areas where signals available off-air are limited, than in metropolitan areas where numerous, high quality off-air signals are often available without the aid of cable television systems. Traditional Overbuild. 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. Intercable has experienced overbuilds in connection with certain systems that it has owned or managed for limited partnerships, and currently there are overbuilds in the systems owned or managed by Intercable. Constructing and developing a cable television system is a capital intensive process, and it is often difficult for a new cable system operator to create a marketing edge over the existing system. Generally, an overbuilder would be required to obtain franchises from the local governmental authorities, although in some instances, the overbuilder could be the local government itself. In any case, an overbuilder would be required to obtain programming contracts from entertainment programmers and, in most cases, would have to build a complete cable system, including headends, trunk lines and drops to individual subscribers homes, throughout the franchise areas. DBS. High-powered direct-to-home satellites have made possible the --- wide-scale delivery of programming to individuals throughout the United States using small roof-top or wall-mounted antennas. Several companies began offering direct broadcast satellite ("DBS") service over the last few years and additional entrants are expected. Companies offering DBS service use video compression technology to increase channel capacity of their systems to 100 or more channels and to provide packages of movies, satellite network and other program services which are competitive to those of cable television systems. DBS cannot currently offer its subscribers local programming, although at least one future DBS entrant is attempting to offer customers regional delivery of local broadcast signals. In addition to emerging high-powered DBS competition, cable television systems face competition from a major medium-powered satellite distribution provider and several low-powered providers, whose service requires use of much larger home satellite dishes. Not all subscribers terminate cable television service upon acquiring a DBS system. The Managing General Partner has observed that there are DBS subscribers that also elect to subscribe to cable television service in order to obtain the greatest variety of programming on multiple television sets, including local programming not available through DBS service. The ability of DBS service providers to compete successfully with the cable television industry will depend on, among other factors, the ability of DBS providers to overcome certain legal and technical hurdles and the availability of equipment at reasonable prices. Telephone. Federal cross-ownership restrictions historically limited --------- entry by local telephone companies into the cable television business. The 1996 Telecommunications Act (the "1996 Telecom Act") eliminated this cross-ownership restriction, making it possible for companies with considerable resources to overbuild existing cable operators and enter the business. Several telephone companies have begun seeking cable television franchises from local governmental authorities and constructing cable television systems. Ameritech, one of the seven regional Bell Operating Companies ("BOCs"), which provides telephone service in a multi-state region including Illinois, has been the most active BOC in seeking local cable franchises within its service area. It has already begun cable service in Naperville, Illinois and has also obtained franchises for Glen Ellyn and Vernon Hills, Illinois, all of which are currently served by cable systems owned by three partnerships managed by Intercable. The Managing General Partner cannot predict at this time the extent of telephone company competition that will emerge to owned or managed cable television systems. The entry of telephone companies as direct competitors, however, is likely to continue over the next several years and could adversely affect the profitability and market value of Intercable's owned and managed systems. The entry of electric utility companies 5 into the cable television business, as now authorized by the 1996 Telecom Act, could have a similar adverse effect. Private Cable. Additional competition is provided by private cable ------------- television systems, known as Satellite Master Antenna Television (SMATV), serving multi-unit dwellings such as condominiums, apartment complexes, and private residential communities. These private cable systems may enter into exclusive agreements with apartment owners and homeowners associations, which may preclude operators of franchised systems from serving residents of such private complexes. Private cable systems that do not cross public rights of way are free from the federal, state and local regulatory requirements imposed on franchised cable television operators. In some cases, the Partnership has been unable to provide cable television service to buildings in which private operators have secured exclusive contracts to provide video and telephony services. The Partnership is interested in providing these same services, but expects that the market to install and provide these services in multi-unit buildings will continue to be highly competitive. MMDS. Cable television systems also compete with wireless program ---- distribution services such as multichannel, multipoint distribution service ("MMDS") systems, commonly called wireless cable, which are licensed to serve specific areas. MMDS uses low-power microwave frequencies to transmit television programming over-the-air to paying subscribers. The MMDS industry is less capital intensive than the cable television industry, and it is therefore more practical to construct MMDS systems in areas of lower subscriber penetration. Wireless cable systems are now in direct competition with cable television systems in several areas of the country, including the system in Pima County, Arizona owned by Intercable. Telephone companies have recently acquired or invested in wireless companies, and may use MMDS systems to provide services within their service areas in lieu of wired delivery systems. Enthusiasm for MMDS has waned in recent months, however, as Bell Atlantic and NYNEX have suspended their investment in two major MMDS companies. To date, the Partnership has not lost a significant number of subscribers, nor a significant amount of revenue, to MMDS operators competing with the Partnership's cable television systems. A series of actions taken by the FCC, however, including reallocating certain frequencies to the wireless services, are intended to facilitate the development of wireless cable television systems as an alternative means of distributing video programming. The FCC recently held auctions for spectrum that will be used by wireless operators to provide additional channels of programming over larger distances. In addition, an emerging technology, Local Multipoint Distribution services ("LMDS"), could also pose a significant threat to the cable television industry, if and when it becomes established. LMDS, sometimes referred to as cellular television, could have the capability of delivering more than 100 channels of video programming to a subscriber's home. The potential impact, however, of LMDS is difficult to assess due to the newness of the technology and the absence of any current fully operational LMDS systems. Cable television systems are also in competition, in various degrees with other communications and entertainment media, including motion pictures and home video cassette recorders. REGULATION AND LEGISLATION - -------------------------- The operation of cable television systems is extensively regulated by the FCC, some state governments and most local governments. The new 1996 Telecom Act alters the regulatory structure governing the nation's telecommunications providers. It removes barriers to competition in both the cable television market and the local telephone market. Among other things, it also reduces the scope of cable rate regulation. The 1996 Telecom Act requires the FCC to undertake a host of implementing rulemakings, the final outcome of which cannot yet be determined. Moreover, Congress and the FCC have frequently revisited the subject of cable regulation. Future legislative and regulatory changes could adversely affect the Partnership's operations. This section briefly summarizes key laws and regulations affecting the operation of the Partnership's cable systems and does not purport to describe all present, proposed, or possible laws and regulations affecting the Partnership. 6 Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate --------------------- regulation regime on the cable television industry. Under that regime, all cable systems are subject to rate regulation, unless they face "effective competition" in their local franchise area. Federal law now defines "effective competition" on a community-specific basis as requiring either low penetration (less than 30%) by the incumbent cable operator, appreciable penetration (more than 15%) by competing multichannel video providers ("MVPs"), or the presence of a competing MVP affiliated with a local telephone company. Although the FCC rules control, local government units (commonly referred to as local franchising authorities or "LFAs") are primarily responsible for administering the regulation of the lowest level of cable -- the basic service tier ("BST"), which typically contains local broadcast stations and public, educational, and government ("PEG") access channels. Before an LFA begins BST rate regulation, it must certify to the FCC that it will follow applicable federal rules, and many LFAs have voluntarily declined to exercise this authority. LFAs also have primary responsibility for regulating cable equipment rates. Under federal law, charges for various types of cable equipment must be unbundled from each other and from monthly charges for programming services. The 1996 Telecom Act allows operators to aggregate costs for broad categories of equipment across geographic and functional lines. This change should facilitate the introduction of new technology. The FCC itself directly administers rate regulation of any cable programming service tiers ("CPST"), which typically contain satellite-delivered programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only if an LFA first receives at least two rate complaints from local subscribers and then files a formal complaint with the FCC. When new CPST rate complaints are filed, the FCC now considers only whether the incremental increase is justified and will not reduce the previously established CPST rate. Under the FCC's rate regulations, most cable systems were required to reduce their BST and CPST rates in 1993 and 1994, and have since had their rate increases governed by a complicated price cap scheme that allows for the recovery of inflation and certain increased costs, as well as providing some incentive for expanding channel carriage. The FCC has modified its rate adjustment regulations to allow for annual rate increases and to minimize previous problems associated with regulatory lag. Operators also have the opportunity of bypassing this "benchmark" regulatory scheme in favor of traditional "cost-of-service" regulation in cases where the latter methodology appears favorable. Premium cable services offered on a per-channel or per- program basis remain unregulated, as do affirmatively marketed packages consisting entirely of new programming product. Federal law requires that the BST be offered to all cable subscribers, but limits the ability of operators to require purchase of any CPST before purchasing premium services offered on a per-channel or per-program basis. The 1996 Telecom Act sunsets FCC regulation of CPST rates for all systems (regardless of size) on March 31, 1999. It also relaxes existing uniform rate requirements by specifying that uniform rate requirements do not apply where the operator faces "effective competition," and by exempting bulk discounts to multiple dwelling units, although complaints about predatory pricing still may be made to the FCC. Cable Entry Into Telecommunications. The 1996 Telecom Act provides ----------------------------------- that no state or local laws or regulations may prohibit or have the effect of prohibiting any entity from providing any interstate or intrastate telecommunications service. States are authorized, however, to impose "competitively neutral" requirements regarding universal service, public safety and welfare, service quality, and consumer protection. State and local governments also retain their authority to manage the public rights-of-way and may require reasonable, competitively neutral compensation for management of the public rights-of-way when cable operators provide telecommunications service. The favorable pole attachment rates afforded cable operators under federal law can be gradually increased by utility companies owning the poles (beginning in 2001) if the operator provides telecommunications service, as well as cable service, over its plant. Cable entry into telecommunications will be affected by the regulatory landscape now being fashioned by the FCC and state regulators. One critical component of the 1996 Telecom Act to facilitate the entry of new telecommunications providers (including cable operators) is the interconnection obligation imposed on all telecommunications carriers. Review of the FCC's initial interconnection order is now pending before the Eighth 7 Circuit Court of Appeals. Telephone Company Entry Into Cable Television. The 1996 Telecom Act --------------------------------------------- allows telephone companies to compete directly with cable operators by repealing the historic telephone company/cable cross-ownership ban. Local exchange carriers ("LECs"), including the BOCs, can now compete with cable operators both inside and outside their telephone service areas. Because of their resources, LECs could be formidable competitors to traditional cable operators, and certain LECs have begun offering cable service. As described above, the General Partner is now witnessing the beginning of LEC competition in a few of its cable communities. Under the 1996 Telecom Act, a LEC providing video programming to subscribers will be regulated as a traditional cable operator (subject to local franchising and federal regulatory requirements), unless the LEC elects to provide its programming via an "open video system" ("OVS"). To qualify for OVS status, the LEC must reserve two-thirds of the system's activated channels for unaffiliated entities. Although LECs and cable operators can now expand their offerings across traditional service boundaries, the general prohibition remains on LEC buyouts (i.e., any ownership interest exceeding 10 percent) of co-located cable systems, cable operator buyouts of co-located LEC systems, and joint ventures between cable operators and LECs in the same market. The 1996 Telecom Act provides a few limited exceptions to this buyout prohibition, including a carefully circumscribed "rural exemption." The 1996 Telecom Act also provides the FCC with the limited authority to grant waivers of the buyout prohibition (subject to LFA approval). Electric Utility Entry Into Telecommunications/Cable Television. The --------------------------------------------------------------- 1996 Telecom Act provides that registered utility holding companies and subsidiaries may provide telecommunications services (including cable television) notwithstanding the Public Utilities Holding Company Act. Electric utilities must establish separate subsidiaries, known as "exempt telecommunications companies" and must apply to the FCC for operating authority. Again, because of their resources, electric utilities could be formidable competitors to traditional cable systems. Additional Ownership Restrictions. The 1996 Telecom Act eliminates --------------------------------- statutory restrictions on broadcast/cable cross-ownership (including broadcast network/cable restrictions), but leaves in place existing FCC regulations prohibiting local cross-ownership between co-located television stations and cable systems. The 1996 Telecom Act also eliminates the three year holding period required under the 1992 Cable Act's "anti-trafficking" provision. The 1996 Telecom Act leaves in place existing restrictions on cable cross-ownership with SMATV and MMDS facilities, but lifts those restrictions where the cable operator is subject to effective competition. In January 1995, however, the FCC adopted regulations which permit cable operators to own and operate SMATV systems within their franchise area, provided that such operation is consistent with local cable franchise requirements. Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable system from devoting more than 40% of its activated channel capacity to the carriage of affiliated national program services. A companion rule establishing a nationwide ownership cap on any cable operator equal to 30% of all domestic cable subscribers has been stayed pending further judicial review. There are no federal restrictions on non-U.S. entities having an ownership interest in cable television systems or the FCC licenses commonly employed by such systems. Section 310(b)(4) of the Communications Act does, however, prohibit foreign ownership of FCC broadcast and telephone licenses, unless the FCC concludes that such foreign ownership is consistent with the public interest. BCI's investment in Intercable could, therefore, adversely affect any plan to acquire FCC broadcast or common carrier licenses. The Partnership, however, does not currently plan to acquire such licenses. Must Carry/Retransmission Consent. The 1992 Cable Act contains --------------------------------- broadcast signal carriage requirements that allow local commercial television broadcast stations to elect once every three years between 8 requiring a cable system to carry the station ("must carry") or negotiating for payments for granting permission to the cable operator to carry the station ("retransmission consent"). Less popular stations typically elect "must carry," and more popular stations typically elect "retransmission consent." Must carry requests can dilute the appeal of a cable system's programming offerings, and retransmission consent demands may require substantial payments or other concessions. Either option has a potentially adverse affect on the Partnership's business. Additionally, cable systems are required to obtain retransmission consent for all "distant" commercial television stations (except for satellite- delivered independent "superstations" such as WTBS). The constitutionality of the must carry requirements has been challenged and is awaiting a decision from the U.S. Supreme Court. Access Channels. LFAs can include franchise provisions requiring --------------- cable operators to set aside certain channels for public, educational and governmental access programming. Federal law also requires cable systems to designate a portion of their channel capacity (up to 15% in some cases) for commercial leased access by unaffiliated third parties. The FCC has adopted rules regulating the terms, conditions and maximum rates a cable operator may charge for use of the designated channel capacity, but use of commercial leased access channels has been relatively limited. The FCC released revised rules in February 1997 which mandate a modest rate reduction and could make commercial leased access a more attractive option to third party programmers. Access to Programming. To spur the development of independent cable --------------------- programmers and competition to incumbent cable operators, the 1992 Cable Act imposed restrictions on the dealings between cable operators and cable programmers. Of special significance from a competitive business posture, the 1992 Cable Act precludes video programmers affiliated with cable companies from favoring cable operators over competitors and requires such programmers to sell their programming to other multichannel video distributors. This provision limits the ability of vertically integrated cable programmers to offer exclusive programming arrangements to cable companies. Other FCC Regulations. In addition to the FCC regulations noted --------------------- above, there are other FCC regulations covering such areas as equal employment opportunity, subscriber privacy, programming practices (including, among other things, syndicated program exclusivity, network program nonduplication, local sports blackouts, indecent programming, lottery programming, political programming, sponsorship identification, and children's programming advertisements), registration of cable systems and facilities licensing, maintenance of various records and public inspection files, frequency usage, lockbox availability, antenna structure notification, tower marking and lighting, consumer protection and customer service standards, technical standards, and consumer electronics equipment compatibility. The FCC is expected to impose new Emergency Alert System requirements on cable operators this year. The FCC has the authority to enforce its regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities used in connection with cable operations. Two pending FCC proceedings of particular competitive concern involve inside wiring and navigational devices. The former rulemaking is considering ownership of cable wiring located inside multiple dwelling unit complexes. If the FCC concludes that such wiring belongs to, or can be unilaterally acquired by the complex owner, it will become easier for complex owners to terminate service from the incumbent cable operator in favor of a new entrant. The latter rulemaking is considering whether cable customers must be allowed to purchase cable converters from third party vendors. If the FCC concludes that such distribution is required, and does not make appropriate allowances for signal piracy concerns, it may become more difficult for cable operators to combat theft of service. Copyright. Cable television systems are subject to federal copyright --------- licensing covering carriage of television and radio broadcast signals. In exchange for filing certain reports and contributing a percentage of their revenues to a federal copyright royalty pool (that varies depending on the size of the system and the number of distant broadcast television signals carried), cable operators can obtain blanket permission to retransmit copyrighted material on broadcast signals. The possible modification or elimination of this compulsory copyright license is the subject of continuing legislative review and could adversely affect the Partnership's ability to obtain desired broadcast programming. In addition, the cable industry pays music licensing fees to BMI and is 9 negotiating a similar arrangement with ASCAP. Copyright clearances for nonbroadcast programming services are arranged through private negotiations. State and Local Regulation. Cable television systems generally are -------------------------- operated pursuant to nonexclusive franchises granted by a municipality or other state or local government entity in order to cross public rights-of-way. Federal law now prohibits franchise authorities from granting exclusive franchises or from unreasonably refusing to award additional franchises. Cable franchises generally are granted for fixed terms and in many cases include monetary penalties for non-compliance and may be terminable if the franchisee fails to comply with material provisions. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction. Each franchise generally contains provisions governing cable operations, service rates, franchise fees, system construction and maintenance obligations, system channel capacity, design and technical performance, customer service standards, and indemnification protections. A number of states subject cable television systems to the jurisdiction of centralized state governmental agencies, some of which impose regulation of a character similar to that of a public utility. Although LFAs have considerable discretion in establishing franchise terms, there are certain federal limitations. For example, LFAs cannot insist on franchise fees exceeding 5% of the system's gross revenues, cannot dictate the particular technology used by the system, and cannot specify video programming other than identifying broad categories of programming. Federal law contains renewal procedures designed to protect incumbent franchisees against arbitrary denials of renewal. Even if a franchise is renewed, the franchise authority may seek to impose new and more onerous requirements such as significant upgrades in facilities and services or increased franchise fees as a condition of renewal. Similarly, if a franchise authority's consent is required for the purchase or sale of a cable system or franchise, such authority may attempt to impose more burdensome or onerous franchise requirements in connection with a request for consent. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of their franchises. GENERAL. The Partnership's business consists of providing cable television services to a large number of customers, the loss of any one of which would have no material effect on the Partnership's business. The Roseville System has had some subscribers who later terminated the service. Terminations occur primarily because people move to another home or to another city. In other cases, people terminate on a seasonal basis or because they no longer can afford or are dissatisfied with the service. The amount of past due accounts in the Roseville System is not significant. The Partnership's policy with regard to past due accounts is basically one of disconnecting service before a past due account becomes material. The Partnership does not depend to any material extent on the availability of raw materials; it carries no significant amounts of inventory and it has no material backlog of customer orders. The Partnership does not have any employees because all properties are managed by employees of the Managing General Partner. Intercable has engaged in research and development activities relating to the provision of new services but the amount of the Partnership's funds expended for such research and development has never been material. Compliance with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment has had no material effect upon the capital expenditures, earnings or competitive position of the Partnership. ITEM 2. PROPERTIES ------------------- The Partnership acquired the Roseville System in April 1988. The following sets forth (i) the monthly basic plus service rates charged to subscribers and (ii) the number of basic subscribers and pay units for the Roseville System. The monthly basic service rate set forth herein represents, with respect to systems with multiple headends, the basic service rate charged to the majority of the subscribers within the system. In cable television 12 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, 1996, the Roseville System operated cable plant passing approximately 23,300 homes, with an approximate 76% penetration rate. Figures for numbers of subscribers, miles of cable plant and homes passed are compiled from the Managing General Partner's records and may be subject to adjustments.
At December 31, ------------------------- ROSEVILLE SYSTEM 1996 1995 1994 - ---------------- ------- ------- ------- Monthly basic plus service rate $ 24.30 $ 22.95 $ 21.75 Basic subscribers 17,878 16,470 14,946 Pay units 10,975 11,153 10,733
ITEM 3. LEGAL PROCEEDINGS -------------------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------------------------------------------------------------ None. PART II. -------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK ------------------------------------------------- AND RELATED SECURITY HOLDER MATTERS ----------------------------------- While the Partnership 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 14, 1997, the number of equity security holders in the Partnership was 6,342. 11 Item 6. Selected Financial Data - --------------------------------
For the Year Ended December 31, ----------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- Revenues $ 8,571,921 $14,465,490 $13,082,094 $12,251,764 $11,160,962 Operating Expenses 5,273,095 7,972,171 7,298,356 6,476,534 5,726,675 Management and Supervision Fees and Allocated Overhead from General Partners 1,060,130 1,848,033 1,737,106 1,590,738 1,452,321 Depreciation and Amortization 1,786,583 4,469,809 5,645,264 6,007,116 5,981,609 Operating Income (Loss) 452,113 175,477 (1,598,632) (1,822,624) (1,999,643) Net Income (Loss) 20,760,774/(a)/ (1,553,063) (2,994,486) (2,879,606) (3,195,844) Net Income (Loss) per Limited Partnership Unit 124.98/(a)/ (9.37) (18.06) (17.36) (19.27) Weighted Average Number of Limited Partnership Units Outstanding 164,178 164,178 164,178 164,178 164,178 General Partners' Deficit (3,356) (245,344) (229,814) (199,869) (171,073) Limited Partners' Capital 2,464,357 11,945,571 13,483,104 16,447,645 19,298,455 Total Assets 12,727,595 36,160,374 36,683,823 39,507,610 43,454,780 Debt 9,850,000 22,981,227 21,832,052 22,208,312 23,086,835 Managing General Partner Advances - 448,872 665,782 - 238,198
(a) Net income resulted primarily from the sale of the Carmel System by IDS/Jones Growth Partners 87-A, Ltd. 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- The following discussion of the financial condition and results of operations of IDS/Jones Growth Partners 87-A, Ltd. (the "Partnership") contains, in addition to historical information, forward-looking statements that are based upon certain assumptions and are subject to a number of risks and uncertainties. The Partnership's actual results may differ significantly from the results predicted in such forward-looking statements. FINANCIAL CONDITION - ------------------- It is the publicly announced policy of Jones Intercable, Inc.'s ("Intercable") that it intends to liquidate its managed limited partnerships, including the Partnership, as opportunities for sales of partnership cable television systems arise in the marketplace over the next several years. In accordance with Intercable's policy, the Partnership's cable television system serving the communities in and around Carmel, Indiana (the "Carmel System") was sold in February 1996 and the Partnership has entered into an asset purchase agreement to sell the cable television system serving the communities in and around Roseville, California (the "Roseville System") to an unaffiliated third party in the first half of 1997. On October 14, 1996, the Partnership entered into an asset purchase agreement pursuant to which it agreed to sell the Roseville System to an unaffiliated party. The sales price is $30,900,000, subject to normal closing adjustments. Closing of the sale is subject to several closing conditions, including the approval of the holders of a majority of the limited partnership interests in a vote of limited partners to be conducted in the first half of 1997. Upon closing of the sale of the Roseville System, the Partnership will pay all of its indebtedness, which totaled $9,850,000 at December 31, 1996, a brokerage fee of $386,250 to The Jones Group, Ltd., an affiliate of the Managing General Partner and a brokerage fee of $386,250 to IDS Management Corporation, an affiliate of the Supervising General Partner. For a period of one year following the closing date, $1,550,000 of the sale proceeds will remain in escrow as security for the Partnership's agreement to indemnify the purchaser under the asset purchase agreement. Because the $1,550,000 will remain in escrow for one year following the closing date, this portion of the net sales proceeds, net of claims against such escrow, will not be distributed to limited partners until 1998. The Partnership will distribute the approximate $18,727,500 remaining net proceeds to its limited partners. This distribution will give the Partnership's limited partners an approximate return of $456 per $1,000 invested in the Partnership. Taking into account the distribution made on the sale of the Carmel System and the anticipated distribution to be made on the sale of the Roseville System in 1997, the limited partners will have received a total of $1,187 for each $1,000 invested in the Partnership. Because the limited partners will receive total distributions that are less than 125 percent of their initial capital contributions, the general partners of the Partnership will receive no distributions from the sale of the Roseville System. Upon the completion of the escrow period related to sale of the Roseville System, the Partnership will distribute the remaining proceeds to limited partners, which, if no claims are made against the escrow, would total approximately $38 for each $1,000 invested in the Partnership and then the Partnership will be liquidated and dissolved. On February 28, 1996, the Partnership sold the Carmel System to Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary of Intercable, for a sales price of $44,235,333. This price represented the average of three separate, independent appraisals of the fair market value of the Carmel System. The proceeds were used to repay the outstanding principal balance of the Partnership's term loan of $22,655,000, and, together with funds borrowed from the Partnership's new revolving credit facility, a $30,000,000 distribution was made to the limited partners in April 1996. This distribution gave the Partnership's limited partners an approximate return of $731 per $1,000 invested in the Partnership. Disregarding the effect of the Carmel System's operations, for 1996, the Partnership reported operating income before depreciation and amortization of approximately $1,987,368. The Partnership expended approximately $1,568,312 in capital improvements during 1996. Of these improvements, approximately 65 percent related to the construction of cable television plant. Approximately 29 percent related to service drops to homes. The remaining expenditures related to various system enhancements in the Partnership's system. Funding for these expenditures was provided by cash generated from operations and borrowings available under the Partnership's credit facility. Anticipated capital expenditures for 1997 in the Partnership's Roseville System are approximately $1,424,000. Construction of system extensions will account for approximately 55 percent of these expenditures. The remainder of the expenditures relate to various enhancements in the Partnership's Roseville System. These capital expenditures are necessary to maintain the value of the Roseville System until it is sold. Funding for these expenditures is expected to be provided by cash on hand and cash generated from operations and, if necessary, borrowings available under the Partnership's credit facility, as discussed below. Depending upon the timing of the closing of the sale of the Roseville System, the Partnership likely will make only the portion of budgeted capital expenditures scheduled to be made during the Partnership's continued ownership of the Roseville System. 13 When the Partnership sold its Carmel System, it used a portion of the sales proceeds to repay its term loan's then-outstanding principal balance of $22,655,000. Also on February 28, 1996, the Partnership entered into a new reducing revolving credit agreement with a commitment up to $10,000,000. The reducing revolving credit period expires December 31, 2003. The commitment amount reduces quarterly, beginning March 31, 1999. In April 1996, the Partnership re-borrowed approximately $9,100,000 available from the new $10,000,000 revolving credit facility, which it used, together with cash on hand from the sale of the Carmel System, to fund a $30,000,000 distribution to the Partnership's limited partners in April 1996. At December 31, 1996, the Partnership had $9,850,000 outstanding under the credit facility, leaving $150,000 available for future borrowings. Interest on the new commitment is at the Partnership's option of the Prime Rate or the London Interbank Offering Rate plus 1-1/4 percent. The effective interest rate on amounts outstanding were 6.77 percent and 6.91 percent at December 31, 1996 and 1995, respectively. The credit facility will be repaid in full upon the sale of the Roseville System. The Partnership believes that cash on hand and cash generated from operations will be sufficient to fund capital expenditures and other liquidity needs of the Partnership until the Roseville System is sold. RESULTS OF OPERATIONS - --------------------- 1996 Compared to 1995 --------------------- Revenues of the Partnership decreased $5,893,569, or approximately 41 percent, to $8,571,921 in 1996 from $14,465,490 in 1995. This decrease was due to the sale of the Carmel System. Disregarding the effect of the Carmel System sale, revenues increased $831,050, or approximately 13 percent, to $7,213,953 in 1996 from $6,382,903 in 1995. Increases in the number of basic service subscribers in the Partnership's Roseville System accounted for approximately 54 percent of the increase in revenues. The number of basic service subscribers in the Roseville System increased by 1,408 subscribers, or approximately 9 percent, to 17,878 subscribers at December 31, 1996 from 16,470 subscribers for the similar period in 1995. Basic service rate increases accounted for approximately 23 percent of the increase in revenues. No other single factor significantly contributed to the increase in revenues. Operating expenses consist primarily of costs associated with the operation and administration of the Partnership's cable television systems. The principal cost components are salaries paid to system personnel, programming expenses, professional fees, subscriber billing costs, rent for leased facilities, cable system maintenance expenses and marketing expenses. Operating expenses decreased $2,699,076, or approximately 34 percent, to $5,273,095 in 1996 from $7,972,171 in 1995. This decrease was due to the sale of the Carmel System. Disregarding the effect of the Carmel System sale, operating expenses increased $463,956, or approximately 12 percent, to $4,335,837 for 1996 from $3,871,881 for 1995. This increase was primarily due to increases in programming fees, which accounted for approximately 69 percent of the increase. No other single factor significantly affected the increase in operating expenses. Operating expenses represented 60 percent of revenues in 1996 and 61 percent in 1995. Management and supervision fees and allocated overhead from the General Partners decreased $787,903, or approximately 43 percent, to $1,060,130 in 1996 from $1,848,033 in 1995. This decrease was due to the sale of the Carmel System. Disregarding the effect of the Carmel System sale, management and supervision fees and allocated overhead from the General Partners increased $75,587, or approximately 9 percent, to $890,748 in 1996 from $815,161 in 1995. This increase was due to the increase in revenues, upon which such fees and allocations are based. Depreciation and amortization expense decreased $2,683,226, or approximately 60 percent, to $1,786,583 in 1996 from $4,469,809 in 1995. This decrease was due to the sale of the Carmel System. Disregarding the effect of the Carmel System sale, depreciation and amortization expense decreased $378,043, or approximately 22 percent, to $1,340,395 in 1996 from $1,718,438 in 1995. This decrease was due to the maturation of the Partnership's asset base. Operating income increased $276,636, to $452,113 in 1996 compared to $175,477 in 1995. This change was primarily due to the decrease in depreciation and amortization expense. The cable television industry generally measures the financial performance of a cable television system in terms of operating income before depreciation and amortization. This measure is not intended to be a substitute or improvement upon the items disclosed on the financial statements, rather it is included because it is an industry standard. Operating 14 income before depreciation and amortization decreased $2,406,590, or approximately 52 percent, to $2,238,696 in 1996 from $4,645,286 for 1995. This decrease was due to the sale of the Carmel System. Disregarding the effect of the Carmel System sale, operating income before depreciation and amortization increased $291,507, or approximately 17 percent, to $1,987,368 in 1996 from $1,695,861 in 1995. This increase was due to the increase in revenues exceeding the increases in operating expenses and management and supervision fees and allocated overhead from the General Partners. Interest expense decreased $983,277, or approximately 57 percent, to $749,270 in 1996 from $1,732,547 in 1995. This decrease in interest expense was primarily due to the lower outstanding balance on the Partnership's interest bearing obligation, as a result of a portion of the proceeds from the sale of the Carmel System being used to repay the outstanding loan principal balance of $22,655,000 on February 28, 1996. The Partnership reported a gain on the sale of the Carmel System of $21,096,325 in 1996. No such gain was reported in 1995. The Partnership reported net income of $20,760,774 in 1996 compared to a net loss of $1,553,063 for 1995. The net income in 1996 was a result of the gain on the sale of the Carmel System. 1995 Compared to 1994 --------------------- Revenues of the Partnership increased $1,383,396, or approximately 11 percent, to $14,465,490 in 1995 from $13,082,094 in 1994. An increase in basic subscribers accounted for approximately 49 percent of the increase in revenues. Basic subscribers totaled 35,669 at December 31, 1995 compared to 33,102 at December 31, 1994, an increase of 2,567, or approximately 8 percent. Advertising revenues accounted for approximately 27 percent of the increase in revenues. No other individual factor significantly affected the increase in revenues. Operating expenses increased $673,815, or approximately 9 percent, to $7,972,171 in 1995 from $7,298,356 in 1994. Operating expenses consumed 55 percent and 56 percent of revenue during the years ended December 31, 1995 and 1994, respectively. The increase in operating expenses was primarily due to increases in programming fees, which accounted for approximately 71 percent of the increase. No other individual factor significantly affected the increase in operating expenses. Management and supervision fees and allocated overhead from the General Partners increased $110,927, or approximately 6 percent, to $1,848,033 in 1995 from $1,737,106 in 1994. This increase was due to the increase in revenues, upon which such management and supervision fees are based, as well as increases in allocated expenses from the Managing General Partner. Depreciation and amortization decreased $1,175,455, or approximately 21 percent, to $4,469,809 in 1995 from $5,645,264 in 1994. This decrease was due to the maturation of the Partnership's intangible asset base. The Partnership recorded operating income of $175,477 in 1995, compared to an operating loss of $1,598,632 in 1994. This change was a result of the increase in revenues and the decrease in depreciation and amortization expense exceeding the increases in operating expenses, management and supervision fees and allocated overhead from the General Partners. Operating income before depreciation and amortization expenses increased $598,654, or approximately 15 percent, to $4,645,286 in 1995 from $4,046,632 in 1994 due to the increase in revenues exceeding the increase in operating expenses and management and supervision fees and allocated overhead from the General Partners. Interest expense increased $358,591, or approximately 26 percent, to $1,732,547 in 1995 from $1,373,956 in 1994. This increase was due primarily to higher outstanding balances on interest bearing obligations during 1995. Net loss decreased $1,441,423, or approximately 48 percent, to $1,553,063 in 1995 from $2,994,486 in 1994. These losses were due to the factors discussed above. 15 Item 8. Financial Statements - ----------------------------- IDS/JONES GROWTH PARTNERS 87-A, LTD. ------------------------------------ (A Limited Partnership) FINANCIAL STATEMENTS -------------------- AS OF DECEMBER 31, 1996 AND 1995 -------------------------------- INDEX -----
Page ---- Report of Independent Public Accountants 17 Balance Sheets 18 Statements of Operations 20 Statements of Partners' Capital (Deficit) 21 Statements of Cash Flows 22 Notes to Financial Statements 23
16 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Partners of IDS/Jones Growth Partners 87-A, Ltd.: We have audited the accompanying balance sheets of IDS/JONES GROWTH PARTNERS 87-A, LTD. (a Colorado limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1996. 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 IDS/Jones Growth Partners 87-A, Ltd. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Denver, Colorado, March 7, 1997. 17 IDS/JONES GROWTH PARTNERS 87-A, LTD. ------------------------------------ (A Limited Partnership) BALANCE SHEETS --------------
December 31, -------------------------- ASSETS 1996 1995 ------ ----------- ------------ CASH $ 478,797 $ 557,506 TRADE RECEIVABLES, less allowance for doubtful receivables of $32,637 and $24,428 at December 31, 1996 and 1995, respectively 373,301 623,890 INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment, at cost 16,234,764 35,421,532 Less- accumulated depreciation (7,195,326) (15,195,244) ----------- ------------ 9,039,438 20,226,288 Franchise costs and other intangible assets, net of accumulated amortization of $12,551,102 and $24,675,391 at December 31, 1996 and 1995, respectively 2,650,448 14,397,338 ----------- ------------ Total investment in cable television properties 11,689,886 34,623,626 DEPOSITS AND PREPAID EXPENSES 185,611 355,352 ----------- ------------ Total assets $12,727,595 $ 36,160,374 =========== ============
The accompanying notes to financial statements are an integral part of these balance sheets. 18 IDS/JONES GROWTH PARTNERS 87-A, LTD. ------------------------------------ (A Limited Partnership) BALANCE SHEETS -------------- LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) -------------------------------------------
December 31, ---------------------------- LIABILITIES: 1996 1995 ------------ ------------ Debt $ 9,850,000 $ 22,981,227 Accounts payable-Managing General Partner 43,813 448,872 Trade accounts payable and accrued liabilities 349,695 984,610 Subscriber prepayments 23,086 45,438 ------------ ------------ Total liabilities 10,266,594 24,460,147 ------------ ------------ COMMITMENTS AND CONTINGENCIES (NOTE 7) PARTNERS' CAPITAL (DEFICIT): General Partners- Contributed capital 500 500 Accumulated deficit (3,856) (245,844) ------------ ------------ (3,356) (245,344) ------------ ------------ Limited Partners- Net contributed capital (164,178 units outstanding at December 31, 1996 and 1995) 35,824,200 35,824,200 Accumulated deficit (3,359,843) (23,878,629) Distributions (30,000,000) - ------------ ------------ 2,464,357 11,945,571 ------------ ------------ Total liabilities and partners' capital $ 12,727,595 $ 36,160,374 ============ ============
The accompanying notes to financial statements are an integral part of these balance sheets. 19 IDS/JONES GROWTH PARTNERS 87-A, LTD. ------------------------------------ (A Limited Partnership) STATEMENTS OF OPERATIONS ------------------------
Year Ended December 31, ---------------------------------------- 1996 1995 1994 ----------- ----------- ----------- REVENUES $ 8,571,921 $14,465,490 $13,082,094 COSTS AND EXPENSES: Operating expenses 5,273,095 7,972,171 7,298,356 Management and supervision fees and allocated overhead from General Partners 1,060,130 1,848,033 1,737,106 Depreciation and amortization 1,786,583 4,469,809 5,645,264 ----------- ----------- ----------- OPERATING INCOME (LOSS) 452,113 175,477 (1,598,632) ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (749,270) (1,732,547) (1,373,956) Gain on sale of cable television system 21,096,325 - - Other, net (38,394) 4,007 (21,898) ----------- ----------- ----------- Total other income (expense) 20,308,661 (1,728,540) (1,395,854) ----------- ----------- ----------- NET INCOME (LOSS) $20,760,774 $(1,553,063) $(2,994,486) =========== =========== =========== ALLOCATION OF NET INCOME (LOSS): General Partners $ 241,988 $ (15,530) $ (29,945) =========== =========== =========== Limited Partners $20,518,786 $(1,537,533) $(2,964,541) =========== =========== =========== NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ 124.98 $ (9.37) $ (18.06) =========== =========== =========== WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 164,178 164,178 164,178 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 20 IDS/JONES GROWTH PARTNERS 87-A, LTD. ------------------------------------ (A Limited Partnership) STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) -----------------------------------------
Year Ended December 31, ---------------------------------------- 1996 1995 1994 ----------- ----------- ----------- GENERAL PARTNERS: Jones Cable Corporation Balance, beginning of year $ (122,672) $ (114,907) $ (99,935) Net income (loss) for year 120,994 (7,765) (14,972) ----------- ----------- ----------- Balance, end of year $ (1,678) $ (122,672) $ (114,907) =========== =========== =========== IDS Cable Corporation Balance, beginning of year $ (122,672) $ (114,907) $ (99,934) Net income (loss) for year 120,994 (7,765) (14,973) ----------- ----------- ----------- Balance, end of year $ (1,678) $ (122,672) $ (114,907) =========== =========== =========== Total Balance, beginning of year $ (245,344) $ (229,814) $ (199,869) Net income (loss) for year 241,988 (15,530) (29,945) ----------- ----------- ----------- Balance, end of year $ (3,356) $ (245,344) $ (229,814) =========== =========== =========== LIMITED PARTNERS: Balance, beginning of year $11,945,571 $13,483,104 $16,447,645 Distributions (30,000,000) - - Net income (loss) for year 20,518,786 (1,537,533) (2,964,541) ----------- ----------- ----------- Balance, end of year $ 2,464,357 $11,945,571 $13,483,104 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 21 IDS/JONES GROWTH PARTNERS 87-A, LTD. ----------------------------------- (A Limited Partnership) STATEMENTS OF CASH FLOWS ------------------------
Year Ended December 31 ----------------------------------------- 1996 1995 1994 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 20,760,774 $(1,553,063) $(2,994,486) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,786,583 4,469,809 5,645,264 Gain on sale of cable television system (21,096,325) - - Amortization of interest rate protection contract - 33,336 33,336 Decrease (increase) in trade receivables 250,589 (125,374) (177,629) Decrease (increase) in deposits and prepaid expenses (253,798) (129,790) 41,383 Increase (decrease) in trade accounts payable and accrued liabilities and subscriber prepayments (657,267) 97,349 (118,823) Increase (decrease) in amount due Managing General Partner (405,059) (216,910) 665,782 ------------ ----------- ----------- Net cash provided by operating activities 385,497 2,575,357 3,094,827 ------------ ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment, net (1,568,312) (3,573,252) (3,174,865) Franchise renewal costs - (1,384) (105,508) Proceeds from sale of cable television system 44,235,333 - - ------------ ----------- ----------- Net cash provided by (used in) investing activities 42,667,021 (3,574,636) (3,280,373) ------------ ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 9,895,965 1,398,225 36,298 Repayment of debt (23,027,192) (249,050) (412,558) Distribution to Limited Partners (30,000,000) - - ------------ ----------- ----------- Net cash provided by (used in) financing activities (43,131,227) 1,149,175 (376,260) ------------ ----------- ----------- Increase (decrease) in cash (78,709) 149,896 (561,806) Cash, beginning of year 557,506 407,610 969,416 ------------ ----------- ----------- Cash, end of year $ 478,797 $ 557,506 $ 407,610 ============ =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 900,250 $ 1,690,619 $ 1,256,215 ============ =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 22 IDS/JONES GROWTH PARTNERS 87-A, LTD. ----------------------------------- (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS ----------------------------- (1) ORGANIZATION AND PARTNERS' INTERESTS ------------------------------------ Formation and Business ---------------------- IDS/Jones Growth Partners 87-A, Ltd. (the "Partnership"), a Colorado limited partnership, was formed on September 15, 1987, pursuant to a public offering. The Partnership was formed to acquire, develop and operate cable television systems. Jones Cable Corporation, a Colorado corporation, is the "Managing General Partner" and manager of the Partnership. IDS Cable Corporation, a Minnesota corporation, is the "Supervising General Partner". Jones Intercable, Inc. ("Intercable"), the parent of Jones Cable Corporation, manages the cable television systems owned by the Partnership. Intercable and its subsidiaries also own and operate cable television systems as well as manage cable television systems for other limited partnerships for which it is general partner and, also, for affiliated entities. Cable Television System Acquisitions ------------------------------------ In 1988, the Partnership acquired the cable television system serving the communities in and around Roseville, California (the "Roseville System") and, in 1989, the Partnership acquired the cable television system serving the communities in and around Carmel, Indiana (the "Carmel System"). The Carmel System was sold in February 1996 and the Partnership has entered into an asset purchase agreement to sell the Roseville System during the first half of 1997. Cable Television System Sales ----------------------------- On February 28, 1996, the Partnership sold the Carmel System to Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary of Intercable, for a sales price of $44,235,333. This price represented the average of three separate, independent appraisals of the fair market value of the Carmel System. The proceeds were used to repay the outstanding principal balance on the Partnership's term loan of $22,655,000, and, together with funds borrowed from the Partnership's new revolving credit facility, a $30,000,000 distribution was made to the limited partners in April 1996. This distribution gave the Partnership's limited partners an approximate return of $731 per $1,000 invested in the Partnership. On October 14, 1996, the Partnership entered into an asset purchase agreement pursuant to which it agreed to sell the Roseville System to an unaffiliated party. The sales price is $30,900,000, subject to normal closing adjustments. Closing of the sale is subject to several closing conditions, including the approval of the holders of a majority of the limited partnership interests in a vote of limited partners to be conducted in the first half of 1997. Upon closing of the sale of the Roseville System, the Partnership will pay all of its indebtedness, which totaled $9,850,000 at December 31, 1996, a brokerage fee of $386,250 to The Jones Group, Ltd., an affiliate of the Managing General Partner and a brokerage fee of $386,250 to IDS Management Corporation, an affiliate of the Supervising General Partner. For a period of one year following the closing date, $1,550,000 of the sale proceeds will remain in escrow as security for the Partnership's agreement to indemnify the purchaser under the asset purchase agreement. Because the $1,550,000 will remain in escrow for one year following the closing date, this portion of the net sales proceeds, net of claims against such escrow, will not be distributed to limited partners until 1998. The Partnership will distribute the approximate $18,727,500 remaining net proceeds to its limited partners. This distribution will give the Partnership's limited partners an approximate return of $456 per $1,000 invested in the Partnership. Taking into account the distribution made on the sale of the Carmel System and the anticipated distribution to be made on the sale of the Roseville System in 1997, the limited partners will have received a total of $1,187 for each $1,000 invested in the Partnership. Because the limited partners will receive total distributions that are less than 125 percent of their initial capital contributions, the general partners of the Partnership will receive no distributions from the sale of the Roseville System. Upon the completion of the escrow period related to sale of the Roseville System, the Partnership will distribute the remaining proceeds to limited partners, which, if no claims are made against the escrow, would total approximately $38 for each $1,000 invested in the Partnership and then the Partnership will be liquidated and dissolved. 23 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 Managing General Partner and the Supervising General Partner purchased their interests in the Partnership by contributing $250 each to partnership capital. All profits and losses of the Partnership are allocated 99 percent to the limited partners, 1/2 percent to the Managing General Partner and 1/2 percent to the Supervising 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's partnership agreement and interest income earned prior to the first acquisition by the Partnership of a cable television system, which was allocated 100 percent to the limited partners. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Accounting Records ------------------ The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. The Partnership's tax returns are also prepared on the accrual basis. The preparation of financial statements in conformity with generally accepted accounting principles requires the Managing General Partner's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Purchase Price Allocation ------------------------- Cable television system acquisitions were accounted for as purchases with the purchase price allocated to tangible and intangible assets based upon an independent appraisal. The method of allocation of the purchase price was as follows: first, to the fair value of the net tangible assets acquired; second to the value of subscriber lists and any non-compete agreements; third, to franchise costs; and fourth, to costs in excess of interests in net assets purchased. Acquisition fees paid to affiliates of the general partners and other system acquisition costs were capitalized and included in the costs of intangible assets. Property, Plant and Equipment ----------------------------- Depreciation is provided using the straight-line method over the following estimated service lives: Cable distribution systems 5 - 15 years Equipment and tools 3 - 5 years Office furniture and equipment 5 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 franchises, subscriber lists 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 - 11 years Subscriber lists 1 year Costs in excess of interests in net assets purchased 32 years
24 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 1996 presentation. (3) TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES ----------------------------------------------------- Management Fees, Supervision Fees, Distribution Ratios and Reimbursements ------------------------------------------------------------------------- The Managing General Partner manages the Partnership and receives a fee for its services equal to 5 percent of the gross revenues of the Partnership, excluding revenues from the sale of cable television systems or franchises. Management fees paid to the Managing General Partner were $428,596, $723,275 and $654,105 during 1996, 1995 and 1994, respectively. The Supervising General Partner participates in certain management decisions of the Partnership and receives a fee for its services equal to 1/2 percent of the gross revenues of the Partnership, excluding revenues from the sale of cable television systems or franchises. Supervision fees paid to the Supervising General Partner during the years ended December 31, 1996, 1995 and 1994 were $42,860, $72,327 and $65,410, respectively. The Partnership 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 Partnership. Such services, and their related costs, are necessary to the operation of the Partnership and would have been incurred by the Partnership if it was a stand alone entity. Allocations of personnel costs are based primarily on actual time spent by employees of Intercable with respect to each partnership managed. Remaining overhead costs are allocated based on the pro rata relationship of the Partnership's revenues to the total revenues of all systems owned or managed by Intercable and certain of its affiliates. Systems owned by Intercable and all other systems owned by partnerships for which Intercable is the general partner are also allocated a proportionate share of these expenses. The Managing General Partner believes that the methodology used in allocating overhead and administrative expense is reasonable. Reimbursements made to Intercable by the Partnership for allocated overhead and administrative expenses were $588,674, $1,052,431 and $1,017,591 for 1996, 1995 and 1994, respectively. The Supervising General Partner may also be reimbursed for certain expenses incurred on behalf of the Partnership. There were no reimbursements made to the Supervising General Partner by the Partnership for allocated overhead and administrative expenses during the years ended December 31, 1996, 1995 and 1994. The Partnership was charged interest by Intercable during 1996 at an average interest rate of 8.58 percent on amounts due to the Managing General Partner, which approximated Intercable's weighted average cost of borrowing. Total interest charged to the Partnership by Intercable was $1,864, $25,456 and $19,296 in 1996, 1995 and 1994, respectively. Payments to/from Affiliates for Programming Services ---------------------------------------------------- The Partnership receives programming from Superaudio, Jones Education Company, Great American Country, Inc. and Product Information Network, all of which are affiliates of the Managing General Partner. Payments to Superaudio totaled approximately $12,464, $19,486 and $19,257 in 1996, 1995 and 1994, respectively. Payments to Jones Education Company totaled $39,838, $46,778 and $22,017 in 1996, 1995 and 1994, respectively. Payments to Great American Country, Inc., which initiated service in 1996, totaled $14,806 in 1996. The Partnership receives a commission from Product Information Network based on a percentage of advertising revenue and number of subscribers. Product Information Network paid commissions to the Partnership totaling $22,820, $29,029 and $12,236 in 1996, 1995 and 1994, respectively. 25 (4) PROPERTY, PLANT AND EQUIPMENT ----------------------------- Property, plant and equipment as of December 31, 1996 and 1995, consists of the following:
December 31, -------------------------- 1996 1995 ----------- ------------ Cable distribution systems $15,376,046 $ 32,857,826 Equipment and tools 438,674 1,180,288 Office furniture and equipment 232,915 596,016 Buildings 9,060 72,415 Vehicles 176,069 712,987 Land 2,000 2,000 ----------- ------------ 16,234,764 35,421,532 Less - accumulated depreciation (7,195,326) (15,195,244) ----------- ------------ $ 9,039,438 $ 20,226,288 =========== ============
(5) DEBT ---- Debt consists of the following: December 31, -------------------------- 1996 1995 ----------- ------------ Lending institutions - Revolving credit agreement $ 9,850,000 $ - Term loan - 22,827,500 Capital lease obligations - 153,727 ----------- ------------ $ 9,850,000 $ 22,981,227 =========== ============
As discussed in Note (1), on February 28, 1996, the Partnership sold its Carmel System and used a portion of the sales proceeds to repay the then- outstanding term loan principal balance of $22,655,000. Also, on February 28, 1996, the Partnership entered into a new reducing revolving credit agreement with a commitment up to $10,000,000. The reducing revolving credit period expires December 31, 2003. The commitment amount reduces quarterly, beginning March 31, 1999. At December 31, 1996, the outstanding balance under the Partnership's revolving credit facility was $9,850,000. Installments due on debt principal for each of the five years in the period ending December 31, 2001 and thereafter, respectively, are: $-0-, $-0-, $850,000, $1,500,000, $2,000,000 and $5,500,000. All outstanding indebtedness is expected to be repaid upon the sale of the Roseville System. Interest on the new commitment is at the Partnership's option of the Prime Rate or the London Interbank Offering Rate plus 1-1/4 percent. The effective interest rates on amounts outstanding were 6.77 percent and 6.91 percent at December 31, 1996 and 1995, respectively. At December 31, 1996, the carrying amount of the Partnership's long-term debt did not differ significantly from the estimated fair value of the financial instruments. The fair value of the Partnership's long-term debt is estimated based on the discounted amount of future debt service payments using rates of borrowing for a liability of similar risk. At December 31, 1996, substantially all of the Partnership's property, plant and equipment secured the above indebtedness. (6) INCOME TAXES ------------ Income taxes have not been recorded in the accompanying financial statements because they accrue directly to the partners. The federal and state income tax returns of the Partnership are prepared and filed by the Managing General Partner. 26 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 losses reported to the partners is different from that reported in the statements of operations due to the difference in depreciation allowed under generally accepted accounting principles and the expense allowed for tax purposes under the Modified Accelerated Cost Recovery System (MACRS). There are no other significant differences between taxable loss and the net loss reported in the statements of operations. (7) COMMITMENTS AND CONTINGENCIES ----------------------------- Office and other facilities are rented under various long-term lease arrangements. Rent paid under such lease arrangements totaled $124,949, $159,083 and $152,323, respectively, for the years ended December 31, 1996, 1995 and 1994. Minimum commitments under operating leases for each of the five years in the period ended December 31, 2001 and thereafter are as follows: 1997 $19,343 1998 - 1999 - 2000 - 2001 - Thereafter - ------- $19,343 ======= (8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION ----------------------------------------- Supplementary profit and loss information is presented below:
Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Maintenance and repairs $ 61,416 $ 133,002 $ 135,550 ========== ========== ========== Taxes, other than income and payroll taxes $ 327,504 $ 397,118 $ 364,608 ========== ========== ========== Advertising $ 66,135 $ 141,988 $ 95,760 ========== ========== ========== Depreciation of property, plant and equipment $1,317,776 $2,529,591 $2,277,171 ========== ========== ========== Amortization of intangible assets $ 468,807 $1,940,218 $3,368,093 ========== ========== ==========
27 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON --------------------------------------------------------- ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------- None. PART III. --------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------------------------------ The Partnership itself has no officers or directors. Certain information concerning the directors and executive officers of the Managing General Partner is set forth below. Directors of the Managing General Partner serve until the next annual meeting of the Managing General Partner and until their successors shall be elected and qualified.
Name Age Positions with the Managing General Partner - ---- --- ------------------------------------------- Glenn R. Jones 67 Chairman of the Board and Chief Executive Officer James B. O'Brien 47 President Kevin P. Coyle 45 Vice President of Finance Elizabeth M. Steele 45 Vice President and Secretary
Mr. Glenn R. Jones has been Chairman of the Board of the Managing General Partner since its formation in October 1986. Mr. Jones served as President of the Managing General Partner until September of 1990 at which time he was elected Chief Executive Officer. Mr. Jones has served as Chairman of the Board of Directors and Chief Executive Officer of Jones Intercable, Inc. since its formation in 1970, and he was President from June 1984 until April 1988. Mr. Jones is the sole shareholder, President and Chairman of the Board of Directors of Jones International, Ltd. He is also Chairman of the Board of Directors of several affiliates of the Managing General Partner. Mr. Jones has been involved in the cable television business in various capacities since 1961, is a member of the Board of Directors and the Executive Committee of the National Cable Television Association. Additionally, Mr. Jones is a member of the Board of Governors for the American Society for Training and Development, and a member of the Board of Education Council of the National Alliance of Business. Mr. Jones is also a founding member of the James Madison Council of the Library of Congress. Mr. Jones has been the recipient of several awards including the Grand Tam Award in 1989, the highest award from the Cable Television Administration and Marketing Society; the President's Award from the Cable Television Public Affairs Association in recognition of Jones International's educational efforts through Mind Extension University (now Knowledge TV); the Donald G. McGannon Award for the advancement of minorities and women in cable from the United Church of Christ Office of Communications; the STAR Award from American Women in Radio and Television, Inc. for exhibition of a commitment to the issues and concerns of women in television and radio; the Cableforce 2000 Accolade awarded by Women in Cable in recognition of Jones Intercable, Inc.'s innovative employee programs; the Most Outstanding Corporate Individual Achievement Award from the International Distance Learning Conference for his contributions to distance education; the Golden Plate Award from the American Academy of Achievement for his advances in distance education; the Man of the Year named by the Denver chapter of the Achievement Rewards for College Scientists; and in 1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame. Mr. James B. O'Brien was elected President of the Managing General Partner in September of 1990. Mr. O'Brien joined Jones Intercable, Inc. in January 1982. Mr. O'Brien was elected President and a Director of Jones Intercable, Inc. in December 1989. Prior to being elected President and a Director of Jones Intercable, Inc., 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 Jones Intercable, Inc. Executive Committee in August 1993. As President, he is responsible for the day-to-day operations of the cable television systems managed and owned by Jones Intercable, Inc. Mr. O'Brien is a board member of Cable Labs, 28 Inc., the research arm of the 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. Mr. Kevin P. Coyle was elected Vice President of Finance of the Managing General Partner in February 1989. Mr. Coyle is the principal financial and accounting officer of the Managing General Partner. Mr. Coyle joined The Jones Group, Ltd. in July 1981 as Vice President/Financial Services. He was elected Treasurer of Jones Intercable, Inc. in August 1987, Vice President/Treasurer in April 1988 and Group Vice President/Finance in October 1990. Ms. Elizabeth M. Steele has served as Secretary of the Managing General Partner since August 1987 and Vice President since February 1989. Ms. Steele joined Jones Intercable, Inc. in August 1987 as Vice President/General Counsel and Secretary. From August 1980 until joining Jones Intercable, Inc., Ms. Steele was an associate and then a partner at the Denver law firm of Davis, Graham & Stubbs, which serves as counsel to Jones Intercable, Inc. Certain information concerning directors and executive officers of the Supervising General Partner is set forth below. Directors of the Supervising General Partner serve until the next annual meeting of the Supervising General Partner and until their successors shall be elected and qualified.
Name Age Positions with the Supervising General Partner - ---- --- ---------------------------------------------- Janis E. Miller 44 President and Director Morris Goodwin, Jr. 44 Vice President, Treasurer and Director Lori J. Larson 37 Vice President and Director Ronald W. Powell 51 Vice President Bradley C. Nelson 31 Vice President John M. Knight 43 Vice President
Ms. Janis E. Miller has served as Vice President of Variable Assets of American Express Financial Corporation since December 1993. From June 1990 to November 1993, Ms. Miller held the position of Vice President of Mutual Funds/Limited Partnership Product Development and Marketing with American Express Financial Corporation. Mr. Morris Goodwin, Jr. has served as Vice President and Treasurer of American Express Financial Corporation since July 1989. From January 1988 to July 1989, he had been the Chief Financial Officer and Treasurer of IDS Bank & Trust Company. From January 1980 to January 1988, he was a Vice President with Morgan Stanley, an investment banking business headquartered in New York. Ms. Lori J. Larson has been employed by American Express Financial Corporation since 1981 and currently holds the title of Vice President. Since August 1988, she has been responsible for day-to-day management of vendor relationships, due diligence review, and operational aspects for various limited partnerships distributed by American Express Financial Advisors Inc. In addition, Ms. Larson is responsible for product development of the publicly offered mutual funds in the IDS Mutual Fund Group. Mr. Ronald W. Powell has held the position of Vice President and Assistant General Counsel with American Express Financial Corporation since November 1985. He has been a member of the American Express Financial Corporation law department since 1975. Mr. Bradley C. Nelson joined American Express Financial Corporation in 1991 as an Investment Department analyst following his graduation from Cornell University's Johnson Graduate School of Management where he earned an MBA with a concentration in finance. 29 Inc., the research arm of the cable television industry. He also serves as Vice Chairman and a director of the Cable Television Administration and Marketing Association and as a director and member of the Executive Committee 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. Mr. Kevin P. Coyle was elected Vice President of Finance of the Managing General Partner in February 1989. Mr. Coyle is the principal financial and accounting officer of the Managing General Partner. Mr. Coyle joined The Jones Group, Ltd. in July 1981 as Vice President/Financial Services. He was elected Treasurer of Jones Intercable, Inc. in August 1987, Vice President/ Treasurer in April 1988 and Group Vice President/Finance in October 1990. Ms. Elizabeth M. Steele has served as Secretary of the Managing General Partner since August 1987 and Vice President since February 1989. Ms. Steele joined Jones Intercable, Inc. in August 1987 as Vice President/General Counsel and Secretary. From August 1980 until joining Jones Intercable, Inc., Ms. Steele was an associate and then a partner at the Denver law firm of Davis, Graham & Stubbs, which serves as counsel to Jones Intercable, Inc. Certain information concerning directors and executive officers of the Supervising General Partner is set forth below. Directors of the Supervising General Partner serve until the next annual meeting of the Supervising General Partner and until their successors shall be elected and qualified.
Name Age Positions with the Supervising General - ---- --- -------------------------------------- Lori J. Larson 37 President and Director Morris Goodwin, Jr. 45 Vice President, Treasurer and Director Bradley C. Nelson 32 Vice President Ronald W. Powell 52 Vice President John M. Knight 44 Vice President
Ms. Lori J. Larson has been employed by American Express Financial Corporation since 1981 and currently holds the title of President. Since August 1988, she has been responsible for day-to-day management of vendor relationships, due diligence review, and operational aspects for various limited partnerships distributed by American Express Financial Advisors Inc. In addition, Ms. Larson is responsible for product development of the publicly offered mutual funds in the IDS Mutual Fund Group. Mr. Morris Goodwin, Jr. has served as Vice President and Treasurer of American Express Financial Corporation since July 1989. From January 1988 to July 1989, he had been the Chief Financial Officer and Treasurer of IDS Bank & Trust Company. From January 1980 to January 1988, he was a Vice President with Morgan Stanley, an investment banking business headquartered in New York. Mr. Bradley C. Nelson joined American Express Financial Corporation in 1991 as an Investment Department analyst following his graduation from Cornell University's Johnson Graduate School of Management where he earned an MBA with a concentration in finance. Mr. Ronald W. Powell has held the position of Vice President and Vice President and Assistant General Counsel with American Express Financial Corporation since November 1985. He has been a member of the American Express Financial Corporation law department since 1975. 30 Intercable, the parent of the Managing General Partner, also advances funds and charges interest on the balance payable from the Partnership. The interest rate charged the Partnership approximates Intercable's weighted average cost of borrowing. TRANSACTIONS WITH AFFILIATES Jones Education Company ("JEC") is owned 63% by Jones International, Ltd. ("International"), an affiliate of the General Partner, 9% by Glenn R. Jones, 12% by Bell Canada International Inc. ("BCI") and 16% by the General Partner. JEC operates two television networks, JEC Knowledge TV and Jones Computer Network. JEC Knowledge TV provides programming related to computers and technology; business, careers and finance; health and wellness; and global culture and languages. Jones Computer Network provides programming focused primarily on computers and technology. JEC sells its programming to certain cable television systems owned or managed by Intercable. The Great American Country network provides country music video programming to certain cable television systems owned or managed by Intercable. This network is owned and operated by Great American Country, Inc., a subsidiary of Jones International Networks, Ltd., an affiliate of International. Jones Galactic Radio, Inc. is a company now owned by Jones International Networks, Ltd., an affiliate of International. Superaudio, a joint venture between Jones Galactic Radio, Inc. and an unaffiliated entity, provides satellite programming to certain cable television systems owned or managed by Intercable. The Product Information Network Venture (the "PIN Venture") is a venture among a subsidiary of Jones International Networks, Ltd., an affiliate of International, and two unaffiliated cable system operators. The PIN Venture operates the Product Information Network ("PIN"), which is a 24-hour network that airs long-form advertising generally known as "infomercials." The PIN Venture generally makes incentive payments of approximately 60% of its net advertising revenue to the cable systems that carry its programming. Most of Intercable's owned and managed systems carry PIN for all or part of each day. Revenues received by the Partnership from the PIN Venture relating to the Roseville System totaled approximately $22,820 for the year ended December 31, 1996. The charges to the Partnership for related party transactions are as follows for the periods indicated:
For the Year Ended December 31, ------------------------------- 1996 1995 1994 -------- ---------- ------- Management fees $428,596 $ 723,275 $ 654,105 Supervision fees 42,860 72,327 65,410 Allocation of expenses 588,674 1,052,431 1,017,591 Interest expense 2,275 25,456 29,296 Amount of advances outstanding 43,813 448,872 665,782 Highest amount of advances outstanding 647,012 448,872 665,782 Programming fees: Jones Education Company 39,838 46,778 22,017 Great American Country 14,806 0 0 Superaudio 12,464 19,486 19,257
31 Intercable, the parent of the Managing General Partner, also advances funds and charges interest on the balance payable from the Partnership. The interest rate charged the Partnership approximates Intercable's weighted average cost of borrowing. TRANSACTIONS WITH AFFILIATES Jones Education Company ("JEC") is owned 63% by Jones International, Ltd. {"International"), an affiliate of the General Partner, 9% by Glenn R. Jones, 12% by Bell Canada International Inc. ("BCI") and 16% by the General Partner. JEC operates two television networks, JEC Knowledge TV and Jones Computer Network. JEC Knowledge TV provides programming related to computers and technology; business, careers and finance; health and wellness; and global culture and languages. Jones Computer Network provides programming focused primarily on computers and technology. JEC sells its programming to certain cable television systems owned or managed by Intercable. The Great American Country network provides country music video programming to certain cable television systems owned or managed by Intercable. This network is owned and operated by Great American Country, Inc., a subsidiary of Jones International Networks, Ltd., an affiliate of International. Jones Galactic Radio, Inc. is a company now owned by Jones International Networks, Ltd., an affiliate of International. Superaudio, a joint venture between Jones Galactic Radio, Inc. and an unaffiliated entity, provides satellite programming to certain cable television systems owned or managed by Intercable. The Product Information Network Venture ("PIN Venture") is a venture among a subsidiary of Jones International Networks, Ltd., an affiliate of International, and two unaffiliated cable system operators. The PIN Venture operates the Product Information Network ("PIN"), which is a 24-hour network that airs long-form advertising generally know as "infomercials." The PIN Venture generally makes incentive payments of approximately 60% of its net advertising revenue to the cable systems that carry its programming. Most of Intercable's owned and managed systems carry PIN for all of part of each day. Revenues received by the Partnership from the PIN Venture relating to the Roseville Systems totaled approximately $22,820 for the year ended December 31, 1996. The charges to the Partnership for related party transactions are as follows for the periods indicated:
For the Year Ended December 31, ------------------------------- 1996 1995 1994 ------- --------- ------- Management fees $428,596 $ 723,275 $ 654,105 Supervision fees 42,860 72,327 65,410 Allocation of expenses 588,674 1,052,431 1,017,591 Interest expense 1,864 25,456 29,296 Amount of advances outstanding 43,813 448,872 665,782 Highest amount of advances outstanding 647,012 448,872 665,782 Programming fees: Jones Education Company 39,838 46,778 22,017 Great American Country 14,806 0 0 Superaudio 12,464 19,486 19,257
32 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. IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership By Jones Cable Corporation, its Managing General Partner By:______________________________ Glenn R. Jones Chairman of the Board and Dated: March 24, 1997 Chief Executive Officer By IDS Cable Corporation, its Supervising General Partner By:_____________________________ Lori J. Larson Dated: March 24, 1997 President and Director Pursuant to the requirements 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. OFFICERS AND DIRECTORS OF JONES CABLE CORPORATION: By:_______________________________ Glenn R. Jones Chairman of the Board and Chief Executive Officer Dated: March 24, 1997 (Principal Executive Officer) By:_______________________________ Kevin P. Coyle Vice President/Finance (Principal Financial and Dated: March 24, 1997 Accounting Officer) 33 OFFICERS AND DIRECTORS OF IDS CABLE CORPORATION: By:_______________________________ Lori J. Larsen President and Director Dated: March 24, 1997 (Principal Executive Officer) By:_______________________________ Morris Goodwin, Jr. Vice President, Treasurer and Director (Principal Financial and Dated: March 24, 1997 Accounting Officer) By:_______________________________ Bradley C. Nelson Dated: March 24, 1997 Vice President and Director 34 OFFICERS AND DIRECTORS OF IDS CABLE CORPORATION: By:_______________________________ Lori J. Larson President and Director Dated: March 24, 1997 (Principal Executive Officer) By:_______________________________ Morris Goodwin, Jr. Vice President, Treasurer and Director (Principal Financial and Dated: March 24, 1997 Accounting Officer) By:_______________________________ Bradley C. Nelson Dated: March 24, 1997 Vice President and Director 35 EX-10.21 2 REVOLVING CREDIT AGREEMENT REVOLVING CREDIT AGREEMENT -------------------------- THIS AGREEMENT, made this 28th day of February, 1996, by and between IDS/JONES GROWTH PARTNERS 87-A, 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 Placer County, California, and the City of Roseville, California, as defined below, the "System"); WHEREAS, Borrower desires to borrow $10,000,000.00 for the purpose of refinancing existing debt and obtaining working capital; and WHEREAS, Bank is willing to lend $10,000,000.00 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 Section 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 Operating Cash Flow" shall mean at any time four (4) times ------------------------------ Borrower's Operating Cash Flow for the most recent 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 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 IDS/Jones Growth Partners 87-A, 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 "Collateral Assignment" shall mean that certain Collateral Assignment of --------------------- Management Agreement and Consent of even date herewith executed by Jones and consented to by Jones Intercable. 1.10 "Commitment" shall mean the maximum aggregate principal amount which ---------- Bank has agreed to advance at any one time under Section 2.1 hereof. 1.11 "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. 1.12 "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. -2- 1.13 "Debt Service" shall mean, for each twelve-month period ending on the ------------ last day of a fiscal quarter, the sum of all principal and interest payments due on Funded Debt during such period. 1.14 "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. 1.15 "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. 1.16 "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. 1.17 "Event of Default" shall have the meaning set forth in Section 7.1 ---------------- below. 1.18 "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. 1.19 "FCC" shall mean the Federal Communications Commission. --- 1.20 "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 or indebtedness which has been expressly subordinated to the indebtedness owing to Bank, (b) Capital Leases, and (c) installment purchases of real or personal property. 1.21 "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. 1.22 "Gross Operating Revenues" shall mean, for any period for which such sum ------------------------ is being computed, the sum of all revenues of Borrower during such period determined in accordance with GAAP. 1.23 "Home Office Allocations" shall mean, for any period for which such sum ----------------------- is being computed, the amount of reimbursement payable by Borrower to Jones Intercable for general overhead and administrative expenses pursuant to Section 4.2 of the Partnership Agreement during such period. -3- 1.24 "IDS" shall mean IDS Cable Corporation, a Minnesota corporation, which --- is the Supervising General Partner of Borrower. 1.25 "Jones" shall mean Jones Cable Corporation, a Colorado corporation, ----- which is the Managing General Partner of Borrower. 1.26 "Jones Intercable" shall mean Jones Intercable, Inc., a Colorado ---------------- corporation, and the owner of 100% of the outstanding stock of Jones. 1.27 "Loan" shall mean the outstanding principal balance of indebtedness ---- advanced under the Commitment. 1.28 "Local Authorities" shall mean individually and collectively the ----------------- California state and local authorities which govern cable television systems. 1.29 "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. 1.30 "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. 1.31 "Note" shall mean Borrower's promissory note evidencing Borrower's ---- indebtedness to Bank under the Loan, in the form attached hereto as Exhibit B. --------- 1.32 "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, (d) interest expense of Borrower, (e) Management Fees, and (f) Home Office Allocations, less any non-cash gains or income of Borrower determined in accordance with GAAP. 1.33 "Partnership Agreement" shall mean the IDS/Jones Growth Partners Program --------------------- Limited Partnership Agreement dated as of September 15, 1987, as it may be amended from time to time, by and among Jones, as Managing General Partner, IDS, as Supervising General Partner, and certain other parties identified therein, as limited partners. 1.34 "Restricted Payments" shall mean redemptions, repurchases, dividends and ------------------- distributions of any kind in respect of partnership interests in Borrower. 1.35 "Security Agreement" shall mean that certain Security Agreement of even ------------------ date herewith executed by Borrower in favor of Bank. -4- 1.36 "Subordination Agreements" shall mean the Subordination Agreements of ------------------------ even date herewith executed by Jones and Jones Intercable, in favor of Bank. 1.37 "Subsidiary" shall mean any corporation of which the Borrower, directly ---------- or indirectly, owns more than 50% of any class or classes of securities. 1.38 "System" shall mean collectively Borrower's cable television franchises, ------ properties and systems in and around Placer County, California, and the City of Roseville, California, as more particularly described in Exhibit C hereto. 1.39 "Termination Date" shall mean the earlier of December 31, 2003 or the ---------------- date on which the Commitment is terminated pursuant to Section 2.7 hereof. 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 amount of the Commitment. Prior to March 31, 1999, the Commitment shall be Ten Million Dollars ($10,000,000.00). The Commitment shall be reduced on the last day of each calendar quarter commencing with the calendar quarter ending March 31, 1999, and continuing on the last day of each calendar quarter thereafter, by the following amounts:
Amount of Year Quarterly Reduction ---- ------------------- 3/31/99 through 12/31/99 $250,000 3/31/2000 through 12/31/2000 $375,000 3/31/2001 through 12/31/2001 $500,000 3/31/2002 through 12/31/2002 $625,000 3/31/2003 through 12/31/2003 $750,000
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. -5- 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) Commencing with the calendar quarter ending March 31, 1999, and on the last day of each calendar quarter thereafter, there shall be due and payable such amounts of principal, if any, as are necessary to reduce the outstanding principal balance of the Note to an amount equal to the reduced Commitment taking effect on such date pursuant to Section 2.1 of this Agreement. (b) Notwithstanding the preceding portion of this Section 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. 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-quarter percent (1-1/4%) per annum. (ii) "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. (iii) "Business Day in London" shall mean a day on which banks in ---------------------- London are open for the transaction of business. (iv) "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 succeeding Business Day in London, subject to clauses (c) and (d) below; (b) interest shall accrue from and including the first day of -6- 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. (v) "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)ally 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. (vi) "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 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 -7- rate at, above or below the rate or rates at which Bank or FNBA lends to other parties. (viii) "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) Bank's negotiable nonpersonal 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. (ix) "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. -8- (b) Interest on Loan. At Borrower's election in accordance with the ---------------- provisions of Section 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 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 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 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 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 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 Section 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 -9- $100,000 for an Adjusted Libor Rate. Borrower shall not elect more than four (4) different Portions (other than a Portion bearing interest at the 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 Reference Rate. (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 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 the last day of the calendar quarter in which this Agreement is executed, 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 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 Section 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 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 -10- 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 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 Section 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 Section 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 -11- 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 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 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 Section 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 a Reference Rate 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, 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 Reference Rate, and of not less than $100,000, for a Portion subject to the Adjusted Libor Rate; -12- (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. 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 Prepayments. ----------- (a) Subject to the provision of subsection (b) below, Borrower may pay or prepay the outstanding principal balance under the Loan at any time without premium or penalty, and such payments or prepayments shall not reduce the Commitment (other than as it may have been reduced pursuant to Section 2.1 above) and may be reborrowed. All principal payments or repayments shall be applied first to any Portion bearing interest at the Reference Rate, with any remaining amounts of the payment or 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 -13- Borrower pursuant to paragraph 2.8 (b) hereof, payments or 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 payment. (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 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 Fees. Borrower shall pay Bank a fee of $50,000 upon execution of this ---- Agreement. In addition, from the date hereof until the Loan is paid in full, Borrower shall pay Bank a commitment fee at the rate of three- eighths of one percent (3/8%) per annum on the unborrowed portion of the Commitment, which shall be payable at the offices of the Bank specified above, quarterly, in arrears as billed by the Bank. The commitment fee shall be calculated on the basis of the actual number of days elapsed over a year of three hundred sixty-five (365) days or three hundred sixty-six (366) days, if applicable, and shall be payable on the last day of each March, June, September and December, commencing the last day of the calendar quarter in which this Agreement is executed. 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"). 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 -14- satisfactory to 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 California and in all other states in which the nature of its activities or the character of its properties requires such qualification, except those jurisdictions where 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 Section 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 set forth therein and as supplemented by reports delivered to Bank pursuant to Section 5.4 hereof, a general description of the property and assets comprising -15- 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 franchises 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), 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 governmental (federal, state or local) or nongovernmental approvals, waivers or consents material to the conduct of its business and operations, 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. Except as disclosed on Exhibit C hereto, 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 its financial condition or its 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 Section 5.6. 3.9 Partnership Interests. The percentages of general partnership interest --------------------- in Borrower are accurately set forth on Exhibit C attached hereto; all partnership interests in Borrower are validly existing and the creation and sale -16- thereof by Borrower were effected in compliance with all applicable federal and state securities and other applicable laws; and Jones and IDS are the sole general partners of Borrower. 3.10 Financial Information. Borrower's annual financial statement for the --------------------- period ended December 31, 1994, and Borrower's unaudited statement for the period ended September 30, 1995, 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 required to be disclosed in such financial statements, 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 and local taxes, other than taxes not yet due or which may be paid hereafter without penalty or which are contested in good faith, 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 and indebtedness pursuant to Capital Leases permitted pursuant to Section 6.2 of this Agreement. 3.13 Management Agreements. Borrower is a party to no management or --------------------- consulting agreements for the provision of services to Borrower, other than the Partnership Agreement. 3.14 Investments. Borrower has no Subsidiaries or investments in or loans to ----------- any other individuals or business entities. 3.15 ERISA. Except as disclosed on Exhibit C hereto, 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. -17- 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 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 nonenumerated 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: -18- 4.1 Promissory Note and Collateral Documents. The Note and such Collateral ---------------------------------------- Documents as may be specified by Bank under Section 2.11, each duly executed by Borrower. 4.2 Authorization Documents. (a) 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; (b) a certified copy of the resolution of the Board of Directors of Jones Intercable authorizing the execution and full performance by Jones Intercable of the Collateral Assignment and its Subordination Agreement; and (c) incumbency certificates setting forth the officers of each of Jones Intercable and Jones. 4.3 Opinion of Counsel. An opinion letter from counsel for Borrower and ------------------ Jones substantially in the form of Exhibit D hereto. --------- 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. 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 Agreements. Subordination Agreements executed by Jones ------------------------ and Jones Intercable substantially in the form of Exhibit E hereto, --------- together with appropriate certified board resolutions and a legal opinion substantially in the form of Exhibit F hereto. --------- 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 Section 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 Consent. A Consent executed by Jones Intercable, consenting to Bank's ------- security interest in that certain Management Agreement between Borrower and Jones Intercable dated as of July 20, 1987, in form satisfactory to Bank. 4.10 Other Documents. Such additional documents as Bank may reasonably --------------- request. - 19 - 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, California 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 Sections 5.13, 5.14 and 5.15 hereof, prepared in accordance with GAAP, together with a certificate executed by the President, 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 occurred any Event of Default or any event which with the giving of notice or the passage of 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 1995 with audited annual financial statements, including the financial statements and information required under Section 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 ----------------------- Sections 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 -20- 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 nonpayment 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 would reasonably be expected to have a materially adverse effect on 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. 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 thereto 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. -21- 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 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 at the last day of such fiscal quarter not to exceed 4.0:1 through June 30, 1997, 3.5:1 from September 30, 1997 through June 30, 1999, and 3.0:1 thereafter. -22- 5.14 Interest Coverage Ratio. At all times, 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 payable on Funded Debt for such quarter, which will not be less than 2.25:1. 5.15 Debt Service Coverage Ratio. At all times, Borrower will maintain as of --------------------------- the last day of each fiscal quarter of Borrower a ratio of (a) Annualized Operating Cash Flow to (b) Debt Service, which will not be less than 1.5:1 through December 31, 1997 and thereafter not less than 1.25:1. 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 Section 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 or loans or advances subordinated to the Loan pursuant to the Subordination Agreement, (c) indebtedness to Jones Intercable for Home Office Allocations or loans or advances subordinated to the Loan pursuant to the Subordination Agreement, and (d) other indebtedness, not exceeding, in the aggregate, $750,000, pursuant to capital leases, purchase money 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 -23- indebtedness and obligations incurred to purchase or lease fixed or capital assets permitted under Section 6.2(d) 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, except for a ------------------- distribution to partners of certain proceeds from the sale of cable franchises in Indiana not exceeding in the aggregate $31,000,000.00. 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 any such transaction in the normal and ordinary course of business for value received. 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 in an amount greater than twenty-five percent (25%) of Borrower's Gross Operating Revenues for -24- such quarter. Borrower shall not make any payment of or accrue Home Office Allocations 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. Notwithstanding the foregoing, 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 Section 6.9 and Section 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 Intercable's weighted average cost of borrowing) may be paid in any fiscal quarter. 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 to have been false or misleading when made in any material respect; or (c) If Borrower shall default in the payment or performance of any obligation or indebtedness to -25- 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 unsecured for thirty (30) days after notice thereof to Borrower given by Bank; or (e) If the Managing General Partner of Borrower ceases to be Jones unless Jones is replaced by Jones Intercable or another wholly owned subsidiary of Jones Intercable; or (f) If custody or control of any substantial part of the property of Borrower shall be assumed by any 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 uncollected 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 non-appealable determination which has a materially adverse effect on Borrower; or (g) If Borrower, Jones or Jones Intercable shall become insolvent, bankrupt or generally fail to pay its debts as such debts become due; or if Borrower, Jones or Jones Intercable admits in writing its inability to pay its debts; or if Borrower, Jones or Jones Intercable 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, Jones or Jones Intercable makes an assignment for the benefit of creditors; or if Borrower, Jones or Jones Intercable 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, Jones or Jones Intercable; or -26- (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 Section 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 of Borrower to Bank, hereunder or otherwise, to be immediately due and payable and shall have the immediate right to enforce or realize 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. 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, IDS or any limited partner of Borrower or enforced against the separate assets of Jones, IDS or any limited partner of Borrower, and the liability of Jones, IDS 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 and IDS in their capacity as general partners as defendants 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 or IDS's separate assets. Notwithstanding the foregoing, nothing set forth herein shall be deemed to limit the liability of Jones or IDS or -27- prohibit Bank from taking any legal action (a) against Jones, IDS or their assets for any fraud or intentional misconduct of Jones or IDS, or (b) against Jones or its assets for breach of its undertakings under its Subordination Agreement. 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 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. -28- 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. (303) 790-7324), with a copy to the General Counsel (Facsimile No. (303) 799-1644), and if to Bank, to the attention of Leslie Kelly, Vice President (Facsimile No. (303) 585-4135). 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. 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. -29- IN WITNESS WHEREOF, the undersigned, by their duly authorized partners or officers, have executed this Agreement the day and year first above written. IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership By: JONES CABLE CORPORATION, a Colorado corporation, its Managing General Partner By: [SIGNATURE APPEARS HERE] ------------------------------ Title: Treasurer ---------------------------- COLORADO NATIONAL BANK, a national banking association By: [SIGNATURE APPEARS HERE] ---------------------------------- Title: Vice President ------------------------------- -30- EXHIBIT A --------- ADVANCE REQUEST FORM In accordance with Section 2.6 of the Revolving Credit Agreement (as amended, the "Loan Agreement") dated the 28th day of February, 1996, between IDS/Jones Growth Partners 87-A, Ltd., a Colorado limited partnership (herein "Borrower"), and Colorado National Bank, a national banking association, the undersigned, being the President, Vice President/Finance or Treasurer of Jones Cable Corporation, a Colorado corporation, and the Managing General Partner of Borrower, being the duly authorized representative of the Borrower, hereby requests on behalf of the Borrower an advance. As of the date hereof, the undersigned hereby requests, represents and certifies that: (a) the aggregate amount of the requested advance is $_____________; (b) Borrower has elected the [Adjusted Libor Rate/Reference Rate] to apply to the requested advance; [or Borrower has elected the Adjusted Libor Rate to apply to $_____________ of the requested advance and the Reference Rate to apply to $___________ of the requested advance]; and (c) the representations and warranties set forth in Section 3 of the Loan Agreement are true and correct; no Event of Default (as defined in the Loan Agreement) or event which with the passage of time or the giving of notice or both would constitute an Event of Default under the Loan Agreement has occurred and is continuing; and there has been no material adverse change in Borrower's financial condition or business since the date of the Loan Agreement. IN WITNESS WHEREOF, the undersigned, being the President, Vice President/Finance or Treasurer of Jones has executed this Certificate this 28th day of February, 1996. By: JONES CABLE CORPORATION, a Colorado corporation By: ------------------------------- Title: ----------------------------- EXHIBIT B --------- FORM OF PROMISSORY NOTE $10,000,000.00 February 28, 1996 FOR VALUE RECEIVED, the undersigned, IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership, with its principal office at 9697 East Mineral Avenue, Englewood, Colorado 80112 (herein "Borrower"), hereby promises to pay to the order of COLORADO NATIONAL BANK (herein "Bank") at its offices at 918 l7th Street, Denver, Colorado 80202, the principal sum of Ten Million Dollars ($l0,000,000.00), or such lesser sum as may be advanced hereunder, together with interest thereon, as provided below. Borrower promises to pay interest on the unpaid principal balance hereof in accordance with Section 2.5 of the Loan Agreement referenced below. Borrower promises to pay principal in quarterly installments on the last day of each calendar quarter commencing on March 31, 1999, and ending on December 31, 2003 in accordance with Section 2.4 of the Loan Agreement referenced below. Borrower hereby waives presentment, demand for payment, notice of dishonor or acceleration, protest or notice of protest, and any and all other notices or demands in connection with the delivery, acceptance, performance, default or enforcement of this Note, excepting any notice requirements set forth in the Loan Agreement referenced below. This Note arises out of a certain Revolving Credit Agreement of even date herewith by and between Borrower and Colorado National Bank (as amended from time to time, herein the "Loan Agreement") to which reference is made for a statement of the respective rights and obligations of the parties and the terms and conditions therein provided under which the principal hereof and accrued interest thereon, if any, may become immediately due and payable. Notwithstanding the face amount of this Note, the undersigned's liability hereunder shall be limited at all times to the actual aggregate outstanding indebtedness to Bank, principal and interest, under the Loan (as defined in the Loan Agreement), together with all fees and expenses provided for in the Loan Agreement. Anything contained in this Note to the contrary notwithstanding, in any action or proceeding brought on this Note, the Loan Agreement, or the indebtedness evidenced hereby, no deficiency judgment shall be sought or obtained against Jones Cable Corporation, a Colorado corporation and Borrower's Managing General Partner ("Jones"), IDS Cable Corporation, a Minnesota corporation, and the Borrower's Supervising General Partner ("IDS") or any limited partner of Borrower or enforced against the separate assets of Jones, IDS or any limited partner of Borrower, and the liability of Jones, IDS or any limited partner of Borrower for any amounts due under this Note or the Loan Agreement, shall be limited to the interest of Jones, IDS or any limited partner of Borrower in the assets of Borrower. Bank may join Jones or IDS in their capacity as general partners as defendants in any legal action it undertakes to enforce its rights and remedies under this Note or the Loan 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' or IDS' separate assets. Notwithstanding the foregoing, nothing set forth herein shall be deemed to limit the liability of Jones or IDS or prohibit Bank from taking any legal action (a) against Jones or IDS or their assets for any fraud or intentional misconduct of Jones or IDS or (b) against Jones or its assets for breach of its undertakings under its Subordination Agreement. Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Loan Agreement. IN WITNESS WHEREOF, the undersigned, by its Managing General Partner, has executed this Note the day and year first above written. IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership By: JONES CABLE CORPORATION, a Colorado corporation, its Managing General Partner By: --------------------------------- Title: ------------------------------ COLORADO NATIONAL BANK, a national banking association By: -------------------------------------- Title: ----------------------------------- (21172) 02/21/96 Page 1 EXHIBIT C ROSEVILLE, CALIFORNIA SYSTEM BASIC SUBSCRIBER COUNT THROUGH JANUARY 31, 1996: 16,560 FRANCHISES - ---------- County of Placer, California - ---------------------------- . Placer County Code, Chapter 28, Franchises for Cable Television Systems . Ordinance No. 3612-B dated November 5, 1985, granting a cable television franchise to West Star Communications, Inc. . Ordinance No. 3861-B dated November 10, 1987, granting an extension to the existing cable television franchise area to Weststar Communications, Inc. . Ordinance No. 3883-B dated January 12, 1988, consenting to the transfer and assignment of the franchise to Jones Intercable, Inc. ("Jones"), IDS/Jones Growth Partners 87-A, Ltd., or, subject to certain conditions, any limited partnership(s) of which Jones is a general partner or any joint venture or general partnership of which Jones or any such limited partnership(s) is a constituent partner (an "Affiliate"), and subsequent transfers and assignments among Affiliates; the Ordinance also consents to the grant of a security interest . Letter to the Placer County Board of Supervisors from Jones Intercable, Inc. dated February 1, 1988, accepting every term, condition and limitation contained in the Franchise . Letter to the Senior Deputy County Counsel of Placer County from Jones Intercable, Inc. dated April 20, 1988, confirming that no further action needs to be taken to facilitate the transfer of the franchise from Jones Intercable, Inc. to IDS/Jones Growth Partners 87-A, Ltd. Expiration Date: November 5, 2000 (21172) 02/21/96 Page 2 City of Roseville, California - ----------------------------- . Chapter 2.40 of Title 2, Community Antenna Television System, Roseville Municipal Code . Ordinance No.1822 dated November 28, 1984, consenting to the transfer of the cable television franchise from Roseville Cablevision, Inc. and Stoner Cable Television, Inc. to Weststar Communications II, to restate in its entirety the terms and conditions of the franchise, and to repeal all prior CATV system franchise ordinances . Ordinance No.2088 dated January 20, 1988, consenting to the transfer of the franchise to Jones Intercable, Inc., and/or to any limited partnership(s) of which Jones Intercable , Inc. or Jones Cable Corporation is a general partner, or to any joint venture or general partnership(s) of which Jones Intercable, Inc. or any such limited partnership is a constituent partner (an "Affiliate"), provided that, regardless of whether Jones Cable Corporation or any other Affiliate becomes the grantee and franchisee, that Jones Intercable, Inc. shall act as manager of the System; if Jones Intercable, Inc. shall at any time be removed by the grantee and franchisee as manager of the System, such grantee and franchisee shall, within 90 days after such removal, replace the manager of the System and obtain the City's consent thereto, which consent shall not be unreasonably withheld; the Ordinance also consents to the grant of a security interest in the franchise . Acceptance of CATV Franchise by Jones Intercable, Inc. dated February 1, 1988 . Letter to the Roseville City Attorney from Jones Intercable, Inc. dated March 8, 1988, providing the City with the names and addresses of the lending institutions which Jones Intercable has granted a security interest in the franchise to pursuant to Section 6 of Ordinance 2088 . Letter to the Roseville City Attorney from Jones Intercable, Inc. dated April 19, 1988, notifying the City that Jones intends to transfer the franchise within 30 days to IDS/Jones Growth Partners 87-A, Ltd. (of which Jones Cable Corporation is the Managing General Partner); enclosing a certificate of insurance (bonds to be delivered 4/21/88), form of Acceptance of CATV Franchise, and form of Agreement by Jones Intercable, Inc. agreeing to act as manager of the system; also consenting to a waiver of the notice requirements of Section 6 of Ordinance No.2088 . Letter to the Deputy Clerk of the City of Roseville dated April 28, 1988, providing the City with the name and address of a lending institution which IDS/Jones Growth Partners 87-A, Ltd. granted a security interest in the franchise to pursuant to Section 6 of Ordinance 2088 . Acceptance of CATV Franchise by IDS/Jones Growth Partners 87-A, Ltd. dated April 29, 1988 (21172) 02/21/96 Page 3 . Agreement executed by Jones Intercable, Inc. dated April 29, 1988, agreeing to act as manager of the Roseville system subject to the terms of a Management Agreement dated July 20, 1987, between Jones Intercable, Inc. and Jones Cable Corporation (attached as Exhibit A) . Letter dated January 31, 1992, regarding the initiation of negotiations for renewal of the franchise. . Ordinance No.2813 adopted September 21, 1994, extending the term of the franchise and amending Ordinance Nos .1822 and 2088. . Acceptance of terms and conditions of Ordinance No.2813 by IDS/Jones Growth Partners 87-A, Ltd. dated September 30, 1994. . Letter Agreement dated October 14, 1994, between the City of Roseville and Jones, regarding capital grant for access studio equipment. . Letter dated February 14, 1996 notifying the City that IDS/Jones Growth Partners 87-A, Ltd. intends to grant a security interest in the franchise to Colorado National Bank. Expiration Date: December 28, 1999 (21172) 02/21/96 Page 4 FCC LICENSES (Granting of a security interest in FCC licenses is prohibited.) - ------------ Business Radio KNAX84O Business Radio WPCG511 Business Radio WPCK220 Business Radio KD37440 (Itinerant) Earth Station E930212 Microwave WNES942
POLE AGREEMENTS/LINE CROSSING AGREEMENTS - ---------------------------------------- 1. Pole Attachment Agreement (Support Structure Use Agreement) dated April 9, 1991, with Roseville Telephone Company for the City of Roseville, Placer County, California. 2. Pole Attachment Agreement (Support Structure Use Agreement) dated April 9, 1991, with Roseville Telephone Company for Placer County, California 3.* Pole Attachment Agreement dated October 15, 1990, with Pacific Gas and Electric Company for the town(s) and surrounding area(s) of Roseville served by PG&E, within PG&E's Drum Division of the Sacramento Valley Region. 4.* Pole Attachment Agreement dated April 4, 1990, with Sacramento Municipal Utility District ("Permittor") for the area served by Permittor in the vicinity of Sacramento, California. EASEMENTS AND RIGHTS OF WAY LICENSES AND PERMITS - ------------------------------------------------ 1. Easement and Right-of-Way dated December 14, 1994, granted by Daniel W. Sanford and Barbara J. Sanford for certain property known as 8530 Sunrise Avenue in Roseville, Placer County, California 95661 (Parcel ID #470-211- 001-000). REAL PROPERTY OWNED - ------------------- None. - -------------------------------- *Consent to the grant of a security interest required, but not yet obtained. (21172) 02/21/96 Page 5 REAL PROPERTY LEASED - -------------------- 1. Industrial Real Estate Lease/Multi-Tenant Facility (office/warehouse space) dated November 4, 1991, between Y.A. Bar Livestock Co., successor in interest to MTA Investment Company, and IDS/Jones Growth Partners 87-A, Ltd.; Letter agreement dated June 30, 1995, providing for an additional 700 square feet of office space known as Suite G and increasing the rental amount. Record Owner: Y.A. Bar Livestock Co. Description of Leased Premises: 501 Guiseppe Court, Unit C, D, E and G Roseville, California 95678 (Approximately 8,400 square feet of warehouse space and approximately 3,900 square feet of office space within an approximately 17,200 square foot industrial building. The property also includes approximately 17,000 square feet of fenced and paved yard area. Approximately 700 square feet of office space, known as Suite G, was added to the Lease effective July 1, 1995.) A. Sublease dated October 4, 1991, between IDS/Jones Growth Partners 87- A, Ltd. and A & T Sprinklers, Inc.; Addendum to Sublease dated October 25, 1991; Letter dated September 22, 1993, clarifying the expiration date of the Sublease; Letter dated September 7, 1994, extending the term of the Sublease. Description of Leased Premises: Approximately 2,400 square feet of warehouse space within Unit C and approximately 8,000 square feet of fenced and paved yard space. B. Lease Agreement for Tower and Ground Space dated April 16, 1992, between IDS/Jones Growth Partners 87-A, Ltd. ("87-A") and RAM Mobile Data USA Limited Partnership for space on 87-A's tower, land and other personal property at 501-C Guiseppe Court, Roseville, California . (21172) 02/21/96 Page 6 Legal Description of Property: The property located at 501-C Guiseppe Court, City of Roseville, County of Placer, State of California 95678. The geodetic coordinates of the property are as follows: 38 degrees 42' 48" N. Latitude 121 degrees 17' 56" W. Longitude The leased premises shall consist of the following: (a) ground space area of approximately eighty (80) square feet located near the southern base of the tower. (b) space on the tower for two (2) antenna mounts for the installation, maintenance and operation of radio transmitting and receiving antennas . C. Lease Agreement for Tower Space commencing January 1, 1995, between IDS/Jones Growth Partners 87-A, Ltd. ("87-A") and Destineer Corporation for space on 87-A's tower, land and other personal property at 501-C Guiseppe Court, Roseville, California. Description of Leased Premises: The property located at 501-C Guiseppe Court, City of Roseville, County of Placer, State of California 95678. (21172) 02/21/96 Page 7 ERISA PLANS - ----------- The following benefit plans, neither of which is a defined benefit plan, are covered by ERISA: 1. 401(k) Plan - "Jones Intercable, Inc. et al Profit Sharing/Retirement Plan" 2. Health Insurance Plan (Medical, dental, life, accidental death and dismemberment, long-term disability) - "Jones Intercable, Inc. et al Health and Welfare Plan" February 28, 1996 Colorado National Bank Seventeenth Street at Champa Denver, Colorado 80202 Re: Revolving Credit Agreement dated as of February 26, 1996, by and between IDS/Jones Growth Partners 87-A and Colorado National Bank Ladies and Gentlemen: I am Vice President and General Counsel of each of Jones Intercable, Inc. ("Intercable"), a Colorado corporation, Jones Cable Corporation ("JCC"), a Colorado corporation and the Managing General Partner of IDS/Jones Growth Partners 87-A, a Colorado limited partnership (the "Borrower"), and have acted as counsel to Intercable, JCC and the Borrower in connection with a $10,000,000 credit facility extended to the Borrower pursuant to a Revolving Credit Agreement (the "Loan Agreement") dated as of February 28, 1996, by and between the Borrower and Colorado National Bank (the "Bank"). The $10,000,000 credit facility is evidenced by the Note issued by the Borrower to the Bank pursuant to the Loan Agreement. The indebtedness of the Borrower to the Bank is secured in part by the Security Agreement, which grants the Security Interest in the Collateral (as defined therein) to the Bank. This opinion is being rendered to you in compliance with Paragraph 4.1 of the Loan Agreement. Capitalized terms used herein without definition have the same meanings as in the Loan Agreement. In my capacity as such counsel, I have examined originals, or copies identified to my satisfaction as being true copies, of such records, documents or other instruments as in my judgment are necessary or appropriate to enable me to render the opinions expressed below. These records, documents and instruments included the following: EXHIBIT D --------- Colorado National Bank February 28, 1996 Page 2 1. The Limited Partnership Agreement (the "Partnership Agreement") and the Certificate of Limited Partnership of the Borrower, each as amended to date; 2. The Articles of Incorporation of each of Intercable and JCC, as amended to date; 3. The bylaws of each of Intercable and JCC, as amended to date; 4. All records of proceedings and actions of the Board of Directors of each of Intercable and JCC relating to the transactions contemplated by the Loan Agreement; 5. The Loan Agreement; 6. The Note; 7. The Security Agreement; 8. The Subordination Agreements; 9. Uniform Commercial Code financing statements naming the Bank as a secured party and the Borrower as debtor to be filed in the offices of the Colorado Secretary of State, the California Secretary of State and the Placer County, California Recorder; the foregoing being referred to herein as the "Financing Statements"; 10. The Collateral Assignment of Management Agreement and Consent (the "Consent"); 11. Searches conducted by Search Company International of the Uniform Commercial Code records of (a) the Secretary of State of Colorado, indexed under the name of the Borrower as a "debtor", dated January 11, 1996 and effective through January 4, 1996; (b) the Arapahoe County, Colorado Clerk and Recorder, indexed under the name of the Borrower as a "debtor", dated January 12, 1996 and effective through December 27, 1995; (c) the Secretary of State of California indexed under the name of the Borrower as a "debtor", dated January 18, 1996 and effective through December 28, 1995; Colorado National Bank February 28, 1996 Page 3 and (d) the Placer County, California Recorder, indexed under the name of the Borrower as a "debtor" dated January 18, 1996 and effective through January 9, 1996; the foregoing having been delivered to the Bank and being referred to herein as the "UCC Searches"; and 12. Searches under the name of the Borrower conducted by Search Company International of the Clerks of (a) the Arapahoe County, Colorado District Court, dated January 12, 1996 and effective through November 27, 1995, (b) the Placer County, California Superior Court, dated January 18, 1996 and effective through January 9, 1996, (c) the United States District Court for the Eastern District of California, Sacramento Division, dated January 12, 1996 and effective through January 5, 1996 and (d) the United States District Court for the District of Colorado, dated January 18, 1996 and effective through January 11, 1996; the foregoing having been delivered to the Bank and being referred to herein as the "Litigation Searches." Collectively, the Loan Agreement, the Security Agreement, the Note, the Subordination Agreements, the Consent, and the Financing Statements are referred to herein as the "Loan Documents." I have obtained and relied upon such certificates and assurances from public officials as I have deemed necessary in connection with the opinion set forth herein. I have also relied upon and assumed, with the Bank's consent, the accuracy and completeness of the UCC Searches, the Litigation Searches and the records upon which they are based. I have investigated such questions of law for the purpose of rendering this opinion as I have deemed necessary. This opinion is limited in all respects to the internal laws of the State of Colorado and to United States federal law (except that no opinion is expressed herein as to the Communications Act of 1934, as amended, the rules and regulations of the Federal Communications Commission promulgated pursuant thereto, or to the rules and regulations of the United States Copyright Office and the Copyright Royalty Tribunal, or to matters controlled by, Colorado National Bank February 28, 1996 Page 4 required by, or issued pursuant to, any of the foregoing). I express no opinion herein as to whether a Colorado or other court would apply Colorado law to any particular aspect of the subject matter hereof. On the basis of the foregoing and in reliance thereon, and subject to the limitations, qualifications and exceptions set forth below, I am of the opinion that: 1. The Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Colorado. The Borrower is duly qualified to do business as a foreign limited partnership and in good standing in the State of California and each other jurisdiction in which the ownership of its properties or the nature of its activities or both makes such qualification necessary, except to the extent that failure to be so qualified does not have a material adverse effect on the business, operations or financial condition of the Borrower. 2. Each of Intercable and JCC is a corporation duly incorporated validly existing and in good standing under the laws of the State of Colorado. JCC is duly qualified to do business as a foreign corporation and in good standing in the State of California and each other jurisdiction in which the ownership of its properties or the nature of its activities or both makes such qualification necessary, except to the extent that failure to be so qualified does not have a material adverse effect on the business, operations or financial condition of the Borrower. JCC is the Managing General Partner of the Borrower, with such powers and authority as are conferred upon it by the Partnership Agreement and applicable law. 3. (a) The Borrower has partnership power and authority to execute and deliver the Loan Documents, to make the borrowings provided for in the Loan Agreement, to execute and deliver the Note in evidence of such borrowings and to perform its obligations under the Loan Documents, and all such action has been duly and validly authorized by all necessary partnership proceedings on its part. (b) JCC has corporate power and authority to execute and deliver on behalf of the Partnership the Loan Documents and perform its obligations thereunder, and all Colorado National Bank February 28, 1996 Page 5 such action has been duly and validly authorized by all necessary corporate proceedings on its part. (c) Each of Intercable and JCC has corporate power and authority to execute and deliver the Consent and perform its obligations thereunder, and all such action has been duly and validly authorized by all necessary corporate proceedings on the part of each. 4. (a) The Loan Documents have been duly and validly executed and delivered by the Borrower, and constitute the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with the respective terms thereof. (b) The Consent has been duly and validly executed and delivered by each of Intercable and JCC, and constitutes the legal, valid and binding obligation of each of Intercable and JCC, enforceable against each of them in accordance with the terms thereof, to the extent of the applicability of such terms to each of them. 5. No consent or approval by, and no filing with, any federal or Colorado governmental agency or regulatory body, is necessary on the part of the Borrower, Intercable or JCC in connection with the execution, delivery and performance by the Borrower of the Loan Documents or by Intercable and JCC of the Consent, except filings required to perfect and maintain a security interest in the Collateral in favor of the Bank, and except for certain consents, approvals and filings listed on Exhibit C to the Loan Agreement which have not been obtained. 6. Neither the execution, delivery or performance by the Borrower of the Loan Documents or by Intercable or JCC of the Consent (a) constitutes a violation of any Colorado or federal law, except for violations which, in the aggregate, would not materially and adversely effect the business, operations or financial condition of the Borrower or the ability of the Borrower, Intercable or JCC to perform their respective obligations under the Loan Documents, (b) constitutes a breach of or a default under the Partnership Agreement or the Articles of Incorporation or bylaws of either of Intercable or JCC or, to my knowledge, any agreement or instrument to which the Borrower, Intercable or JCC is a party or to or by which any of their respective properties are subject or bound, the breach of or default Colorado National Bank February 28, 1996 Page 6 under which would have a materially adverse effect on the business, operations or financial condition of the Borrower or (c) creates any interest in any property of the Borrower, except the Security Interest. 7. To my knowledge and except for litigation and proceedings affecting the cable industry generally, there is no pending or threatened proceeding by or before any court or other tribunal against the Borrower which if adversely decided would have a material adverse effect on the business, operations or financial condition of the Borrower. 8. Subject to the provisions of Section 9-306 of the Uniform Commercial Code of the State of Colorado (the "Code"), the provisions of the Security Agreement are sufficient to create the Security Interest. Under the Code, the description of the Collateral set forth in the Financing Statement to be filed in Colorado (the "Colorado Financing Statement") is sufficient to create a security interest in the items and types of Collateral (other than fixtures) described therein. Upon the filing of the Colorado Financing Statement with the office of the Secretary of State of Colorado, such filing is sufficient, subject to Section 9-306 of the Code, to perfect the Security Interest in all right, title and interest of the Borrower in accounts and general intangibles, and in those items and types of Collateral described in the Security Agreement in which a security interest may be perfected by the filing of a financing statement in the State of Colorado under the Code and which is in the possession of the Borrower, except that I express no opinion as to the perfection of the Security Interest in personal property affixed to real property in such manner as to become a fixture under the laws of the State of Colorado. My opinion in Paragraph 4 above as to the enforceability of the Loan Documents is subject to the following limitations: (i) such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought; (iii) the Code and other laws and judicial decisions of Colorado require that the Bank exercise its rights under the Loan Documents in good faith and in a Colorado National Bank February 28, 1996 Page 7 commercially reasonable manner and a court may decline to strictly enforce certain covenants therein if it concludes that such enforcement would be unreasonable under the then existing circumstances; (iv) public policy considerations may limit the rights of the Bank to obtain certain remedies and to indemnification; (v) the granting by the Borrower of the Security Interest and the transfer of certain rights of the Borrower or the Bank in such property to a foreclosure purchaser may, in some instances, require or be conditioned upon receipt of the consent of certain third parties who have granted the Borrower certain contractual or other rights; (vi) no opinion is expressed as to the enforceability of the choice of law, severability, waiver, or set off provisions (including the waiver of any defenses or procedural rights available to the Borrower or JCC contained in the Loan Documents); (vii) to the extent that any Loan Document might be deemed to provide that the Bank may enter upon and take possession of the Collateral by force amounting to a breach of the peace or public disturbance, without liability by reason of the manner of such entry and possession, such provisions would not be enforceable; (viii) no opinion is expressed as to the enforceability of the provisions of the Loan Documents which purport to authorize the Bank to sign and file documents in the name or on behalf of the Borrower or JCC without the signatures of the appropriate representatives of the Borrower or officers of JCC, acting on behalf of the Borrower; (ix) no opinion is expressed as to the enforceability of any future advances provisions in the Loan Documents (other than with respect to any advances made pursuant to the Loan Agreement) with respect to any future advances which were not reasonably within the contemplation of the parties at the time such documents were executed; (x) the duty to exercise reasonable care in the custody and preservation of collateral in a secured party's possession may not be disclaimed by agreement, waived or varied prior to default; and (xi) no opinion is expressed as to the enforceability, priority or perfection of the Security Interest to the extent it relates to Collateral located outside the State of Colorado. With respect to the opinion set forth in Paragraph 5, the limitation stated in clause (v) hereof is also applicable. For purposes of rendering the opinion expressed in Paragraph 7 hereof, I have, with your permission, relied upon my own knowledge, without investigation or inquiry, and the Litigation Searches. Colorado National Bank February 28, 1996 Page 8 With respect to my opinion in Paragraph 8, (i) the opinion expressed herein does not purport to cover the title to or existence of any of the Collateral; (ii) I have assumed that the Company has rights in the Collateral and that sufficient value has been given for purposes of satisfying Sections 9-203(1)(c) and (b), respectively, of the Code; (iii) I call your attention to the necessity of filing a continuation statement with respect to the Colorado Financing Statements between July 1, 1996 and December 31, 1997, in order to continue the perfection of the security interest perfected thereby after December 31, 1997, and to the necessity of filing continuation statements from time to time thereafter in appropriate five year intervals under the applicable provisions of the Code; (iv) additional filings under the Code may be required, among other things, upon the change of location of the debtor as provided in Section 9-103 (3) (e) of the Code or the change of the name of the debtor as provided in Section 9-402(7) thereof; (v) in the case of property which becomes Collateral after the date hereof, Section 552 of the United States Bankruptcy Code limits the extent to which property acquired by a debtor after the commencement of a case under the United States Bankruptcy Code may be subject to a security interest arising from a security agreement entered into by the debtor before commencement of the case; (vi) no opinion is expressed as to the perfection or priority of the Security Interest in any Collateral consisting of copyrights, other literary property rights, trade and service marks, patents and applications therefor, know-how, processes, trade secrets, undocumented computer software, unrecorded and unwritten data and information, and rights and licenses thereunder, cash which is not in the Banks' possession, documents of title and goods subject thereto, uncertificated securities, interests in minerals or the like (including oil and gas) before extraction and accounts arising from the sale thereof at the wellhead or minehead, timber, farm products and crops and Collateral subject to the Assignment of Claims Act of 1940, as amended; and (vii) no opinion is expressed as to the effect of any event occurring subsequent to the date hereof on the existence or perfection of the Security Interest. Furthermore, the transfer of Collateral may require the consent of a Local Authority to avoid forfeiture of any franchise issued by such Local Authority. To the extent that the obligations of the Borrower, Intercable or JCC may be dependent upon such matters, I assume for purposes of this opinion that the Bank is duly Colorado National Bank February 28, 1996 Page 9 organized, validly existing and in good standing under its jurisdiction of organization; that to the extent contemplated thereby, the Loan Documents have been duly authorized, executed and delivered by the Bank and constitute the legal, valid and binding obligations of the Bank, enforceable against the Bank in accordance with their respective terms; and that the Bank has the requisite corporate or other organizational power and authority to perform its obligations under the Loan Documents. This opinion is as of the date hereof and I disclaim any undertaking or obligation to advise the Bank of changes which may hereafter be brought to my attention. This opinion is rendered only to the Bank, and is solely for its benefit in connection with the transactions contemplated by the Loan Agreement This opinion may not be relied upon by the Bank for any other purpose or relied upon by any other person, firm or corporation for any purpose without my prior written consent. Very truly yours, Elizabeth M. Steele General Counsel SUBORDINATION AGREEMENT This Subordination Agreement (this "Agreement") is made as of this 28th day of February, 1996, by and between JONES INTERCABLE, INC., a Colorado corporation with offices at 9697 East Mineral Avenue, Englewood, Colorado 80112 (herein "Subordinated Creditor") and COLORADO NATIONAL BANK, a national banking association with offices at 918 17th Street, Denver, Colorado 80202 (herein "Bank") In order to induce Bank to extend credit to IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership (herein "Borrower"), and in consideration therefor, and for other good and valuable consideration, the parties hereto hereby agree as follows: 1. "Senior Debt" shall mean all of the indebtedness, liabilities and obligations of Borrower to Bank, whether now existing or hereafter arising, including, without limitation, the indebtedness, liabilities and obligations arising under that certain Revolving Credit Agreement of even date herewith between Borrower and Bank (the "Loan Agreement") and all principal and interest under and evidenced by that certain Promissory Note of even date herewith executed by Borrower in favor of Bank in the principal amount of $10,000,000.00, as such indebtedness, agreement and instrument may be amended, extended, renewed, refinanced, supplemented or assigned from time to time hereafter. "Subordinated Debt" shall mean all indebtedness, liabilities and obligations of Borrower to Subordinated Creditor, whether now existing or hereafter arising, including any advances, indebtedness, liabilities and obligations, all interest and other fees which may be or become due with respect thereto, whether or not evidenced by promissory notes, and any accrued and unpaid Home Office Allocations. As used herein, the term "Home Office Allocations" shall have the definition set forth in the Loan Agreement. 2. The payment of any and all Subordinated Debt is hereby expressly subordinated to all Senior Debt to the extent and in the manner set forth in this Agreement. 3. Subordinated Creditor shall not accelerate, demand, sue for, commence any collection or enforcement action or proceeding, take, receive, accept or retain any payment or distribution of any character, whether in cash, securities or other property, in respect of the principal of, premium on, or interest on, the Subordinated Debt or any collateral security thereof or until all Senior Debt shall have been paid in full with interest, including interest during any bankruptcy or similar proceeding involving Borrower from the date of the filing thereof to the date of distribution (notwithstanding any statute, including without EXHIBIT E --------- limitation the Federal Bankruptcy Code, any rule of law or bankruptcy procedures to the contrary); provided, however, that if there is not continuing an Event of Default under the Loan Agreement and Borrower is not at the time otherwise in default under the Senior Debt, and such payment will not constitute an Event of Default or an event which, with the passage of time or giving notice, would constitute an Event of Default, Borrower may pay Subordinated Debt to Subordinated Creditor with interest thereon except as otherwise limited by Section 6.9 of the Loan Agreement. 4. Subordinated Creditor hereby acknowledges that the payment of Home Office Allocations by Borrower to Subordinated Creditor and the repayment by Borrower to Subordinated Creditor of advances or indebtedness and any interest and fees due thereon are subject to the limitations set forth in the Loan Agreement and Subordinated Creditor hereby confirms that it is bound by such limitations. 5. In the event of the institution of and in connection with any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceedings relative to Borrower, or its property, or any proceeding for the voluntary liquidation, dissolution or other winding-up of Borrower and whether or not involving insolvency or bankruptcy proceedings: (a) all Senior Debt shall first be paid in full before any payment or distribution of any character, whether in cash, securities or other property, shall be made in respect of any Subordinated Debt; (b) any payment or distribution of any character, whether in cash, securities or other property, which would otherwise (but for the terms hereof) be payable or deliverable in respect of any Subordinated Debt shall be paid or delivered directly to Bank, until all Senior Debt shall have been paid in full, and Subordinated Creditor irrevocably authorizes, empowers and directs all receivers, trustees, liquidators, conservators and others having authority to effect all such payments and deliveries; and (c) Subordinated Creditor shall execute and deliver to Bank all such further instruments confirming the authorization referred to in the foregoing clause (b) and all such powers of attorney, proofs of claim, assignments of claim and other instruments and shall take all such other actions as may be requested by Bank in order to enable Bank to enforce all of its rights hereunder and all claims of Bank upon or in respect of the Subordinated Debt, and failing execution of such instruments or taking of such actions by Subordinated Creditor, Bank is hereby authorized and empowered to execute and perform the same on behalf of the Subordinated Creditor. 6. In the event any payment or distribution of any character, whether in cash, securities or other property, is received by Subordinated Creditor in contravention of the terms of this Agreement or the Loan Agreement, and before all Senior Debt shall have been paid in full, such payment or distribution shall be held by Subordinated Creditor, as trustee of an express trust, in trust for the benefit of Bank, and shall be paid over or delivered and transferred to Bank for application to all Senior Debt remaining unpaid until such Senior Debt shall have been paid in full. Subordinated Creditor hereby assigns to Bank all rights of Subordinated Creditor to any such payments or distributions, which Bank may exercise in Bank's name or in the name of Subordinated Creditor, and agrees to execute such instruments as may be required by Bank to enable Bank to enforce such claims. Any payments or distributions received in excess of the amount sufficient to pay all Senior Debt in full shall be returned by Bank to Subordinated Creditor. 7. If the Subordinated Debt is evidenced in whole or part by any promissory note or other instruments, Subordinated Creditor agrees, at Bank's request, to endorse and deliver such notes and instruments to Bank to be held by Bank subject to the provisions of this Agreement, or to note on the face thereof that the same is subject to this Agreement. 8. Notwithstanding anything to the contrary contained in any other instrument or document delivered in connection with the Subordinated Debt or otherwise, including, without limitation, any prior or subsequent perfection of a security interest or lien, any security interests and liens now or hereafter held by Subordinated Creditor in any collateral security for the Subordinated Debt shall be junior and subordinate to any security interests and liens now or hereafter held by Bank in the same collateral. So long as the Senior Debt shall remain unpaid, Bank may at all times in its sole discretion exercise any and all powers and rights which it now has or may hereafter acquire with respect to any of the collateral securing the Senior Debt, all without the necessity of obtaining any consent or approval of Subordinated Creditor. 9. Subordinated Creditor represents and warrants that Subordinated Creditor is duly organized, validly existing and in good standing under the laws of the State of Colorado and has the power and authority under the laws of Colorado and under its articles of incorporation and by-laws or other organizational documents to enter into this Agreement; all actions necessary or appropriate for its execution and performance of this Agreement have been taken and upon its execution, this Agreement will constitute its valid and binding obligation enforceable in accordance with its terms; and the making and performance of this Agreement will not violate any law or regulation, federal, state or local, or its articles of incorporation or by-laws or other organizational documents or result in any violation of or constitute a default under any material agreement or instrument by which it or any of its property is bound. 10. This Agreement is a continuing agreement of subordination and Bank may continue to make loans to or otherwise accept the obligations of Borrower in reliance hereon, without notice to Subordinated Creditor, until this Agreement is revoked by notice, actually received, given to Bank by Subordinated Creditor in writing. Such notice of revocation shall not affect this Agreement as to any Senior Debt existing prior to receipt of the aforesaid notice or as to any Senior Debt arising thereafter and created pursuant to an enforceable commitment given Borrower by Bank prior to receipt of such notice; but as to such Senior Debt, this Agreement shall remain in full force and effect and all indebtedness of Borrower to Subordinated Creditor, then existing or thereafter created shall be subordinated to such Senior Debt. Before or after any such notice of revocation is received, Bank may make any renewals, extensions or other modifications of any kind relating to the terms and conditions of any Senior Debt or any collateral security or guaranty therefor, and may release or exchange or otherwise deal with any collateral security or guaranty or may release any balance of funds on deposit or otherwise held by Bank without notice or consent of Subordinated Creditor and without impairing or affecting Bank's rights under this Agreement. 11. While this Agreement remains in effect, Subordinated Creditor covenants and agrees that it will not modify or amend or permit modification or amendment of the terms and conditions of the Subordinated Debt without obtaining Bank's prior written consent thereto. 12. No waiver of Bank's rights hereunder shall be effective unless in a writing signed by Bank, and each waiver shall extend only to the specific instance involved and shall not impair or affect Bank's rights in any other respect at any other time. Subordinated Creditor hereby waives all notices with respect to the subject matter hereof, including, but not limited to, notice of acceptance of this Agreement, of the making of loans or advances to the Borrower or any extensions, renewals or modifications thereof, releases of collateral security or guarantors or other indulgences of any character, or of the occurrence or declaration of any default or the taking of any collection or enforcement action. This Agreement shall be binding upon the successors and assigns of Subordinated Creditor, may not be amended except by a writing signed by the parties hereto, and shall be construed according to the laws of the State of Colorado. 13. Subject to the provisions of this Agreement and the rights of Bank hereunder, as between Borrower and Subordinated Creditor, nothing herein contained shall impair the obligation of Borrower, which is absolute and unconditional, to pay the Subordinated Debt as and when the same shall become due and payable in accordance with the terms thereof, or prevent Subordinated Creditor upon default with respect to the Subordinated Debt, from exercising all rights, powers and remedies otherwise provided therein or by applicable law. 14. Subordinated Creditor hereby acknowledges that its undertakings hereunder, including its agreement to be bound by the limitations on the payment of Home Office Allocations set forth in the Loan Agreement, are not subject to the non-recourse provisions set forth in Paragraph 8.1 of the Loan Agreement and that Bank may take any legal action against Subordinated Creditor by reason of such undertakings and Bank shall have unlimited recourse against the separate assets of Subordinated Creditor in order to satisfy any liability of Subordinated Creditor to Bank by reason of such undertakings. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: JONES INTERCABLE, INC., a Colorado corporation By: By: -------------------------- ----------------------------- Title: Title: ----------------------- -------------------------- [CORPORATE SEAL] COLORADO NATIONAL BANK By: ----------------------------- Title: -------------------------- The undersigned hereby: (a) acknowledges and confirms that it has received an executed copy of this Subordination Agreement and approves of and consents to it in all respects; and (b) agrees to be bound by and to observe all of the terms and conditions of this Subordination Agreement. IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership By: JONES CABLE CORPORATION, a Colorado corporation, its Managing General Partner By: --------------------------------- Title: ------------------------------ SUBORDINATION AGREEMENT This Subordination Agreement (this "Agreement") is made as of this 28th day of February, 1996, by and between JONES CABLE CORPORATION, a Colorado corporation with offices at 9697 East Mineral Avenue, Englewood, Colorado 80112 (herein "Subordinated Creditor") and COLORADO NATIONAL BANK, a national banking association with offices at 918 17th Street, Denver, Colorado 80202 (herein "Bank") In order to induce Bank to extend credit to IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership in which Subordinated Creditor is the Managing General Partner (herein "Borrower") and in consideration therefor, and for other good and valuable consideration, the parties hereto hereby agree as follows: 1. "Senior Debt" shall mean all of the indebtedness, liabilities and obligations of Borrower to Bank, whether now existing or hereafter arising, including, without limitation, the indebtedness, liabilities and obligations arising under that certain Revolving Credit Agreement of even date herewith between Borrower and Bank (the "Loan Agreement") and all principal and interest under and evidenced by that certain Promissory Note of even date herewith executed by Borrower in favor of Bank in the principal amount of $10,000,000.00, as such indebtedness, agreement and instrument may be amended, extended, renewed, refinanced, supplemented or assigned from time to time hereafter. "Subordinated Debt" shall mean all indebtedness, liabilities and obligations of Borrower to Subordinated Creditor, whether now existing or hereafter arising, including any advances, indebtedness, liabilities and obligations, all interest and other fees which may be or become due with respect thereto, whether or not evidenced by promissory notes, and any accrued and unpaid Management Fees. As used herein, the term "Management Fees" shall have the definition set forth in the Loan Agreement. 2. The payment of any and all Subordinated Debt is hereby expressly subordinated to all Senior Debt to the extent and in the manner set forth in this Agreement. 3. Subordinated Creditor shall not accelerate, demand, sue for, commence any collection or enforcement action or proceeding, take, receive, accept or retain any payment or distribution of any character, whether in cash, securities or other property, in respect of the principal of, premium on, or interest on, the Subordinated Debt or any collateral security therefor until all Senior Debt shall have been paid in full with interest, including interest during any bankruptcy or similar proceeding involving Borrower from the date of the filing thereof to the date of distribution (notwithstanding any statute, including without limitation the Federal Bankruptcy Code, any rule of law or EXHIBIT E bankruptcy procedures to the contrary); provided, however, that if there is not continuing an Event of Default under the Loan Agreement and Borrower is not at the time otherwise in default under the Senior Debt, and such payment will not constitute an Event of Default or an event which, with the passage of time or giving notice, would constitute an Event of Default, Borrower may pay Subordinated Debt to Subordinated Creditor with interest thereon except as otherwise limited by Section 6.9 of the Loan Agreement. 4. Subordinated Creditor hereby acknowledges that the payment of Management Fees by Borrower to Subordinated Creditor and the repayment by Borrower to Subordinated Creditor of advances or indebtedness and any interest and fees due thereon are subject to the limitations set forth in the Loan Agreement and Subordinated Creditor hereby confirms that it is bound by such limitations. 5. In the event of the institution of and in connection with any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceedings relative to Borrower, or its property, or any proceeding for the voluntary liquidation, dissolution or other winding-up of Borrower and whether or not involving insolvency or bankruptcy proceedings: (a) all Senior Debt shall first be paid in full before any payment or distribution of any character, whether in cash, securities or other property, shall be made in respect of any Subordinated Debt; (b) any payment or distribution of any character, whether in cash, securities or other property, which would otherwise (but for the terms hereof) be payable or deliverable in respect of any Subordinated Debt shall be paid or delivered directly to Bank, until all Senior Debt shall have been paid in full, and Subordinated Creditor irrevocably authorizes, empowers and directs all receivers, trustees, liquidators, conservators and others having authority to effect all such payments and deliveries; and (c) Subordinated Creditor shall execute and deliver to Bank all such further instruments confirming the authorization referred to in the foregoing clause (b) and all such powers of attorney, proofs of claim, assignments of claim and other instruments and shall take all such other actions as may be requested by Bank in order to enable Bank to enforce all of its rights hereunder and all claims of Bank upon or in respect of the Subordinated Debt, and failing execution of such instruments or taking of such actions by Subordinated Creditor, Bank is hereby authorized and empowered to execute and perform the same on behalf of the Subordinated Creditor. 6. In the event any payment or distribution of any character, whether in cash, securities or other property, is received by Subordinated Creditor in contravention of the terms of this Agreement or the Loan Agreement, and before all Senior Debt shall have been paid in full, such payment or distribution shall be held by Subordinated Creditor, as trustee of an express trust, in trust for the benefit of Bank, and shall be paid over or delivered and transferred to Bank for application to all Senior Debt remaining unpaid until such Senior Debt shall have been paid in full. Subordinated Creditor hereby assigns to Bank all rights of Subordinated Creditor to any such payments or distributions, which Bank may exercise in Bank's name or in the name of Subordinated Creditor, and agrees to execute such instruments as may be required by Bank to enable Bank to enforce such claims. Any payments or distributions received in excess of the amount sufficient to pay all Senior Debt in full shall be returned by Bank to Subordinated Creditor. 7. If the Subordinated Debt is evidenced in whole or part by any promissory note or other instruments, Subordinated Creditor agrees, at Bank's request, to endorse and deliver such notes and instruments to Bank to be held by Bank subject to the provisions of this Agreement, or to note on the face thereof that the same is subject to this Agreement. 8. Notwithstanding anything to the contrary contained in any other instrument or document delivered in connection with the Subordinated Debt or otherwise, including, without limitation, any prior or subsequent perfection of a security interest or lien, any security interests and liens now or hereafter held by Subordinated Creditor in any collateral security for the Subordinated Debt shall be junior and subordinate to any security interests and liens now or hereafter held by Bank in the same collateral. So long as the Senior Debt shall remain unpaid, Bank may at all times in its sole discretion exercise any and all powers and rights which it now has or may hereafter acquire with respect to any of the collateral securing the Senior Debt, all without the necessity of obtaining any consent or approval of Subordinated Creditor. 9. Subordinated Creditor represents and warrants that Subordinated Creditor is duly organized, validly existing and in good standing under the laws of the State of Colorado and has the power and authority under the laws of Colorado and under its articles of incorporation and by-laws or other organizational documents to enter into this Agreement; all actions necessary or appropriate for its execution and performance of this Agreement have been taken and upon its execution, this Agreement will constitute its valid and binding obligation enforceable in accordance with its terms; and the making and performance of this Agreement will not violate any law or regulation, federal, state or local, or its articles of incorporation or by-laws or other organizational documents or result in any violation of or constitute a default under any material agreement or instrument by which it or any of its property is bound. 10. This Agreement is a continuing agreement of subordination and Bank may continue to make loans to or otherwise accept the obligations of Borrower in reliance hereon, without notice to Subordinated Creditor, until this Agreement is revoked by notice, actually received, given to Bank by Subordinated Creditor in writing. Such notice of revocation shall not affect this Agreement as to any Senior Debt existing prior to receipt of the aforesaid notice or as to any Senior Debt arising thereafter and created pursuant to an enforceable commitment given Borrower by Bank prior to receipt of such notice; but as to such Senior Debt, this Agreement shall remain in full force and effect and all indebtedness of Borrower to Subordinated Creditor, then existing or thereafter created shall be subordinated to such Senior Debt. Before or after any such notice of revocation is received, Bank may make any renewals, extensions or other modifications of any kind relating to the terms and conditions of any Senior Debt or any collateral security or guaranty therefor, and may release or exchange or otherwise deal with any collateral security or guaranty or may release any balance of funds on deposit or otherwise held by Bank without notice or consent of Subordinated Creditor and without impairing or affecting Bank's rights under this Agreement. 11. While this Agreement remains in effect, Subordinated Creditor covenants and agrees that it will not modify or amend or permit modification or amendment of the terms and conditions of the Subordinated Debt without obtaining Bank's prior written consent thereto. 12. No waiver of Bank's rights hereunder shall be effective unless in a writing signed by Bank, and each waiver shall extend only to the specific instance involved and shall not impair or affect Bank's rights in any other respect at any other time. Subordinated Creditor hereby waives all notices with respect to the subject matter hereof, including, but not limited to, notice of acceptance of this Agreement, of the making of loans or advances to the Borrower or any extensions, renewals or modifications thereof, releases of collateral security or guarantors or other indulgences of any character, or of the occurrence or declaration of any default or the taking of any collection or enforcement action. This Agreement shall be binding upon the successors and assigns of Subordinated Creditor, may not be amended except by a writing signed by the parties hereto, and shall be construed according to the laws of the State of Colorado. 13. Subject to the provisions of this Agreement and the rights of Bank hereunder, as between Borrower and Subordinated Creditor, nothing herein contained shall impair the obligation of Borrower, which is absolute and unconditional, to pay the Subordinated Debt as and when the same shall become due and payable in accordance with the terms thereof, or prevent Subordinated Creditor upon default with respect to the Subordinated Debt, from exercising all rights, powers and remedies otherwise provided therein or by applicable law. 14. Subordinated Creditor hereby acknowledges that its undertakings hereunder, including its agreement to be bound by the limitations on the payment of Management Fees set forth in the Loan Agreement, are not subject to the non- recourse provisions set forth in Paragraph 8.1 of the Loan Agreement and that Bank may take any legal action against Subordinated Creditor by reason of such undertakings and Bank shall have unlimited recourse against the separate assets of Subordinated Creditor in order to satisfy any liability of Subordinated Creditor to Bank by reason of such undertakings. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: JONES CABLE CORPORATION, a Colorado corporation By: By: --------------------------- --------------------------------- Title: Title: ------------------------ ------------------------------ [CORPORATE SEAL] COLORADO NATIONAL BANK By: --------------------------------- Title: ------------------------------ The undersigned hereby: (a) acknowledges and confirms that it has received an executed copy of this Subordination Agreement and approves of and consents to it in all respects; and (b) agrees to be bound by and to observe all of the terms and conditions of this Subordination Agreement. IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership By: JONES CABLE CORPORATION, a Colorado corporation, its Managing General Partner By: -------------------------- Title: ----------------------- February 28, 1996 Colorado National Bank Seventeenth Street at Champa Denver, Colorado 80202 Re: Subordination Agreements dated as of February 28, 1996, by and between Colorado National Bank and each of Jones Intercable, Inc. and Jones Cable Corporation Ladies and Gentlemen: I am Vice president and General Counsel of each of Jones Intercable, Inc., a Colorado corporation ("Intercable") and Jones Cable Corporation, a Colorado corporation ("JCC"), and have acted as counsel to Intercable and to JCC in connection with a $10,000,000 credit facility extended to IDS/Jones Growth Partners 87-A, a Colorado limited partnership (the "Borrower") pursuant to a Revolving Credit Agreement (the "Loan Agreement") dated as of February 28, 1996, by and between the Borrower and Colorado National Bank (the "Bank"). This opinion is being rendered to you in compliance with Paragraph 4.6 of the Loan Agreement. Capitalized terms used herein without definition have the same meanings as in the Loan Agreement. In my capacity as such counsel, I have examined originals, or copies identified to my satisfaction as being true copies, of such records, documents or other instruments as in my judgment are necessary or appropriate to enable me to render the opinions expressed below. These records, documents and instruments included the following: 1. The Articles of Incorporation of each of Intercable and JCC, as amended to date; 2. The bylaws of each of Intercable and JCC, as amended to date; EXHIBIT F --------- Colorado National Bank February 28, 1996 Page 2 3. All records of proceedings and actions of the Board of Directors of each of Intercable and JCC relating to the transactions contemplated by the Loan Agreement; 4. The Loan Agreement; 5. That certain Subordination Agreement dated the date hereof by and between Intercable and the Bank (the "Intercable Subordination Agreement") and 6. That certain Subordination Agreement dated the date hereof by and between JCC and the Bank (the "JCC Subordination Agreement"). I have obtained and relied upon such certificates and assurances from public officials as I have deemed necessary in connection with the opinions set forth herein. I have investigated such questions of law for the purpose of rendering this opinion as I have deemed necessary. This opinion is limited in all respects to the internal laws of the State of Colorado and to United States federal law (except that no opinion is expressed herein as to the Communications Act of 1934, as amended, the rules and regulations of the Federal Communications Commission promulgated pursuant thereto, or to the rules and regulations of the United States Copyright Office and the Copyright Royalty Tribunal, or to matters controlled by, required by, or issued pursuant to, any of the foregoing). I express no opinion herein as to whether a Colorado or other court would apply Colorado law to any particular aspect of the subject matter hereof. On the basis of the foregoing and in reliance thereon, and subject to the limitations, qualifications and exceptions set forth below, I am of the opinion that: 1. Each of Intercable and JCC is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Colorado. 2. (a) Intercable has the corporate power and authority to execute and deliver the Intercable Subordination Agreement and perform its obligations thereunder, and all such action has been duly and validly Colorado National Bank February 28, 1996 Page 3 authorized by all necessary corporate proceedings on its part. (b) JCC has the corporate power and authority to execute and deliver the JCC Subordination Agreement and perform its obligations thereunder, and all such action has been duly and validly authorized by all necessary corporate proceedings on its part. 3. (a) The Intercable Subordination Agreement has been duly and validly executed and delivered by Intercable, and constitutes the legal, valid and binding obligation of Intercable, enforceable against it in accordance with the terms thereof. (b) The JCC Subordination Agreement has been duly and validly executed and delivered by JCC, and constitutes the legal, valid and binding obligation of JCC, enforceable against it in accordance with the terms thereof. 4. No consent or approval by, and no filing with, any federal or Colorado governmental agency or regulatory body, is necessary on the part of either Intercable or JCC in connection with the execution, delivery and performance by Intercable and JCC of the Intercable Subordination Agreement and the JCC Subordination Agreement, respectively. 5. Neither the execution, delivery or performance by Intercable of the Intercable Subordination Agreement or by JCC of the JCC Subordination Agreement (a) constitutes a violation of any Colorado or federal law, except for violations which, in the aggregate, would not materially and adversely effect the business, operations or financial condition of Intercable or JCC or the ability of either thereof to perform its respective obligations under the Subordination Agreements or (b) constitutes a breach of or a default under the respective Articles of Incorporation or bylaws of Intercable and JCC or, to my knowledge, any agreement or instrument to which Intercable or JCC is a party or to or by which any of their respective properties are subject or bound, the breach of or default under which would have a materially adverse effect on the business, operations or financial condition of Intercable and JCC My opinion in Paragraph 3 above as to the enforceability of the Subordination Agreements is subject to the following limitations: (i) such enforceability may be Colorado National Bank February 28, 1996 Page 4 limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; (ii) certain rights and remedies granted to the Bank may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought; (iii) the Colorado Uniform Commercial Code and other laws and judicial decisions of Colorado require that the Bank exercise its rights in the Collateral in good faith and in a commercially reasonable manner and a court may decline to strictly enforce certain covenants in the Subordination Agreements if it concludes that such enforcement would be unreasonable under the then existing circumstances (iv) public policy considerations may limit the rights of the Bank to obtain certain remedies; (v) no opinion is expressed as to the enforceability of the provisions of the Subordination Agreements which purport to authorize the Bank to execute documents in the name or on behalf of Intercable or JCC without the signatures of the appropriate representatives thereof; and (vi) no opinion is expressed as to the enforceability of any choice of law, severability, or waiver provisions contained in the Subordination Agreements. To the extent that the obligations of either Intercable or JCC may be dependent upon such matters, I assume for purposes of this opinion that the Bank is duly organized, validly existing and in good standing under its jurisdiction of organization; that to the extent contemplated thereby, the Subordination Agreements have been duly authorized executed and delivered by the Bank and constitute the legal, valid and binding obligations of the Bank, enforceable in accordance with their respective terms; and that the Bank has the requisite corporate or other organizational power and authority to perform its obligations under the Subordination Agreements. This opinion is as of the date hereof and I disclaim any undertaking or obligation to advise the Bank of changes which may hereafter be brought to my attention. This opinion is rendered only to the Bank, and is solely for its benefit in connection with the transactions contemplated by the Loan Agreement This opinion may not be relied upon by the Bank for any other purpose or relied upon by any other Colorado National Bank February 28, 1996 Page 5 person, firm or corporation for any purpose without my prior written consent. Very truly yours, Elizabeth M. Steele General Counsel EX-27 3 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 478,797 0 373,301 32,637 0 0 9,039,438 7,195,326 12,727,595 416,594 9,850,000 0 0 0 2,461,001 12,727,595 0 8,571,921 0 8,119,808 (21,057,931) 0 749,270 20,760,774 0 20,760,774 0 0 0 20,760,774 124.98 124.98
-----END PRIVACY-ENHANCED MESSAGE-----