-----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, U/GMD5AVX1397r2fQAHlmL1oVxu04cufw49cLFva9pG7VJc45dTJFTMgtu7nmZTW 0m5Ovha/2boH+jcNeqjjjg== 0000950134-96-000714.txt : 19960315 0000950134-96-000714.hdr.sgml : 19960315 ACCESSION NUMBER: 0000950134-96-000714 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960313 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JONES INTERCABLE INC CENTRAL INDEX KEY: 0000275605 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 840613514 STATE OF INCORPORATION: CO FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09953 FILM NUMBER: 96534500 BUSINESS ADDRESS: STREET 1: 9697 EAST MINERAL AVE CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037923111 10-K 1 FORM 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) OR [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from June 1, 1995 through December 31, 1995 Commission file number: 1-9953 JONES INTERCABLE, INC. ---------------------- (Exact name of registrant as specified in its charter) Colorado 84-0613514 -------- ---------- (State of Organization) (IRS Employer Identification No.) P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111 ------------------------- -------------- (Address of principal executive (Registrant's telephone no. office and Zip Code) including area code) Securities registered pursuant to Section 12(g) of the Act: ----------------------------------------------------------- Common Stock, $.01 par value Class A Common Stock, $.01 par value 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 --- --- Aggregate market value as of March 1, 1996 of the voting stock held by non-affiliates: Common Stock $29,799,088 Class A Common Stock $185,738,121 Shares outstanding of each of the registrant's classes of common stock as of March 1, 1996: Common Stock: 5,113,021 Class A Common Stock: 26,263,523 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.________________ 2 JONES INTERCABLE, INC. TRANSITION REPORT ON FORM 10-K FOR THE TRANSITION PERIOD JUNE 1, 1995 THROUGH DECEMBER 31, 1995 TABLE OF CONTENTS
Page No. -------- PART I 1 ITEM 1. BUSINESS 1 The Company 1 The Cable Television Industry 1 Industry Growth 2 System Operations 3 Programming 3 System Revenues 4 The Company's Cable Television Business 5 The Company's Other Businesses 9 Recent Acquisitions of Cable Television Systems 10 Proposed Acquisitions of Cable Television Systems 11 Recent and Proposed Dispositions of Cable Television Systems 12 Recent Exchange of Cable Television Systems 12 Proposed Exchange of Cable Television Systems 13 Refinancing of the Company's Credit Facility 14 Redemption by the Company of 7.5% Subordinated Convertible Debentures due 2007 14 Execution of Letter of Intent 14 Change of the Company's Fiscal Year 14 Increase in the Company's Authorized Class A Common Stock 14 Cable Television Franchises 15 Competition 15 Regulation and Legislation 19 Telecommunications Act of 1996 19 Cable Television Consumer Protection and Competition Act of 1992 21 Cable Communications Policy Act of 1984 25 Franchising 25 Ownership and Market Structure 25 Foreign Ownership Restriction 26 Program Origination and Exclusivity Obligations 27 Copyright Matters 27
i 3 State Regulation 28 Local Regulation 28 Technical and Reporting Requirements 28 Regulatory Fees and Other Matters 29 Miscellaneous Provisions 29 ITEM 2. PROPERTIES 30 Cable Television Systems Owned by the Company 30 ITEM 3. LEGAL PROCEEDINGS 34 Alexandria Litigation 34 Tampa Litigation 35 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 36 EXECUTIVE OFFICERS OF THE COMPANY 36 PART II 38 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 38 ITEM 6. SELECTED FINANCIAL DATA 40 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 41 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 49 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 81 PART IV 81 ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K 81
ii 4 PART I ITEM 1. BUSINESS THE COMPANY Jones Intercable, Inc. (the "Company") is a Colorado corporation organized in 1970. The Company is primarily engaged in the cable television business. See Item 1, The Company's Cable Television Business. The Company also holds equity interests in a number of programming and other cable-related subsidiaries. See Item 1, The Company's Other Businesses. Jones International, Ltd. ("International") beneficially owns approximately 48% of the Common Stock of the Company and approximately 9% of the Class A Common Stock of the Company. Glenn R. Jones, the Chairman of the Board of Directors and Chief Executive Officer of the Company, personally owns approximately 9% of the Company's Common Stock and approximately 2% of the Company's Class A Common Stock. Because of his 100% ownership of International, Mr. Jones is deemed to be the beneficial owner of all shares of the Company owned by International, and his direct and indirect stock ownership enables him to control the election of a majority of the Company's Board of Directors and gives him voting power over approximately 41% of votes to be cast by all shareholders of the Company on matters not requiring a class vote. As of December 31, 1995, Bell Canada International Inc. ("BCI") owned 9,914,300 shares, or approximately 38%, of the Company's Class A Common Stock and, through such ownership, BCI owned an approximate 30% economic interest in the Company. In addition, BCI holds an option to purchase 2,878,151 shares of Common Stock of the Company from International, Glenn R. Jones and certain of their affiliates which, if and when exercised, would enable BCI to elect a majority of the members of the Board of Directors of the Company. In February 1996, BCI purchased 43,200 additional shares of the Company's Class A Common Stock in the market, thereby raising BCI's aggregate ownership to 9,957,500 shares of the Company's Class A Common Stock, and BCI has informed the Company that BCI intends to purchase additional shares of Class A Common Stock of the Company in the market from time to time in the future. At December 31, 1995, the Company had a total of approximately 3,686 employees. The executive offices of the Company are located at 9697 E. Mineral Avenue, Englewood, Colorado 80112, and its telephone number is (303) 792-3111. Unless the context otherwise requires, the term "Company" as used herein refers to Jones Intercable, Inc. and its subsidiaries, including Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary that owns a majority of the cable television assets of the Company. THE CABLE TELEVISION INDUSTRY The cable television industry developed in the late 1940s and early 1950s in response to the needs of residents in predominantly rural and mountainous areas of the country where the quality of television reception was inadequate because of geographic location, surrounding terrain, man-made structures or the curvature of the earth. During recent decades, cable television systems have also been constructed in suburban areas and larger cities where signal interference problems or limited 1 5 availability of channels created a desire for better reception and expanded service. Television reception is substantially improved by cable television because of its insulation from outside interference. The cable television industry, which started as a technical solution to the problem of delivering television signals to remote areas of rural America, has now become an entertainment staple in a majority of American homes. It is a dynamic, evolving and ever more complex industry. Cable penetration, or the percentage of U.S. television households that subscribe to cable television, now stands at approximately 65%. A cable television system is a facility that receives satellite, broadcast and FM radio signals by means of high antennas, a microwave relay service or earth stations, amplifies the signals and distributes them by coaxial and/or fiber-optic cable to the premises of its subscribers, who pay a fee for the service. A cable television system may also originate its own programming for distribution through its cable plant. The physical plant of a cable television system consists of four principal operating components. The first, known as the "headend" facility, receives television and radio signals with microwave relay systems, special antennae and satellite earth stations. The second component, the distribution network, originating at the headend and extending throughout the system, consists of coaxial and/or fiber-optic cables placed on poles or buried underground, and associated electronic equipment. The third component of the system is a "drop cable" that extends from the distribution network into the subscriber's home and connects to the subscriber's television set. The fourth component, a converter, is the home terminal device necessary to expand channel capacity and to deliver pay-per-view and other premium services. The cable television industry is undergoing significant change. With recent announcements of alliances between cable television companies and telephone, computer and software companies, the Company believes that the nature of the cable television business is evolving from a traditional coaxial network delivering only video entertainment to a more sophisticated, digital platform environment where cable systems may deliver traditional programming as well as other services, including data, telephone and expanded educational and entertainment services on an interactive basis. See Item 1, The Company's Cable Television Business. INDUSTRY GROWTH. Based upon information obtained by the Company from industry sources, the Company believes that the following table demonstrates the growth of the cable television industry in the United States for the periods indicated:
Approximate Percentage Approximate Number of TV Households With End of Year of Basic Subscribers(1) Basic Cable Service(2) ----------- ----------------------- ---------------------- 1985 39,872,250 46% 1986 42,237,140 48%
2 6 1987 44,970,880 51% 1988 48,636,520 54% 1989 52,564,470 57% 1990 54,871,330 59% 1991 55,786,390 61% 1992 57,211,600 62% 1993 58,834,440 63% 1994 60,495,090 63% 1995 62,231,730(3) 65%(3)
(1) The number of basic subscribers is computed by dividing the sum of total individual-dwelling subscribers and total revenues from bulk-rate subscribers by the standard basic service rate. (2) The percentage is computed by dividing the number of basic subscribers by the number of TV households in the United States (95,360,730 estimated TV households in 1995). (3) As of July 1995. SYSTEM OPERATIONS. The operation of cable television systems is generally conducted pursuant to the terms of a franchise or similar license granted by the local governing body for the area to be served or by a state agency. Franchises generally are granted on a non-exclusive basis for a period of 5 to 15 years. Joint use or pole rental agreements are normally entered into with electric and/or telephone utilities serving a cable television system's area and annual rentals generally range from $5 to $15 for each pole used. These rates may increase in the future. See Item 1, Cable Television Franchises; Item 1, Competition; and Item 1, Regulation and Legislation. PROGRAMMING. Cable television systems generally offer various types of programming, which include basic service, tier service, premium services, 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 and also usually includes programs originated locally by the system, which may consist of music, news, weather reports, stock market and financial information and live or videotaped programs of a public service or entertainment nature. FM radio signals are also frequently distributed to subscribers as part of the basic service. The Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") contains signal carriage requirements. Rules promulgated under the 1992 Cable Act allow each commercial television broadcast station to elect every three years whether to require the cable systems in its area to carry its signal or to require the cable systems to negotiate with the station for "retransmission consent" to carry the station. If a local commercial broadcast television station requires a cable system to negotiate with the station for retransmission consent, and the cable system is unable to obtain retransmission consent, the cable 3 7 system is not permitted to continue carriage of such station. See Item 1, Regulation and Legislation. During the initial three-year election period which began on October 6, 1993 and continues through December 31, 1996, no broadcast stations carried on Company-owned cable television systems that elected retransmission consent have withheld consent to the retransmission of their signals. These arrangements will have to be renewed by October 6, 1996 in order to permit continued carriage of broadcast signals by Company-owned systems. In most systems, tier services are also offered on an optional basis to subscribers. These channels generally include 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. Systems also offer a package that includes the basic service channels and the tier services. Cable television systems offer premium services to their subscribers, which consist of feature films, sporting events and other special features that are presented without commercial interruption. The cable television operator buys premium programming from suppliers such as HBO, Showtime, Cinemax or others at a cost based on the number of subscribers served by the cable operator. The per service cost of premium service programming usually is significantly more expensive for the system operator than the basic service or tier service programming, and consequently the system operator prices premium service separately when sold to subscribers. Cable television systems offer to subscribers pay-per-view programming. Pay-per-view is a service that allows subscribers to receive single programs, frequently consisting of motion pictures and major sporting events, and to pay for such service on a program-by-program basis. SYSTEM REVENUES. Monthly service fees for basic, tier and premium services constitute the major source of revenue for cable television systems. A subscriber to a cable television system generally pays an initial connection charge and a fixed monthly fee for the cable programming services received. The amount of the monthly service fee varies from one area to another, and historically has been a function, in part, of the number of channels and services included in the service package and the cost of such services to the cable television system operator. In most instances, a separate monthly fee for each premium service and certain other specific programming is charged to subscribers, with discounts generally available to subscribers receiving multiple premium services. Cable television operators have been able to generate additional revenue through the sale of commercial spots and channel space to advertisers. As with other forms of advertising, the cable television operator receives a fee from the advertisers that is based on the programming service on which the advertisements appear, the volume of advertising and the time of the day at which it is broadcast. Advertising, as well as fees generated by home shopping and pay-per- view, represent additional sources of revenue for cable television systems. These services are not regulated under the 1992 Cable Act. 4 8 The 1992 Cable Act mandated a greater degree of regulation of the cable television industry, including rate regulation. Under the 1992 Cable Act's definition of "effective competition," nearly all cable systems in the United States, including almost all of those owned and managed by the Company, are subject to rate regulation with respect to basic cable services. In addition, the FCC is permitted to regulate rates for non-basic service tiers other than premium services in response to complaints filed by franchising authorities and/or cable subscribers. Rate regulations adopted by the FCC, which became effective September 1, 1993, provide for a benchmark and price cap system that is used to regulate basic and non-basic service rates, and cost-of-service showings are available to cable operators to allow them to justify rates above benchmark levels. The Telecommunications Competition and Deregulation Act of 1996 eliminates regulation of this service tier for small cable operators and, in some circumstances, will reduce, and by 1999 eliminate, rate regulation for cable programming service packages for all cable television systems. See Item 1, Regulation and Legislation. Cost-of-service showings justifying rates above benchmark levels were filed for the following Company-owned systems: Alexandria, Virginia; Augusta, Georgia; Charles County, Maryland; Dale City, Virginia; Jefferson County, Colorado; Manassas, Virginia and Pima County, Arizona. For these systems, the Company anticipates no further reductions in revenues or operating income before depreciation and amortization resulting from the FCC's rate regulations. The cost-of-service showings have not yet received final approval from franchising authorities, however, and there can be no assurance that the cost-of-service showings will prevent further rate reductions unless such final approvals are received. The Company complied with the February 22, 1994 benchmark regulations and reduced rates in the following Company-owned systems: Hilo, Hawaii; Kenosha, Wisconsin; Oxnard and Walnut Valley, California; and Panama City Beach, Florida. The Company's Anne Arundel System is currently subject to effective competition as defined by the 1992 Cable Act, and, as a result, is not subject to rate regulation. THE COMPANY'S CABLE TELEVISION BUSINESS The Company operates cable television systems for itself and for its managed limited partnerships. At December 31, 1995, the Company managed 54 cable television systems, 41 of which, operating in 19 states, were owned by Company-managed partnerships and 13 of which, operating in 10 states, were owned by the Company. The Company's existing managed partnerships own cable television systems located in California, Colorado, Florida, Illinois, Indiana, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, South Carolina, Texas and Wisconsin. The Company-owned cable television systems are located in Arizona, California, Colorado, Florida, Georgia, Hawaii, Maryland, South Carolina, Virginia and Wisconsin. In January 1996, the Company acquired another cable television system in Virginia, and in February 1996, the Company acquired additional cable television systems in Maryland and Virginia. See Item 1, Recent Acquisitions of Cable Television Systems and Proposed Acquisitions of Cable Television Systems. At December 31, 1995, Company-owned systems served approximately 439,400 basic subscribers who subscribed to a total of approximately 367,600 pay units. And, at such date, systems held by Company-managed partnerships served approximately 997,200 basic subscribers who 5 9 subscribed to a total of approximately 716,000 pay units. (Each premium service subscribed to equals one pay unit.) According to industry sources, as of December 31, 1995, the Company ranked among the top 10 multiple system cable television operators in the United States. The Company historically has grown by acquiring and developing cable television systems for both itself and its managed limited partnerships, primarily in suburban areas with attractive demographic characteristics. The Company intends to liquidate its managed limited partnerships as opportunities for sales of partnership cable television systems arise in the marketplace over the next several years. See Item 1, Recent and Proposed Dispositions of Cable Television Systems. Key elements of the Company's operating strategy include increasing basic penetration levels and revenue per subscriber through targeted marketing, superior customer service and maintenance of high technical standards. The Company has deployed fiber optic cable wherever practical in its current rebuild and upgrade projects, which improves system reliability and picture quality, increases channel capacity and provides the potential for new business opportunities. The Company has focused on pay-per-view and advertising as revenue growth opportunities, and expects to continue to do so in the future. The Company is implementing a balanced strategy of acquiring cable television systems from Company-managed limited partnerships and from third parties. See Item 1, Recent Acquisitions of Cable Television Systems and Proposed Acquisitions of Cable Television Systems. As part of this process, certain systems owned by the Company and its managed partnerships may be sold to third parties and Company-owned systems may be exchanged for systems owned by other cable system operators. See Item 1, Recent and Proposed Dispositions of Cable Television Systems, Recent Exchange of Cable Television Systems and Proposed Exchange of Cable Television Systems. It is the Company's plan to cluster its cable television properties, to the extent feasible, in geographic areas. Clustering systems may enable the Company to obtain operating efficiencies, and it should position the Company to capitalize on new revenue and business opportunities as the telecommunications industry evolves. The Company also intends to maintain and enhance the value of its current cable television systems through capital expenditures. Such expenditures will include, among others, cable television plant extensions and the upgrade and rebuild of certain systems. The Company also intends to institute new services as they are developed and become economically viable. Acquisitions of cable television systems, the development of new services and capital expenditures for system extensions and upgrades are subject to the availability of cash generated from operations, debt and/or equity financing. The capital resources needed to accomplish these strategies are expected to be provided by the sale of debt and/or equity securities (subject to market conditions), borrowings under the Company's new $500 million credit agreement and cash generated from the Company's operating activities. In addition, the Company may explore other financing options such as private equity capital and the disposition of non-strategic assets. There can be no assurance that the capital resources necessary to accomplish the Company's acquisition and development plans will be available on terms and conditions acceptable to the Company, or at all. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. 6 10 Within the past several years, and at an increasing pace recently, the cable television industry has seen much change. With recent alliances between cable television companies and telephone, computer and software companies, the Company believes that the nature of the cable television business is evolving from a traditional coaxial network delivering only video entertainment to a more sophisticated, digital platform environment where cable systems may be capable of delivering traditional programming as well as other services, including data, telephone and expanded educational and entertainment services on an interactive basis. As this convergence of various technologies progresses, cable television companies will have to reevaluate their system architecture, upgrade their cable plants in order to take advantage of new opportunities and consider clustering their systems in geographic areas where they can achieve economies of scale and reasonable returns on the investments made. The Company is also directly affected by the entry into the marketplace of local telephone companies that, as a result of the passage of recent legislation, now have the ability to provide telephone and video services in direct competition with the Company. See Item 1, Regulation and Legislation. This direct competition with local telephone companies is an additional consideration in the ongoing evaluation by the Company of its position in this changing marketplace. The Company intends, where possible, to pursue these new technological opportunities as they evolve. The ability of the Company to do so, however, will be dependent in large part on the availability of debt and equity financing. The Company is involved in analyzing and testing new technologies used in the telecommunications area, including combined telephone and video services to multiple dwelling units. The Company is utilizing the experience of BCI to provide expertise in the telecommunications area. BCI, through its parent company and its affiliates, is engaged in many areas of the telecommunications business. BCE Inc., the parent of BCI, is the largest telecommunications company in Canada. BCE Inc. is also the parent company of Bell Canada, the largest provider of telecommunications services in Canada. Bell Northern Research, an affiliate of BCI, is Canada's largest research and development organization and is engaged in developing and analyzing new technologies used in the telecommunications area. Northern Telecom, a 52% subsidiary of BCE Inc., is a leading global manufacturer of telecommunications equipment. As cable television systems in the United States evolve and change into more sophisticated digital networks providing traditional television entertainment, but also telephone and data services, and as competition between cable television operators, telephone companies and others develops, the relationship between BCI and the Company may provide the Company with access to expertise and experience that it would not otherwise have available. With respect to the systems owned by the Company and its subsidiaries, the Company earns revenues through monthly service rates and related charges to cable television subscribers. The Company's subscribers have the option to choose a limited basic service consisting generally of broadcast stations and a few cable networks ("basic" service) or a package of services consisting of basic service and tier services ("basic plus" service). The basic plus service generally consists of most of the cable networks, including ESPN, USA Network, CNN, Discovery, Lifetime and others. See Item 1, The Cable Television Industry, Programming. 7 11 Monthly service rates include fees for basic service, basic plus service and premium services. At December 31, 1995, monthly basic service rates ranged from $4.95 to $15.50 for residential subscribers, monthly basic plus service rates ranged from $10.00 to $26.33 for residential subscribers, and monthly premium services ranged from $1.13 to $14.95 per premium service. In addition, the Company earns revenues from pay-per-view programs and advertising fees. Pay-per- view programs, which usually are either unique sporting events or recently released movies, are available on many of the Company's cable television systems. Subscribers are permitted to choose individual movies for a set fee ranging from $1.99 to $6.95 per movie and individual special events for a set fee ranging from $4.95 to $54.95 per event. Related charges may include a nonrecurring installation fee that ranges from $1.99 to $50.00; however, from time to time the Company has followed the common industry practice of reducing 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, subscribers are free to discontinue the service at any time without penalty, and most terminations occur because a subscriber moves to another home or to another city. For the year ended December 31, 1995, of the total subscriber fees received by Company-owned systems, basic and basic plus service fees accounted for approximately 65% of total revenues, premium service fees accounted for approximately 17% of total revenues, pay-per-view fees were approximately 3% of total revenues, advertising fees were approximately 7% of total revenues and the remaining 8% of total revenues came from equipment rentals, installation fees and program guide charges. The Company is dependent upon timely receipt of service fees to provide for maintenance and replacement of plant and equipment, current operating expenses and other costs. As the general partner of its managed limited partnerships, the Company earns management fees which are generally 5% of the gross revenues of the partnership, not including revenues from the sale of cable television systems or franchises. The Company also receives reimbursement from the partnerships for certain allocated overhead and administrative expenses incurred by the Company in its management activities. From time to time, the Company has made advances to certain of its managed limited partnerships and has deferred collection of management fees and expense reimbursements owed by certain of its managed limited partnerships to allow for expansion of a cable television system or other cash needs of such a partnership. Upon dissolution of a Company-managed partnership or the sale or refinancing of its cable television systems, the Company is generally entitled to receive 25 percent of the net remaining assets of such partnership, after payment of partnership debts and after investors have received an amount equal to their capital contributions plus, in most cases, a stated preferential return on their investment. Pursuant to the terms of the various limited partnership agreements, the Company has full operational control of the management and day-to-day business of the partnerships. The Company historically has found that the cash flow of a particular cable television system and the long-term value of that system can be increased as a result of (i) the addition of new subscribers through increased market penetration, (ii) the building of extensions to reach new potential subscribers in the franchise area, (iii) the addition of new programming services or products, and (iv) periodic rate adjustments. Increases in subscribers usually result from specific marketing efforts undertaken by a cable system operator within the community, which may include telephone 8 12 solicitation, particular program promotions, direct mailings, increased advertising or other means. A cable operator also can build extensions to systems, which increase the number of homes passed by the cable system and the number of potential subscribers, and thereby increase the potential revenue from additional subscriber fees. The building of extensions to cable television systems usually occurs due to the development within the system's franchise area of a new housing area adjacent to areas then served by the system or the availability of a franchise for an area adjacent to the current franchise area. In addition, increased revenues may be generated from the offering of additional services to subscribers. New cable services have been developed and introduced since the inception of the cable television industry, and new cable services are expected to continue to develop. These services could include new services which offer movies or other entertainment on demand or nearly on demand by a subscriber (known as "near video on demand"), interactive services including both games and entertainment, as well as information and consumer services. No assurance can be given that the Company will be able to increase the cash flow of any particular cable television system or the value of that system by any of the methods described above, the rate regulations promulgated by the FCC under the 1992 Cable Act may limit the amount of any rate increases with respect to regulated services the Company will be able to implement in the future. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company's business consists of providing cable television services to a large number of customers, the loss of any one or more of which would have no material effect on the Company's business. Each of the cable television systems owned or operated by the Company 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 systems owned or operated by the Company is not significant. The Company's policy with regard to these accounts is basically one of disconnecting service before a past due account becomes material. The Company 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 Company has engaged in research and development activities relating to the provision of new services. 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 Company. THE COMPANY'S OTHER BUSINESSES The Company operates a number of non-cable television businesses through subsidiaries: The Jones Group, Ltd., a cable television brokerage company; Jones Futurex, Inc. which manufactures and markets data encryption products and provides contract manufacturing services; Jones Satellite Networks, Inc., a second-tier subsidiary of the Company that delivers radio programming to radio stations throughout the United States via satellite; and Superaudio, a joint venture between a subsidiary of the Company, Jones Galactic Radio, Inc., and an unaffiliated party that offers FM stereo audio service programming to cable television system subscribers. The Company also has an interest 9 13 in the cable/telephony business in the United Kingdom through its approximate 10% equity ownership of Bell Cablemedia plc, the United Kingdom's third largest cable communications operator. The Company also owns direct and indirect minority interests in Mind Extension University and Jones Computer Network, affiliated programming services. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operation. RECENT ACQUISITIONS OF CABLE TELEVISION SYSTEMS Augusta System. In October 1995, JCH purchased from Cable TV Fund 12-B, Ltd. ("Fund 12-B"), a Company-managed limited partnership, the cable television system serving areas in and around Augusta, Georgia (the "Augusta System") for a purchase price of $142,618,000, subject to normal closing adjustments. The Company, as general partner of Fund 12-B, received a distribution from Fund 12-B of $13,222,000 upon the closing of this transaction. As result of such distribution, the net capital required to purchase the Augusta System was $129,396,000, which was provided from cash on hand. The Augusta System serves approximately 68,200 basic subscribers and passes approximately 102,000 homes. The Augusta System is contiguous with the cable television system already owned by the Company serving areas in and around North Augusta, South Carolina (the "North Augusta System"), and since closing they have been operated as one system. Together, the Augusta System and the North Augusta System serve approximately 84,100 basic subscribers and pass approximately 125,700 homes. Unless the context otherwise requires, references hereinafter to the "Augusta System" refer to both the Augusta System and the North Augusta System. Dale City System. In November 1995, JCH, through its wholly-owned subsidiary, Jones Communications of Virginia, Inc., purchased from an unaffiliated company the cable television systems serving areas in and around Dale City, Lake Ridge, Woodbridge, Fort Belvoir, Triangle, Dumfries, Quantico, Accoquan and portions of Prince William County, all in the State of Virginia (the "Dale City System") for $123,000,000, subject to normal closing adjustments. Jones Financial Group, Ltd. ("Financial Group"), an affiliate of the Company, was paid a fee of $1,328,400 upon closing of this transaction for acting as the Company's financial advisor in connection with this transaction. The fee paid to Financial Group and all other fees paid or payable to Financial Group as hereinafter described, are based upon 90% of the estimated commercial rate charged by unaffiliated brokers. The Dale City System serves approximately 49,300 subscribers and passes approximately 65,100 homes. Manassas System. In January 1996, JCH, through its wholly-owned subsidiary, Jones Communications of Virginia, Inc., purchased from unaffiliated companies the cable television systems serving areas in and around Manassas, Manassas Park, Haymarket and portions of Prince William County, all in the State of Virginia (the "Manassas System") for a purchase price of $71,100,000, subject to normal closing adjustments. Financial Group was paid a fee of $896,000 upon closing of this transaction for acting as the Company's financial advisor in connection with this transaction. The Manassas System serves approximately 26,500 basic subscribers and passes approximately 39,300 homes. 10 14 Carmel System. In February 1996, JCH purchased from IDS/Jones Growth Partners 87-A, Ltd., a Company-managed partnership, the cable television system serving areas in and around Carmel, Indiana (the "Carmel System") for a purchase price of $44,235,333, subject to normal closing adjustments. The purchase price represented the average of three separate independent appraisals of the fair market value of the Carmel System. The Carmel System serves approximately 19,200 basic subscribers and passes approximately 24,400 homes. Orangeburg System. In February 1996, JCH purchased from Jones Cable Income Fund 1-B, Ltd., a Company-managed partnership, the cable television system serving areas in and around Orangeburg, South Carolina (the "Orangeburg System") for a purchase price of $18,347,667, subject to normal closing adjustments. The purchase price represented the average of three separate independent appraisals of the fair market value of the Orangeburg System. The Orangeburg System serves approximately 12,500 basic subscribers and passes approximately 16,530 homes. Tampa System. In February 1996, JCH purchased from Cable TV Fund 12-BCD Venture, a venture comprised of three Company-managed partnerships, the cable television system serving areas in and around Tampa, Florida (the "Tampa System") for a purchase price of $110,395,667, subject to normal closing adjustments. The purchase price represented the average of three separate independent appraisals of the fair market value of the Tampa System. The Tampa System serves approximately 65,000 basic subscribers and passes approximately 128,500 homes. The Company's purchase of the Carmel System, the Orangeburg System and the Tampa System was funded by borrowings available under the Company's $500 million revolving credit facility. The Carmel System, the Orangeburg System and the Tampa System have been subsequently transferred to TWEAN as discussed below. PROPOSED ACQUISITIONS OF CABLE TELEVISION SYSTEMS Manitowoc System. JCH has agreed to purchase from Cable TV Joint Fund 11 (the "Venture"), a venture comprised of four Company-managed partnerships, the cable television system serving the City of Manitowoc, Wisconsin (the "Manitowoc System") for a purchase price of $15,735,667, subject to normal closing adjustments. The Manitowoc System serves approximately 10,800 basic subscribers and passes approximately 16,000 homes. JCH's acquisition of the Manitowoc System is subject to a number of conditions that have not yet been satisfied, including the approval of the holders of a majority of the limited partnership interests of each of the four constituent partnerships of the venture that owns the Manitowoc System and the approval of the City of Manitowoc to the renewal and transfer of the franchise. The Company will receive from the four partnerships that comprise the Venture general partner distributions totaling approximately $3,900,000 upon the closing of the sale of the Manitowoc System. Lodi System. JCH has agreed to purchase from Jones Spacelink Income Partners 87-1, L.P., a Company-managed partnership, the cable television systems serving areas in and around Lodi, Ohio (the "Lodi System") for a purchase price of $25,706,000, subject to normal closing adjustments. The Lodi System serves approximately 15,100 basic subscribers and passes approximately 20,600 homes. Ripon System. JCH has agreed to purchase from Jones Spacelink Income/Growth Fund 1-A, Ltd., a Company-managed partnership, the cable television system serving areas in and around Ripon, Wisconsin (the "Ripon System") for a purchase price of $3,712,667, subject to normal closing adjustments. The Ripon System serves approximately 2,450 basic subscribers and passes approximately 2,500 homes. 11 15 Lake Geneva System. JCH has agreed to purchase from Jones Spacelink Income/Growth Fund 1-A, Ltd., a Company-managed partnership, the cable television system serving areas in and around Lake Geneva, Wisconsin (the "Lake Geneva System") for a purchase price of $6,345,667, subject to normal closing adjustments. The Lake Geneva System serves approximately 3,600 basic subscribers and passes approximately 5,400 homes. The closings of these four acquisitions are expected to occur during the first half of 1996, and such closings are not contingent upon the closing of the Time Warner exchange discussed below. RECENT AND PROPOSED DISPOSITIONS OF CABLE TELEVISION SYSTEMS As described above, Company-managed partnerships recently have sold or have agreed to sell the Augusta System, the Carmel System, the Orangeburg System, the Tampa System, the Manitowoc System, the Lodi System, the Ripon System and the Lake Geneva System to JCH. In addition, as described below, one of the Company's managed partnerships has agreed to sell its cable television system to an unaffiliated cable television system operator. The Company is generally entitled to a general partner distribution from its managed partnerships upon the sale of partnership-owned cable television systems provided that the limited partners have received an amount equal to their capital contributions plus, in most cases, a stated preferential return on their investment. The Company received such a distribution on the sale of the Augusta System and the Tampa System and will receive general partner distributions upon the sale of the Lancaster System and the Manitowoc System. The Company did not or will not receive general partner distributions on the sales of the Carmel System, the Orangeburg System, the Lodi System, the Ripon System or the Lake Geneva System. Lancaster System. Cable TV Fund 11-B, Ltd. ("Fund 11-B"), a Company-managed partnership that owns the cable television system serving areas in and around Lancaster, New York (the "Lancaster System"), has entered into an agreement to sell the Lancaster System to an unaffiliated party for a sales price of approximately $84,000,000. The Company, as general partner of the partnership, is entitled to receive a distribution of approximately $13,950,000 upon the closing of the sale of the Lancaster System, which is expected to occur during the first half of 1996. In addition, The Jones Group, Ltd., a wholly owned subsidiary of the Company, will receive a fee of $2,100,000 for acting as the broker in this transaction. RECENT EXCHANGE OF CABLE TELEVISION SYSTEMS In August 1995, the Company entered into an asset exchange agreement (the "TWEAN Exchange Agreement") with Time Warner Entertainment-Advance/Newhouse Partnership ("TWEAN"), an unaffiliated cable television operator. The Company subsequently assigned the TWEAN Exchange Agreement to JCH. On February 29, 1996, JCH conveyed to TWEAN the Carmel System, the Orangeburg System and the Tampa System and cash in the amount of $3,500,000, subject to normal closing adjustments. In return, JCH received substantially all of the assets of cable television systems serving Andrews Air Force Base, Capitol Heights, Cheltenham, District Heights, Fairmont Heights, Forest Heights, Morningside, Seat Pleasant, Upper Marlboro and portions of Prince Georges County, Maryland (the "Prince Georges County System") and a portion of 12 16 Fairfax County, Virginia (the "Reston System"). Taking into account the aggregate purchase price paid by JCH for the Carmel System, the Orangeburg System and the Tampa System, plus the $3,500,000 cash consideration paid by JCH to TWEAN, the aggregate consideration paid for the Prince Georges County System and the Reston System was approximately $176,468,000. The Prince Georges County System and the Reston System serve approximately 85,000 subscribers. The Company paid Financial Group a $1,668,000 fee upon the completion of the exchange as compensation to it for acting as the Company's financial advisor. The Prince Georges County System is contiguous to the Alexandria, Virginia, Calvert County, Maryland and Charles County, Maryland cable television systems, all of which are owned or managed by the Company. The Reston System is approximately 12 miles from the Company's Alexandria, Virginia system. The acquisition of the Prince Georges County System and the Reston System, together with the acquisition of the Dale City System in November 1995 and the Manassas System in January 1996 and the other cable television systems already owned or managed by the Company in the area, have brought the total number of basic subscribers owned or managed by the Company in the Baltimore/Washington, D.C. metropolitan area to approximately 300,000 subscribers. PROPOSED EXCHANGE OF CABLE TELEVISION SYSTEMS In September 1995, the Company entered into an asset exchange agreement (the "Time Warner Exchange Agreement") with Time Warner Entertainment Company, L.P. ("Time Warner"), an unaffiliated cable television operator. The Company has assigned the Time Warner Exchange Agreement to JCH. Pursuant to the Time Warner Exchange Agreement, JCH will convey to Time Warner the Manitowoc System, the Lodi System, the Ripon System and the Lake Geneva System, all of which systems are currently owned by Company-managed partnerships but are to be transferred to JCH prior to the exchange, and JCH will also convey to Time Warner the cable television system serving areas in and around Hilo, Hawaii (the "Hilo System") and the cable television system serving areas in and around Kenosha, Wisconsin (the "Kenosha System"), both of which systems are currently owned by the Company but are to be transferred to JCH prior to the exchange. In return, JCH will receive from Time Warner the cable television systems serving the communities in and around Savannah, Georgia (the "Savannah System") and cash in the amount of $4,000,000 subject to normal closing adjustments. Taking into account the aggregate purchase price to be paid by the Company for the Lodi System, the Lake Geneva System, the Ripon System and the Manitowoc System and the estimated valuation of the Hilo System and the Kenosha System, less the $4,000,000 cash consideration to be paid by Time Warner to JCH, the aggregate consideration to be paid for the Savannah System is approximately $119,195,000. The Savannah System passes approximately 100,000 homes and serves approximately 63,000 subscribers. The closing of the transactions contemplated by the Time Warner Exchange Agreement is subject to customary closing conditions, including obtaining necessary governmental and other third party consents. The parties intend to complete the transactions during the first half of 1996, but there can be no assurance that all conditions will be satisfied or waived by that time. Either party may terminate the exchange if it is not completed on or before September 30, 1996. The Company will pay Financial Group a $1,286,000 fee upon completion of the exchange as compensation to it for acting as the Company's financial advisor. 13 17 REFINANCING OF THE COMPANY'S CREDIT FACILITY On October 31, 1995, the Company, through JCH, refinanced its bank borrowing on terms and conditions that included, among other things, an increase in its overall corporate (parent and subsidiary) borrowing capacity from $300 million to $500 million, a decrease in borrowing costs and an increase in financial flexibility. As required by the new credit facility, the Company restructured by transferring a majority of the Company-owned cable television systems to JCH, which is the borrower under this new credit facility. The Company anticipates that the transfers required under this new credit facility will be completed during the first quarter of 1996. REDEMPTION BY THE COMPANY OF 7.5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007 On October 12, 1995, the Company redeemed the remaining outstanding 7.5% Convertible Subordinated Debentures (the "Debentures") due 2007, at a price equal to 101.5% of the principal amount, plus accrued interest. The total principal amount of Debentures was $43,100,000, $23,732,000, of which were held by the Company and $19,368,000 of which were held by unaffiliated investors. The Debentures were repurchased with cash on hand. EXECUTION OF LETTER OF INTENT On November 1, 1995, the Company entered into a letter of intent with an unaffiliated party to set forth the preliminary understanding of the parties as to their intent to enter into an asset purchase agreement whereby the Company would agree to purchase a cable television system servicing subscribers in portions of Anne Arundel County, Maryland for a purchase price of $96,500,000 subject to certain closing adjustments. Execution of a definitive asset purchase agreement and the closing of the transaction are subject to a number of conditions, including clearance by various governmental agencies. CHANGE OF THE COMPANY'S FISCAL YEAR On September 12, 1995, the Company filed an application with the Internal Revenue Service to change its fiscal year end from May 31 to December 31, and the Internal Revenue Service has approved the requested change in the Company's fiscal year. INCREASE IN THE COMPANY'S AUTHORIZED CLASS A COMMON STOCK On July 10, 1995, at the annual meeting of the shareholders of the Company, the shareholders approved an amendment to the Company's Articles of Incorporation to increase the number of authorized shares of the Company's Class A Common Stock from 30,000,000 shares to 60,000,000 shares. 14 18 CABLE TELEVISION FRANCHISES The cable television systems owned or managed by the Company are constructed and operated under fixed-term franchises or other types of operating authorities (referred to collectively herein as "franchises") that are generally non-exclusive and are granted by state and/or local governmental authorities. These franchises typically contain many conditions, such as time limitations on commencement and completion of construction, conditions of service, including the number of channels, types of programming and the provision of free service to schools and certain other public institutions, and the maintenance of insurance and indemnity bonds. The provisions of local franchises are subject to federal regulation. The Company holds approximately 70 franchises. These franchises provide for the payment of fees to the issuing authorities and range from 3% to 5% of gross revenues. 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 Company has never had a franchise revoked. The Company's franchises initially had terms of approximately 10 to 15 years. The duration of the Company's outstanding franchises presently varies from a period of months to an indefinite period of time. The Company is currently negotiating the renewal of six franchises that are either operating under extensions or will expire prior to December 31, 1996. During the next three to five years, the renewal process must commence for a significant number of the franchises for cable television systems owned or managed by the Company and its affiliates. The Company recently has experienced lengthy negotiations with some franchising authorities for the granting of franchise renewals. Some of the issues involved in recent renewal negotiations include rate regulation, customer service standards, cable plant upgrade or replacement and shorter terms of franchise agreements. COMPETITION Cable television systems currently experience competition from several sources. High-powered direct-to-home satellites have made possible the wide-scale delivery of programming by several companies to individuals throughout the United States using small roof-top or wall-mounted antennas. Companies offering direct broadcast satellite ("DBS") services use video compression technology to increase channel capacity of their systems and to provide packages of movies, network and other program services which are competitive to those of cable television systems. However, DBS cannot offer its subscribers local video services or programming. Two companies offering DBS services began operations in 1994 and together offer more than 150 channels of service using video compression technology. Two other companies offering DBS service recently began operations. In addition, a joint venture comprised of MCI Telecommunications, Inc. and the News Corporation Limited won the rights to provide a DBS service through a FCC spectrum auction. Other companies have proposed providing similar DBS program packages. A medium-powered satellite distribution also offers 100 channels of service. The FCC has initiated a new interactive television service which will permit non-video transmission of information between an individual's 15 19 home and entertainment and information service providers. This service will provide an alternative means for DBS systems and other video programming distributors, including television stations, to initiate new interactive television services. This service may also be used by the cable television industry. Although the cable television industry does not generally provide two-way interactive service from its subscribers' homes to cable television offices, such services may be provided on a wider basis in the future. Not all subscribers terminate cable television service upon acquiring a DBS system. The Company has observed that a number of DBS subscribers also elect to subscribe to cable television service in order to obtain the greatest variety of programming on multiple television sets, including local video services or 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 availability of equipment at reasonable prices. Although the Company has not yet encountered competition from a telephone company providing video services as a cable operator or video dialtone provider, it is anticipated that the Company's cable television systems will face such competition in the near future. Federal cross-ownership restrictions have historically limited entry into the cable television business by potentially strong competitors such as telephone companies. Legislation recently enacted into law will result in the elimination of such restrictions, making it possible for companies with considerable resources, and consequently a potentially greater willingness or ability to overbuild, to enter the business. Several telephone companies have begun seeking cable television franchises from local governmental authorities as a consequence of litigation that successfully challenged the constitutionality of the cable television/telephone company cross-ownership restrictions. See Item 1, Regulation and Legislation, Ownership and Market Structure for a description of the potential participation of the telephone industry in the delivery of cable television services. The Company cannot predict at this time when and to what extent telephone companies will provide cable television services within service areas in competition with Company owned or managed cable television systems. The Company is aware of the following imminent competition from telephone companies: Ameritech, one of the seven regional Bell operating companies, which provides telephone service in a multi-state region including Illinois, has just obtained a franchise that will allow it to provide cable television service in Naperville, Illinois, a community currently served by a cable system owned by one of the Company's managed partnerships. Chesapeake and Potomac Telephone Company of Virginia and Bell Atlantic Video Service Company, both subsidiaries of Bell Atlantic, another of the regional Bell operating companies, have announced their intention to build a cable television system in Alexandria, Virginia in competition with a Company-owned cable television system. Bell Atlantic is preparing for the construction and operation of a cable telecommunications business in northern Virginia, including the Alexandria metropolitan area. The FCC has granted GTE Virginia's application for authority to construct, operate, own and maintain video dialtone facilities in northern Virginia, including in the Dale City System's service area. To date, GTE has not begun construction of a video distribution system. The entry of telephone companies as direct competitors could adversely affect the profitability and market value of the Company's owned and managed systems. Additional competition is present from private cable television systems known as Master Antenna Television (MATV) and Satellite Master Antenna Television (SMATV) serving multi-unit 16 20 dwellings such as condominiums, apartment complexes, and private residential communities. These private cable systems may enter into exclusive agreements with apartment owners, condominium associations, and homeowners associations, which may preclude operators of franchised systems from serving residents of such private complexes. In 1991, the FCC made available a microwave service to SMATV systems which will facilitate the ability of private cable television systems to distribute video entertainment programming among several SMATV systems within a local area. Private cable systems that do not cross public rights of way or interconnect separately owned and managed buildings are free from the federal regulatory requirements imposed on franchised cable television operators. The telecommunications bill which Congress recently passed exempts any facilities that do not use public rights of way (such as SMATVs serving multiple buildings not under common ownership) from classification as a cable system and from franchise and other requirements applicable to cable operators. A number of states have enacted laws to afford operators of franchised cable television systems access to multi-unit dwellings, although some of these statutes have been successfully challenged in the courts. Recently, companies that install and operate private cable television systems have been installing telephone systems as well as providing cable television services in some areas in which the Company's cable television systems provide cable television service to multi-unit dwellings and similar complexes. In some cases, the Company has been unable to provide cable television service in buildings in which these private operators have secured exclusive contracts to provide video and telephony services. The Company expects that the market to install and provide these services in multi-unit buildings will continue to be highly competitive. In November 1995, the Company launched in its Alexandria System a telephone service in selected apartments and condominium units. Cable television franchises are not exclusive, so that more than one cable television system may be built in the same area (known as an "overbuild"), with potential loss of revenues to the operator of the original cable television system. The Company has experienced overbuilds in connection with certain systems that it has owned or managed for limited partnerships, and currently there are several overbuilds in the Company's systems. Constructing and developing a cable television system is a capital intensive process and, because most cable television systems provide essentially the same programming, it is often difficult for a new cable system operator to create a marketing edge over the existing system. Generally, an overbuilder also would be required to obtain franchises from the local governmental authorities, although in some instances, the overbuilder could be the local government, such as a city or town, and in some such cases, no franchise would be required. 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. The Panama City Beach System has lost basic subscribers and commercial units to an overbuilder. This overbuild continues to provide significant competition and has had an adverse effect on this system's operations. Cable television systems also may 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 subscribers. MMDS systems have generally focused on 17 21 providing service to residents of rural areas that are not served by cable television systems, but providers of programming via wireless cable systems will generally have the potential to compete directly with cable television systems in urban areas as well. Wireless cable systems are now in direct competition with cable television systems in several areas of the country. Telephone companies have recently invested in wireless systems located in California and Maryland as well as other states. These wireless systems could be used on an interim or permanent basis by telephone companies to provide video services within their service areas in lieu of the video dialtone or other wired delivery systems which have been proposed. 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, but the previous unavailability of frequency spectrum, programming services and the regulatory delays encountered by MMDS systems in obtaining licenses have delayed the growth of the MMDS industry. To date, the Company has not lost a significant number of subscribers, nor a significant amount of revenue, to MMDS operators competing with the Company's cable television systems. A series of actions taken by the FCC, 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. 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 approximately 50 channels, or if two systems were combined 100 channels, of video programming to a subscriber's home, and this capacity could be increased by using video compression technology. 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. The FCC has established a new wireless telecommunications service known as Personal Communications Service ("PCS"). It is envisioned that PCS would provide portable non-vehicular mobile communications services similar to that available from cellular telephone companies, but at a lower cost. PCS is delivered by placing numerous microcells in a particular area to be covered, accessible to both residential and business customers. Because of the need to link the many microcells necessary to deliver this service economically, many parties are investigating integration of PCS with cable television operations. Several cable television multiple system operators hold or have requested experimental licenses from the FCC to test PCS technology, and the FCC has allocated spectrum to PCS licensees which is being awarded through an auction process. In addition to competing with one another, cable television systems compete with broadcast television, which consists of television signals that the viewer is able to receive directly on his television using his antenna ("off- air"). 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 available cable systems. Accordingly, it has generally been less difficult to obtain higher penetration rates in areas where there is signal interference from surrounding mountains or 18 22 where signals available off-air are limited, than in metropolitan areas where higher quality off-air signals are often available without the aid of cable television systems. Cable television systems also compete with translator and low power television stations. Translators receive broadcast signals and rebroadcast them on different frequencies at low power pursuant to an FCC license. Low power television stations increase the number of television signals in many areas of the country, and provide off-air television programs, either pay or advertiser-supported, to limited local areas. Cable television systems are also in competition, in various degrees, with other communications and entertainment media including motion pictures and home video cassette recorders, and are dependent upon the continued popularity of television itself. The construction of more powerful transmission facilities near a cable television system or an increase in the number of television signals in such an area also could have an adverse effect on revenues. REGULATION AND LEGISLATION The cable industry is regulated under the Telecommunications Act of 1996 (the "1996 Cable Act"), the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") and the Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the regulations implementing these statutes. The Federal Communications Commission (the "FCC") has promulgated regulations covering such areas as the registration of cable television systems, cross-ownership between cable television and other communications businesses, carriage of television broadcast programming, consumer protection and customer service standards and lockbox enforcement, origination cablecasting and sponsorship identification, limitations on commercial advertising in children's programming, the regulation of basic cable and cable programming service rates in areas where cable television systems are not subject to effective competition, signal leakage and frequency use, technical performance, maintenance of various records, equal employment opportunity, and antenna structure notification, marking and lighting. In addition, cable operators periodically are required to file various informational reports with the FCC. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. State or local franchising authorities, as applicable, also have the right to enforce various regulations, impose fines or sanctions, issue orders or seek revocation subject to the limitations imposed upon such franchising authorities by federal, state and local laws and regulations. Several states have assumed regulatory jurisdiction of the cable television industry, and it is anticipated that other states will do so in the future. To the extent the cable television industry begins providing telephone service, additional state and federal regulations will be applied to the cable television industry. Cable television operations are subject to local regulation insofar as systems operate under franchises granted by local authorities. The following is a summary of federal laws and regulations materially affecting the cable television industry, and a description of state and local laws with which the cable industry must comply. TELECOMMUNICATIONS ACT OF 1996. The 1996 Cable Act, which became law on February 8, 1996, substantially revised the Communications Act of 1934, as 19 23 amended, including the 1984 Cable Act and 1992 Cable Act, and has been described as one of the most significant changes in communications regulation since the original Communications Act of 1934. The 1996 Cable Act is intended, in part, to promote substantial competition in the telephone local exchange and in the delivery of video and other services. As a result of the 1996 Cable Act, local telephone companies (also known as local exchange carriers or "LECs") and other service providers are permitted to provide video programming, and cable television operators are permitted entry into the telephone local exchange market. The FCC is required to conduct rulemaking proceedings over the next several months to implement various provisions of the 1996 Cable Act. Among other provisions, the 1996 Cable Act modifies various rate regulation provisions of the 1992 Cable Act. Generally, under the 1996 Cable Act, cable programming service tier rates are deregulated on March 31, 1999. Upon enactment, the cable programming service rates charged by "small" cable operators are deregulated in systems serving 50,000 or fewer subscribers. Subscribers are no longer permitted to file programming service complaints with the FCC, and complaints may only be brought by a franchising authority if, within 90 days after a rate increase becomes effective, it receives subscriber complaints. The FCC is required to act on such complaints within 90 days. In addition to the existing definition of "effective competition," a new effective competition test permits deregulation of both the basic and programming service tier rates where a telephone company offers cable service by any means other than direct-to-home satellite services, provided that such service is comparable to the services provided by the unaffiliated cable operator. The uniform rate provision of the 1992 Cable Act was amended to exempt bulk discounts to multiple dwelling units so long as a cable operator that is not subject to effective competition does not charge predatory prices to a multiple dwelling unit. The most far-reaching changes in the communications business will result from the telephony provisions of the 1996 Cable Act. The statute expressly preempts any legal barriers to competition in the local telephone business that previously existed in state and local laws and regulations. Many of these barriers had been lifted by state actions over the last few years, but the 1996 Cable Act completed the task. The 1996 Cable Act also establishes new requirements for maintaining and enhancing universal telephone service and new obligations for telecommunications providers to maintain privacy of customer information. The 1996 Cable Act establishes uniform requirements and standards for entry, competitive carrier interconnection and unbundling of LEC monopoly services. Depending on the degree and form of regulatory flexibility afforded the LECs, the Company's ability to competitively offer telephone services may be adversely affected. In addition, the Company's ability to effectively compete and provide telephone services will depend upon the outcome of various FCC rulemakings, including the proceeding dealing with interconnection obligations of telecommunications carriers. The 1996 Cable Act repealed the cable television/telephone cross-ownership ban adopted in the 1984 Cable Act. The federal cross-ownership ban was particularly important to the cable industry because telephone companies already own certain facilities such as poles, ducts and associated rights of way. While this ban had been overturned by several courts, formal removal of the ban ended the last legal constraints on telephone company plans to enter the cable market. Under the 1996 Cable Act, telephone companies in their capacity as common carriers now may lease capacity to others to provide cable television service. Telephone companies have the option of providing video service as cable operators or through "open video systems" ("OVS"), a regulatory regime that may provide 20 24 more flexibility than traditional cable service. The 1996 Cable Act exempts OVS operators from many of the regulatory obligations that currently apply to cable operators, such as rate regulation and franchise fees, although other requirements are still applicable. OVS operators, although not subject to franchise fees as defined by the 1992 Cable Act, are subject to fees charged by local franchising authorities or other governmental entities in lieu of franchise fees. (Under certain circumstances, cable operators also will be able to offer service through open video systems.) In addition, the 1996 Cable Act eliminated the requirement that telephone companies file Section 214 applications with the FCC before providing video service. This limits the opportunity of cable operators to mount challenges at the FCC regarding telephone company entry into the video market. The 1996 Cable Act also contains restrictions on buying out incumbent cable operators in a telephone company's service area, especially in suburban and urban markets. Other parts of the 1996 Cable Act also will affect cable operators. Under the 1996 Cable Act, the FCC is required to revise the current pole attachment rate formula. This revision will result in an increase in the rates paid by entities, including cable operators, that provide telecommunication services. The rates will be phased in after a five-year period. (Cable operators that provide only cable services are unaffected.) Under the V-chip provisions of the 1996 Cable Act, cable operators and other video providers are required to pass along any program rating information that programmers include in video signals. Cable operators also are subject to new scrambling requirements for sexually explicit programming, and cable operators that provide Internet access or other online services are subject to the new indecency limitations for computer services. These provisions already have been challenged, and the courts have preliminarily enjoined the enforcement of these content-based provisions. Under the 1996 Cable Act, a franchising authority may not require a cable operator to provide telecommunications services or facilities, other than an institutional network, as a condition to a grant, renewal or transfer of a cable franchise, and franchising authorities are preempted from regulating telecommunications services provided by cable operators and from requiring cable operators to obtain a franchise to provide such services. The 1996 Cable Act also repealed the 1992 Cable Act's anti-trafficking provision, which generally required the holding of cable television systems for three years. It is premature to predict the specific effects of the 1996 Cable Act on the cable industry in general or the Company in particular. The FCC shortly will be undertaking numerous rulemaking proceedings to interpret and implement the 1996 Cable Act. It is not possible at this time to predict the outcome of those proceedings or their effect on the Company. CABLE TELEVISION CONSUMER PROTECTION AND COMPETITION ACT OF 1992. The 1992 Cable Act effected significant changes to the legislative and regulatory environment in which the cable television industry operated. The 1992 Cable Act generally mandated a greater degree of regulation of the cable television industry. Pursuant to the FCC's definition of "effective competition" adopted following enactment of the 1984 Cable Act, and under the FCC's rules and regulations, substantially all of the Company's systems were rate deregulated in the mid-1980s. Under the 1992 Cable Act's definition of "effective competition," nearly all cable systems in the United States, including those owned and managed by the Company, were again subjected to rate regulation of basic cable services. 21 25 The 1992 Cable Act also allowed the FCC to regulate rates for non-basic service tiers (other than premium services) in response to complaints filed by franchising authorities and/or cable subscribers. As discussed above, the 1996 Cable Act will over time again allow for rate deregulation of cable service programming. In 1993, the FCC adopted a benchmark regulatory scheme for the regulation of basic and cable programming service rates. Rather than relying on the benchmark scheme, however, operators may submit cost-of-service showings to justify rates above the applicable benchmarks. A cable operator that can demonstrate through a cost-of-service showing that rates for basic and non-basic services are justified will not be required to reduce rates or be regulated under the benchmark and price cap system. Franchising authorities may not elect cost-of-service as their primary form of rate regulation but must apply the FCC benchmark system. Except for those operators that filed cost-of-service showings, cable operators whose rates are subject to regulation and that were above the benchmark levels generally reduced those rates to the benchmark level, or by 10%, whichever was less, adjusted forward for inflation. Operators who did not adjust rates pursuant to the FCC's regulations, or whose cost-of-service showings fail to justify current rates, could be subject to refund liability and interest. In 1994, the FCC revised its benchmark regulations. Effective May 1994, cable television systems not seeking to justify rates with a cost-of-service showing were required to reduce rates up to 17% of the rates in effect on September 30, 1992, adjusted for inflation, channel modifications, equipment costs and certain increases in programming costs. Under certain conditions, systems were permitted to defer these rate adjustments until July 1994. Further rate reductions for cable systems whose rates are below the revised benchmark levels, as well as reductions that would require operators to reduce rates below benchmark levels in order to achieve a 17% rate reduction, were held in abeyance pending completion of cable system cost studies. The FCC recently requested some of these "low price" systems to complete cost study questionnaires. After review of these questionnaires, the FCC could decide to permanently defer any further rate reductions, or require the additional 7% rate roll back for some or all of these systems. The FCC has instituted a streamlined upgrade methodology by which operators may recover the costs of upgrading their plant. The FCC also regulates the manner in which cable operators may charge subscribers for new channels added to cable programming services tiers. The FCC instituted a three-year flat fee mark-up plan. Commencing on January 1, 1995, operators may charge subscribers up to $.20 per channel for any channels added after May 14, 1994, but may not make adjustments to monthly rates totaling more than $1.20 plus an additional $.30 to cover programming license fees for those channels over the first two years of the three-year period. In year three, an additional channel may be added with another $.20 increase in rates. Rates may also increase in the third year to cover any additional costs for the programming for any of the channels added during the entire three-year period. Cable operators electing to use the $.20 per channel adjustment may not also take a 7.5% mark-up on programming cost increases, which is otherwise permitted under the FCC's regulations. The FCC has requested further comment on whether cable operators should continue to receive the 7.5% mark-up on increases in license fees on existing programming services. The FCC will permit cable operators to exercise their discretion in setting rates for new product tiers so long as, among other conditions, the channels that are subject to rate regulation are 22 26 priced in conformity with applicable regulations and cable operators do not remove programming services from existing rate-regulated service tiers and offer them on the new product tiers. In September 1995, the FCC authorized a new, alternative method of implementing rate adjustments which will allow cable operators to increase rates for programming annually on the basis of projected increases in external costs (inflation, costs for programming, franchise-related obligations and changes in the number of regulated channels) rather than on the basis of cost increases incurred in a preceding quarter. Operators that elect not to recover all of their accrued external costs and inflation pass-throughs each year may recover them (with interest) in subsequent years. In December 1995, the FCC adopted final cost-of-service rate regulations requiring, among other things, cable operators to exclude 34% of system acquisition costs related to intangible and tangible assets used to provide regulated services. The FCC also reaffirmed the industry-wide 11.25% after-tax rate of return on an operator's allowable rate base, but initiated a further rulemaking in which it proposes to use an operator's actual debt, cost and capital structure to determine an operator's cost of capital or rate of return. After a rate has been set pursuant to a cost-of-service showing, rate increases for regulated services are indexed for inflation, and operators are permitted to increase rates in response to increases in costs beyond their control, such as taxes and increased programming costs. New a la carte services that are offered by cable operators in a package will be subject to rate regulation by the FCC, although only if the FCC deems it necessary to do so. The FCC has indicated that it could not envision circumstances in which any price for a collective offering of premium channels that had traditionally been offered on a per-channel basis would be found to be unreasonable. The United States Court of Appeals for the District of Columbia recently upheld the FCC's rate regulations implemented pursuant to the 1992 Cable Act, but ruled that the FCC impermissibly failed to permit cable operators to adjust rates for certain cost increases incurred during the period between the 1992 Cable Act's passage and the initial date of rate regulation. The FCC has not yet implemented the court's ruling. The 1992 Cable Act encouraged competition by allowing municipalities, which are otherwise legally qualified, to own and operate their own cable systems without having to obtain a franchise by preventing franchising authorities from granting exclusive franchises or unreasonably refusing to award additional franchises covering an existing cable system's service area. The 1992 Cable Act also made several procedural changes to the process under which a cable operator may seek to enforce renewal rights, which could make it easier in some cases for a franchising authority to deny renewal. The 1992 Cable Act also precluded video programmers affiliated with cable companies from favoring cable operators over competitors and required such programmers to sell their programs to other multichannel video distributors. This provision may limit the ability of cable program suppliers to offer exclusive programming arrangements with cable companies and could affect the volume discounts that program suppliers currently offer to the Company as a multiple system operator. The 1992 Cable Act prohibits the common ownership of cable systems and co-located MMDS or SMATV systems; however, the 1996 Cable Act repealed the ban on cable MMDS cross-ownership where a cable system is subject to effective competition. 23 27 The 1992 Cable Act contained new signal carriage requirements. The FCC adopted rules implementing the must-carry provisions for non-commercial and commercial stations and retransmission consent for commercial stations in March 1993. These rules allow commercial television broadcast stations that are "local" to a cable system, i.e., the system is located in the station's Area of Dominant Influence ("ADI"), to elect every three years whether to require the cable system to carry the station, subject to certain exceptions, or whether to require the cable system to negotiate for "retransmission consent" to carry the station. The first such election was made in June 1993 and thus the Company will go through the process again in 1996. Cable systems must obtain retransmission consent for the carriage of all "distant" commercial broadcast stations, except for certain "superstations" (i.e., commercial satellite-delivered independent stations such as WTBS). All commercial stations entitled to carriage were to have been carried by June 1993, and any non-must-carry stations (other than superstations) for which retransmission consent had not been obtained could no longer be carried after October 5, 1993. Local non-commercial television stations are also given mandatory carriage rights, subject to certain exceptions, within the larger of: (i) a 50-mile radius from the station's city of license; or (ii) the station's Grade B contour (a measure of signal strength). Unlike commercial stations, non-commercial stations are not given the option to negotiate retransmission consent for the carriage of their signal. The must-carry provisions for non-commercial stations became effective in December 1992. In 1993, a federal district court upheld the constitutional validity of the must-carry signal carriage requirements. This decision was vacated by the United States Supreme Court in 1994 and remanded for further development of a factual record. The Supreme Court's majority determined that the must-carry rules were content neutral, but that it was not yet proven that the rules were needed to preserve the economic health of the broadcasting industry. In 1995, the federal district court again upheld the must-carry rules' validity. The United States Supreme Court is currently reviewing this decision. In 1993, a federal district court upheld provisions of the 1992 Cable Act concerning rate regulation, retransmission consent, restrictions on vertically integrated cable television operators and programmers, mandatory carriage of programming on commercial leased channels and public, educational and governmental access channels and the exemption for municipalities from civil damage liability arising out of local regulation of cable services. The 1992 Cable Act's provisions providing for multiple ownership limits for cable operators and advance notice of free previews for certain programming services have been found unconstitutional, and these decisions have been appealed. The FCC's regulations relating to the carriage of indecent programming, which were recently upheld by the United States Court of Appeals for the District of Columbia, have been appealed to the United States Supreme Court. The 1992 Cable Act required the FCC to establish national customer service standards and the FCC adopted regulations governing office hours, telephone availability, installations, outages, service calls, and billing and refund policies. State or municipal authorities may enact laws or regulations which impose stricter or different customer service standards than those set by the FCC. 24 28 CABLE COMMUNICATIONS POLICY ACT OF 1984. The 1984 Cable Act was the first federal legislation to impose comprehensive and uniform national regulations on cable television systems and franchising authorities. Among other things, the legislation regulated the provision of cable television service pursuant to a franchise, specified those circumstances under which a cable television operator may obtain modification of its franchise, established criteria under which a franchise shall be renewed and established maximum fees payable by cable television operators to franchising authorities. The law prescribes a standard of privacy protection for cable subscribers, and imposes equal employment opportunity requirements on the cable television industry. It restricts the amount of fees paid by a cable television operator to a franchising authority to a maximum of 5% of gross revenues during the term of the franchise. Franchising authorities are granted authority to establish requirements in new franchises and renewal of existing franchises for the designation and use of public educational and governmental access channels. Franchising authorities are empowered to establish requirements for cable-related facilities and equipment, which may include requirements that relate to channel capacity, system configuration and other facility or equipment requirements related to the establishment and operation of a cable television system. Many of the other provisions of the 1984 Cable Act have been superseded by the 1992 Cable Act and the 1996 Cable Act. FRANCHISING. The responsibility for franchising or other authorization of cable television systems is left to state and local authorities. There are, however, several provisions in the 1984 Cable Act that govern the terms and conditions under which cable television systems provide service. These include uniform standards and policies that are applicable to cable television operators seeking renewal of a cable television franchise. The procedures established provide for a formal renewal process should the franchising authority and the cable television operator decline to use an informal procedure. A franchising authority unable to make a preliminary determination to renew a franchise is required to hold a hearing in which the operator has the right to participate. In the event a determination is made not to renew the franchise at the conclusion of the hearing, the franchising authority must provide the operator with a written decision stating the specific reasons for non-renewal. Generally, the franchising authority can finally decide not to renew a franchise only if it finds that the cable operator has not substantially complied with the material terms of the present franchise, has not provided reasonable service in light of the community's needs, does not have the financial, legal or technical ability to provide the services being proposed for the future, or has not presented a reasonable proposal for future service. A final decision of non-renewal by the franchising authority is appealable in court. The 1996 Cable Act preempts franchising authorities from regulating telecommunications services provided by cable operators and from requiring cable operators to obtain a franchise to provide such services. A franchising authority may not require a cable operator to provide telecommunications services or facilities, other than an institutional network, as a condition to a grant, renewal or transfer of a cable franchise. OWNERSHIP AND MARKET STRUCTURE. FCC rules generally prohibit the direct or indirect common ownership, operation, control or interest in a cable television system, on the one hand, and a local television broadcast station whose television signal (predicted grade B contour as defined under FCC regulations) reaches any portion of the community served by the cable television system, on the 25 29 other hand. For purposes of the cross-ownership rules, "control" of licensee companies is attributed to all 5% or greater stockholders, except for mutual funds, banks and insurance companies which may own less than 10% without attribution of control. The FCC has requested comment as to whether to raise the attribution criteria from 5% to 10% and for passive investors from 10% to 20%, and whether it should exempt from attribution certain widely held limited partnership interests where each individual interest represents an insignificant percentage of total partnership equity. The 1996 Cable Act eliminated the statutory ban on the cross-ownership of a cable system and a television station, and permits the FCC to amend or revise its own regulations regarding the cross-ownership ban. The FCC recently lifted its ban on the cross-ownership of cable television systems by broadcast networks and revised its regulations to permit broadcast networks to acquire cable television systems serving up to 10% of the homes passed in the nation, and up to 50% of the homes passed in a local market. The local limit would not apply in cases where the network-owned cable system competes with another cable operator. The 1996 Cable Act generally restricts common carriers from holding greater than a 10% financial interest or any management interest in cable operators that provide cable service within the carrier's telephone exchange service area or from entering joint ventures or partnerships with cable operators in the same market subject to four general exceptions, which include population density and competitive market tests. The FCC may waive the buyout restrictions if it determines that, because of the nature of the market served by the cable system or the telephone exchange facilities, the cable operator or LEC would be subject to undue economic distress by enforcement of the restrictions; the system or LEC facilities would not be economically viable if the provisions were enforced; the anticompetitive effects of the proposed transaction clearly would be outweighed by the public interest in serving the community; and the local franchising authority approves the waiver. The FCC has imposed limits on the number of cable systems that a single cable operator may own. In general, no cable operator may hold an attributable interest in cable systems that pass more than 30% of all homes nationwide. Attributable interests for these purposes include voting interests of 5% or more (unless there is another single holder of more than 50% of the voting stock), officerships, directorships and general partnership interests. The FCC has stayed the effectiveness of these rules pending the outcome of the appeal of the United States District Court decision holding the multiple ownership limit restrictions of the 1992 Cable Act unconstitutional. FOREIGN OWNERSHIP RESTRICTION. The Communications Act restricts the extent to which non-U.S. citizens may have ownership or control rights in certain categories of licenses issued by the FCC. Licenses subject to these restrictions (the "Restricted Licenses") include broadcast licenses, common carrier radio licenses (such as common carrier point-to-point microwave licenses), and commercial mobile radio service ("CMRS") licenses (such as cellular telephone, paging and personal communications service ("PCS") licenses). Section 310(b)(4) of the Communications Act provides that, absent a specific public interest determination by the FCC, a corporation may not control the licensee of any of these restricted licenses if non-U.S. citizens hold more than 25% of the ownership or voting rights of the corporation. (Different and more restrictive standards apply if non-U.S. entities hold interests directly in the licensee of a Restrictive License.) 26 30 Section 310(b)(4) precludes the Company from controlling any Restricted Licenses unless the Company obtains a public interest determination by the FCC that it may hold restricted licenses even though non-U.S. participation in the Company, including levels of non-U.S. ownership and voting rights, exceed the benchmarks under Section 310(b)(4). The FCC licenses commonly employed in cable television operations do not fall within the category of Restricted Licenses subject to the foreign ownership restrictions in Section 310(b) of the Communications Act. The category of Restricted Licenses, however, includes licenses commonly used in the provision of conventional and mobile telephone service, such as common carrier point-to-point microwave licenses, common carrier transmit satellite earth station licenses, cellular telephone licenses and PCS licenses. Although Section 310(b) restricts the control of Restricted Licenses by the Company due to BCI's investment in the Company, the Company may acquire carriage services from existing U.S. carriers holding these licenses to the extent that it finds a need for these communications links in the conduct of its business. In November 1995, the FCC issued its Report and Order in IB Docket No. 95-22, in which, among other things, the FCC adopted a new policy of considering the competitive opportunities provided to U.S. carriers in foreign markets as a basis for permitting corporations with foreign participation above the benchmarks of Section 310(b)(4) to control Restricted Licenses other than broadcast licenses. This policy may expand the opportunities for corporations with foreign participation above the Section 310(b)(4) benchmarks to obtain FCC approval allowing them to hold non-broadcast Restricted Licenses, provided that the home country of the non-U.S. participants provides effective competitive opportunities for U.S. carriers. PROGRAM ORIGINATION AND EXCLUSIVITY OBLIGATIONS. Cable television systems may originate programs and may present advertising subject to compliance with the FCC's regulations governing political broadcasts, political advertisements and sponsorship identification, and prohibitions on lotteries and obscene programming. FCC regulations currently require cable television systems located within 35 miles of a television market to delete syndicated programs on distant broadcast signals upon request of the copyright owner or the local station holding the exclusive rights to broadcast the same program within its television market. Similar blackout regulations also are applicable to network programming in which local network affiliates hold exclusive rights. COPYRIGHT MATTERS. The Copyright Act of 1976 grants cable television systems a "compulsory license" to carry distant television signals authorized by the FCC. In consideration for the compulsory license, cable television systems are required to pay royalties to the owners of the copyrighted material which is carried. These copyright royalty payments are based upon a percentage of a cable television system's gross revenues from basic subscriber service. Every cable television system must submit statements of account and royalty payments to the Copyright Office. The Copyright Act contains specific formulas for calculating the amount of the royalty fee. In general, under these formulas, the larger the system and the greater the number of distant signals carried, the greater will be the royalty fees. Failure to comply constitutes copyright infringement and may result in the imposition of fines and other penalties. The distribution of royalties is administered by the Library or Congress which will use arbitration panels to resolve royalty distribution disputes. 27 31 The possible simplification, modification or elimination of the compulsory license is the subject of continuing legislative review. Consequently, the nature or amount of future royalty payments for broadcast signal carriage cannot presently be predicted. The elimination or substantial modification of the cable compulsory license could adversely affect the Company's ability to obtain suitable programming and could substantially increase the cost of programming that would remain available for distribution to the Company's cable subscribers. Copyrighted music performed in programming supplied to cable television systems by pay cable networks (such as HBO) and cable programming networks (such as USA Network) has generally been licensed by the networks through private agreements with the American Society of Composers and Publishers ("ASCAP") and BMI, Inc. ("BMI"), the two major performing rights organizations in the United States. ASCAP and BMI offer "through to the viewer" licenses to the cable networks which cover the retransmission of the cable networks' programming by cable television systems to their customers. The cable industry has just concluded negotiations on licensing fees with BMI for the use of music performed in programs locally originated by cable television systems, although no actual agreements are in place; negotiations with ASCAP are ongoing. ASCAP has filed an infringement suit against several cable operators as representatives of cable systems using its music in the pay programming and cable programming networks provided to subscribers. STATE REGULATION. Several states have subjected cable television systems to the jurisdiction of state governmental agencies, some of which have exercised jurisdiction over transfers of control of cable systems, customer service standards and franchising requirements. Attempts in other states to so regulate cable television systems are continuing and can be expected to increase. LOCAL REGULATION. A cable television system is generally operated pursuant to a non-exclusive franchise or permit granted by the local governing body of the area to be served. Franchises are granted for a stated term, generally 10 to 15 years, and in many cases are cancelable for failure to comply with various conditions and limitations, including compliance with national, state and local safety and electrical codes, required rates of construction and conditions of service. Franchises usually call for the payment of fees to the granting authority. Some state and local regulations governing cable television systems may be subject to requirements imposed by the FCC and are also subject to the requirements imposed by Federal law. The FCC has generally preempted local regulation of the technical standards with which cable television systems must comply, and has recently implemented uniform standards for the industry. TECHNICAL AND REPORTING REQUIREMENTS. The FCC licenses radio, microwave and satellite facilities used by cable television systems. The FCC rules include technical standards for cable television systems with which all systems must comply. The FCC requires cable television systems to file annual reports pertaining to frequency usage, subscriber information and equal employment opportunity practices. The FCC has recently adopted new technical standards, and franchising authorities may not require cable television systems to adhere to standards that are stricter than those of the FCC. 28 32 REGULATORY FEES AND OTHER MATTERS. Pursuant to the dictates of the Communications Act, the FCC has adopted requirements for payment of annual "regulatory fees" by the various industries it regulates, including the cable television industry. Currently, cable television systems are required to pay regulatory fees which may be passed on to subscribers as "external cost" adjustments to rates for basic cable service. Effective September 18, 1995, the per subscriber fee increased from $0.37 per subscriber per year to $0.49. Fees for other FCC licenses increased as well, including licenses for business radio, cable television relay systems (CARS) and earth stations. Those fees however, may not be collected directly from subscribers. In addition, the FCC has adopted regulations pursuant to the 1992 Cable Act which require cable systems to permit customers to purchase video programming on a per-channel or a per-event basis without the necessity of subscribing to any tier of service, other than the basic service tier, unless the cable system is technically incapable of doing so. Generally cable systems must become technically capable of complying with the statutory obligation by December 2002. Consistent with its statutory obligations the FCC also has adopted a number of measures for improving compatibility between existing cable systems and consumer electronics equipment, including a prohibition from scrambling program signals carried on the basic tier, absent a waiver. The FCC also is considering whether to extend this prohibition to cover all regulated tiers of programming. MISCELLANEOUS PROVISIONS. The Communications Act specifically empowers the FCC to impose fines upon cable television system operators for willful or repeated violation of the FCC's rules and regulations. The FCC has adjudicatory authority over pole attachment disputes where a state has not asserted jurisdiction. The 1996 Cable Act extends the regulation of rates, terms and conditions of pole attachments to telecommunications service providers and requires the FCC to prescribe regulations to govern the charges for pole attachments used by telecommunications carriers to provide telecommunications services when the parties fail to resolve the dispute over such charges. The 1996 Cable Act, among other provisions, increases significantly future pole attachment rates for cable systems which used pole attachments in connection with the provision of telecommunications services as a result of a new rate formula charged to telecommunication carriers for the non-usable space of each pole. These rates are to be phased in after a five-year period. The 1996 Cable Act requires the FCC, in consultation with industry standard-setting organizations, to adopt regulations which would encourage commercial availability to consumers of all services offered by multichannel video programming distributors. The regulations adopted may not prohibit programming distributors from offering consumer equipment, so long as the cable operator's rates for such equipment are not subsidized by charges for the services offered. The rules also may not compromise the security of the services offered, or the efforts of service providers from preventing theft of service. The FCC may waive these rules so as not to hinder the development of advanced services and equipment. The 1996 Cable Act requires the FCC to examine the market for closed captioned programming and prescribe regulations which ensure that video programming, with certain exceptions, is fully accessible through closed captioning. In December 1994, the FCC announced that its long-standing Emergency Broadcast System rules were to be replaced. The new rules establish cable television and technical standards to support 29 33 a new Emergency Alert System. Cable operators must install and activate equipment necessary for the new system by July 1, 1997. The FCC has initiated a rulemaking to consider, among other issues, whether to adopt uniform regulations governing telephone and cable inside wiring. The regulations ultimately adopted by the FCC could affect the Company's ownership interests and access to inside wiring used to provide telephony and video programming services. In a related rulemaking proceeding, the FCC will consider the appropriate treatment of cable inside wiring in multiple dwelling unit buildings. The outcome of that rulemaking could affect cable operators' access to inside wiring in MDUs. ITEM 2. PROPERTIES The Company leases a portion of its executive offices from Jones Properties, Inc., a subsidiary of International. The offices consist of a 101,500 square foot office building located at 9697 East Mineral Avenue, Englewood, Colorado. This building was completed in July 1985. The lease has a 15-year term expiring in July 2000 with three 5-year renewal options at market rates existing at the beginning of the option period. The annual rent is currently $24.00 per square foot, plus operating expenses and will not, by the terms of the lease, exceed such amount during the remainder of the term. The Company subleases approximately 49% of the building to International and certain other affiliates on the same terms and conditions as the primary lease. The Company leases from Jones Panorama Properties, Inc., a wholly-owned subsidiary of the Company, an approximate 60,000 square foot office building (the "Panorama Falls Building") located at 9085 E. Mineral Avenue, Englewood, Colorado for a lease price of $12.00 per square foot. The Panorama Falls Building contains additional executive offices of the Company. The Company has subleased approximately 35% of the Panorama Falls Building to International and others on the same terms and conditions as the primary lease. CABLE TELEVISION SYSTEMS OWNED BY THE COMPANY 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 cable television systems owned by the Company. The monthly basic plus service rates set forth herein represent, with respect to systems with multiple headends, the basic plus service rate charged to the majority of the subscribers within the system. In cable television systems, basic subscribers can subscribe to more than one pay TV service. Thus, the total number of pay services subscribed to by basic subscribers are called pay units. As of December 31, 1995, the Company-owned cable television systems passed approximately 650,800 homes, representing an approximate 67% penetration rate. Figures for numbers of subscribers and homes passed are compiled from the Company's records and may be subject to adjustments. 30 34
ALEXANDRIA, VIRGINIA At 12/31/ At 5/31/ - -------------------- --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $23.33 $21.53 $21.53 $24.65 Basic subscribers 38,916 38,497 38,863 35,366 Pay units 32,510 32,590 32,524 29,797 ANNE ARUNDEL COUNTY, MARYLAND At 12/31/ At 5/31/ - ----------------------------- --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $22.85 $22.85 $21.95 $21.20 Basic subscribers 48,712 47,786 46,285 43,555 Pay units 43,895 42,590 41,682 38,004 At 12/31/1995 ------------- AUGUSTA, GEORGIA * - ---------------- Monthly basic plus service rate $23.98 Basic subscribers 84,146 Pay units 67,428
* In December 1995, the Augusta System (acquired by the Company in October 1995 from one of its managed limited partnerships) and the North Augusta System were combined.
AUGUSTA, GEORGIA At 5/31/ - ---------------- -------------------------------------- 1995 1994 1993 ---- ---- ---- Monthly basic plus service rate $23.20 $23.20 $23.20 Basic subscribers 66,950 65,339 63,758 Pay units 55,320 52,776 52,226 At Acquisition -------------- NORTH AUGUSTA, SOUTH CAROLINA At 5/31/ (12/15 - ----------------------------- --------------------- ------ 1995 1994 1993 ---- ---- ---- Monthly basic plus service rate $21.45 $21.45 $21.45 Basic subscribers 15,477 15,065 15,080 Pay units 10,157 9,680 7,221
31 35
CHARLES COUNTY, MARYLAND At 12/31/ At 5/31/ - ------------------------ --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $26.33 $24.80 $24.80 $23.59 Basic subscribers 23,285 22,702 21,690 20,784 Pay units 35,589 34,186 32,578 31,460 DALE CITY, VIRGINIA At Acquisition - ------------------- -------------- 11/29/95 -------- Monthly basic plus service rate $24.07 Basic subscribers 49,297 Pay units 44,935 HILO, HAWAII At 12/31/ At 5/31/ - ------------ --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $21.57 $21.57 $21.68 $21.45 Basic subscribers 17,289 17,140 16,696 15,924 Pay units 13,820 13,516 12,810 11,468 At 12/31/1995 ------------- JEFFERSON COUNTY, COLORADO * - -------------------------- Monthly basic plus service rate $23.06 Basic subscribers 26,954 Pay units 26,666
* The Clear Creek County and Jefferson County Systems have been combined.
CLEAR CREEK, COLORADO At 5/31/ - --------------------- -------------------------------------- 1995 1994 1993 ---- ---- ---- Monthly basic plus service rate $21.97 $21.97 $22.60 Basic subscribers 1,587 1,585 1,537 Pay units 933 948 981 JEFFERSON COUNTY/ EVERGREEN, COLORADO At 5/31/ - ------------------- -------------------------------------- 1995 1994 1993 ---- ---- ---- Monthly basic plus service rate $23.06 $22.06 $21.25 Basic subscribers 24,538 23,027 21,613 Pay units 25,069 24,880 22,687
32 36
KENOSHA, WISCONSIN At 12/31/ At 5/31/ - ------------------ --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $19.94 $19.94 $21.18 $22.95 Basic subscribers 28,131 27,056 25,047 23,188 Pay units 20,554 18,937 18,175 17,934 OXNARD, CALIFORNIA At 12/31/ At 5/31/ - ------------------ --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $19.15 $19.15 $20.00 $23.95 Basic subscribers 39,101 39,032 37,338 35,953 Pay units 26,751 25,952 23,851 22,237 PANAMA CITY BEACH, FLORIDA At 12/31/ At 5/31/ - -------------------------- --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $21.10 $21.10 $21.20 $21.20 Basic subscribers* 7,380 7,893 8,406 7,984 Pay units** 6,285 5,966 9,399 5,522
* During 1995, the Panama City Beach System has lost subscribers to an overbuilder. (See Item 1, Competition.) ** The number of pay units in the Panama City Beach System has fluctuated during fiscal years 1994 and 1995 due to pay unit marketing promotions. These marketing promotions resulted in periodic increases in pay units, followed by decreases in pay units upon the expiration of the promotional period.
PIMA COUNTY, ARIZONA At 12/31/ At 5/31/ - -------------------- --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $24.00 $24.00 $22.50 $23.20 Basic subscribers 56,512 53,279 49,311 46,739 Pay units 35,532 35,084 32,442 30,529 WALNUT VALLEY, CALIFORNIA At 12/31/ At 5/31/ - ------------------------- --------- -------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- Monthly basic plus service rate $23.75 $22.06 $22.74 $23.75 Basic subscribers 18,944 18,669 17,790 17,193 Pay units 13,321 13,290 13,097 13,375
33 37 ITEM 3. LEGAL PROCEEDINGS Alexandria Litigation On February 22, 1994, the Company and The Jones Group, Ltd. (the "Jones Group"), a subsidiary of the Company engaged in the cable television system brokerage business, were named as defendants in a lawsuit brought by three individuals who are Class A Unitholders in Jones Intercable Investors, L.P. (the "Partnership"), a master limited partnership in which the Company is general partner. The litigation, entitled Luva Vaughan et al v. Jones Intercable, Inc. et al, Case No. CV 94-3652, was filed in the Circuit Court for Jackson County, Missouri, and purports to be "for the use and benefit of" the Partnership. As originally filed, the suit sought rescission of the sale of the Alexandria, Virginia cable television system (the "Alexandria System") by the Partnership to the Company, which sale was completed on November 2, 1992. It also sought a constructive trust on the profits derived from the operation of the Alexandria System since the date of the sale and an accounting and other equitable relief. The plaintiffs also alleged that the $1,800,000 commission paid to Jones Group by the Partnership in connection with such sale was improper, and asked the Court to order that such commission be repaid to the Partnership. Under the terms of the partnership agreement of the Partnership, the Company has the right to acquire cable television systems from the Partnership at a purchase price equal to the average of three independent appraisals of the cable television system to be acquired. The plaintiffs claim that the appraisals obtained in connection with the sale of the Alexandria System were improperly obtained, were not made by qualified appraisers and were otherwise improper. The purchase price paid by the Company upon such sale was approximately $73,200,000. The amount of damages being sought by the plaintiffs has not been specified. On October 21, 1994, plaintiffs filed a motion to dismiss Jones Group in response to Jones Group's argument that Missouri lacked personal jurisdiction over it. Plaintiffs' motion was granted, and plaintiffs then filed an action in Colorado against Jones Group seeking a return of the brokerage commission. The Company and Jones Group filed motions for summary judgment in the Missouri and Colorado cases, respectively. The Missouri court granted the Company's motion in part and dismissed all counts of the complaint for rescission. It also struck the plaintiffs' jury demand. The Colorado court also granted Jones Group's motion in part finding that the payment of the brokerage commission was not a breach of the partnership agreement, but leaving for trial the issue of whether such payment constituted a breach of fiduciary duty. Subsequently, the plaintiffs have filed an amended complaint in the Missouri case, recasting their allegations in terms of breach of contract, common law fraud, conversion and breach of fiduciary duty. The plaintiffs have reasserted their right to a jury trial. On October 4, 1995, the Court granted the Company's motion for summary judgment on the common law fraud, conversion and breach of fiduciary duty claims and also struck plaintiffs' demand for a jury trial. As a result, 34 38 there is only one remaining substantive claim (breach of contract); no claim for punitive damages; and the trial will be to the Court commencing on April 29, 1996. On October 25, 1995, plaintiffs and Jones Group filed, in the Colorado action, a joint motion to stay the Colorado action until the resolution of the Missouri action. The motion to stay is pending before the Colorado court. The Company has conducted written discovery in the form of interrogatories and requests for production of documents; has noticed the depositions of plaintiffs and plaintiffs' expert and has retained an expert to testify that the three appraisals were performed in accordance with standard appraisal methodologies. Although plaintiffs have retained an "expert" appraiser to testify that the value of the Alexandria System in November 1992 was $85 million, approximately $12 million more than the purchase price, the Company believes both that the purchase price was fair and that the brokerage commission was properly paid to Jones Group in accordance with the express terms of the partnership agreement. Consequently, the Company intends to defend the litigation at trial in April 1996. Tampa Litigation In August 1995, Cable TV Fund 12-BCD Venture (the "Venture"), a Colorado joint venture in which Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Colorado limited partnerships, are general partners, entered into a purchase and sale agreement pursuant to which the Venture agreed to sell its Tampa, Florida cable television system (the "Tampa System") to the Company. The Company is the general partner of each of Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. The Company subsequently assigned its rights and obligations under the purchase and sale agreement to JCH. JCH acquired the Tampa System on February 28, 1996, and the Tampa System, together with other systems owned by JCH, was exchanged for systems owned by an unaffiliated cable television operator on February 29, 1996. See Item 1, Recent Acquisitions of Cable Television Systems and Recent Exchange of Cable Television Systems. On September 20, 1995, a civil action entitled David Hirsch, on behalf of himself and all others similarly situated, Plaintiff vs. Jones Intercable, Inc., Defendant, was filed in the District Court, County of Arapahoe, State of Colorado (Case No. 95-CV-1800). The plaintiff has brought the action as a class action on behalf of himself and all other limited partners of Cable TV Fund 12-D, Ltd. ("Fund 12-D") against the Company seeking to recover damages caused by the Company's alleged breaches of its fiduciary duties to the limited partners of Fund 12-D in connection with the sale of the Tampa System. On January 25, 1996, the plaintiff filed an amended complaint and request for a jury trial. On February 20, 1996, the Company filed a Motion to Dismiss the Complaint on the ground that it fails to state a claim upon which relief can be granted as a matter of law. The Company believes that it has meritorious defenses, and the Company intends to defend this lawsuit vigorously. On November 17, 1995, a civil action entitled Martin Ury, derivatively on behalf of Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Plaintiff vs. Jones Intercable, Inc., Defendant and Cable TV Fund 12-BCD Venture, Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Nominal Defendants, was filed in the District Court, 35 39 County of Arapahoe, State of Colorado (Case No. 95-CV-2212). The plaintiff, a limited partner of Fund 12-D, has brought the action as a derivative action on behalf of the three partnerships that comprise the Venture against the Company seeking to recover damages caused by the Company's alleged breaches of its fiduciary duties to the Venture and to the limited partners of the three partnerships that comprise the Venture in connection with the sale of the Tampa System and the subsequent exchange of the Tampa System with an unaffiliated cable television operator in return for systems owned by that operator. On February 1, 1996, the Company filed a Motion to Dismiss the Complaint on the ground that it fails to state a claim upon which relief can be granted as a matter of law. The Company believes that it has meritorious defenses, and the Company intends to defend this lawsuit vigorously. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE COMPANY Glenn R. Jones 66 Chairman of the Board and Chief Executive Officer James B. O'Brien 46 President Ruth E. Warren 46 Group Vice President/Operations Kevin P. Coyle 44 Group Vice President/Finance Christopher J. Bowick 40 Group Vice President/Technology George H. Newton 61 Group Vice President/Telecommunications Timothy J. Burke 45 Group Vice President/Taxation/Administration Raymond L. Vigil 49 Group Vice President/Human Resources Cynthia A. Winning 44 Group Vice President/Marketing Elizabeth M. Steele 44 Vice President/General Counsel/Secretary Larry W. Kaschinske 36 Controller
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and Chief Executive Officer of the Company since its formation in 1970, and he was President from June 1984 until April 1988. Mr. Jones was elected a member of the Executive Committee of the Board of Directors in April 1985. Mr. Jones is the sole shareholder, President and Chairman of the Board of Directors of Jones International, Ltd. He is also Chairman of the Board of Directors of the subsidiaries of the Company and of certain other affiliates of the Company. Mr. Jones was appointed Vice Chairman of the Board of Directors of Bell Canada International Inc. in February 1995. Mr. Jones has been involved in the cable television business in various capacities since 1961, is a past and present member of the Board of Directors and the Executive Committee of the National Cable Television Association. He also is on the Executive Committee of Cable in the Classroom, an organization dedicated to education via cable. Additionally, in March 1991, Mr. Jones was appointed to the Board of Governors for the American Society for Training and Development, and in November 1992 to the 36 40 Board of Education Council of the National Alliance of Business. Mr. Jones is also a founding member of the James Madison Council of the Library of Congress. Mr. Jones is a past director and member of the Executive Committee of C- Span. Mr. Jones has been the recipient of several awards including the Grand Tam Award in 1989, the highest award from the Cable Television Administration and Marketing Society; the Chairman's Award from the Investment Partnership Association, which is an association of sponsors of public syndications; the cable television industry's Public Affairs Association President's Award in 1990, the Donald G. McGannon award for the advancement of minorities and women in cable; the STAR Award from American Women in Radio and Television, Inc. for exhibition of a commitment to the issues and concerns of women in television and radio; the Women in Cable Accolade in 1990 in recognition of support of this organization; the Most Outstanding Corporate Individual Achievement award from the International Distance Learning Conference; the Golden Plate Award from the American Academy of Achievement for his advances in distance education; the Man of the Year named by the Denver chapter of the Achievement Rewards for College Scientists; and in 1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame. Mr. James B. O'Brien, the Company's President, joined the Company in January 1982. Prior to being elected President and a Director of the Company in December 1989, Mr. O'Brien served as a Division Manager, Director of Operations Planning/Assistant to the CEO, Fund Vice President and Group Vice President/Operations. Mr. O'Brien was appointed to the Company's Executive Committee in August 1993. As President, he is responsible for the day-to-day operations of the cable television systems managed and owned by the Company. Mr. O'Brien is also President and a Director of Jones Cable Group, Ltd., Jones Global Funds, Inc. and Jones Global Management, Inc., all affiliates of the Company. Mr. O'Brien is a board member of Cable Labs, Inc., the research arm of the U.S. cable television industry. He also serves as a director of the Cable Television Administration and Marketing Association and as a director of the Walter Kaitz Foundation, a foundation that places people of ethnic minority groups in positions with cable television systems, networks and vendor companies. Ms. Ruth E. Warren joined the Company in August 1980 and has served in various operational capacities, including system manager and Fund Vice President, since then. Ms. Warren was elected Group Vice President/Operations of the Company in September 1990. Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice President/Financial Services. In September 1985, he was appointed Senior Vice President/Financial Services. He was elected Treasurer of the Company in August 1987, Vice President/Treasurer in April 1988 and Group Vice President/Finance and Chief Financial Officer in October 1990. Mr. Christopher J. Bowick joined the Company in September 1991 as Group Vice President/Technology and Chief Technical Officer. Previous to joining the Company, Mr. Bowick worked for Scientific Atlanta's Transmission Systems Business Division in various technical management capacities since 1981, and as Vice President of Engineering since 1989. Mr. George H. Newton joined the Company in January 1996 as Group Vice President/Telecommunications. Prior to joining the Company, Mr. Newton was President of his 37 41 own consulting business, Clear Solutions, and since 1994 Mr. Newton has served as a Senior Advisor to Bell Canada International. From 1990 to 1993, Mr. Newton served as the founding Chief Executive Officer and Managing Director of Clear Communications, New Zealand, where he established an alternative telephone company in New Zealand. From 1964 to 1990, Mr. Newton held a wide variety of operational and business assignments with Bell Canada International. Mr. Timothy J. Burke joined the Company in August 1982 as corporate tax manager, was elected Vice President/Taxation in November 1986 and Group Vice President/Taxation/Administration in October 1990. Mr. Raymond L. Vigil joined the Company in June 1993 as Group Vice President/Human Resources. Previous to joining the Company, Mr. Vigil served as Executive Director of Learning with USWest. Prior to USWest, Mr. Vigil worked in various human resources posts over a 14-year term with the IBM Corporation. Ms. Cynthia A. Winning joined the Company as Group Vice President/Marketing in December 1994. Previous to joining the Company, Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a sports and event marketing company. From 1979 to 1981 and from 1986 to 1994, Ms. Winning served as the Vice President and Director of Marketing for Citicorp Retail Services, Inc., a provider of private-label credit cards for ten national retail department store chains. From 1981 to 1986, Ms. Winning was the Director of Marketing Services for Daniels & Associates cable television operations, as well as the Western Division Marketing Director for Capital Cities Cable. Ms. Winning also serves as a board member of Cities in Schools, a dropout intervention/prevention program. Ms. Elizabeth M. Steele joined the Company in August 1987 as Vice President/General Counsel and Secretary. From August 1980 until joining the Company, Ms. Steele was an associate and then a partner at the Denver law firm of Davis, Graham & Stubbs, which serves as counsel to the Company. Mr. Larry Kaschinske joined the Company in 1984 as a staff accountant in the Company's former Wisconsin Division, was promoted to Assistant Controller in 1990 and named Controller in August 1994. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock and Class A Common Stock are traded in the over-the-counter market and authorized for quotation on the National Market System operated by the National Association of Securities Dealers, Inc. (NASDAQ), under the following symbols: Common Stock - JOIN Class A Common Stock - JOINA 38 42 The following table shows the high and low prices as quoted on the NASDAQ/National Market System for each quarterly period of calendar years ended December 31, 1995 and 1994 for each class of the Company's stock:
Common Stock Class A Common Stock ------------ -------------------- Calendar Year Ended 12/31/95 High Low High Low ---- --- ---- --- First Quarter 17 1/2 11 7/8 17 1/2 12 Second Quarter 16 1/4 13 1/2 16 1/2 12 7/8 Third Quarter 16 1/4 14 5/8 15 1/2 13 3/8 Fourth Quarter 14 1/2 13 3/4 14 13 1/4 Common Stock Class A Common Stock ------------ -------------------- Calendar Year Ended 12/31/94 High Low High Low ---- --- ---- --- First Quarter 17 1/2 13 3/8 18 13 1/2 Second Quarter 14 3/4 10 3/4 14 3/4 11 Third Quarter 15 7/8 11 7/8 15 3/8 12 Fourth Quarter 15 1/2 11 3/8 15 1/8 11 3/8
At December 31, 1995, the Common Stock and Class A Common Stock of the Company were held of record by 793 and 1,524 shareholders, respectively. The Company has never paid a cash dividend with respect to its shares of Common Stock or Class A Common Stock, and it has no present intention to pay cash dividends in the foreseeable future. The current policy of the Company's Board of Directors is to retain earnings to provide funds for the operation and expansion of its business. Future dividends, if any, will be determined by the Board of Directors in light of the circumstances then existing, including the Company's earnings and financial requirements and general business conditions. If cash dividends are paid in the future, the holders of the Class A Common Stock will be paid $.005 per share per quarter in addition to the amount payable per share of Common Stock. Such additional dividends on the Class A Common Stock are not cumulative but would be adjusted appropriately if cash dividends are declared with respect to a period other than a quarterly period. Certain of the Company's credit arrangements restrict the right of the Company to declare and pay cash dividends without the consent of the holders of the debt. 39 43 Item 6. Selected Financial Data The Company changed its fiscal year end from May 31 to December 31, effective December 31, 1995. The following table sets forth selected financial data regarding the Company's financial position and operating results restated to reflect the change in fiscal year end. This data should be read in conjunction with the Company's consolidated financial statements and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing in Item 7.
1995 1994 1993 1992 1991 --------- --------- -------- -------- ------- (in thousands except per share data) REVENUES: Cable Television Revenue Subscriber service fees $ 135,350 $ 103,335 $ 99,438 $ 82,033 $ 78,243 Management fees 21,462 17,952 17,255 16,820 15,709 Distributions from managed partnerships - - - - 26,790 Non-cable Revenue 32,026 10,602 7,624 6,943 4,774 --------- --------- -------- -------- ------- TOTAL REVENUES 188,838 131,889 124,317 105,796 125,516 --------- --------- -------- -------- ------- COSTS AND EXPENSES: Cable Television Expenses Operating expenses 77,638 55,196 54,307 38,579 41,388 General and administrative 8,284 8,120 10,034 9,304 4,985 Non-cable operating, general and administrative 32,382 11,810 7,989 6,793 5,747 Depreciation and amortization 55,805 45,585 43,328 39,597 40,541 --------- --------- -------- -------- ------- OPERATING INCOME $ 14,729 $ 11,178 $ 8,659 $ 11,523 $ 32,855 ========= ========= ======== ======== ======= INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS $ (21,024) $ (8,691) $ (36,066) $ (26,308) $ 6,371 INCOME TAX BENEFIT (PROVISION) - - - - - --------- --------- -------- -------- ------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS (21,024) (8,691) (36,066) (26,308) 6,371 Extraordinary items- Gain (loss) on early extinguishment of debt (692) - (12,781) (11,409) 6,036 Cumulative effect of change in accounting method- Change in method of accounting for income taxes - - - 3,862 - --------- --------- -------- -------- ------- NET INCOME (LOSS) $ (21,716) $ (8,691) $ (48,847) $ (33,855) $ 12,407 ========= ========= ======== ======== ======= PRIMARY EARNINGS (LOSS) PER SHARE: Income (loss) before extraordinary items $ (.67) $ (.45) $ (2.16) $ (2.05) $ .53 Extraordinary items (.02) - (.76) (.88) .50 Accounting change - - - .30 - --------- --------- -------- -------- ------- $ (.69) $ (.45) $ (2.92) $ (2.63) $ 1.03 ========= ========= ======== ======== ======= WEIGHTED AVERAGE SHARES OUTSTANDING: Primary 31,270 19,517 16,728 12,849 12,010 ========= ========= ======== ======== ======= TOTAL ASSETS $ 860,499 $ 608,289 $ 434,298 $ 434,670 $ 364,342 ========= ========= ======== ======== ======= TOTAL DEBT $ 492,714 $ 281,578 $ 372,908 $ 382,245 $ 311,855 ========= ========= ======== ======== ======= SHAREHOLDERS' INVESTMENT $ 292,795 $ 271,284 $ 17,503 $ 13,996 $ 29,696 ========= ========= ======== ======== =======
40 44 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Revenues The Company derives its revenues from four primary sources: subscriber fees from Company-owned cable television systems, management fees from revenues earned by managed limited partnerships, fees and distributions payable upon the sale of cable television properties owned by managed limited partnerships and revenues from non-cable television subsidiaries. Total revenues for the year ended December 31, 1995 totaled $188,838,000, an increase of $56,949,000, or 43%, over the total of $131,889,000 for the year ended December 31, 1994. This increase reflects the Company's acquisition of the assets of Jones Spacelink, Ltd. ("Spacelink") on December 20, 1994, the purchase of the cable television system serving areas in and around Augusta, Georgia (the "Augusta System") on October 20, 1995, the purchase of the cable television system serving areas in and around Dale City, Virginia (the "Dale City System") on November 29, 1995 and were offset, in part, by the sale of the Company's Gaston County, North Carolina cable television system (the "Gaston System") on July 22, 1994 (the "Purchase and Sale Transactions"). Disregarding the effect of the Purchase and Sale Transactions, total revenues would have increased $10,898,000, or 9%. The Company's subscriber service fees increased $32,015,000, or 31%, to $135,350,000 in 1995 from $103,335,000 in 1994. The effect of the Purchase and Sale Transactions accounted for $22,865,000, or 71%, of this increase. Disregarding the effect of the Purchase and Sale Transactions, subscriber service fees would have increased $8,068,000, or 8%. This increase was due primarily to an increase in the number of basic subscribers and basic service rate adjustments in the cable television systems owned by the Company. The Company receives management fees generally equal to 5% of the gross operating revenues of its managed partnerships. Management fees totaled $21,462,000 for 1995, an increase of $3,510,000, or 20%, over the total of $17,952,000 reported in 1994. The growth of management fee revenue is the result of the acquisition of Spacelink's assets, which included general partner interests in a number of limited partnerships, as well as increases in operating revenues of the Company's managed partnerships. Partnership revenues increased as a result of increases in basic subscribers, increases in advertising sales revenue and basic service rate adjustments. Disregarding the effect of the Spacelink transaction, management fees increased approximately 10%. In its capacity as the general partner of its managed partnerships, the Company also receives revenues in the form of distributions upon the sale of cable television properties owned by such partnerships. No such revenues were recognized during the years ended December 31, 1995, 1994 or 1993. The general partner distribution received by the Company as a result of the sale of the Augusta System by Fund 12-B in October 1995 was recorded as a reduction in the basis of the assets of the Augusta System due to the Company's continuing interest in the Augusta System. The Company also operates certain non-cable subsidiaries. Such subsidiaries include Jones Satellite Programming, Inc. ("JSP"), a distributor of satellite programming to satellite dish owners; Jones Futurex, Inc. ("Futurex"), a manufacturer of various electronic components; and Jones Satellite Networks, Inc. ("JSN"), a distributor of radio programming to radio stations. Futurex and JSN were acquired as part of the acquisition of Spacelink's assets. Non-cable revenue totaled $32,026,000 in 1995, an increase of $21,424,000, or 202%, over the $10,602,000 recorded in 1994. The acquisition of Futurex and JSN accounted for 79% of this increase. The remainder of this increase was due to an increase in the revenue of JSP. 41 45 Costs and Expenses Operating, general and administrative expenses consist primarily of costs associated with the administration of Company-owned cable television systems, the administration of managed partnerships and the administration of the non-cable television entities. The Company is reimbursed by its managed partnerships for costs associated with the administration of the partnerships. The principal administrative cost components are salaries paid to corporate and system personnel, programming expenses, professional fees, subscriber billing costs, data processing costs, rent for leased facilities, cable system maintenance expenses and consumer marketing expenses. Cable operating expenses increased $22,442,000, or 41%, to $77,638,000 in 1995 compared to $55,196,000 in 1994. The Purchase and Sale Transactions accounted for $13,954,000, or 62%, of this increase. Disregarding the effect of the Purchase and Sale Transactions, cable operating expense would have increased $6,406,000, or 12%. This increase was due primarily to increases in premium and satellite programming costs. Cable general and administrative expense increased $164,000, or 2%, to $8,284,000 in 1995 from $8,120,000 in 1994. Disregarding the effect of the Purchase and Sale Transactions, cable general and administrative expenses decreased $718,000, or 9%. This decrease was due primarily to the fact that the Company paid no transponder fees to Jones Earth Segment, Inc. in 1995. The remainder of the decrease is due to a reduction in general and administrative expense. Non-cable operating, general and administrative expense increased $20,572,000, or 174%, to $32,382,000 in 1995 from $11,810,000 in 1994. The acquisition of Futurex and JSN accounted for this increase. Depreciation and amortization expense increased $10,220,000, or 22%, to $55,805,000 in 1995 from $45,585,000 in 1994. The effect of the Purchase and Sale Transactions, as well as capital additions in 1995, were responsible for this increase. Operating Income Operating income increased $3,551,000, or 32%, to $14,729,000 in 1995 from $11,178,000 in 1994, due to the factors discussed above. The cable television industry generally measures the performance of a cable television system in terms of cash flow or operating income before depreciation and amortization. The value of a cable television system is often determined using multiples of cash flow. This measure is not intended to be a substitute or improvement upon the items disclosed on the financial statements, rather it is included because it is an industry standard. Operating income before depreciation and amortization increased $13,771,000, or 24%, to $70,534,000 in 1995 from $56,763,000 in 1994. Disregarding the effect of the Purchase and Sale Transactions, operating income before depreciation and amortization would have increased $5,218,000, or 10%. Other Income (Expense) Interest expense increased $12,669,000, or 34%, to $49,552,000 in 1995 from $36,883,000 in 1994. This increase was due primarily to interest on the $200 million of Senior Notes sold in March 1995 which was offset, in part, by a decrease in interest expense on the Company's credit facility due to lower outstanding balances. 42 46 In 1995, the Company recorded net equity in the losses of affiliates totaling $58,000 compared to $3,707,000 in 1994. The Company recognized equity in the losses of its managed partnerships, Mind Extension University, IDS/Jones Joint Venture Partners and Jones Customer Service Management, LLC. Such losses were offset, in part, by equity in the net income of Jones Intercable Investors, L.P. and Jones Global Group, Inc. ("JGG"). JGG, an affiliate of which the Company owns a 38% interest, recognized gains on the sale of certain of JGG's Bell Cablemedia ADSs. Interest income increased $8,497,000, or 144%, to $14,383,000 in 1995 from $5,886,000 in 1994. This increase was due to the increase in the Company's cash on hand during the year, prior to the acquisition of the Augusta System and the Dale City System, from the Bell Canada International Inc. investment in December 1994 and the sale of $200 million of Senior Notes in March 1995. The Company recorded a gain of $15,496,000 in July 1994 on the sale of its Gaston System. No similar gain was recognized during 1995. The Company recognized a loss of $692,000 in 1995 related to the redemption of its 7.5% Convertible Subordinated Debentures. No similar loss was recognized in 1994. Net loss increased $13,025,000, or 150%, to $21,716,000 in 1995 from $8,691,000 in 1994. This increase was primarily due to the gain recognized in 1994 on the sale of the Gaston System. The Company anticipates the continued recognition of operating income prior to depreciation and amortization charges, but net losses resulting from depreciation, amortization and interest expenses may continue in the future. To the extent the Company recognizes general partner distributions from its managed partnerships and/or gains on the sale of Company-owned systems in the future, such losses may be reduced or eliminated; however, there is no assurance as to the timing or recognition of these distributions or sales. Year Ended December 31, 1994 Compared to Year Ended December 31, 1993 Revenues Total revenues for the year ended December 31, 1994 increased $7,572,000, or 6%, to $131,889,000 in 1994 from $124,317,000 in 1993. An increase in the revenues of JSP accounted for approximately 39% of this increase. Increases in the number of basic subscribers and advertising revenue accounted for 41% of this increase. The net effect of the purchase of the North Augusta System and the sales of the Gaston System and the Company's cable television system serving areas around San Diego, California (the "San Diego System") accounted for approximately 11% of this increase. The increase in revenue would have been greater but for the effect of the reduction in basic rates due to rate regulations issued by the FCC in implementing the 1992 Cable Act. In 1994, the Company's subscriber service fees increased $3,897,000, or 4%, from $99,438,000 in 1993 to $103,335,000 in 1994. The net effect of the purchase of the North Augusta System and the sale of the Gaston System and the San Diego System accounted for 21% of this increase. The remainder of this increase was due to increases in subscribers and advertising sales revenue. Management fees increased approximately 4%, from $17,255,000 in 1993 to $17,952,000 in 1994. Partnership revenues increased as a result of increases in the number of basic subscribers in partnership systems as well as increases in revenues from pay-per-view, advertising sales and the installation of service. These increases somewhat mitigated the effect of the reduction in basic rates by the Company's managed partnerships due to the FCC's basic rate regulations. 43 47 Non-cable revenue increased $2,978,000, or 39%, from $7,624,000 in 1993 to $10,602,000 in 1994. This increase was due to an increase in the revenues of JSP. Costs and Expenses For the year ended December 31, 1994, cable operating expenses increased $889,000, or 2%, from $54,307,000 in 1993 to $55,196,000 in 1994. This increase was due primarily to increases in satellite programming fees and premium service programming fees. For the year ended December 31, 1994, cable general and administrative expense decreased $1,914,000, or 19%, from $10,034,000 in 1993 to $8,120,000 in 1994. This decrease was due to a decrease in transponder fees paid to Jones Earth Segment, Inc. In addition, the Company recognized non-cash compensation expense related to the grant of certain stock options in 1993. No such expense was recognized in 1994. For the year ended December 31, 1994, non-cable operating, general and administrative expenses increased $3,821,000, or 48%, from $7,989,000 in 1993 to $11,810,000 in 1994. This increase was due to increases in the expenses of JSP, which consist primarily of programming costs. Depreciation and amortization expense increased $2,257,000, or 5%, for the year ended December 31, 1994 totaling $45,585,000 in 1994 and $43,328,000 in 1993. This increase was due to the purchase of the North Augusta System and to capital additions in 1994. Operating Income Operating income increased $2,519,000, or 29%, to $11,178,000 in 1994 from $8,659,000 in 1993. This increase was due primarily to the decrease in general and administrative expenses. Operating income before depreciation and amortization increased $4,776,000, or 9%, to $56,763,000 in 1994 from $51,987,000 in 1993. Disregarding the net effect of the purchase of the North Augusta System and the sale of the Gaston System and the San Diego System, operating income before depreciation and amortization increased 8%. Other Income (Expense) Interest expense decreased $3,897,000, or 10%, to $36,883,000 in 1994 from $40,780,000 in 1993. This decrease was due primarily to the redemption of the remaining $138,000,000 principal amount of the Company's 13% Subordinated Debentures due 2000 in May 1993. The effect of this redemption was somewhat mitigated by an increase in interest expense as a result of higher balances outstanding on the Company's revolving credit facility. Equity in losses of affiliated entities decreased $110,000, or 3%, from $3,817,000 in 1993 to $3,707,000 in 1994. Interest income increased $1,967,000, or 50%, for the year ended December 31, 1994 from $3,919,000 in 1993 to $5,886,000 in 1994. This increase was due to higher average balances outstanding from certain managed partnerships as well as interest income earned on advances made to Mind Extension University, Inc. The Company recognized a $15,496,000 gain on the sale of its Gaston System in 1994. In 1993, the Company recognized a $3,231,000 loss on the sale of its San Diego System. 44 48 In 1993, the Company recognized a loss on the early extinguishment of debt totaling $12,781,000. No similar loss was recognized in 1994. For the year ended December 31, 1994, net loss decreased $40,156,000, from $48,847,000 in 1993 to $8,691,000 in 1994. This decrease was due primarily to the effect of the gain on the Gaston System, the loss of the San Diego System and the loss on early extinguishment of debt. Regulatory Matters As a result of rate orders issued by the FCC, cost-of-service showings have been filed for the following Company-owned cable television systems: Jefferson County, Colorado; Charles County, Maryland; Dale City, Virginia; Manassas, Virginia; Pima County, Arizona; Alexandria, Virginia; and Augusta, Georgia. For these systems, the Company anticipates no further reductions in revenues or operating income before depreciation and amortization resulting from the FCC's rate regulations. The cost-of-service showings have not yet received final approval from franchising authorities, however, and there can be no assurance that the cost-of-service showings will prevent further rate reductions until such final approvals are received. On January 31, 1996, Congress passed the Telecommunications Competition and Deregulation Act of 1996 (the "1996 Act") which substantially revised the federal laws regulating the Company's cable television business. The President signed the 1996 Act into law on February 8, 1996. Among other things, the 1996 Act promotes increased competition from the delivery of video, data and other services by local telephone companies (also known as local exchange carriers or "LECs") and others, permits cable television operators to provide local voice and data communications services and deregulates the customer programming service rates of smaller operations upon enactment and other operators in 1999. The 1996 Act allows telephone companies to provide cable television services within their telephone service areas operating as conventional cable systems, or "open video systems" that afford access to other video providers. Telephone companies offering stand-alone cable television service or cable television service in connection with an open video system could provide substantial competition to the Company's owned and managed systems. The 1996 Act also permits entities to provide local telecommunications services in competition with the LECs. The 1996 Act establishes local exchange competition as a national policy by preempting laws that prohibit competition in the local exchange and establishes uniform requirements and standards for entry, competitive carrier interconnection and unbundling of LEC monopoly services. One premise of the 1996 Act is that additional regulatory flexibility for LECs is necessary to allow them to respond to competition. Depending on the degree and form of regulatory flexibility afforded the LECs, the Company's ability to compete to provide telephony services may be adversely affected. FINANCIAL CONDITION The Company historically has grown by acquiring and developing cable television systems for both itself and its managed limited partnerships, primarily in suburban areas with attractive demographic characteristics. The Company intends to liquidate its Company-managed limited partnerships as opportunities for sales of partnership cable television systems arise in the marketplace over the next several years. The Company is implementing a balanced strategy of acquiring cable television systems from Company-managed limited partnerships and from third parties. As part of this process, certain systems owned by the Company and its managed partnerships may be sold to third parties and Company-owned systems may be exchanged for systems owned by other cable system operators. It is the Company's plan to cluster its cable television properties, to the extent feasible, in geographic areas. Clustering systems may enable the Company to obtain operating efficiencies, and it should position the Company to capitalize on new revenue and business opportunities as the telecommunications industry evolves. The Company also intends to maintain and enhance the value of its current cable television systems through capital 45 49 expenditures. Such expenditures will include, among others, cable television plant extensions and the upgrade and rebuild of certain systems. The Company also intends to institute new services as they are developed and become economically viable. Acquisitions of cable television systems, the development of new services and capital expenditures for system extensions and upgrades are subject to the availability of cash generated from operations, debt and/or equity financing. The capital resources to accomplish these strategies are expected to be provided by the sale of debt and/or equity securities (subject to market conditions), borrowings under the Company's $500 million revolving credit facility and cash generated from the Company's operating activities. In addition, the Company may explore other financing options such as private equity capital and/or the sale of non-strategic assets. There can be no assurance that the capital resources necessary to accomplish the Company's acquisition and development plans will be available on terms and conditions acceptable to the Company, or at all. In conjunction with the Company's acquisition strategy, the Company purchased the cable television systems serving areas in and around Augusta, Georgia (the "Augusta System") in October 1995, Dale City, Virginia (the "Dale City System") in November 1995 and Manassas, Virginia (the "Manassas System") in January 1996. These transactions are described in detail in Note 2 of the Notes to Consolidated Financial Statements. The $129,396,000 of capital required to purchase the Augusta System, which represents the purchase price of $142,618,000 less the Company's general partner distribution of approximately $13,222,000, was provided by cash on hand. The $123,000,000 of capital required to purchase the Dale City System was provided by cash on hand and $30,000,000 of borrowings available under the Company's credit facility. The $71,000,000 of capital required to purchase the Manassas System was provided by borrowings available under the Company's revolving credit facility. On February 28, 1996, the Company purchased the cable television systems serving areas in and around Tampa, Florida (the "Tampa System"), areas in and around Carmel, Indiana (the "Carmel System") and areas in and around Orangeburg, South Carolina (the "Orangeburg System") from certain of its limited partnerships. The $172,979,000 of capital required to purchase such systems was provided by borrowings available under the Company's revolving credit facility. On February 29, 1996, the Company transferred the Tampa System, the Carmel System and the Orangeburg System to an unaffiliated party in exchange for the cable television systems serving portions of Prince Georges County, Maryland (the "Prince Georges County System") and portions of Fairfax County, Virginia (the "Reston System"). The above transactions increased the Company's basic subscriber base by approximately 229,000 basic subscribers to approximately 547,000 basic subscribers. In addition, these transactions are part of the Company's strategy to cluster its cable systems. The Augusta System is contiguous to the Company's cable television system serving areas in and around North Augusta, South Carolina (the "North Augusta System"). The Dale City System, the Manassas System, the Prince Georges County System and the Reston System are near other Company owned and managed systems in the Washington/Baltimore area. The Company has entered into agreements with certain of its managed partnerships to purchase the cable television systems serving Manitowoc, Wisconsin (the "Manitowoc System"), Lodi, Ohio (the "Lodi System"), Lake Geneva, Wisconsin (the "Lake Geneva System") and Ripon, Wisconsin (the "Ripon System"). Such transactions are expected to close in the first half of 1996. In addition, the Company has entered into an agreement to acquire the cable television system serving Savannah, Georgia (the "Savannah System"). This transaction is also part of the Company's strategy to cluster its cable systems since the Savannah System is in relatively close proximity to the Company's Augusta System. This transaction is expected to close in the first half of 1996. To acquire the Savannah System, the Company will transfer the Manitowoc System, the Lodi System, the Ripon System 46 50 and the Lake Geneva System, together with the Company-owned cable television systems serving Kenosha, Wisconsin and Hilo, Hawaii, to an unaffiliated party in exchange for the Savannah System. The Savannah System serves approximately 63,000 subscribers. From time to time, the Company makes loans to its managed partnerships, although it is not required to do so. As of December 31, 1995, the Company had advanced funds to various managed partnerships and other affiliates of the Company totaling approximately $14,311,000, a decrease of approximately $13,712,000 over the amount advanced at December 31, 1994. Of the total balance of $14,311,000, an advance to Cable TV Fund 15-A Ltd. ("Fund 15-A"), one of the Company's managed partnerships, accounted for approximately $4,815,000, or 34%. The Company advanced funds to Fund 15-A primarily to fund that partnership's capital expenditures. It is anticipated that Fund 15-A will repay this advance over time with cash generated from operations and borrowings available under its credit facility. In addition, an advance to Cable TV Fund 12-BCD Venture (the "Venture") accounted for approximately $4,113,000, or 29%, of the outstanding balance. The Venture renogotiated its credit agreements and repaid the advance in February 1996. The remainder of the advances represent funds for capital expansion and improvements of properties owned by 22 partnerships where additional credit sources were not then available to the partnerships. None of these advances are individually significant. These advances reduce the Company's available cash and its liquidity. The Company anticipates the repayment of these advances over time. The Company does not anticipate significant increases in the amount advanced to its managed partnerships during 1996. These advances bear interest at rates equal to the Company's weighted average cost of borrowing. The Company purchased property, plant and equipment totaling approximately $63,216,000 during the year ended December 31, 1995. Such expenditures were principally the result of the following: (a) the upgrade and rebuild of the cable plant in the Alexandria, Virginia and North Augusta, South Carolina systems; and (b) new extension projects, drop materials, converters and various maintenance projects in the Pima County, Arizona; Anne Arundel, Maryland; and Charles County, Maryland systems. Estimated capital expenditures, excluding acquisitions, for 1996 are approximately $78,000,000. Funding for such expenditures is expected to be provided by cash generated from operations and borrowings available under the Company's credit facility, as discussed below. On October 12, 1995, the Company redeemed the remaining outstanding 7.5% Convertible Subordinated Debentures (the "Debentures") due 2007, at a price equal to 101.5% of the principal amount, plus accrued interest. The total principal amount of the debentures was $43,100,000, of which $23,732,000 were held by the Company and $19,368,000 were held by unaffiliated investors. The Debentures were redeemed with cash on hand. The Company recognized a loss of $692,000 related to the redemption. Sources of Funds The Company's cash balance at December 31, 1995, was $2,314,000. The decrease in such balance from December 31, 1994 reflects the cash used for the acquisitions of the Augusta System and the Dale City System. On October 31, 1995, the Company, through Jones Cable Holdings, Inc. ("JCH"), a new wholly owned subsidiary, entered into a $500,000,000 reducing revolving credit facility with a group of commercial banks. The new credit facility provides for the transfer of a majority of the Company's cable television properties to JCH, which is the borrower under the new credit facility. The entire $500,000,000 commitment is available through March 31, 1999, at which time the commitment will be reduced quarterly with a final maturity of December 31, 2004. As of December 31, 1995, $30,000,000 was outstanding under this agreement. Interest on outstanding obligations ranges from Base Rate to Base Rate plus 1/8% or LIBOR plus 5/8% to LIBOR plus 1 1/8% based on certain leverage covenants. In addition, a commitment fee of 3/16% to 3/8% on the unused commitment is also required. The effective 47 51 interest rate on amounts outstanding at December 31, 1995 was 6.56%. Upon the completion of the acquisition of the Manassas System, the Prince Georges County System and the Reston System in the first quarter of 1996, the balance outstanding on this credit facility was approximately $285,000,000. On October 6, 1995, Cable TV Fund 11-B, Ltd. ("Fund 11-B"), one of the Company's managed limited partnerships, entered into an agreement to sell the cable television systems serving areas in and around Lancaster, New York to an unaffiliated third party for $84,000,000. Upon closing of this transaction, Fund 11-B will repay its indebtedness, a brokerage fee and a sales tax liability, and Fund 11-B then will distribute the remaining proceeds to its partners. The Company, as general partner of Fund 11-B, expects to receive a distribution of approximately $13,950,000 related to this transaction. In addition, The Jones Group, Ltd., a wholly-owned subsidiary of the Company, will receive a fee of $2,100,000 for acting as the broker in this transaction. The closing of this transaction is expected to occur in the first half of calendar 1996. The Company has an effective registration statement relating to the sale of $600 million of senior debt securities, senior subordinated debt securities, subordinated debt securities and Class A Common Stock. The Company may, from time to time, issue securities not to exceed $600 million pursuant to this registration statement. Proceeds would be used for general corporate purposes, which may include acquisitions of cable television systems from managed partnerships and/or from unaffiliated parties, refinancings of indebtedness, working capital, capital expenditures, and repurchases and redemptions of securities. The Company has sufficient sources of capital available, consisting of cash generated from operations and available borrowings from its credit facility, to complete the above described acquisitions and meet its operational needs. 48 52 Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS
Page ---- Report of Independent Public Accountants 50 Consolidated Balance Sheets 51 Consolidated Statements of Operations 53 Consolidated Statements of Shareholders' Investment 54 Consolidated Statements of Cash Flows 55 Notes to Consolidated Financial Statements 56
49 53 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO JONES INTERCABLE, INC.: We have audited the accompanying consolidated balance sheets of JONES INTERCABLE, INC. (a Colorado corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' investment and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jones Intercable, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Denver, Colorado, March 1, 1996 ARTHUR ANDERSEN LLP 50 54
CONSOLIDATED BALANCE SHEETS Jones Intercable, Inc. As of December 31, 1995 and 1994 and Subsidiaries - ------------------------------------------------------------------------------------------------------------------- ASSETS 1995 1994 (Stated in Thousands) - ------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS $ 2,314 $ 78,646 RESTRICTED CASH 9,770 1,196 RECEIVABLES: Trade receivables, net of allowance for doubtful accounts of $1,056,000 in 1995 and $1,008,000 in 1994 19,332 11,783 Affiliated entities 14,311 28,023 Other 2,442 957 INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment, at cost 475,436 333,666 Less - Accumulated depreciation (171,948) (144,043) -------- --------- 303,488 189,623 Franchise costs, net of accumulated amortization of $118,601,000 in 1995 and $100,056,000 in 1994 186,096 81,204 Cost in excess of interests in net assets purchased, net of accumulated amortization of $8,654,000 in 1995 and $7,249,000 in 1994 66,562 62,237 Noncompete agreement, net of accumulated amortization of $1,360,000 in 1995 and $1,217,000 in 1994 2,097 428 Subscriber lists, net of accumulated amortization of $42,882,000 in 1995 and $37,236,000 in 1994 55,058 16,260 Investments in affiliates and domestic cable television partnerships 45,745 41,056 Investment in Bell Cablemedia plc 99,613 56,893 -------- --------- TOTAL INVESTMENT IN CABLE TELEVISION PROPERTIES 758,659 447,701 -------- --------- DEFERRED TAX ASSET, net of valuation allowance of $70,748,000 in 1995 and $63,636,000 in 1994 3,862 3,862 DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 49,809 36,121 -------- --------- TOTAL ASSETS $ 860,499 $ 608,289 ======== =========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 51 55
CONSOLIDATED BALANCE SHEETS Jones Intercable, Inc. As of December 31, 1995 and 1994 and Subsidiaries - -------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' INVESTMENT 1995 1994 (Stated in Thousands) - -------------------------------------------------------------------------------------------------------------------- LIABILITIES: Accounts payable and accrued liabilities $ 69,411 $ 49,324 Subscriber prepayments and deposits 5,579 6,103 Subordinated debentures and other debt 462,714 281,578 Credit facility 30,000 - ---------- ----------- TOTAL LIABILITIES 567,704 337,005 ---------- ----------- COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 11) SHAREHOLDERS' INVESTMENT: Class A Common Stock, $.01 par value, 60,000,000 shares authorized; 26,212,055 and 26,131,388 shares issued at December 31, 1995 and 1994, respectively 262 261 Common Stock, $.01 par value, 5,550,000 shares authorized; 5,113,021 shares issued at December 31, 1995 and 1994 51 51 Additional paid-in capital 394,875 394,153 Unrealized holding gain on marketable securities 42,504 - Accumulated deficit (144,897) (123,181) ---------- ----------- TOTAL SHAREHOLDERS' INVESTMENT 292,795 271,284 ---------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 860,499 $ 608,289 ========== ===========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 52 56
CONSOLIDATED STATEMENTS OF OPERATIONS Jones Intercable, Inc. For the years ended December 31, 1995, 1994 and 1993 and Subsidiaries - ------------------------------------------------------------------------------------------------------------------------ 1995 1994 1993 (In Thousands Except Per Share Data) - ------------------------------------------------------------------------------------------------------------------------ REVENUES FROM CABLE TELEVISION OPERATIONS: Cable Television Revenue Subscriber service fees $ 135,350 $ 103,335 $ 99,438 Management fees 21,462 17,952 17,255 Non-cable Revenue 32,026 10,602 7,624 -------- --------- -------- TOTAL REVENUES 188,838 131,889 124,317 COSTS AND EXPENSES: Cable Television Expenses Operating expenses 77,638 55,196 54,307 General and administrative expenses (including approximately $2,717,000, $2,994,000 and $3,849,000 of related party expenses during the years ended December 31, 1995, 1994 and 1993, respectively) 8,284 8,120 10,034 Non-cable operating, general and administrative 32,382 11,810 7,989 Depreciation and amortization 55,805 45,585 43,328 -------- --------- -------- OPERATING INCOME 14,729 11,178 8,659 OTHER INCOME (EXPENSE): Interest expense (49,552) (36,883) (40,780) Equity in losses of affiliated entities (58) (3,707) (3,817) Interest income 14,383 5,886 3,919 Gain (loss) on sale of assets - 15,496 (3,231) Other, net (526) (661) (816) -------- --------- -------- LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (21,024) (8,691) (36,066) Income tax provision - - - -------- --------- -------- LOSS BEFORE EXTRAORDINARY ITEM (21,024) (8,691) (36,066) EXTRAORDINARY ITEM: Loss on early extinguishment of debt, net of related income taxes (692) - (12,781) -------- --------- -------- NET LOSS $ (21,716) $ (8,691) $ (48,847) ======== ========= ======== PRIMARY LOSS PER SHARE: Loss before extraordinary item $ (.67) $ (.45) $ (2.16) Extraordinary item (.02) - (.76) -------- --------- -------- $ (.69) $ (.45) $ (2.92) ======== ========= ======== WEIGHTED AVERAGE NUMBER OF CLASS A COMMON AND COMMON SHARES OUTSTANDING 31,270 19,517 16,728 ======== ========= ========
The accompanying notes to consolidated financial statements are an integral part of these statements. 53 57
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT Jones Intercable, Inc. For the years ended December 31, 1993, 1994 and 1995 and Subsidiaries - ------------------------------------------------------------------------------------------------------------------------------- Unrealized Holding Class A Common Stock Common Stock Additional Gain on ---------------------- -------------------- Paid-In Marketable Accumulated Shares Amount Shares Amount Capital Securities Deficit (Stated in Thousands) - ------------------------------------------------------------------------------------------------------------------------------- BALANCES, December 31, 1992 8,834 $ 88 4,913 $ 49 $ 67,343 $ - $ (53,482) Proceeds from stock options exercised 46 1 - - 305 - - Sale of Class A Common Stock 3,449 34 - - 48,582 - - Class A Common Stock issued upon conversion of Subordinated Debentures 6 - - - 100 - - Class A Stock Option Grants - - - - 4,080 - - Purchase of Company Stock from Jones Spacelink, Ltd. (60) (1) - - (413) - (336) Net loss - - - - - - (48,847) --------- -------- -------- -------- --------- --------- -------- BALANCES, December 31, 1993 12,275 122 4,913 49 119,997 - (102,665) Proceeds from stock options exercised 42 1 200 2 1,460 - - Class A Stock Option Grants - - - - 261 - - Spacelink Acquisition 3,900 39 - - 16,241 - (11,825) Sale of Class A Common Stock to Bell Canada International Inc. 9,914 99 - - 256,194 - - Net loss - - - - - - (8,691) --------- -------- -------- -------- --------- --------- -------- BALANCES, December 31, 1994 26,131 261 5,113 51 394,153 - (123,181) Proceeds from stock options exercised 81 1 - - 461 - - Class A Common Stock Grants - - - - 261 - - Unrealized holding gain on marketable securities - - - - - 42,504 - Net loss - - - - - - (21,716) --------- -------- -------- -------- --------- --------- -------- BALANCES, December 31, 1995 26,212 $ 262 5,113 $ 51 $ 394,875 $ 42,504 $ (144,897) ========= ======== ======== ======== ========= ========= ========
The accompanying notes to consolidated financial statements are an integral part of these statements. 54 58
CONSOLIDATED STATEMENTS OF CASH FLOWS Jones Intercable, Inc. For the years ended December 31, 1995, 1994 and 1993 and Subsidiaries - --------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 (Stated in Thousands) - --------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (21,716) $ (8,691) $ (48,847) Adjustments to reconcile net loss to net cash provided by operating activities: Extraordinary loss on early extinguishment of debentures, net of related income taxes 692 - 12,781 Class A Common Stock option expense 261 261 - Loss (gain) on sale of assets - (15,496) 3,231 Depreciation and amortization 55,805 45,585 43,328 Equity in losses of affiliated entities 58 3,707 3,817 Increase in restricted cash (8,574) (1,196) - Increase in trade receivables (7,549) (2,193) (1,154) Increase in other receivables, deposits, prepaid expenses and other assets (14,526) (827) (12,865) Increase in accounts payable, accrued liabilities and subscriber prepayments and deposits 19,040 7,597 4,910 --------- -------- -------- Net cash provided by operating activities 23,491 28,747 5,201 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of cable television systems (253,724) - (26,455) Sale of cable television systems - 35,587 15,258 Purchase of property and equipment (63,216) (28,801) (20,155) Investment in cable television partnerships and affiliates (4,200) (34,846) (16,918) Acquisition Costs - (5,438) - Other, net (304) 997 - --------- -------- -------- Net cash used in investing activities (321,444) (32,501) (48,270) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 30,000 84,000 192,000 Repayment of debt - (251,000) (164,000) BCI Investment - 258,893 - Equity acquisition fees - (2,600) - Proceeds from Senior Note Offering 200,000 - - Senior Note offering costs (3,500) - - Proceeds from issuance of Class A Common Stock and Class A Common Stock options 462 1,463 53,004 Decrease (increase) in accounts receivable from affiliated entities 13,712 (9,680) (1,218) Purchase of Company stock - - (748) Redemption of debentures (19,368) - (138,000) Proceeds from debenture offerings, net - - 98,115 Other, net 315 670 761 --------- -------- -------- Net cash provided by financing activities 221,621 81,746 39,914 --------- -------- -------- Increase (decrease) In Cash and Cash Equivalents (76,332) 77,992 (3,155) Cash and Cash Equivalents, beginning of year 78,646 654 3,809 --------- -------- -------- Cash and Cash Equivalents, end of year $ 2,314 $ 78,646 $ 654 ========= ======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements. 55 59 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 1995, 1994 and 1993 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Jones Intercable, Inc. was formed in 1970 to own, operate and manage cable television systems. Jones Intercable, Inc. and its subsidiaries are referred to herein as the "Company." As of December 31, 1995, through a total of 54 owned and managed cable television systems, the Company served approximately 1.4 million subscribers in the United States. On December 19, 1994, the shareholders of the Company approved an Exchange Agreement and Plan of Reorganization and Liquidation dated May 31, 1994, as amended, between the Company and Jones Spacelink, Ltd. ("Spacelink") providing for the acquisition by the Company of substantially all of the assets of Spacelink and the assumption by the Company of all of the liabilities of Spacelink. On December 20, 1994, the Company acquired all of the assets of Spacelink (except for the 2,859,240 shares of the Company's Common Stock owned by Spacelink) and assumed all of the liabilities of Spacelink (other than liabilities with respect to Spacelink shareholders exercising dissenters' rights) in exchange for 3,900,000 shares of the Company's Class A Common Stock. Glenn R. Jones, Chairman and Chief Executive Officer of the Company, controls the election of a majority of the Company's Board of Directors, through his ownership of a majority of the Company's outstanding Common Stock. In May 1994, the Company and Bell Canada International Inc. ("BCI") entered into an agreement whereby BCI agreed to acquire an approximate 30% economic interest in the Company through the purchase of approximately 38% of the Class A Common Stock of the Company. BCI is a wholly owned subsidiary of BCE Inc., Canada's largest telecommunications company. On December 19, 1994, the shareholders of the Company approved the agreement. The investment by BCI was made in two installments: the purchase of 2,500,000 newly issued shares of Class A Common Stock of the Company at $22 per share for $55,000,000 in March 1994, and the purchase of 7,414,300 newly issued shares of Class A Common Stock of the Company at $27.50 per share for $203,893,250 in December 1994, resulting in BCI owning an approximate 30% economic interest in the Company for a total consideration of approximately $258,900,000. BCI also has a contractual commitment to invest up to an additional $141,100,000 to maintain its 30% interest in the event the Company offers additional Class A Common Stock. BCI has the right to maintain or increase its ownership by investing amounts beyond the $141,100,000 commitment. On December 20, 1994, Jones International, Ltd. ("International"), which is wholly owned by Glenn R. Jones, Chairman and Chief Executive Officer of the Company, as well as certain subsidiaries of International, and Mr. Jones individually, granted BCI options to acquire 2,878,151 shares of the Common Stock of the Company. Except in limited circumstances, the option will only be exercisable during the eighth year after December 20, 1994. The exercise of such options would result in BCI holding a sufficient number of shares of the Common Stock of the Company to enable BCI to elect a majority of the Company's Board of Directors. Effective Registration Statement The Company has an effective registration statement relating to the sale of $600 million of senior debt securities, senior subordinated debt securities, subordinated debt securities and Class A Common Stock. The Company, from time to time, may issue securities not to exceed $600 million pursuant to this 56 60 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 registration statement. Proceeds would be used for general corporate purposes, which may include the acquisition of cable television systems from managed partnerships and/or from unaffiliated parties, refinancings of indebtedness, working capital, capital expenditures, and repurchases and redemptions of securities. Summary of Significant Accounting Policies Basis of Presentation The Company has changed its fiscal year end from May 31 to December 31, effective December 31, 1995. Accordingly, the accompanying financial statements have been restated to present the Company's financial position as of December 31, 1995 and 1994 and its results of operations, changes in shareholders' investments and cash flows for each of the three years in the period ended December 31, 1995. The preparation of financial statements in conformity with generally accepted accounting principles requires 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. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, including Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary formed in October 1995 that owns a majority of the cable television assets currently held by the Company. The Company's investments in affiliates and domestic cable television partnerships (Note 4) are carried at cost plus equity in profits and losses. All significant intercompany transactions have been eliminated in consolidation. Statements of Cash Flows The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Income taxes and interest paid during the periods presented are as follows:
December 31, ------------------------------------------------- 1995 1994 1993 ------------------------------------------------- (Stated in Thousands) Income taxes $ - $ - $ - ======== ======== ======== Interest $ 43,079 $ 36,904 $ 39,751 ======== ======== ========
Non-cash transactions: On July 22, 1994, the Company and certain of its wholly owned subsidiaries transferred all of their interests in their cable/telephony properties in the United Kingdom to Bell Cablemedia plc ("Bell Cablemedia"), in exchange for 6,035,648 ADSs representing 30,178,240 Ordinary Shares of Bell Cablemedia. On October 13, 1994, Jones Spanish Holdings, Inc. ("Spanish 57 61 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Holdings") and Jones International Spanish Investments, Inc. transferred all of their interests in their Spanish cable/telephony properties to Bell Cablemedia in exchange for a total of 190,148 ADSs, representing 950,740 Ordinary Shares of Bell Cablemedia. As described above, on December 20, 1994, the Company acquired substantially all of the assets of Spacelink and assumed all of the liabilities of Spacelink in exchange for 3,900,000 shares of the Company's Class A Common Stock. As described in Note 4, on April 11, 1995, the Company converted its $20,000,000 in advances to the Mind Extension University, Inc. ("ME/U") into Class A Common Shares of Jones Education Networks, Inc. ("JEN"). During 1995 and 1994, the Company recorded $261,000 and $261,000, respectively of Additional Paid-in Capital related to Class A Common Stock option grants as discussed in Note 9. Restricted Cash Restricted cash consists of $3,413,000 relating to a non-qualified deferred compensation plan in which certain employees of the Company participate and $6,357,000 pledged to commercial banks for letters of credit. In February 1996, $4,600,000 of the cash pledged for letters of credit was released by the banks. Property, Plant and Equipment Depreciation of property, plant and equipment is provided using the straight-line method over the following estimated service lives: Distribution systems including capitalized interest and operating expenses Primarily 15 years Buildings 10-20 years Equipment and tools 3- 5 years Premium service equipment 5 years Earth receive stations 5-15 years Vehicles 3- 4 years Other property, plant and equipment 3- 5 years
Franchise Costs Costs incurred in obtaining cable television franchises and other operating authorities are initially deferred and amortized over the lives of the franchises. Franchise rights acquired through purchase of cable television systems are stated at estimated fair value at the date of acquisition and amortized over the remaining terms of the franchises. Amortization is determined using the straight-line method over lives of one to 18 years. Cost in Excess of Interests in Net Assets Purchased The cost of acquisitions in excess of the fair values of net assets acquired is being amortized using the straight- line method over a 40-year life. The Company assesses the realizability of these assets through periodic independent appraisals. Any impairments are recognized as an expense on the Company's Consolidated Statements of Operations. 58 62 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Investment in Equity Securities The 6,225,796 American Depository Shares ("ADSs") of Bell Cablemedia plc held by the Company are now considered available for sale because of an effective shelf registration statement that is available to the Company. In accordance with Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities," the ADSs are reflected at their quoted fair market value with the unrealized holding gain reflected as a separate component of shareholders' investment. Deferred Financing Costs Costs incurred in connection with the issuance of debentures and the execution of revolving credit agreements are deferred and amortized using the effective interest method over the life of such issues and agreements. Distributions from Managed Partnerships Distributions earned by the Company as general partner of its managed partnerships related to cable television properties sold by such partnerships to unaffiliated parties are recorded as revenues when received. Distributions earned by the Company as general partner of its managed partnerships related to cable television properties sold by such partnerships to the Company are treated as a reduction of the purchase prices of the cable television systems purchased. Distributions earned by the Company as general partner of its managed partnerships related to cable television properties sold by such partnerships to entities in which the Company has a continuing equity interest are deferred and recognized as revenue in future periods. Earnings Per Share of Class A Common Stock and Common Stock Net loss per share of Class A Common Stock and Common Stock is based on the weighted average number of shares outstanding during the periods. Common stock equivalents were not significant to the computation of primary earnings per share. Treasury Stock Shares held in treasury have been retired and classified as authorized but unissued shares in accordance with the Colorado Business Corporation Act. 2. ACQUISITIONS, EXCHANGES AND SALES Acquisitions by the Company On October 20, 1995, the Company purchased the cable television system serving areas in and around Augusta, Georgia (the "Augusta System") from Cable TV Fund 12-B, Ltd. ("Fund 12-B"), one of the Company's managed limited partnerships. The purchase price was $142,618,000, subject to normal closing adjustments. The purchase price was determined by averaging three separate independent appraisals of the fair market value of the Augusta System. The Company, as general partner of Fund 12- 59 63 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 B, received a distribution from Fund 12-B of $13,222,000 upon the closing of this transaction. Such distribution reduced the Company's basis in the assets of the Augusta System. The Augusta System passes approximately 102,000 homes and serves approximately 68,200 basic subscribers. Funding for this transaction was provided by cash on hand. On November 29, 1995, the Company purchased the cable television system serving Dale City, Lake Ridge, Woodbridge, Fort Bevoir, Triangle, Dumfries, Quantico, Accoquan and portions of Prince William County, all in the state of Virginia (the "Dale City System") from an unaffiliated party. The purchase price was $123,000,000, subject to normal closing adjustments. The purchase was funded by cash on hand and borrowings available under the Company's credit facility. The Company paid Jones Financial Group, Ltd. ("Financial Group"), a subsidiary of Jones International, Ltd., a fee of $1,328,400 for acting as the Company's financial advisor in connection with this transaction. All fees paid to Financial Group by the Company are based upon 90% of the estimated commercial rate charged by unaffiliated brokers. The Dale City System passes approximately 65,100 homes and serves approximately 49,300 basic subscribers. On January 10, 1996, the Company purchased the cable television systems serving Manassas, Manassas Park, Haymarket and portions of unincorporated Prince William County, all in the State of Virginia (the "Manassas System") from an unaffiliated party. The purchase price of the Manassas System was $71,000,000, subject to normal closing adjustments. The purchase was funded by borrowings available under the Company's credit facility. The Company paid Financial Group a fee of $896,000 for acting as the Company's financial advisor in connection with this transaction. All fees paid to Financial Group by the Company are based upon 90% of the estimated commercial rate charged by unaffiliated brokers. The Manassas System passes approximately 39,300 homes and serves approximately 26,500 basic subscribers. On August 11, 1995, the Company entered into a purchase and sale agreement with IDS/Jones Growth Partners 87-A, Ltd., one of the Company's managed partnerships, to acquire from such partnership the cable television system serving areas in and around Carmel, Indiana (the "Carmel System"). The purchase price was $44,235,333, which was the average of three separate independent appraisals of the fair market value of the Carmel System. The Carmel System passes approximately 24,400 homes and serves approximately 19,200 basic subscribers. Closing of this transaction was completed February 28, 1996. The purchase of the Carmel System was funded by borrowings available under the Company's revolving credit facility. On August 11, 1995, the Company entered into a purchase and sale agreement with Jones Cable Income Fund 1-B, Ltd., one of the Company's managed partnerships, to acquire from such partnership the cable television system serving areas in and around Orangeburg, South Carolina (the "Orangeburg System"). The purchase price was $18,347,667, which was the average of three separate independent appraisals of the fair market value of the Orangeburg System. The Orangeburg System passes approximately 16,530 homes and services approximately 12,500 basic subscribers. Closing of this transaction was completed February 28, 1996. The purchase of the Orangeburg System was funded by borrowings available under the Company's revolving credit facility. On August 11, 1995, the Company entered into a purchase and sale agreement with the Cable TV Fund 12-BCD Venture (the "Venture"), a joint venture of three of the Company's managed partnerships, 60 64 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 to acquire from the Venture the cable television system serving areas in and around Tampa, Florida (the "Tampa System"). The purchase price was $110,395,667, which was the average of three separate independent appraisals of the fair market value of the Tampa System. The Tampa System passes approximately 128,500 homes and serves approximately 65,000 basic subscribers. Closing of this transaction was completed February 28, 1996. The purchase of the Tampa System was funded by borrowings available under the Company's revolving credit facility. Exchange by the Company On August 11, 1995, the Company entered into an asset exchange agreement (the "TWEAN Exchange Agreement") with Time Warner Entertainment-Advance/Newhouse Partnership ("TWEAN"), an unaffiliated cable television system operator. Pursuant to the TWEAN Exchange Agreement, on February 29, 1996, the Company conveyed to TWEAN the Carmel System, the Orangeburg System and the Tampa System and cash in the amount of $3,500,000 (subject to normal closing adjustments). In return, the Company received from TWEAN 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 Georges County, all in Maryland (the "Prince Georges County System"), and portions of Fairfax County, Virginia (the "Reston System"). These systems serve approximately 85,000 subscribers. This transaction was considered a non-monetary exchange of similar productive assets for accounting purposes and the Prince Georges County System and the Reston System were recorded at the historical cost of the assets given up plus the $3,500,000 cash consideration. The Company paid Financial Group a $1,668,000 fee upon the completion of the TWEAN Exchange Agreement as compensation to it for acting as the Company's financial advisor. All fees paid to Financial Group by the Company are based upon 90% of the estimated commercial rate charged by unaffiliated brokers. The pro forma effect of the above-described acquisitions and exchange on the Company's results of operations for the year ended December 31, 1995, assuming the transactions occurred January 1, 1995, are presented in the following unaudited tabulation. The Company expects operating income before depreciation and amortization to increase approximately $40,230,000 as a result of these transactions, but depreciation and amortization charges will cause operating income to decrease and net loss to increase.
For the year ended December 31, 1995: ------------------------------------- As Reported Adjustments Pro Forma ----------- ----------- ----------- Revenues $ 188,838 $ 98,703 $ 287,541 ============= ============ ============= Operating Income $ 14,729 $ (8,260) $ 6,469 ============= ============ ============= Net Loss $ (21,716) $ (38,859) $ (60,575) ============= ============ ============= Loss Per Share $ (.69) $ (1.94) ============= =============
61 65 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 The pro forma effect of the above-described acquisitions and exchange and the acquisition of the assets of Jones Spacelink, Ltd. in December 1994 on the Company's results of operations for the year ended December 31, 1994, assuming the transactions occurred January 1, 1994, are presented in the following unaudited tabulation:
For the year ended December 31, 1994: ------------------------------------- As Reported Adjustments Pro Forma ----------- ----------- ----------- Revenues $ 131,889 $ 133,958 $ 265,847 ============= ============ ============= Operating Income $ 11,178 $ (15,504) $ (4,326) ============= ============ ============= Net Loss $ (8,691) $ (54,632) $ (63,323) ============= ============ ============= Loss Per Share $ (.45) $ (3.24) ============= =============
Prior Year Acquisition In December 1993, the Company acquired the cable television systems serving North Augusta, South Carolina and surrounding areas (the "North Augusta System") for $27,200,000. The Company paid The Jones Group, Ltd. $680,000 for brokerage services related to this acquisition. At that time, the Company owned only 20% of The Jones Group, Ltd. The North Augusta System acquisition was accounted for using the purchase method of accounting. Its results of operations are included in the Company's Consolidated Statements of Operations from December 15, 1993 forward. Proposed Acquisitions by the Company On September 5, 1995, the Company entered into an asset purchase agreement with Cable TV Joint Fund 11, a joint venture (the "Venture") among Cable TV Fund 11-A, Ltd., Cable TV Fund 11-B, Ltd., Cable TV Fund 11-C, Ltd. and Cable TV Fund 11-D, Ltd., Colorado limited partnerships managed by the Company, to acquire from the Venture the cable television system serving the City of Manitowoc, Wisconsin (the "Manitowoc System"). The purchase price is $15,735,667, which is the average of three separate independent appraisals of the fair market value of the Manitowoc System. The closing of this transaction is contingent upon the City of Manitowoc's approval of the renewal and transfer of the City of Manitowoc cable television franchise and the approval of the transaction by a majority of the limited partners of each of the four partnerships that form the Venture. The Company, as general partner of the partnerships that form the Venture, will receive a distribution of approximately $3,900,000 upon the closing of this transaction. The Manitowoc System passes approximately 16,000 homes and serves approximately 10,800 basic subscribers. On September 5, 1995, the Company entered into an asset purchase agreement with Jones Spacelink Income Partners 87- 1, L.P., a Colorado limited partnership managed by the Company, to acquire from that partnership the cable television systems serving the communities of Lodi, Burbank, Lafayette Township, New London, Bailey Lakes, Savannah Shreve, Jeromesville, West Lafayette, Loudonville, Perrysville, Creston, Gloria Glens, Sterling, Seville, Westfield Center, Chippewa, Lake 62 66 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Area, Rittman, West Salem, Bloomville, Spencer, Polk and Congress, all in the State of Ohio (the "Lodi System"). The purchase price is $25,706,000, which is the average of three separate independent appraisals of the fair market value of the Lodi System. The Lodi System passes approximately 20,600 homes and serves approximately 15,100 basic subscribers. On September 5, 1995, the Company entered into an asset purchase agreement with Jones Spacelink Income/Growth Fund 1-A, Ltd., a Colorado limited partnership managed by the Company, to acquire from that partnership the cable television system serving the areas in and around Ripon, Wisconsin (the "Ripon System"). The purchase price is $3,712,667, which is the average of three separate independent appraisals of the fair market value of the Ripon System. The Ripon System passes approximately 2,500 homes and serves approximately 2,450 basic subscribers. On September 5, 1995, the Company entered into a second asset purchase agreement with Jones Spacelink Income/Growth Fund 1-A, Ltd. to acquire from that partnership the cable television system serving the areas in and around Lake Geneva, Wisconsin (the "Lake Geneva System"). The purchase price is $6,345,667, which is the average of three separate independent appraisals of the fair market value of the Lake Geneva System. The Lake Geneva System passes approximately 5,400 homes and serves approximately 3,600 basic subscribers. Funding for these acquisitions is expected to be provided by borrowings available under the Company's revolving credit facility. The closings of the Company's acquisitions of the Manitowoc System, the Lodi System, the Ripon System and the Lake Geneva System are not contingent upon the closing of the Time Warner exchange. Proposed Exchange by the Company On September 1, 1995, the Company entered into an asset exchange agreement (the "Time Warner Exchange Agreement") with Time Warner Entertainment Company, L.P. ("Time Warner"), an unaffiliated party. Pursuant to the Time Warner Exchange Agreement, the Company will convey to Time Warner the cable television system serving Hilo, Hawaii (the "Hilo System") and the cable television system serving Kenosha, Wisconsin (the "Kenosha System") as well as the Manitowoc System, the Lodi System, the Ripon System and the Lake Geneva System. The Hilo System and the Kenosha System serve approximately 17,000 and 27,000 basic subscribers, respectively, and pass approximately 23,000 and 39,000 homes, respectively. In return, the Company will receive from Time Warner the cable television systems serving the communities in and around Savannah, Georgia (the "Savannah System") and cash in the amount of $4,000,000, subject to normal closing adjustments. Taking into account the aggregate purchase price to be paid by the Company for the Lodi System, the Lake Geneva System, the Ripon System and the Manitowoc System and the estimated valuation of the Hilo System and the Kenosha System, less the $4,000,000 cash purchase price to be paid by Time Warner to the Company, the aggregate consideration to be paid for the Savannah System is approximately $119,195,000. The Savannah System passes approximately 100,000 homes and serves approximately 63,000 subscribers. This transaction will be considered a non-monetary exchange of similar productive assets for accounting purposes and the Savannah System will be recorded at the historic costs of the assets given up less the $4,000,000 cash consideration. 63 67 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 The closing of the transaction contemplated by the Time Warner Exchange Agreement is subject to customary closing conditions, including obtaining necessary governmental and other third party consents. The parties intend to complete the transactions during the first half of 1996, but there can be no assurance that all conditions will be satisfied or waived by that time. Either party may terminate the Time Warner Exchange Agreement if the transactions are not completed on or before September 30, 1996. The Company will pay Financial Group a $1,286,000 fee upon the completion of the Time Warner Exchange Agreement as compensation to it for acting as the Company's financial advisor. All fees paid to Financial Group by the Company are based upon 90% of the estimated commercial rate charged by unaffiliated brokers. Sales by the Company During 1993, the Company sold the cable television system serving a portion of San Diego County, California for $15,258,000. Brokerage fees totaling approximately $381,000, or 2 1/2% of the sales prices, were paid to The Jones Group, Ltd., which at the time was owned 20% by the Company. The Company recognized a loss relating to this transaction of $3,231,000 during 1993. On January 7, 1994, the Company entered into an agreement with Bresnan Communications Company ("Bresnan") to sell its Gaston County, North Carolina cable television system (the "Gaston System") to Bresnan for $36,500,000, subject to normal closing adjustments. Closing on this transaction occurred in July 1994. The Company paid The Jones Group, Ltd., which at the time was owned 20% by the Company, $912,500 for brokerage services related to this acquisition. Proceeds from the sale of the Gaston System were used to repay amounts outstanding on the Company's credit facility. The Company recognized a gain of $15,496,400 related to this transaction. Proposed Sale by Managed Partnership On October 6, 1995, Cable TV Fund 11-B, Ltd. ("Fund 11-B"), one of the Company's managed partnerships, entered into an agreement to sell the cable television systems serving areas in and around Lancaster, New York to an unaffiliated third party for $84,000,000. Upon closing of this transaction, Fund 11-B will repay its indebtedness, a brokerage fee and a sales tax liability, and Fund 11-B then will distribute the remaining proceeds to its partners. The Company, as general partner of Fund 11-B, expects to receive a distribution of approximately $13,950,000 related to this transaction. In addition, The Jones Group, Ltd., which became a wholly owned subsidiary of the Company on December 20, 1994, will receive a fee of $2,100,000 for acting as the broker in this transaction. The closing of this transaction is expected to occur in the first half of 1996. 3. TRANSACTIONS WITH RELATED PARTIES The Company and the limited partnerships for which the Company is general partner (Note 5) have had, and will continue to have, certain transactions with International and its other subsidiaries. Principal recurring transactions are as follows: 64 68 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Costs Shared by the Company and Managed Partnerships Jones Interactive, Inc. ("Jones Interactive"), a wholly-owned subsidiary of International, provides information management and data processing services for all companies affiliated with International. Charges to the various operating companies are based on usage of computer time by each entity. Amounts charged to the Company and its affiliated partnerships for the years ended December 31, 1995, 1994 and 1993 totaled $6,439,000, $5,361,000 and $4,175,000, respectively. The Company is party to a lease with Jones Properties, Inc., a wholly-owned subsidiary of International, under which the Company has leased a 101,500 square foot office building in Englewood, Colorado. The lease agreement, as amended, has a 15-year term, expiring July 2000, with three 5-year renewal options. The annual rent is not to exceed $24.00 per square foot, plus operating expenses. The Company has subleased approximately 49% of the building to International and certain affiliates of International on the same terms and conditions as the above-mentioned lease. Rent payments to Jones Properties, Inc., net of subleasing reimbursements, for the three years ended December 31, 1995, 1994 and 1993 were $1,645,000, $1,762,000 and $1,735,000, respectively. Upon the closing of the BCI investment in December 1994, the Company entered into a Secondment Agreement with BCI. Pursuant to the Secondment Agreement, BCI provided nine secondees during 1995. These secondees worked for the Company and its managed partnerships. The Company reimbursed BCI for the full employment costs of such individuals. The Company reimbursed BCI $823,000 during the year ended December 31, 1995. No such reimbursements were made during 1994 or 1993. The Company paid approximately 25%, 21% and 21% of the above-described data processing, rental and secondment expenses during the years ended December 31, 1995, 1994 and 1993, respectively. The remainder of the expenses were allocated to and paid by the Company's managed limited partnerships. Costs Borne and Payments Received by the Company In 1992, the Company entered into a license agreement with Jones Space Segment, Inc. ("Space Segment"), an affiliate of International, to use a non-preemptible transponder on a domestic communications satellite leased by Space Segment. Under the license agreement, as amended, which expired December 31, 1994, the Company, Jones Infomercial Networks, Inc. and Jones Computer Network, Ltd. ("JCN"), both affiliates of International, had a license to use the transponder for their respective purposes. The Company recognized $1,172,000 and $2,400,000 of rental expense related to this lease agreement during the years ended December 31, 1994 and 1993, respectively. Because the license has expired, no expense related to this lease agreement was recognized during the year ended December 31, 1995. Product Information Network, Inc. ("PIN") is an affiliate of International that provides a satellite programming service. PIN shows product infomercials 24 hours a day, seven days a week. A portion of the revenues generated by PIN are paid to the cable television systems that carry PIN's programming. Most of the Company's owned cable television systems carry PIN for all or part of each day. Aggregate payments received by the Company from PIN relating to the Company's owned cable television systems 65 69 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 totaled approximately $300,000 and $103,000 for the years ended December 31, 1995 and 1994, respectively. No such payments were made for the year ended December 31, 1993. The Company has incurred approximately $2,717,000, $2,994,000 and $3,849,000 of related party expenses in connection with the related party transactions shared with managed partnerships and the related party costs borne solely by the Company, which have been charged to operating, general and administrative expenses during the years ended December 31, 1995, 1994 and 1993, respectively. Effective upon the closing of the BCI investment in December 1994, the Company entered into a Supply and Services Agreement with BCI. Pursuant to the Supply and Services Agreement, BCI provides the Company with access to the expert advice of personnel from BCI and its affiliates for the equivalent of three man-years on an annual basis. The Company will pay an annual fee of $2,000,000 to BCI during the term of the agreement. Payments to BCI under the Supply and Services Agreement during the year ended December 31, 1995 totaled $2,000,000. No payments were made during the years ended December 31, 1994 and 1993. Financial Group, which is owned by International and Glenn R. Jones, performs services for the Company as its agent in connection with negotiations regarding various financial arrangements of the Company. The Company has entered into a Financial Services Agreement with Financial Group pursuant to which Financial Group has agreed to render financial advisory and related services to the Company for a fee equal to 90% of the fees that would be charged to the Company by unaffiliated third parties for the same or comparable services. The Company will pay Financial Group an annual $1,000,000 retainer as an advance against payments due pursuant to this agreement and will reimburse Financial Group for its reasonable out-of-pocket expenses. The term of the Financial Services Agreement is for eight years. The Company paid fees totaling $1,328,400 in 1995 related to the purchase of the Dale City System. In December 1994, the Company paid fees of $2,000,000 to Financial Group for its services to the Company in connection with the BCI investments in the Company (see Note 1). In addition, the Company paid an advisory fee of L.414,854 (approximately $632,600) to Financial Group in 1994 for its services to the Company in connection with the Company's transfer of all of its interests in its cable/telephony properties in the United Kingdom to Bell Cablemedia plc (see Note 4). During 1994 and 1993, the Company carried accounts receivable from International and its affiliates totaling $2,000,000. This receivable was repaid in January 1995. Interest on such receivables was charged at the Company's average cost of borrowing plus 2%. For information about additional transactions between the Company and related parties, see Note 4 below. 4. INVESTMENTS IN CABLE TELEVISION PARTNERSHIPS AND JOINT VENTURES Jones Global Group, Inc. The Company owns a 38% interest in Jones Global Group, Inc. ("Jones Global Group"), a Colorado corporation of which 62% is owned by International. On July 22, 1994, Jones Global Group and certain of Jones Global Group's wholly owned subsidiaries transferred all of their interests in their cable/telephony properties in the United Kingdom to Bell Cablemedia plc, a public limited company 66 70 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 incorporated under the laws of England and Wales, in exchange for 3,663,584 American Depository Shares ("ADSs") representing 18,317,920 Ordinary Shares of Bell Cablemedia. In July 1994, Jones Global Group sold 1,100,000 ADSs. Jones Global Group paid an advisory fee of L.251,812 (approximately $384,000) to Financial Group for its services to Jones Global Group in connection with the aforementioned United Kingdom transactions. In 1995, Jones Global Group sold an additional 444,200 ADSs. The Company accounts for Jones Global Group using the equity method of accounting and accordingly has recorded its share of gain relating to the sale of ADSs by Jones Global Group. Bell Cablemedia plc On July 22, 1994, the Company and certain of its wholly owned subsidiaries transferred all of their interests in their cable/telephony properties in the United Kingdom to Bell Cablemedia plc in exchange for 6,035,648 ADSs representing 30,178,240 Ordinary Shares of Bell Cablemedia. As a result of this transaction, the Company no longer owns any direct interest in cable/telephony properties in the United Kingdom. Jones Spanish Holdings, Inc. ("Spanish Holdings") is an affiliate indirectly owned 38% by the Company and 62% by International. On October 13, 1994, Spanish Holdings and Jones International Spanish Investments, Inc., a subsidiary of International, transferred all of their interests in their cable/telephony properties in Spain to Bell Cablemedia in exchange for a total of 190,148 ADSs representing 950,740 Ordinary Shares of Bell Cablemedia. Such shares subsequently were transferred to the Company in repayment of advances made to finance such affilates' Spanish operations. As a result of this transaction, the Company and its affiliates no longer own any direct interest in cable/telephony properties in Spain. The Company paid an advisory fee of L.414,854 (approximately $632,600) to Financial Group in 1994 for its services to the Company in connection with the aforementioned United Kingdom and Spain transactions. The 6,225,796 ADSs of Bell Cablemedia plc held by the Company are now considered available for sale because of an effective shelf registration statement that is available to the Company. In accordance with Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities," the ADSs are reflected at their estimated fair market value with the unrealized holding gain reflected as a separate component of shareholders' investment. Mind Extension University, Inc. During 1992, the Company invested $10,000,000 in ME/U, an affiliated company and subsidiary of JEN, that provides educational programming through affiliated and unaffiliated cable television systems, for 25% of the stock of ME/U, which also received certain advertising avails and administrative and marketing considerations from the Company. The number of shares of Class A Common Stock of ME/U issued to the Company was based on the average of two separate independent appraisals of ME/U. Through its acquisition of the assets of Spacelink, the Company obtained an additional 13% interest in ME/U in December 1994. Spacelink had acquired such interest for $3,135,000. Payments made to ME/U by the Company for programming provided to the Company's owned cable television systems for the years ended December 31, 1995, 1994 and 1993 totaled approximately $196,000, $116,000 and $90,000, respectively. At December 31, 1995, the Company's net investment in ME/U was $2,419,977. Jones Education Networks, Inc. In 1993, 1994 and 1995, the Company advanced a total of $20,000,000 to ME/U. Interest on such advances was charged at the Company's weighted average cost of borrowing plus two percent. On 67 71 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 April 11, 1995, the Company converted its advances to ME/U into shares of Class A Common Stock of Jones Education Networks, Inc. ("JEN"), the parent company of ME/U, for an approximate 17% equity interest in JEN. JEN is an affiliate of International and, in addition to its 51% ownership of ME/U, JEN owns an 81% interest in Jones Computer Network, Ltd. ("JCN"). Payments made to JCN by the Company for programming provided to the Company's owned cable television systems for the years ended December 31, 1995 and 1994 totaled approximately $488,000 and $68,000, respectively. No such payments were made for the year ended December 31, 1993. Jones Intercable Investors, L.P. The Company is the general partner of Jones Intercable Investors, L.P., a Colorado limited partnership, which was formed on September 18, 1986, and the Company owns a 1% general partner interest. In a series of transactions, the Company purchased limited partnership units, giving the Company an approximate 19% limited partner interest in Jones Intercable Investors, L.P. The Company's net investment in this partnership totaled approximately $3,982,000 at December 31, 1995. Based upon the quoted market price of $12.38 per unit at December 31, 1995, the quoted market value of this investment was approximately $19,709,000. The Company has accounted for this investment using the equity method of accounting. Jones Cyber Solutions, Ltd. The Company and Jones Cyber Solutions, Ltd. ("JCS"), an indirect subsidiary of International, have formed a venture, known as Jones Customer Service Management, L.L.C., for the purpose of developing a subscriber billing and management system. As of December 31, 1995, the Company had invested $5,200,000 in the venture. JCS is performing the basic system development work for the venture and is being paid periodically on a time and materials basis, plus 10% of the amount charged, for its own service. Upon the completion of the billing and management system software, the Company and JCS will have license rights to use such system in perpetuity. The venture will also perform additional services to the Company in the implementation of the new subscriber billing and management system. The venture intends to subcontract such maintenance and conversion services to JCS on the basis of time and materials plus 10% of the amount of the JCS services. The venture will grant to JCS the exclusive right to distribute the system to third parties for a period of five years for a commission on the license fees to be earned by the venture from such licensing. 5. MANAGED PARTNERSHIPS Organization The Company is general partner for a number of limited partnerships formed to acquire, construct, develop and operate cable television systems. In addition, through its acquisition of Spacelink, the Company obtained general partner interests in a number of partnerships previously managed by Spacelink. Partnership capital has been raised principally through a series of public offerings of limited partnership interests. The Company made a capital contribution of $1,000 to each partnership and is allocated 1% of all partnership profits and losses. The Company also purchased limited partner interests in certain of the partnerships and generally participates with respect to such interests on the same basis as other limited partners. 68 72 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Management Fees As general partner, the Company manages the partnerships and receives a fee for its services generally equal to 5% of the gross revenues of the partnerships, excluding revenues from the sale of cable television systems or franchises. Distributions Any partnership distributions made from cash flow (defined as cash receipts derived from routine operations, less debt principal and interest payments and cash expenses) are generally allocated 99% to the limited partners and 1% to the general partner. With respect to Cable TV Funds 11 and 12, any distributions other than from cash flow, such as from sale or refinancing of the system or upon dissolution of the partnership, are generally made as follows: first, to the limited partners in an amount which, together with all prior distributions, will equal the amount initially contributed to the partnership capital by the limited partners and the balance, 75% to the limited partners and 25% to the general partner. With respect to Cable TV Fund 14, any distributions other than from cash flow are generally made as follows: first, to the limited partners in an amount which, together with all prior distributions from cash flow, will equal 125% of the amount initially contributed to the partnership and the balance, 75% to the limited partners and 25% to the general partner. With respect to Cable TV Fund 15, any distributions other than from cash flow are generally made as follows: first, to the limited partners and general partner in an amount which, together with all prior distributions, will equal the amount initially contributed to the partnership capital by the limited partners and general partner; second, to the limited partners which, together with all prior distributions, will equal a 6% per annum cumulative and noncompounded return on the capital contributions of the limited partners; the balance, 75% to the limited partners and 25% to the general partner. With respect to the Jones Cable Income Fund partnerships, any distributions other than from cash flow are generally made as follows: first, to the limited partners in an amount which, together with all prior distributions made from sources other than cash flow, will equal the amount initially contributed to partnership capital; second, to the limited partners in an amount which, together with all prior distributions from cash flow, will equal a liquidation preference ranging from 10% to 12% per annum, cumulative and noncompounded, on their initial capital contributions and the balance, 75% to the limited partners and 25% to the general partner. Any distributions other than from cash flow made by Jones Intercable Investors, L.P. (Note 4) are generally distributed as follows: first, to the holders of the Class A Units an amount which, together with all prior distributions of cash flow from operations, will equal a preferred return equal to 10% per annum, cumulative and noncompounded, on an amount equal to $16.00 per Class A Unit, less any portion of such amount which may have been returned to the Unitholders from prior sale or refinancing proceeds; second, to the holders of Class A Units an amount which, together with all prior distributions other than distributions of cash flow from operations, will equal $16.00 per Class A Unit, and the remainder, 60% to the holders of the Class A Units and 40% to the general partner. For the partnerships formerly managed by Spacelink, any partnership distributions made from cash flow, as defined, are generally allocated 99% to the limited partners and 1% to the general partner. The 69 73 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 general partner is also entitled to partnership distributions other than from cash flow, such as from the sale or refinancing of systems or upon dissolution of the partnerships, which are a portion of the net remaining assets of such partnership ranging from 15% to 40% after payment of partnership debts and after investors have received an amount equal to their capital contribution plus, in most cases, a preferential return on their investment. The Company recognized distributions from managed partnerships totaling $13,222,000 for the year ended December 31, 1995. No such distributions were recognized during 1994 or 1993. The $13,222,000 distribution received during 1995 from Cable TV Fund 12-B, Ltd. upon the sale to the Company of the cable television system serving the area in and around Augusta, Georgia was recorded as a reduction in the Company's basis in the assets of the Augusta System. Allocations The Company's managed limited partnerships reimburse the Company for certain allocated overhead and administrative expenses. These expenses generally consist of salaries and related benefits paid to corporate personnel (including secondees of BCI), rent, data processing services and other corporate facilities costs. The Company provides engineering, marketing, administrative, accounting, information management, legal, investor relations and other services to the partnerships. Allocations of personnel costs have been based primarily on actual time spent by Company employees with respect to each partnership managed. Remaining overhead costs have been allocated based on revenues and/or the relative cost of partnership assets managed. As of December 1993, remaining overhead costs have been allocated based solely on revenues. Company-owned systems are also allocated a proportionate share of these expenses under the allocation formulas described above. Amounts charged partnerships and other affiliated companies have directly offset the Company's general and administrative expenses by approximately $31,987,000, $32,645,000 and $30,196,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Advances The Company has made advances to certain of the limited partnerships primarily to accommodate expansion and other financing needs of the partnerships. Such advances bear interest at rates equal to the Company's weighted average cost of borrowing which, for the year ended December 31, 1995 was 10.51%. Interest charged to the limited partnerships for the years ended December 31, 1995, 1994 and 1993 was $2,592,000, $4,250,000 and $1,814,000, respectively. 70 74 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Certain condensed financial information regarding managed partnerships, on a combined basis, is as follows:
December 31, -------------------------------------------------- 1995 1994 1993 -------------------------------------------------- (Stated in Thousands) Total assets $ 806,319 $ 923,117 $ 986,560 Debt 676,760 688,393 668,015 Amounts due general partner 14,969 25,735 20,631 Partners' Capital (Net of accumulated deficit) 99,505 174,001 262,230 Revenues 427,877 397,318 385,990 Depreciation and amortization 151,236 153,520 157,643 Operating loss (16,438) (34,565) (32,987) Net income (loss) 20,964 (80,988) (73,655)
The fair market values of the partnerships' assets, as determined by independent appraisals, exceed the combined amounts due the Company and other outstanding indebtedness for each individual partnership, with the exception of Spacelink Fund 4, Ltd. ("Fund 4"). The Company has reserved the portion of its advance to Fund 4 that exceeds the fair value of Fund 4's assets. The amount reported as combined net income (loss) for all managed limited partnerships for the year ended December 31, 1995 included gains on sales and liquidations recognized by certain partnerships which totaled approximately $91,693,000. No such gains were recognized during the years ended December 31, 1994 or 1993. 6. NOTES RECEIVABLE On December 19, 1994, Spacelink received a promissory note from Jones Earth Segment, Inc.("Earth Segment"), then an affiliate of Spacelink, in conjunction with the transfer of Earth Segment to International. The Company acquired this note as part of the acquisition of Spacelink's assets. The principal sum is $6,554,500. Interest on the principal is at the prime rate plus one percent and is paid quarterly. The note matures on December 19, 1999. The note is secured by the real and personal property of Earth Segment. Pursuant to a tax sharing agreement with International, Spacelink was allocated tax benefits based on its pro rata share of taxable loss generated as part of the consolidated group. The tax sharing agreement was terminated effective June 1, 1993. The allocated benefits are to be paid no later than five years from the date they were created. The benefits accrue interest at the prime rate in effect at the time they were created. The Company, through its acquisition of Spacelink's assets, acquired a receivable from International relating to this tax sharing agreement. The balance of this receivable at December 31, 1995 was $1,834,000. 71 75 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 7. DEBT Debt consists of the following:
December 31, ---------------------------- 1995 1994 ---------- ---------- (Stated in Thousands) LENDING INSTITUTIONS: Credit facility $ 30,000 $ - SENIOR NOTES: Senior Notes due March 15, 2002, interest payable semi-annually at 9 5/8% 200,000 - SUBORDINATED DEBENTURES: Debentures due July 15, 2004, interest payable semi-annually at 11.5%, redeemable at the Company's option on or after July 15, 1997 at 106.75% of par, declining to par by July 15, 2000 160,000 160,000 Debentures due March 1, 2008, interest payable semi-annually at 10.5%, redeemable at the Company's option on or after March 1, 2000 at 105.25% of par, declining to par by March 1, 2005 100,000 100,000 Convertible debentures due June 1, 2007, interest payable semi-annually at 7.5%, redeemed October 12, 1995 - 19,368 OTHER: Capitalized equipment lease obligations due in installments through 1998 and other debt 2,714 2,210 ---------- ---------- Total debt $ 492,714 $ 281,578 ========== ==========
On October 31, 1995, the Company, through JCH, entered into a $500,000,000 reducing revolving credit facility with a group of commercial banks. The new credit facility provides for the transfer of a majority of the Company's cable television properties to JCH, which is the borrower under the credit facility. The entire $500,000,000 commitment is available through March 31, 1999, at which time the commitment will be reduced quarterly with a final maturity of December 31, 2004. As of December 1995, $30,000,000 was outstanding under this agreement. Interest on outstanding obligations ranges from Base Rate to Base Rate plus 1/8% or LIBOR plus 5/8% to LIBOR plus 1 1/8% based on certain financial covenants. In addition, a commitment fee of 3/16% to 3/8% on the unused commitment is also required. The effective interest rate on amounts outstanding at December 31, 1995 was 6.56%. On March 23, 1995, the Company sold $200 million of 9 5/8% Senior Notes due 2002. The Senior Notes mature on March 15, 2002. The Senior Notes bear interest from the date of issuance at the rate of 9 5/8% per annum, payable semi-annually on March 15 and September 15 of each year, commencing September 15, 1995. The Senior Notes are not redeemable prior to maturity and are not 72 76 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 subject to any sinking fund. The Senior Notes are senior unsecured obligations of the Company. The Company paid fees of $3,500,000 relating to this transaction. Such fees will be amortized over the life of the notes. The 11.5% Senior Subordinated Debentures due 2004 described above provide for annual sinking fund payments of $50,000,000 commencing July 15, 2002 which are calculated to retire 62 1/2% of the issue prior to maturity after consideration of the debt redemptions. There are no sinking fund requirements related to the 10.5% Senior Subordinated Debentures due March 1, 2008. On October 12, 1995, the Company redeemed the remaining outstanding 7.5% Convertible Subordinated Debentures (the "Convertible Debentures") due 2007, at a price equal to 101.5% of the principal amount, plus accrued interest. The total principal amount of the Convertible Debentures was $43,100,000, of which $23,732,000 were held by the Company and $19,368,000 were held by unaffiliated investors. The Convertible Debentures were redeemed with cash on hand. The Company recognized a loss of $692,000 relating to this redemption. The Company has never paid a cash dividend with respect to its shares of Common Stock or Class A Common Stock, and it has no present intention to pay cash dividends in the foreseeable future. The current policy of the Company's Board of Directors is to retain earnings to provide funds for the operation and expansion of its business. Certain of the Company's credit arrangements restrict the right of the Company to declare and pay cash dividends without the consent of the holders of the debt. At December 31, 1995, the carrying amount of the Company's long-term debt was $492,714,000 and the estimated fair value was $536,814,000. The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same issues. There are not significant debt maturities in the five years ended December 31, 2000. 8. INCOME TAXES Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the liability or asset recorded for deferred taxes. During 1995, 1994, and 1993, changes in the Company's temporary differences and losses from operations, which result primarily from depreciation and amortization, resulted in deferred tax benefits which were offset by a valuation allowance of an equal amount. No current or deferred federal income tax expense or benefit was recorded from continuing operations during the reporting periods. 73 77 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Income tax expense attributable to income or loss from continuing operations differs from the amounts computed by applying the Federal income tax rate of 35% in 1995, 1994, and 1993 as a result of the following:
Year Ended December 31, -------------------------------------------------- 1995 1994 1993 -------------------------------------------------- (Stated in Thousands) Computed "expected" tax (benefit) expense $ (7,358) $ (3,042) $ (12,623) State and local taxes, net of federal income tax benefit (619) (194) (1,150) Dividends excluded for income tax purposes (73) (118) (21) Intangibles not deductible for tax purposes 500 971 243 Tax credits - - 591 Other 261 98 17 ---------- ---------- ----------- Total income tax (benefit) provision from operations (7,289) (2,285) (12,943) Tax effect of extraordinary operations (265) - (4,889) Valuation Allowance 7,554 2,285 17,832 ---------- ---------- ----------- Total income tax benefit $ - $ - $ - ========== ========== ===========
The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994 are presented below:
December 31, --------------------------------------------------- 1995 1994 ------------ ------------ (Stated in Thousands) Deferred Tax Assets: Net operating loss carryforwards $ 58,411 $ 53,226 Investment tax credit carryforwards 1,076 1,076 Alternative minimum tax credit carryforwards 1,116 1,116 Investment in affiliates and domestic television partnerships 9,661 10,093 Future deductible amounts associated with other assets and liabilities 2,330 1,987 ---------- ---------- Total gross deferred tax assets 72,594 67,498 Valuation allowance on deferred tax assets (29,253) (43,509) Deferred tax liabilities Property and equipment, due to differences in depreciation methods for financial statement and tax purposes (24,608) (21,596) Investment in Bell Cablemedia plc (14,871) 1,469 ---------- ---------- Net deferred tax asset $ 3,862 $ 3,862 ========== ==========
74 78 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 At December 31, 1995, the Company had net operating loss carryforwards for income tax purposes aggregating approximately $75,371,000 for alternative minimum tax ("AMT") and $152,709,000 for regular tax which expire $43,126,000 in 2004, $26,203,000 in 2007, $40,809,000 in 2008, $30,216,000 in 2009, 4,025,000 in 2010 and $8,330,000 in 2011. The Company also had investment tax credit carryforwards of $1,076,000 expiring in 1998 through 2005. The Company entered into transactions during the current year which resulted in a change in greater than 50% of the ownership interests of the Company shares. Tax statutes limit the utilization of existing tax NOLs when this occurs to a specified amount each year plus the amount of existing built-in gain in corporate assets at the ownership change. Management believes that the application of the limitation will not likely cause taxable income to occur in a future period due to unavailability of limited NOLs. Management believes that sufficient taxable income will be incurred during the loss carryforward period to utilize approximately $81,961,000 of the $152,709,000 of regular tax loss carryforwards at December 31, 1995. Therefore, a valuation allowance has been established for approximately $70,748,000 of net operating losses and for all investment tax credits and alternative minimum tax credit carryforwards. 9. STOCK OPTIONS In 1984, the shareholders of the Company approved the adoption of a nonqualified stock option plan (the "1984 Plan") to provide for the grant of stock options to key contributors to the Company. As of December 31, 1995, options to purchase 708,396 shares had been granted under the 1984 Plan, of which 411,131 shares were exercised and options to purchase 216,005 shares had been terminated or forfeited upon resignation of the holders. No additional options will be granted pursuant to the 1984 Plan. The Company's 1992 stock option plan (the "1992 Plan") was approved by the Company's shareholders in August 1992. Under the terms of the 1992 Plan, a maximum of 1,800,000 shares of Class A Common Stock and 200,000 shares of Common Stock are available for grant. All employees of the Company, its parent or any participating subsidiary, including directors of the Company who are also employees, are eligible to participate in the 1992 Plan. Options generally become exercisable in equal installments over a four-year period commencing on the first anniversary of the date of grant. The options expire, to the extent not exercised, on the tenth anniversary of the date of grant, or upon the recipient's earlier termination of employment with the Company. Options can be incentive stock options or non-statutory stock options. The exercise price may not be less than 100% of the fair market value for incentive stock options, but may be less than fair market value for non-statutory options. Stock appreciation rights may be granted in tandem with the grant of stock options. The Board of Directors may, in its discretion, establish provisions for the exercise of options different from those described above. In 1994 and 1995, the Company recognized approximately $261,000 and $261,000, respectively, of non-cash compensation expense related to stock options granted on November 9, 1993 under the 1992 Plan. As of December 31, 1995, options to purchase 1,445,039 shares of Class A Common Stock had been granted, of which options to purchase 10,367 shares had been exercised and 34,078 shares had been terminated or forfeited upon resignation of the holders. As of December 31, 1995, all 200,000 of the Common Stock options authorized by the 1992 Plan had been granted and exercised. 75 79 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Information concerning Class A Common Stock options is as follows:
December 31, ---------------------------------------------------------- 1995 1994 1993 ---------------------------------------------------------- Available for grant 396,108 1,166,768 1,148,541 Outstanding 1,482,394 792,401 852,628 Price range, per share $ 5.625-13.81 $ 5.625-13.81 $ 5.625-13.81 Exercisable 412,095 266,123 120,150 Price range, per share $ 5.625-13.81 $ 5.625-13.81 $ 5.625-6.1875 Granted during period 786,511 - 610,928 Terminated during period 15,851 18,227 - Exercised during period 80,667 42,000 45,425 Price range, per share $ 5.625-13.81 $ 5.625 $ 5.625
10. CLASS A COMMON STOCK The Class A Common Stock has certain preferential rights with respect to cash dividends and upon liquidation of the Company. In the case of cash dividends, the holders of the Class A Common Stock will be paid one-half cent per share per quarter in addition to any amount payable per share for each share of Common Stock. In the event of liquidation, holders of the Class A Common Stock are entitled to a preference of $1 per share. After such amount is paid, holders of the Common Stock are entitled to receive $1 per share for each share of Common Stock outstanding. Any remaining amount would be distributed to the holders of the Class A Common Stock and the Common Stock on a pro rata basis. In general, with respect to the election of directors, the holders of Class A Common Stock, voting as a separate class, are entitled to elect that number of directors which constitutes 25% of the total membership of the Board of Directors. In all other matters not requiring a class vote, the holders of the Common Stock and the holders of Class A Common Stock vote as a single class provided that holders of Class A Common Stock have one-tenth of a vote for each share held and the holders of the Common Stock have one vote for each share held. 76 80 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 11. COMMITMENTS AND CONTINGENCIES The Company rents office facilities and equipment under various long-term lease arrangements. Minimum commitments under noncancellable operating leases for the five years ending December 31, 2000 and thereafter are as follows:
Building Facilities Equipment Lease Leases Leases Total ----------- ----------- ------------- ----------- (Stated in Thousands) 1996 $ 1,242 $ 1,700 $ 334 $ 3,276 1997 1,242 1,276 287 2,805 1998 1,242 1,119 124 2,485 1999 1,242 814 71 2,127 2000 725 660 29 1,414 Thereafter - 1,201 - 1,201 -------- -------- -------- -------- Total commitments $ 5,693 $ 6,770 $ 845 $ 13,308 ======== ======== ======== ========
Rent paid during the years ended December 31, 1995, 1994 and 1993, totaled $3,698,000, $3,062,000 and $2,925,000, respectively. Certain amounts included in lease commitments will be allocated to managed limited partnerships using the method discussed in Note 5. On February 22, 1994, the Company and Jones Group were named as defendants in a lawsuit brought by three individuals who are Class A Unitholders in Jones Intercable Investors, L.P. (the "Partnership"), a master limited partnership in which the Company is general partner. The litigation, entitled Luva Vaughan et al v. Jones Intercable, Inc. et al, Case No. CV 94-3652 was filed in the Circuit Court for Jackson County, Missouri, and purports to be "for the use and benefit of" the Partnership. As originally filed, the suit sought rescission of the sale of the Alexandria, Virginia cable television system (the "Alexandria System") by the Partnership to the Company, which sale was completed on November 2, 1992. It also sought a constructive trust on the profits derived from the operation of the Alexandria System since the date of the sale and an accounting and other equitable relief. The plaintiffs also alleged that the $1,800,000 commission paid to Jones Group by the Partnership in connection with such sale was improper, and asked the Court to order that such commission be repaid to the Partnership. Under the terms of the partnership agreement of the Partnership, the Company has the right to acquire cable television systems from the Partnership at a purchase price equal to the average of three independent appraisals of the cable television system to be acquired. The plaintiffs claim that the appraisals obtained in connection with the sale of the Alexandria System were improperly obtained, were not made by qualified appraisers and were otherwise improper. The purchase price paid by the Company upon such sale was approximately $73,200,000. The amount of damages being sought by the plaintiffs has not been specified. 77 81 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 On October 21, 1994, plaintiffs filed a motion to dismiss Jones Group in response to Jones Group's argument that Missouri lacked personal jurisdiction over it. Plaintiffs' motion was granted, and plaintiffs then filed an action in Colorado against Jones Group seeking a return of the brokerage commission. The Company and Jones Group filed motions for summary judgment in the Missouri and Colorado cases, respectively. The Missouri court granted the Company's motion in part and dismissed all counts of the complaint for rescission. It also struck the plaintiffs' jury demand. The Colorado court also granted Jones Group's motion in part finding that the payment of the brokerage commission was not a breach of the partnership agreement, but leaving for trial the issue of whether such payment constituted a breach of fiduciary duty. Subsequently, the plaintiffs have filed an amended complaint in the Missouri case, recasting their allegations in terms of breach of contract, common law fraud, conversion and breach of fiduciary duty. The plaintiffs reasserted their right to a jury trial. On October 4, 1995, the court granted the Company's motion for summary judgment on the common law fraud, conversion and breach of fiduciary duty claims and also struct plaintiffs' demand for a jury trial. As a result, there is only one remaining substantive claim (breach of contract); no claim for punitive damages; and the trial will be to the Court commencing on April 29, 1996. On October 25, 1995, plaintiffs and Jones Group filed, in the Colorado action, a joint motion to stay the Colorado action until the resolution of the Missouri action. The motion to stay is pending before the Colorado court. The Company has conducted written discovery in the form of interrogatories and requests for production of documents; has noticed the depositions of plaintiffs and plaintiffs' expert and has retained an expert to testify that the three appraisals were performed in accordance with standard appraisal methodologies. Although plaintiffs have retained an "expert" appraiser to testify that the value of the Alexandria System in November 1992 was $85 million, approximately $12 million more than the purchase price, the Company believes both that the purchase price was fair and that the brokerage commission was properly paid to Jones Grouip in accordance with the express terms of the partnership agreement. Consequently, the Company intends to defend the litigation at trial in April 1996. In August 1995, Cable TV Fund 12-BCD Venture (the "Venture"), a Colorado joint venture in which Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Colorado limited partnerships, are general partners, entered into a purchase and sale agreement pursuant to which the Venture agreed to sell the Tampa, Florida cable television system (the "Tampa System") to the Company. The Company is the general partner of each of Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. Closing of the purchase of the Tampa System by the Company occurred on February 28, 1996. After closing, the Company exchanged the Tampa System with an unaffiliated cable television operator in return for systems owned by that operator. On September 20, 1995, a civil action entitled David Hirsch, on behalf of himself and all others similarly situated, Plaintiff vs. Jones Intercable, Inc., Defendant, was filed in the District Court, County of Arapahoe, State of Colorado (Case No. 95-CV-1800). The plaintiff has brought the action as a class action on behalf of himself and all other limited partners of Cable TV Fund 12-D, Ltd. against the 78 82 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 1995, 1994 and 1993 Company seeking to recover damages caused by the Company's alleged breaches of its fiduciary duties to the limited partners of Cable TV Fund 12-D, Ltd. in connection with the sale to the Company of the Tampa System. On January 25, 1996, the Plaintiff filed an amended complaint and request for a jury trial. The Company believes that it has meritorious defenses, and the Company intends to defend this lawsuit vigorously. On November 17, 1995, a civil action entitled Martin Ury, derivatively on behalf of Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Plaintiff vs. Jones Intercable, Inc., Defendant and Cable TV Fund 12-BCD Venture, Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Nominal Defendants, was filed in the District Court, County of Arapahoe, State of Colorado (Case No. 95-CV-2212). The plaintiff, a limited partner of Cable TV Fund 12-D, Ltd., has brought the action as a derivative action on behalf of the three partnerships that comprise the Venture against the Company seeking to recover damages caused by the Company's alleged breaches of its fiduciary duties to the Venture and to the limited partners of the three partnerships that comprise the Venture in connection with the sale to the Company of the Tampa System and the subsequent exchange of the Tampa System with an unaffiliated cable television operator in return for systems owned by that operator. On February 1, 1996, the Company filed a Motion to Dismiss the Complaint on the ground that it fails to state a claim upon which relief can be granted as a matter of law. The Company believes that it has meritorious defenses, and the Company intends to defend this lawsuit vigorously. In addition to the above matters, the Company is involved in certain other litigation in its normal course of business. The Company is also negotiating the renewal of certain franchise agreements with franchising authorities. Management believes that the ultimate resolution of such matters will not have a material adverse effect on the Company's financial position or results of operations. 12. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of December 31, 1995 and 1994, consisted of the following:
December 31, ------------------- 1995 1994 ---- ---- Cable distribution systems $ 358,242 $ 249,130 Buildings 13,721 7,055 Land 3,665 2,212 Equipment and tools 12,277 9,273 Premium service equipment 33,481 27,717 Earth receive stations 3,450 3,667 Vehicles 3,125 1,873 Leasehold improvements and office furniture 20,049 15,480 Construction work in progress 4,029 583 Other 23,397 16,676 ----------- ----------- 475,436 333,666 Accumulated depreciation (171,948) (144,043) ----------- ----------- $ 303,488 $ 189,623 =========== ===========
79 83 JONES INTERCABLE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded) For the years ended December 31, 1995, 1994 and 1993 13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1995 ------------------------------------------------------------ Three Months Ended ------------------------------------------------------------ March 31 June 30 September 30 December 31 ---------- ------------- ------------ ----------- (In Thousands Except Per Share Data) Revenues $ 43,891 $ 43,816 $ 44,736 $ 56,395 Depreciation and amortization 12,014 12,811 12,796 18,184 Operating income 3,859 3,310 4,469 3,091 Net loss (3,855) (6,195) (4,449) (7,217) Net loss per share $ (.12) $ (.20) $ (.14) $ (.23)
1994 ------------------------------------------------------------ Three Months Ended ------------------------------------------------------------ March 31 June 30 September 30 December 31 ---------- ------------- ------------ ----------- (In Thousands Except Per Share Data) Revenues $ 32,495 $ 32,908 $ 32,616 $ 33,870 Depreciation and amortization 10,682 12,248 10,525 12,130 Operating income 3,608 2,232 3,365 1,973 Net income (loss) (6,361) (7,137) 10,585 (5,778) Net income (loss) per share $ (.35) $ (.36) $ .53 $ (.27)
80 84 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III The information required by Part III (Items 10, 11, 12 and 13) of Form 10-K is incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, not later than April 29, 1996. The information regarding executive officers required by Item 401 of Regulation S-K of the Form 10-K may be found under the caption "Executive Officers of the Company" at the end of Part I of this Form 10-K. PART IV ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K (A)(1) FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS. (A)(2) SCHEDULES. (A)(3) EXHIBITS. The following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted, incorporated by reference herein: 2.1 Exchange Agreement and Plan of Reorganization and Liquidation, dated as of May 31, 1994 by and between the Company and Jones Spacelink, Ltd. (1) 2.2 Stock Purchase Agreement dated as of May 31, 1994, between Bell Canada International Inc. and the Company. (1) 2.3 Transaction Agreement dated as of May 31, 1994, among Glenn R. Jones, Jones International, Ltd., Bell Canada International Inc. and Jones Spacelink, Ltd. (1) 2.4 Purchase and Sale Agreement dated February 22, 1995 between Cable TV Fund 12-B, Ltd. and the Company. (22) 81 85 2.5 Amendment No. 1 dated July 24, 1995 to Purchase and Sale Agreement dated February 22, 1995 between Cable TV Fund 12-B, Ltd. and the Company. (25) 2.6 Asset Purchase Agreement dated May 31, 1995 between Benchmark Manassas Cable Fund Limited Partnership and the Company. (23) 2.7 Asset Purchase Agreement dated May 31, 1995 between Cablevision of Manassas Park, Inc. and the Company. (23) 2.8 Asset Purchase Agreement dated as of June 30, 1995 between Columbia Associates, L.P. and the Company. (25) 2.9 Purchase and Sale Agreement dated as of August 11, 1995 between IDS/Jones Growth Partners 87-A, Ltd. and the Company. (25) 2.10 Purchase and Sale Agreement dated as of August 11, 1995 between Jones Cable Income Fund 1-B, Ltd. and the Company. (25) 2.11 Purchase and Sale Agreement dated as of August 11, 1995 between Cable TV Fund 12-BCD Venture and the Company. (25) 2.12 Asset Exchange Agreement dated as of August 11, 1995 between Time Warner Entertainment-Advance/Newhouse Partnership and the Company. (25) 2.13 Asset Purchase Agreement dated September 5, 1995 between Cable TV Joint Fund 11 and the Company relating to the Manitowoc System. (26) 2.14 Asset Purchase Agreement dated September 5, 1995, between Jones Spacelink Income Partners 87-1, L.P. and the Company relating to the Lodi System. (26) 2.15 Asset Purchase Agreement dated September 5, 1995, between Jones Spacelink Income/Growth Fund 1-A, Ltd. and the Company relating to the Ripon System. (26) 2.16 Asset Purchase Agreement dated September 5, 1995, between Jones Spacelink Income/Growth Fund 1-A, Ltd. and the Company relating to the Lake Geneva System. (26) 2.17 Asset Exchange Agreement dated September 1, 1995, between the Company and Time Warner Entertainment Company, L.P. (26) 82 86 2.18 Assignment and Assumption Agreement dated as of September 15, 1995 between the Company and Jones Cable Holdings, Inc. 2.19 Purchase and Sale Agreement dated as of October 18, 1995 between the Company and Jones Cable Holdings, Inc. 3.1 Articles of Incorporation and amendments thereto of the Company. (2) 3.2 Amendment to Articles of Incorporation of Company filed July 24, 1995. (25) 3.3 Bylaws of the Company. (25) 4.1 Indenture, dated as of May 15, 1987, between the Company and United Bank of Denver National Association. (4) 4.2 Indenture, dated as of July 15, 1992, between the Company and First Trust National Association. (5) 4.3 First Supplemental Indenture, dated as of July 15, 1992, between the Company and First Trust National Association. (5) 4.4 Second Supplemental Indenture, dated as of March 1, 1993, between the Company and First Trust National Association. (6) 4.5 Form of Shareholders Agreement among Glenn R. Jones, Jones International, Ltd., Bell Canada International Inc. and the Company. (1) 4.6 Indenture dated March 23, 1995 with respect to the Senior Notes, between the Company and U.S. Trust Company of California, N.A. (31) 4.7 First Supplemental Indenture dated as of March 23, 1995 with respect to $200,000,000 aggregate principal amount of the Company's 9 5/8% Senior Notes due 2002, between the Company and the Trustee. (31) 10.1.1 Form of Financial Services Agreement between Jones Financial Group, Ltd. and the Company. (1) 10.1.2 Form of Employment Agreement between Glenn R. Jones and the Company. (1) 83 87 10.1.3 Form of Supply and Services Agreement between Bell Canada International Inc. and the Company. (1) 10.1.4 Form of Secondment Agreement between Bell Canada International Inc. and the Company. (1) 10.1.5 Form of Option Agreement for Glenn R. Jones and Jones International, Ltd. between Bell Canada International Inc. and Newco. (1) 10.1.6 Affiliate Agreement dated August 1, 1994 between the Company and Jones Computer Network, Ltd. (25) 10.1.7 Affiliate Agreement dated August 1, 1994 between the Company and Jones Infomercial Networks, Inc. (25) 10.1.8 Services Agreement between the Company and Jones Interactive, Inc. (25) 10.1.9 Indemnification Agreement dated March 14, 1994, among the Company, Howard O. Thrall and George J. Feltovich. (21) 10.2.1 Non-Qualified Stock Option Plan of the Company. (7) 10.2.2 Form of Non-Qualified Stock Option Agreement. (7) 10.2.3 1992 Stock Option Plan. (8) 10.2.4 Form of Basic Incentive Stock Option Agreement. (8) 10.2.5 Form of Basic Non-Qualified Stock Option Agreement. (8) 10.3.1 Office Lease, dated June 8, 1984, between the Company and Jones Properties, Inc., regarding office space at 9697 East Mineral Avenue, Englewood, Colorado. (9) 10.3.2 Office Building Lease dated December 9, 1994 between Jones Panorama Properties, Inc. and the Company regarding Lot 4, Panorama Office Park. (25) 10.4.1 Partnership Agreement for Cable TV Fund 11. (10) 10.4.2 Partnership Agreement for Cable TV Fund 12. (9) 10.4.3 Partnership Agreement for Cable TV Fund 14. (11) 84 88 10.4.4 Partnership Agreement for Jones Cable Income Fund 1. (12) 10.4.5 First Restated Agreement of Limited Partnership for Jones Intercable Investors, L.P. (13) 10.4.6 Partnership Agreement for IDS/Jones Growth Partners. (14) 10.4.7 Partnership Agreement for Cable TV Fund 15. (15) 10.4.8 Partnership Agreement for IDS/Jones Growth Partners II, L.P. (16) 10.4.9 Partnership Agreement of Jones United Kingdom Fund, Ltd. (18) 10.5.1 Credit Agreement dated December 8, 1992 among the Company, Barclays Bank PLC, Corestates Bank, N.A. and The Bank of Nova Scotia, as Co-Agents and the various lenders named therein. (3) 10.5.2 First Amendment and Waiver to Credit Agreement dated as of January 22, 1993, among the Company, Barclays Bank PLC, Corestates Bank, N.A. and The Bank of Nova Scotia, as Co-Agents and NationsBank of Texas, N.A., as Managing Agent for various lenders. (3) 10.5.3 Second Amendment to Credit Agreement dated November 30, 1994 among the Company, Barclays Bank PLC, CoreStates Bank, N.A. and The Bank of Nova Scotia, as Lenders and as co-agents, and NationsBank of Texas, N.A., as a Lender and as Managing Agent. (25) 10.5.4 Third Amendment dated as of December 19, 1994 among the Company, Barclays Bank PLC, CoreStates Bank, N.A. and The Bank of Nova Scotia, as Lenders and as co-agents, and NationsBank of Texas, N.A., as a Lender and as Managing Agent. (25) 10.5.5 Credit Agreement among Jones Cable Holdings, Inc. and NationsBank of Texas, N.A. and The Bank of Nova Scotia, as lenders and as managing agents and various other lenders. 10.6.1 Copy of a franchise and related documents thereto granting a cable television system franchise for Town of Marana, Arizona. (3) 10.6.2 Copy of a franchise and related documents thereto granting a cable television system franchise for Oro Valley, Arizona. (2) 85 89 10.6.3 Copy of a franchise and related documents thereto granting a cable television system franchise for Pima County, Arizona. (2) 10.6.4 Copy of a franchise and related documents thereto granting a cable television system franchise for The Tucson National Golf Club. (2) 10.6.5 Copy of a franchise and related documents thereto granting a cable television system franchise for Los Angeles County, California. (17) 10.6.6 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Diamond Bar, California. (17) 10.6.7 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Oxnard, California. (2) 10.6.8 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Port Hueneme, California. (3) 10.6.9 Copy of a franchise and related documents thereto granting a cable television system franchise for the Naval Construction Battalion Center, Port Hueneme, California. (2) 10.6.10 Modification of franchise agreement dated June 23, 1993 for the Naval Construction Battalion Center, Port Hueneme, California. (3) 10.6.11 Copy of a franchise and related documents thereto granting a cable television system franchise for the County of Ventura, California. (3) 10.6.12 Copy of a franchise and related documents thereto granting a cable television system franchise for Arapahoe County, Colorado. (2) 10.6.13 Copy of a franchise and related documents thereto granting a cable television system franchise for certain portions of Jefferson County, Colorado. (2) 10.6.14 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Morrison, Colorado. (3) 10.6.15 Copy of a franchise and related documents thereto granting a cable television system franchise for Clear Creek County, Colorado. (32) 10.1.16 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Empire, Colorado. (32) 86 90 10.1.17 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Georgetown, Colorado. (32) 10.1.18 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Idaho Springs, Colorado. (33) 10.1.19 Copy of a franchise and related documents thereto granting a cable television system franchise for the Municipality of Silver Plume, Colorado. (32) 10.1.20 Copy of a franchise and related documents thereto granting a cable television system franchise for Bay County, Florida. (33) 10.1.21 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Panama City Beach, Florida. (33) 10.1.22 Copy of a franchise and related documents thereto granting a cable television system franchise for the District of Hamakua, Hawaii. (34) 10.1.23 Copy of a franchise and related documents thereto granting a cable television system franchise for the Districts of South Hilo and Puna, Hawaii. (34) and (32) 10.6.24 Copy of a franchise and related documents thereto granting a cable television system franchise for Aiken County, South Carolina. (21) 10.6.25 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Dearing, Georgia. (21) 10.6.26 Copy of a franchise and related documents thereto granting a cable television system franchise for Edgefield County, South Carolina. (21) 10.6.27 Copy of a franchise and related documents thereto granting a cable television system franchise for McDuffie County, Georgia. (21) 10.6.28 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of North Augusta, South Carolina. (21) 87 91 10.6.29 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Thomson, Georgia. (21) 10.6.30 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Trenton, South Carolina. (21) 10.1.31 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Augusta, Georgia (Fund 12-B). (27) 10.1.32 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Blythe, Georgia (Fund 12-B). (28) 10.1.33 Copy of a franchise and related documents thereto granting a cable television system franchise for the County of Burke, Georgia (Fund 12-B). (29) 10.1.34 Copy of a franchise and related documents thereto granting a cable television system franchise for the Unincorporated Area of Columbia County, Georgia (Fund 12- B). (30) 10.1.35 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Hephzibah, Georgia (Fund 12-B). (27) 10.1.36 Copy of a franchise and related documents thereto granting a cable television system franchise for the Unincorporated Area of Richmond County, Georgia (Fund 12- B). 27) 10.6.37 Copy of a franchise and related documents thereto granting a cable television system franchise for Anne Arundel County, Maryland. (2) 10.6.38 Copy of a franchise and related documents thereto granting a cable television system franchise for Elizabeth Landing, Maryland. (2) 10.6.39 Copy of a franchise and related documents thereto granting a cable television system franchise for Ft. George G. Meade, Maryland. (17) 10.6.40 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Indian Head, Maryland. (3) 88 92 10.6.41 Copy of a franchise and related documents thereto granting a cable television system franchise for the Indian Head Division, Naval Surface Warfare Center, Indian Head, Maryland. (3) 10.6.42 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of La Plata, Maryland. (2) 10.6.43 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Cherryville, North Carolina. (2) 10.6.44 Copy of a franchise and related documents thereto granting a cable television system franchise for Cleveland County, North Carolina. (2) 10.6.45 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Cramerton, North Carolina. (3) 10.6.46 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Gastonia, North Carolina. (2) 10.6.47 Copy of a franchise and related documents thereto granting a cable television system franchise for the Williamsburg and Jamestown subdivision of Gastonia, North Carolina. (2) 10.6.48 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Kings Mountain, North Carolina. (2) 10.6.49 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Lowell, North Carolina. (2) 10.6.50 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of McAdenville, North Carolina. (3) 10.6.51 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Ranlo, North Carolina. (3) 89 93 10.6.52 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Stanley, North Carolina. (3) 10.6.53 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Clover, South Carolina. (3) 10.6.54 Copy of a franchise and related documents thereto granting a cable television system franchise for York County, South Carolina. (3) 10.6.55 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Alexandria, Virginia. (24) 10.6.56 Copy of a franchise and related documents thereto granting a cable television system franchise for Fort Myer, Virginia. (18) 10.6.57 Amendment dated April 6, 1990, of franchise granting a cable television system franchise for Fort Myer, Virginia. (20) 10.6.58 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Dumfries, Virginia. 10.6.59 Copy of a franchise and related documents thereto granting a cable television system franchise for Fort Belvoir, Virginia. 10.6.60 Copy of a franchise and related documents thereto granting a cable television system franchise for Lake Ridge Parks & Recreation Association, Lake Ridge, Virginia. 10.6.61 Copy of a franchise and related documents thereto granting a cable television system franchise for Prince William County, Virginia. 10.6.62 Copy of a franchise and related documents thereto granting a cable television system franchise for Quantico, Virginia. 10.6.63 Copy of a franchise and related documents thereto granting a cable television system franchise for the United States Marine Corps Base, Quantico, Virginia. 10.6.64 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Haymarket, Virginia. 10.6.65 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Manassas, Virginia. 90 94 10.6.66 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Manassas Park, Virginia. 10.6.67 Copy of a franchise and related documents thereto granting a cable television system franchise for Prince William County, Virginia. 10.6.68 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Kenosha, the Town of Somers and the Village of Pleasant Prairie, Wisconsin. (35) 10.6.69 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Kenosha, Wisconsin. (32) 10.6.70 Copy of a franchise and related documents thereto granting a cable television system franchise for the Village of Pleasant Prairie, Wisconsin. (32) 10.6.71 Copy of a franchise and related documents thereto granting a cable television system franchise for Town of Somers, Wisconsin. (32) 21 List of Subsidiaries of the Company. 23 Consent of Arthur Andersen & Co., independent public accountants, to the incorporation by reference of its report into the Company's Form S-8 and Form S-3 Registration Statements. 27 Financial Data Schedule. _______________ (1) Incorporated by reference from the Company's Current Report on Form 8-K, filed on June 6, 1994. (2) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1988. (3) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1993 (4) Incorporated by reference from Registration Statement No. 33-13545 on Form S-2, filed on April 17, 1987, and Amendment No. 1 thereto, filed on May 8, 1987. (5) Incorporated by reference from Registration Statement No. 33-47030 on Form S-3, filed on April 8, 1992, and Amendment Nos. 1 and 2 thereof, filed on April 24, 1992 and June 4, 1992, respectively, and Post-Effective Amendment No. 1 thereof, filed on July 15, 1992. 91 95 (6) Incorporated by reference from the Company's Current Report on Form 8-K, filed on March 1, 1993. (7) Incorporated by reference from Registration Statement No. 2-91911 on Form S-2, filed on June 27, 1984, and Amendment No. 1 thereto, filed on July 17, 1984. (8) Incorporated by reference from Registration No. 33-54596 on Form S-8, filed on November 16, 1992. (9) Incorporated by reference from Registration Statement No. 2-94127. (10) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1983. (11) Incorporated by reference from Registration Statement No. 33-6976, filed on July 3, 1986, and Amendment No. 1 thereto, filed on November 17, 1986. (12) Incorporated by reference from Registration Statement No. 33-00968 on Form S-1, filed on October 18, 1985. (13) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992. (14) Incorporated by reference from Registration Statement No. 33-12473. (15) Incorporated by reference from Registration Statement No. 33-24358. (16) Incorporated by reference from the Company's Registration Statement on Form 8-A No. 0-18133, dated November 16, 1989. (17) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1989. (18) Incorporated by reference from Form 8-A of Jones United Kingdom Fund, Ltd. (Commission File No. 0-19889). (19) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1990. (20) Incorporated by reference from the Annual Report on Form 10-K of Jones Intercable Investors, L.P. (Commission File No. 1-9287) for the fiscal year ended May 31, 1986. 92 96 (21) Incorporated by reference from the Company's Form S-4 Registration Statement filed on July 11, 1994. (22) Incorporated by reference from the Company's Current Report on Form 8-K dated March 10, 1995. (23) Incorporated by reference from the Company's Current Report on Form 8-K dated June 7, 1995. (24) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1994. (25) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1995. (26) Incorporated by reference from the Company's Current Report on form 8-K dated September 8, 1995. (27) Incorporated by reference from Cable TV Fund 12-B, Ltd.'s Report on Form 10-K for the fiscal year ended December 31, 1985 (Commission File Nos. 0-13193, 0-13807, 0- 13964 and 0-14206). (28) Incorporated by reference from Cable TV Fund 12-B, Ltd.'s Report on Form 10-K for the fiscal year ended December 31, 1987 (Commission File Nos. 0-13193, 0-13807, 0- 13964 and 0-14206). (29) Incorporated by reference from Cable TV Fund 12-B, Ltd.'s Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File Nos. 0-13193, 0-13807, 0- 13964 and 0-14206). (30) Incorporated by reference from Cable TV Fund 12-B, Ltd.'s Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission File Nos. 0-13193, 0-13807, 0- 13964 and 0-14206). (31) Incorporated by reference from the Company's Current Report on form 8-K dated March 23, 1995. (32) Incorporated by reference from the Jones Spacelink, Ltd. Annual Report on Form 10-K for the fiscal year ended May 31, 1993 (Commission File No. 0-8947). (33) Incorporated by reference from the Jones Spacelink, Ltd. Annual Report on Form 10-K for the fiscal year ended May 31, 1987. 93 97 (34) Incorporated by reference from the Jones Spacelink, Ltd. Annual Report on Form 10-K for the fiscal year ended May 31, 1988. (35) Incorporated by reference from the Jones Spacelink, Ltd. Annual Report on Form 10-K for the fiscal year ended May 31, 1985. (b) Reports on Form 8-K Current Report on Form 8-K dated October 10, 1995, describing the David Hirsch civil action regarding the sale of the Tampa System. Current Report on Form 8-K dated Noember 1, 1995, describing the acquisition by Jones Cable Holdings, Inc. of the Augusta System. Current Report on Form 8-K dated November 10, 1995, describing the execution of a letter of intent to acquire a cable television system serving subscribers in Anne Arundel County, Maryland. Current Report on Form 8-K dated December 4, 1995, describing the Martin Ury civil action regarding the sale of the Tampa System. Current Report on Form 8-K dated December 4, 1995 describing the acquisition by Jones Communications of Virginia, Inc. of the Dale City System. 94 98 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JONES INTERCABLE, INC. By: /s/ Glenn R. Jones ----------------------------------- Glenn R. Jones Chairman of the Board and Chief Dated: March 12, 1996 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Glenn R. Jones ----------------------------------- Glenn R. Jones Chairman of the Board and Chief Executive Officer Dated: March 12, 1996 (Principal Executive Officer) By: /s/ Kevin P. Coyle ----------------------------------- Kevin P. Coyle Group Vice President/Finance Dated: March 12, 1996 (Principal Financial Officer) By: /s/ Larry W. Kaschinske ----------------------------------- Larry W. Kaschinske Controller Dated: March 12, 1996 (Principal Accounting Officer)
95 99 By: /s/ James B. O'Brien ----------------------------------- James B. O'Brien Dated: March 12, 1996 President and Director By: /s/ Raymond L. Vigil ----------------------------------- Raymond L. Vigil Dated: March 12, 1996 Group Vice President and Director By: /s/ Derek H. Burney ----------------------------------- Derek H. Burney Dated: March 12, 1996 Director By: /s/ William E. Frenzel ----------------------------------- William E. Frenzel Dated: March 12, 1996 Director By: /s/ Donald L. Jacobs ----------------------------------- Donald L. Jacobs Dated: March 12, 1996 Director By: /s/ James J. Krejci ----------------------------------- James J. Krejci Dated: March 12, 1996 Director By: /s/ Christine Jones-Marocco ----------------------------------- Christine Jones-Marocco Dated: March 12, 1996 Director By: /s/ John A. MacDonald ----------------------------------- John A. MacDonald Dated: March 12, 1996 Director By: ----------------------------------- Daniel E. Somers Dated: Director
96 100 By: /s/ Howard O. Thrall ----------------------------------- Howard O. Thrall Dated: March 12, 1996 Director By: /s/ Robert B. Zoellick ----------------------------------- Robert B. Zoellick Dated: March 12, 1996 Director By: /s/ David K. Zonker ----------------------------------- David K. Zonker Dated: March 12, 1996 Director
97 101 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------ ----------- 2.1 Exchange Agreement and Plan of Reorganization and Liquidation, dated as of May 31, 1994 by and between the Company and Jones Spacelink, Ltd. (1) 2.2 Stock Purchase Agreement dated as of May 31, 1994, between Bell Canada International Inc. and the Company. (1) 2.3 Transaction Agreement dated as of May 31, 1994, among Glenn R. Jones, Jones International, Ltd., Bell Canada International Inc. and Jones Spacelink, Ltd. (1) 2.4 Purchase and Sale Agreement dated February 22, 1995 between Cable TV Fund 12-B, Ltd. and the Company. (22) 102 2.5 Amendment No. 1 dated July 24, 1995 to Purchase and Sale Agreement dated February 22, 1995 between Cable TV Fund 12-B, Ltd. and the Company. (25) 2.6 Asset Purchase Agreement dated May 31, 1995 between Benchmark Manassas Cable Fund Limited Partnership and the Company. (23) 2.7 Asset Purchase Agreement dated May 31, 1995 between Cablevision of Manassas Park, Inc. and the Company. (23) 2.8 Asset Purchase Agreement dated as of June 30, 1995 between Columbia Associates, L.P. and the Company. (25) 2.9 Purchase and Sale Agreement dated as of August 11, 1995 between IDS/Jones Growth Partners 87-A, Ltd. and the Company. (25) 2.10 Purchase and Sale Agreement dated as of August 11, 1995 between Jones Cable Income Fund 1-B, Ltd. and the Company. (25) 2.11 Purchase and Sale Agreement dated as of August 11, 1995 between Cable TV Fund 12-BCD Venture and the Company. (25) 2.12 Asset Exchange Agreement dated as of August 11, 1995 between Time Warner Entertainment-Advance/Newhouse Partnership and the Company. (25) 2.13 Asset Purchase Agreement dated September 5, 1995 between Cable TV Joint Fund 11 and the Company relating to the Manitowoc System. (26) 2.14 Asset Purchase Agreement dated September 5, 1995, between Jones Spacelink Income Partners 87-1, L.P. and the Company relating to the Lodi System. (26) 2.15 Asset Purchase Agreement dated September 5, 1995, between Jones Spacelink Income/Growth Fund 1-A, Ltd. and the Company relating to the Ripon System. (26) 2.16 Asset Purchase Agreement dated September 5, 1995, between Jones Spacelink Income/Growth Fund 1-A, Ltd. and the Company relating to the Lake Geneva System. (26) 2.17 Asset Exchange Agreement dated September 1, 1995, between the Company and Time Warner Entertainment Company, L.P. (26) 103 2.18 Assignment and Assumption Agreement dated as of September 15, 1995 between the Company and Jones Cable Holdings, Inc. 2.19 Purchase and Sale Agreement dated as of October 18, 1995 between the Company and Jones Cable Holdings, Inc. 3.1 Articles of Incorporation and amendments thereto of the Company. (2) 3.2 Amendment to Articles of Incorporation of Company filed July 24, 1995. (25) 3.3 Bylaws of the Company. (25) 4.1 Indenture, dated as of May 15, 1987, between the Company and United Bank of Denver National Association. (4) 4.2 Indenture, dated as of July 15, 1992, between the Company and First Trust National Association. (5) 4.3 First Supplemental Indenture, dated as of July 15, 1992, between the Company and First Trust National Association. (5) 4.4 Second Supplemental Indenture, dated as of March 1, 1993, between the Company and First Trust National Association. (6) 4.5 Form of Shareholders Agreement among Glenn R. Jones, Jones International, Ltd., Bell Canada International Inc. and the Company. (1) 4.6 Indenture dated March 23, 1995 with respect to the Senior Notes, between the Company and U.S. Trust Company of California, N.A. (31) 4.7 First Supplemental Indenture dated as of March 23, 1995 with respect to $200,000,000 aggregate principal amount of the Company's 9 5/8% Senior Notes due 2002, between the Company and the Trustee. (31) 10.1.1 Form of Financial Services Agreement between Jones Financial Group, Ltd. and the Company. (1) 10.1.2 Form of Employment Agreement between Glenn R. Jones and the Company. (1) 104 10.1.3 Form of Supply and Services Agreement between Bell Canada International Inc. and the Company. (1) 10.1.4 Form of Secondment Agreement between Bell Canada International Inc. and the Company. (1) 10.1.5 Form of Option Agreement for Glenn R. Jones and Jones International, Ltd. between Bell Canada International Inc. and Newco. (1) 10.1.6 Affiliate Agreement dated August 1, 1994 between the Company and Jones Computer Network, Ltd. (25) 10.1.7 Affiliate Agreement dated August 1, 1994 between the Company and Jones Infomercial Networks, Inc. (25) 10.1.8 Services Agreement between the Company and Jones Interactive, Inc. (25) 10.1.9 Indemnification Agreement dated March 14, 1994, among the Company, Howard O. Thrall and George J. Feltovich. (21) 10.2.1 Non-Qualified Stock Option Plan of the Company. (7) 10.2.2 Form of Non-Qualified Stock Option Agreement. (7) 10.2.3 1992 Stock Option Plan. (8) 10.2.4 Form of Basic Incentive Stock Option Agreement. (8) 10.2.5 Form of Basic Non-Qualified Stock Option Agreement. (8) 10.3.1 Office Lease, dated June 8, 1984, between the Company and Jones Properties, Inc., regarding office space at 9697 East Mineral Avenue, Englewood, Colorado. (9) 10.3.2 Office Building Lease dated December 9, 1994 between Jones Panorama Properties, Inc. and the Company regarding Lot 4, Panorama Office Park. (25) 10.4.1 Partnership Agreement for Cable TV Fund 11. (10) 10.4.2 Partnership Agreement for Cable TV Fund 12. (9) 10.4.3 Partnership Agreement for Cable TV Fund 14. (11) 105 10.4.4 Partnership Agreement for Jones Cable Income Fund 1. (12) 10.4.5 First Restated Agreement of Limited Partnership for Jones Intercable Investors, L.P. (13) 10.4.6 Partnership Agreement for IDS/Jones Growth Partners. (14) 10.4.7 Partnership Agreement for Cable TV Fund 15. (15) 10.4.8 Partnership Agreement for IDS/Jones Growth Partners II, L.P. (16) 10.4.9 Partnership Agreement of Jones United Kingdom Fund, Ltd. (18) 10.5.1 Credit Agreement dated December 8, 1992 among the Company, Barclays Bank PLC, Corestates Bank, N.A. and The Bank of Nova Scotia, as Co-Agents and the various lenders named therein. (3) 10.5.2 First Amendment and Waiver to Credit Agreement dated as of January 22, 1993, among the Company, Barclays Bank PLC, Corestates Bank, N.A. and The Bank of Nova Scotia, as Co-Agents and NationsBank of Texas, N.A., as Managing Agent for various lenders. (3) 10.5.3 Second Amendment to Credit Agreement dated November 30, 1994 among the Company, Barclays Bank PLC, CoreStates Bank, N.A. and The Bank of Nova Scotia, as Lenders and as co-agents, and NationsBank of Texas, N.A., as a Lender and as Managing Agent. (25) 10.5.4 Third Amendment dated as of December 19, 1994 among the Company, Barclays Bank PLC, CoreStates Bank, N.A. and The Bank of Nova Scotia, as Lenders and as co-agents, and NationsBank of Texas, N.A., as a Lender and as Managing Agent. (25) 10.5.5 Credit Agreement among Jones Cable Holdings, Inc. and NationsBank of Texas, N.A. and The Bank of Nova Scotia, as lenders and as managing agents and various other lenders. 10.6.1 Copy of a franchise and related documents thereto granting a cable television system franchise for Town of Marana, Arizona. (3) 10.6.2 Copy of a franchise and related documents thereto granting a cable television system franchise for Oro Valley, Arizona. (2) 106 10.6.3 Copy of a franchise and related documents thereto granting a cable television system franchise for Pima County, Arizona. (2) 10.6.4 Copy of a franchise and related documents thereto granting a cable television system franchise for The Tucson National Golf Club. (2) 10.6.5 Copy of a franchise and related documents thereto granting a cable television system franchise for Los Angeles County, California. (17) 10.6.6 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Diamond Bar, California. (17) 10.6.7 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Oxnard, California. (2) 10.6.8 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Port Hueneme, California. (3) 10.6.9 Copy of a franchise and related documents thereto granting a cable television system franchise for the Naval Construction Battalion Center, Port Hueneme, California. (2) 10.6.10 Modification of franchise agreement dated June 23, 1993 for the Naval Construction Battalion Center, Port Hueneme, California. (3) 10.6.11 Copy of a franchise and related documents thereto granting a cable television system franchise for the County of Ventura, California. (3) 10.6.12 Copy of a franchise and related documents thereto granting a cable television system franchise for Arapahoe County, Colorado. (2) 10.6.13 Copy of a franchise and related documents thereto granting a cable television system franchise for certain portions of Jefferson County, Colorado. (2) 10.6.14 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Morrison, Colorado. (3) 10.6.15 Copy of a franchise and related documents thereto granting a cable television system franchise for Clear Creek County, Colorado. (32) 10.1.16 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Empire, Colorado. (32) 107 10.1.17 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Georgetown, Colorado. (32) 10.1.18 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Idaho Springs, Colorado. (33) 10.1.19 Copy of a franchise and related documents thereto granting a cable television system franchise for the Municipality of Silver Plume, Colorado. (32) 10.1.20 Copy of a franchise and related documents thereto granting a cable television system franchise for Bay County, Florida. (33) 10.1.21 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Panama City Beach, Florida. (33) 10.1.22 Copy of a franchise and related documents thereto granting a cable television system franchise for the District of Hamakua, Hawaii. (34) 10.1.23 Copy of a franchise and related documents thereto granting a cable television system franchise for the Districts of South Hilo and Puna, Hawaii. (34) and (32) 10.6.24 Copy of a franchise and related documents thereto granting a cable television system franchise for Aiken County, South Carolina. (21) 10.6.25 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Dearing, Georgia. (21) 10.6.26 Copy of a franchise and related documents thereto granting a cable television system franchise for Edgefield County, South Carolina. (21) 10.6.27 Copy of a franchise and related documents thereto granting a cable television system franchise for McDuffie County, Georgia. (21) 10.6.28 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of North Augusta, South Carolina. (21) 108 10.6.29 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Thomson, Georgia. (21) 10.6.30 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Trenton, South Carolina. (21) 10.1.31 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Augusta, Georgia (Fund 12-B). (27) 10.1.32 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Blythe, Georgia (Fund 12-B). (28) 10.1.33 Copy of a franchise and related documents thereto granting a cable television system franchise for the County of Burke, Georgia (Fund 12-B). (29) 10.1.34 Copy of a franchise and related documents thereto granting a cable television system franchise for the Unincorporated Area of Columbia County, Georgia (Fund 12- B). (30) 10.1.35 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Hephzibah, Georgia (Fund 12-B). (27) 10.1.36 Copy of a franchise and related documents thereto granting a cable television system franchise for the Unincorporated Area of Richmond County, Georgia (Fund 12- B). 27) 10.6.37 Copy of a franchise and related documents thereto granting a cable television system franchise for Anne Arundel County, Maryland. (2) 10.6.38 Copy of a franchise and related documents thereto granting a cable television system franchise for Elizabeth Landing, Maryland. (2) 10.6.39 Copy of a franchise and related documents thereto granting a cable television system franchise for Ft. George G. Meade, Maryland. (17) 10.6.40 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Indian Head, Maryland. (3) 109 10.6.41 Copy of a franchise and related documents thereto granting a cable television system franchise for the Indian Head Division, Naval Surface Warfare Center, Indian Head, Maryland. (3) 10.6.42 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of La Plata, Maryland. (2) 10.6.43 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Cherryville, North Carolina. (2) 10.6.44 Copy of a franchise and related documents thereto granting a cable television system franchise for Cleveland County, North Carolina. (2) 10.6.45 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Cramerton, North Carolina. (3) 10.6.46 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Gastonia, North Carolina. (2) 10.6.47 Copy of a franchise and related documents thereto granting a cable television system franchise for the Williamsburg and Jamestown subdivision of Gastonia, North Carolina. (2) 10.6.48 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Kings Mountain, North Carolina. (2) 10.6.49 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Lowell, North Carolina. (2) 10.6.50 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of McAdenville, North Carolina. (3) 10.6.51 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Ranlo, North Carolina. (3) 110 10.6.52 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Stanley, North Carolina. (3) 10.6.53 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Clover, South Carolina. (3) 10.6.54 Copy of a franchise and related documents thereto granting a cable television system franchise for York County, South Carolina. (3) 10.6.55 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Alexandria, Virginia. (24) 10.6.56 Copy of a franchise and related documents thereto granting a cable television system franchise for Fort Myer, Virginia. (18) 10.6.57 Amendment dated April 6, 1990, of franchise granting a cable television system franchise for Fort Myer, Virginia. (20) 10.6.58 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Dumfries, Virginia. 10.6.59 Copy of a franchise and related documents thereto granting a cable television system franchise for Fort Belvoir, Virginia. 10.6.60 Copy of a franchise and related documents thereto granting a cable television system franchise for Lake Ridge Parks & Recreation Association, Lake Ridge, Virginia. 10.6.61 Copy of a franchise and related documents thereto granting a cable television system franchise for Prince William County, Virginia. 10.6.62 Copy of a franchise and related documents thereto granting a cable television system franchise for Quantico, Virginia. 10.6.63 Copy of a franchise and related documents thereto granting a cable television system franchise for the United States Marine Corps Base, Quantico, Virginia. 10.6.64 Copy of a franchise and related documents thereto granting a cable television system franchise for the Town of Haymarket, Virginia. 10.6.65 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Manassas, Virginia. 111 10.6.66 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Manassas Park, Virginia. 10.6.67 Copy of a franchise and related documents thereto granting a cable television system franchise for Prince William County, Virginia. 10.6.68 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Kenosha, the Town of Somers and the Village of Pleasant Prairie, Wisconsin. (35) 10.6.69 Copy of a franchise and related documents thereto granting a cable television system franchise for the City of Kenosha, Wisconsin. (32) 10.6.70 Copy of a franchise and related documents thereto granting a cable television system franchise for the Village of Pleasant Prairie, Wisconsin. (32) 10.6.71 Copy of a franchise and related documents thereto granting a cable television system franchise for Town of Somers, Wisconsin. (32) 21 List of Subsidiaries of the Company. 23 Consent of Arthur Andersen & Co., independent public accountants, to the incorporation by reference of its report into the Company's Form S-8 and Form S-3 Registration Statements. 27 Financial Data Schedule. _______________ (1) Incorporated by reference from the Company's Current Report on Form 8-K, filed on June 6, 1994. (2) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1988. (3) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1993 (4) Incorporated by reference from Registration Statement No. 33-13545 on Form S-2, filed on April 17, 1987, and Amendment No. 1 thereto, filed on May 8, 1987. (5) Incorporated by reference from Registration Statement No. 33-47030 on Form S-3, filed on April 8, 1992, and Amendment Nos. 1 and 2 thereof, filed on April 24, 1992 and June 4, 1992, respectively, and Post-Effective Amendment No. 1 thereof, filed on July 15, 1992. 112 (6) Incorporated by reference from the Company's Current Report on Form 8-K, filed on March 1, 1993. (7) Incorporated by reference from Registration Statement No. 2-91911 on Form S-2, filed on June 27, 1984, and Amendment No. 1 thereto, filed on July 17, 1984. (8) Incorporated by reference from Registration No. 33-54596 on Form S-8, filed on November 16, 1992. (9) Incorporated by reference from Registration Statement No. 2-94127. (10) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1983. (11) Incorporated by reference from Registration Statement No. 33-6976, filed on July 3, 1986, and Amendment No. 1 thereto, filed on November 17, 1986. (12) Incorporated by reference from Registration Statement No. 33-00968 on Form S-1, filed on October 18, 1985. (13) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992. (14) Incorporated by reference from Registration Statement No. 33-12473. (15) Incorporated by reference from Registration Statement No. 33-24358. (16) Incorporated by reference from the Company's Registration Statement on Form 8-A No. 0-18133, dated November 16, 1989. (17) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1989. (18) Incorporated by reference from Form 8-A of Jones United Kingdom Fund, Ltd. (Commission File No. 0-19889). (19) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1990. (20) Incorporated by reference from the Annual Report on Form 10-K of Jones Intercable Investors, L.P. (Commission File No. 1-9287) for the fiscal year ended May 31, 1986. 113 (21) Incorporated by reference from the Company's Form S-4 Registration Statement filed on July 11, 1994. (22) Incorporated by reference from the Company's Current Report on Form 8-K dated March 10, 1995. (23) Incorporated by reference from the Company's Current Report on Form 8-K dated June 7, 1995. (24) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1994. (25) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1995. (26) Incorporated by reference from the Company's Current Report on form 8-K dated September 8, 1995. (27) Incorporated by reference from Cable TV Fund 12-B, Ltd.'s Report on Form 10-K for the fiscal year ended December 31, 1985 (Commission File Nos. 0-13193, 0-13807, 0- 13964 and 0-14206). (28) Incorporated by reference from Cable TV Fund 12-B, Ltd.'s Report on Form 10-K for the fiscal year ended December 31, 1987 (Commission File Nos. 0-13193, 0-13807, 0- 13964 and 0-14206). (29) Incorporated by reference from Cable TV Fund 12-B, Ltd.'s Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File Nos. 0-13193, 0-13807, 0- 13964 and 0-14206). (30) Incorporated by reference from Cable TV Fund 12-B, Ltd.'s Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission File Nos. 0-13193, 0-13807, 0- 13964 and 0-14206). (31) Incorporated by reference from the Company's Current Report on form 8-K dated March 23, 1995. (32) Incorporated by reference from the Jones Spacelink, Ltd. Annual Report on Form 10-K for the fiscal year ended May 31, 1993 (Commission File No. 0-8947). (33) Incorporated by reference from the Jones Spacelink, Ltd. Annual Report on Form 10-K for the fiscal year ended May 31, 1987. 114 (34) Incorporated by reference from the Jones Spacelink, Ltd. Annual Report on Form 10-K for the fiscal year ended May 31, 1988. (35) Incorporated by reference from the Jones Spacelink, Ltd. Annual Report on Form 10-K for the fiscal year ended May 31, 1985. EX-2.18 2 ASSIGMENT & ASSUMPTION AGREEMENT 1 EXHIBIT 2.18 ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement"), dated as of September 15, 1995, is made and entered into by and between Jones Intercable, Inc., a Colorado corporation ("JIC"), and Jones Cable Holdings, Inc., a Colorado corporation ("JCH"). RECITALS A. JCH is a wholly-owned subsidiary of JIC and was formed to be the principal legal entity within JIC to own and operate cable television systems in the United States. In furtherance of this purpose, JIC intends to convey to JCH certain cable television systems that it owns, as well as the stock of the JIC subsidiaries which own cable television systems. B. JIC is party to: (i) that certain Purchase and Sale Agreement, dated as of August 11, 1995 (the "Tampa Purchase Agreement"), with Cable TV Fund 12-BCD Venture ("12-BCD"), pursuant to which JIC agreed to purchase from 12-BCD the assets of the cable television system operating in Tampa, Florida; (ii) that certain Purchase and Sale Agreement, dated as of August 11, 1995 (the "Orangeburg Purchase Agreement"), with Jones Cable Income Fund 1-B, Ltd. ("Fund 1-B"), pursuant to which JIC agreed to purchase from Fund 1-B the assets of the cable television system operating in and around Orangeburg, South Carolina; (iii) that certain Purchase and Sale Agreement, dated as of August 11, 1995 (the "Carmel Purchase Agreement"), with IDS/Jones Growth Partners 87-A, Ltd. ("87-A"), pursuant to which JIC agreed to purchase from 87-A the assets of the cable television systems operating in and around Carmel, Indiana; (iv) that certain Purchase and Sale Agreement, dated as of September 5, 1995 (the "Ripon Purchase Agreement"), with Jones Spacelink Income/Growth Fund 1-A, Ltd. ("Fund 1-A"), pursuant to which JIC agreed to purchase from Fund 1-A the assets of the cable television system operating in and around Ripon, Wisconsin; (v) that certain Purchase and Sale Agreement, dated as of September 5, 1995 (the "Manitowoc Purchase Agreement"), with Cable TV Joint Fund 11 ("Fund 11"), pursuant to which JIC agreed to purchase from Fund 11 the assets of the cable television system operating in Manitowoc, Wisconsin; (vi) that certain Purchase and Sale Agreement, dated as of September 5, 1995 (the "Lake Geneva Purchase Agreement"), with Jones Spacelink Income/Growth Fund 1-A, Ltd. ("Fund 1-A"), pursuant to which JIC agreed to purchase from Fund 1-A the assets of the cable television system operating in and around Lake Geneva, Wisconsin; (vii) that certain Purchase and Sale Agreement, dated as of September 5, 1995 (the "Lodi Purchase Agreement"), with Jones Spacelink Income Partners 87-1, L.P. ("87-1"), pursuant to which JIC agreed to 2 purchase from 87-1 the assets of the cable television systems operating in and around Lodi, Ohio; (viii) that certain Asset Exchange Agreement, dated as of August 11, 1995 (the "TWEAN Exchange Agreement"), with Time Warner Entertainment-Advance/Newhouse Partnership ("TWEAN"), pursuant to which JIC has agreed to convey to TWEAN substantially all of the assets relating to the cable television systems operating in and around Tampa, Florida, Orangeburg, South Carolina, and Carmel, Indiana, and $3.5 million in cash, and TWEAN agreed to convey to JIC substantially all of the assets relating to the cable television systems operating in and around Prince George's County, Maryland and Fairfax County (Reston), Virginia; and (ix) that certain Asset Exchange Agreement, dated as of September 1, 1995 (the "TWE Exchange Agreement"), with Time Warner Entertainment Company, L.P. ("TWE"), pursuant to which JIC agreed to convey to TWE substantially all of the assets relating to the cable systems operating in and around Hilo, Hawaii, Lodi, Ohio, Manitowoc, Wisconsin, Lake Geneva, Wisconsin, Kenosha, Wisconsin and Ripon, Wisconsin, and TWE agreed to convey to JIC substantially all of the assets of the cable television systems operating in and around Savannah, Georgia, and $4 million in cash. C. JIC wishes to assign its rights and obligations under the Tampa Purchase Agreement, Orangeburg Purchase Agreement, Carmel Purchase Agreement, Ripon Purchase Agreement, Manitowoc Purchase Agreement, Lake Geneva Purchase Agreement, Lodi Purchase Agreement, TWEAN Exchange Agreement and TWE Exchange Agreement (collectively, the "JIC Agreements") to JCH, and JCH is willing to accept such assignment and assume such obligations. AGREEMENTS In consideration of the mutual promises and covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, JIC and JCH hereby agree as follows: 1. Assignment and Assumption. Subject to the terms and conditions of this Agreement: (a) JIC hereby assigns, conveys and transfers to JCH all of its right, title and interest under the JIC Agreements, and (b) JCH hereby assumes and shall pay, discharge and perform all of the obligations and duties of JIC under the JIC Agreements. 2. Further Assurances. JIC and JCH shall execute and deliver such further instruments as may be reasonably necessary to carry out the terms of this Agreement. -2- 3 3. Governing Law. The validity, performance and enforcement of this Agreement shall be governed by the internal laws of the State of Colorado, without giving effect to the principles of conflicts of law of such State. JONES INTERCABLE, INC. By: Ruth E. Warren ------------------------------------ Title: Group Vice President/Operations --------------------------------- JONES CABLE HOLDINGS, INC. By: Robert S. Zinn ------------------------------------ Title: Acting Vice President --------------------------------- -3- EX-2.19 3 PURCHASE & SALE AGREEMENT DATED 10/15/95 1 EXHIBIT 2.19 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT is made as of the 18th day of October, 1995, by and between JONES INTERCABLE, INC., a Colorado corporation ("Seller"), and JONES CABLE HOLDINGS, INC., a Colorado corporation ("Buyer"). RECITALS A. Seller owns and operates (i) a cable television system in and around the Towns of Marana and Oro Valley, Arizona and Pima County, Arizona (the "Pima System"); (ii) a cable television system in and around Anne Arundel County, Maryland and Fort George M. Meade, Maryland (the "Anne Arundel System"); (iii) a cable television system in and around the Towns of Indian Head and La Plata, Maryland, Indian Head Naval Ordnance Station and Charles and St. Mary's Counties, Maryland (the "Charles County System"); (iv) a cable television system in and around the Towns of Empire, Georgetown and Silverplume, Colorado, the City of Idaho Springs, Colorado and unincorporated Clear Creek County, Colorado (the "Clear Creek System"); and (v) a cable television system in and around the Town of Dearing, Georgia, the City of Thomson, Georgia, McDuffie County, Georgia, the Town of Trenton, South Carolina, the City of North Augusta, South Carolina, and Edgefield and Aiken Counties, South Carolina (the "North Augusta System"); and B. Seller owns 100% of the outstanding stock of (i) Evergreen Intercable, Inc. ("Evergreen"), which owns and operates a cable television system in and around certain portions of Jefferson County, Colorado (the "Evergreen System"), (ii) Jones Tri-City Intercable, Inc. ("Tri-City"), which owns and operates a cable television system in and around certain portions of Jefferson County, Colorado, Arapahoe County, Colorado and the Town of Morrison, Colorado (the "Tri-City System"); and (iii) Jones Intercable of Alexandria, Inc. ("Jones of Alexandria"), which owns and operates a cable television system in and around the City of Alexandria, Virginia and Fort Myer, Virginia (the "Alexandria System"); and C. Seller is party to that certain Asset Purchase Agreement dated as of February 22, 1995, as amended (the "Augusta Purchase Agreement") with Cable TV Fund 12-B, Ltd. ("Fund 12-B"), by which Seller has agreed to purchase from Fund 12-B the cable television system owned by Fund 12-B in and around 2 the Cities of Augusta, Blythe and Hephzibah, Georgia and the Counties of Burke, Columbia and Richmond, Georgia (the "Augusta System"); and D. Seller desires to sell to Buyer, and Buyer desires to purchase (i) from Seller, (a) the Pima System and the North Augusta System, (b) the stock of Jones of Alexandria (the "Alexandria Stock"), (c) Seller's rights and obligations under the Augusta Purchase Agreement, and (d) certain cash of Seller and (ii) from Evergreen and Tri-City (together, the "Cable Subsidiaries"), respectively, the Evergreen System and the Tri-City System (together, the "Subsidiary Systems"), which Subsidiary Systems (and the Clear Creek System) will be purchased by a subsidiary of Seller (the "Colorado Subsidiary"). In addition, Seller desires to transfer the Anne Arundel System and the Charles County System (together, the "Maryland Systems") to its wholly-owned subsidiary, Jones Communications of Maryland, Inc. ("JCM") in exchange for the issuance by JCM of 100% of its stock (the "JCM Stock") to Seller, and Seller desires to subsequently sell to Buyer, and Buyer desires to purchase from Seller, the JCM Stock. AGREEMENT In consideration of the mutual promises contained in this Agreement and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Purchase and Sale. Subject to the terms and conditions set forth in this Agreement, Seller shall (or, with respect to the Subsidiary Systems, cause the Cable Subsidiaries to) sell, convey, assign, transfer and deliver to Buyer, and Buyer shall (or with respect to the Subsidiary Systems and the Clear Creek System, cause the Colorado Subsidiary to) purchase from Seller (or, with respect to the Subsidiary Systems, from the Cable Subsidiaries): (a) On the Augusta Closing Date (as defined in Paragraph 13 hereof), (i) all of Seller's rights and obligations under the Augusta Purchase Agreement (the "Augusta Purchase Rights") and (ii) cash in an amount equal to the sum of (A) One Million and no/100's Dollars ($1,000,000.00) plus (B) the purchase price due to Fund 12-B pursuant to the Augusta Purchase Agreement for the sale by Fund 12-B of the System, as adjusted as required by the Augusta Purchase Agreement (which amount, prior to such adjustments being made, is -2- 3 One Hundred Forty-Two Million Six Hundred Eighteen Thousand and no/100's Dollars ($142,618,000.00)). (b) On the Second Closing Date (as defined in Paragraph 13 hereof), all of Seller's interest in (i) the Pima System, the North Augusta System and the Clear Creek System (collectively, the "Owned Systems") and the Cable Assets (as defined in Paragraph 2 hereof), (ii) the Alexandria Stock, (iii) the JCM Stock (provided, that prior to the transfer of the JCM Stock to Buyer, Seller shall have transferred the Maryland Systems to JCM in exchange for the issuance to Seller by JCM of such stock) and (iv) cash in an amount equal to $250,000,000.00 (which amount shall be deemed to include the purchase deposits made in escrow by Seller in favor of (A) Benchmark/Manassas Cable Fund Limited Partnership ("Benchmark") pursuant to that certain Asset Purchase Agreement dated as of May 31, 1995 between Seller and Benchmark, as assigned by Seller to Jones of Alexandria pursuant to that certain Assignment and Assumption Agreement dated as of September 1, 1995 between Seller and Jones of Alexandria (the "Benchmark Purchase Agreement") and (B) Cablevision of Manassas Park, Inc. ("CMP") pursuant to that certain Asset Purchase Agreement dated as of May 31, 1995 between Seller and CMP, as assigned by Seller to Jones of Alexandria pursuant to that certain Assignment and Assumption Agreement dated as of September 1, 1995 (the "CMP Purchase Agreement"); and the purchase deposit made in escrow by Jones of Alexandria in favor of Columbia Associates, L.P. ("Columbia") pursuant to that certain Asset Purchase Agreement dated as of June 30, 1995 between Jones of Alexandria and Columbia (the "Columbia Purchase Agreement" and, with the CMP Purchase Agreement and the Benchmark Purchase Agreement, the "New Virginia System Purchase Agreements")) less the amount of cash delivered to Buyer on the Augusta Closing Date. All of the assets described above in this Paragraph 1 shall be transferred and sold free and clear of all security interests, liens, pledges, charges and encumbrances (other than (w) liens for taxes not yet subject to penalties for nonpayment and liens for taxes the payment of which is being contested or the time for doing so has not yet expired; (x) zoning laws and ordinances and similar legal requirements; (y) rights reserved to any governmental authority to regulate the affected Assets; and (z) as to real property interests, any easements, rights-of-way, servitudes, permits, restrictions and minor imperfections or irregularities in title which are reflected in the public records and which do not -3- 4 individually or in the aggregate materially interfere with the right or ability to own, use or operate the real property or to convey good, marketable and indefeasible title to such real property (collectively, the "Permitted Liens"). 2. Assets Conveyed. The assets to be conveyed to Buyer and, as applicable, the Colorado Subsidiary, hereunder (the "Assets") shall consist of: (a) With respect to the Owned Systems, all of the assets and properties of Seller and the Cable Subsidiaries, whether real, personal, tangible or intangible, of whatever description and wherever located, now owned or used by Seller or the Cable Subsidiaries solely in connection with Seller's or the Cable Subsidiaries' ownership or operation of the Owned Systems, except those items excluded pursuant to Paragraph 3 hereof, but including all additions made between the date hereof and the Closing Date, to the end that all of Seller's and the Cable Subsidiaries' assets owned on the Closing Date which are used or owned solely in connection with Seller's or the Cable Subsidiaries' ownership or operation of the Owned Systems shall be sold and transferred to Buyer. Such assets (collectively, the "Cable Assets") shall include, without limitation: (i) all of Seller's and the Cable Subsidiaries' towers, tower equipment, antennas, aboveground and underground cable, distribution systems, headend amplifiers, line amplifiers, earth satellite receive stations and related equipment, microwave equipment, testing equipment, motor vehicles, office equipment, furniture and fixtures, supplies, inventory and other physical assets owned or used by Seller or the Cable Subsidiaries solely in connection with Seller's or the Cable Subsidiaries' ownership or operation of the Owned Systems; (ii) the franchises, leases, agreements, permits, consents, licenses and other contracts, pole line or joint pole agreements, underground conduit agreements, agreements for the reception or transmission of signals by microwave, easements, rights-of-way and construction permits, if any, and any other obligations and agreements between Seller or the Cable Subsidiaries and suppliers and customers, which are owned or used by Seller or the Cable Subsidiaries solely in connection with Seller's or the Cable Subsidiaries' ownership and operation of the Owned Systems; -4- 5 (iii) the real property owned and used solely in connection with the Owned Systems; (iv) all accounts receivable of Seller and the Cable Subsidiaries arising in connection with the Owned Systems; (v) all engineering records, files, data, drawings, blueprints, schematics, maps, reports, lists and plans and processes owned or developed by or for Seller or the Cable Subsidiaries and intended for use solely in connection with the Owned Systems; (vi) all promotional graphics, original art work, mats, plates, negatives and other advertising or related materials developed by or for Seller or the Cable Subsidiaries and intended for use solely in connection with the Owned Systems; and (vii) all of Seller's and the Cable Subsidiaries' correspondence files, lists, records and reports concerning customers and prospective customers of the Owned Systems, concerning television stations whose transmissions are or may be carried as a part of the Owned Systems and concerning all dealings with Federal, state, and local regulatory agencies relating to the ownership or operation of the Owned Systems, including all reports filed by or on behalf of Seller or the Cable Subsidiaries with the Federal Communications Commission (the "FCC") in connection with the Owned Systems and any Statements of Account of the System filed by or on behalf of Seller or the Cable Subsidiaries with the United States Copyright Office in connection with the Owned Systems; provided however, that Seller and the Cable Subsidiaries shall not transfer to Buyer the licenses and agreements identified on Exhibit A attached hereto (the "Additional Agreements") until Seller or the Cable Subsidiaries have obtained the approval of the parties granting the Additional Agreements to such transfer, whereupon such Additional Agreements shall be deemed to be included in the assets to be transferred to Buyer pursuant to this Agreement. (b) The Alexandria Stock, which shall consist of 1000 shares of the Common Stock of Jones of Alexandria. (c) The JCM Stock, which shall consist of 1000 shares of the Common Stock of JCM. -5- 6 (d) The Augusta Purchase Rights. (e) Cash in the amount of Two Hundred Fifty Million and no/100's ($250,000,000.00), (which includes the deposits made by Seller and Jones of Alexandria pursuant to the New Virginia Systems Purchase Agreements), which shall be conveyed to Buyer as described in Paragraphs 1, 4 and 13 hereof. 3. Excluded Assets. The following properties and assets relating to the Owned Systems and their business operations shall be retained by Seller and, as applicable, the Cable Subsidiaries, and shall not be sold, assigned or transferred to Buyer: (a) all claims, rights and interest in and to any refunds for Federal, state or local income or other taxes or fees of any nature whatsoever for periods prior to the Closing Date which are attributable to the Assets, including without limitation, fees paid to the United States Copyright Office; and (b) assets which would otherwise be deemed Assets, but which have been disposed of in the normal course of business or with the written consent of Buyer between the date hereof and the Closing Date. 4. Purchase Price. Subject to the adjustments to be made in accordance with Paragraph 5 hereof, the total purchase price for the Assets shall be Five Hundred Twenty-Three Million Four Hundred Five Thousand Six Hundred Twelve and no/100's ($523,405,612.00) (the "Purchase Price"), which shall be payable by Buyer to Seller as follows: (a) At the Augusta Closing (as defined in Paragraph 13 below), Buyer shall deliver to Seller a promissory note substantially in the form attached hereto as Exhibit B (the "Augusta Note"), the principal amount of which shall be equal to the amount of cash which has been delivered to Buyer by Seller at the Augusta Closing; to wit, the sum of (i) One Million and no/100's Dollars ($1,000,000.00) and (ii) the purchase price due to Fund 12-B pursuant to the Augusta Purchase Agreement for the acquisition of the Augusta System, as such amount is adjusted as required by the Augusta Purchase Agreement. -6- 7 (b) At the Second Closing (as defined in Paragraph 13 below), Buyer shall deliver to Seller a promissory note in the form attached hereto as Exhibit B (the "Second Note"), the principal amount of which shall be equal to (i) the Purchase Price, subject to the adjustments made in accordance with Paragraph 5 below, less (ii) the amount of the Augusta Note. 5. Adjustments. All adjustments provided for herein with respect to this transaction shall increase or decrease the Purchase Price, as appropriate, and shall be made as of the close of business (5:01 p.m., Mountain Time) on the Second Closing Date. (a) Rent, pole rents, franchise fees, taxes, power and utility fees and deposits, insurance premiums, licenses, customer prepayments and deposits attributable to the Owned Systems, and other prepayments and amounts due which are attributable to the Owned Systems shall be prorated and debited or credited to Seller or Buyer, as applicable. For purposes of adjustments made under this Paragraph 5(a), the subscriber accounts receivable of the Owned Systems which are due and payable for and with respect to the month in which the Closing takes place shall be prorated as of the Closing Date. (b) The Purchase Price shall be reduced by any accounts payable, accrued expenses and vehicle lease obligations for which Seller or the Cable Subsidiaries would otherwise be liable hereunder in connection with the Owned Systems, but for which the obligation for payment is assumed by Buyer. (c) Seller and Buyer shall jointly determine the adjustments required by this Paragraph 5 at the Closing. The net amount to which Buyer or Seller, as the case may be, is entitled pursuant hereto shall be thereupon paid by Buyer or Seller, as the case may be, by an adjustment to the Purchase Price. All adjustments made at Closing shall be tentative and shall be subject to final adjustment within 90 days after Closing. 6. Assumption of Liabilities. Buyer shall assume and discharge all debts, liabilities and obligations of Seller (and shall cause the Colorado Subsidiary to assume and discharge all debts, liabilities and obligations of the Cable Subsidiaries) arising with respect to periods subsequent to (a) the Augusta Closing Date insofar as such debts, liabilities and obligations of Seller arise under the Augusta Purchase Agreement and (b) the Second Closing Date under -7- 8 any franchise, license, permit, lease, instrument or agreement transferred to Buyer hereunder and, with respect to periods prior to and including the Second Closing Date, shall assume and discharge all obligations of Seller with respect to the Owned Systems to the extent that the Purchase Price has been reduced pursuant to Paragraph 5(b) hereof to reflect, as applicable, Buyer's and the Colorado Subsidiary's assumption of such obligations; provided, however, that Buyer and the Colorado Subsidiary, as applicable, shall not assume the Additional Agreements until Seller has obtained the approval of the parties granting the Additional Agreements to Seller's or the Cable Subsidiaries' transfer of the Additional Agreements to Buyer or the Colorado Subsidiary, as applicable, whereupon the Additional Agreements shall be deemed to be included in the assets to be assumed by Buyer or the Colorado Subsidiary, as applicable, hereunder. Buyer shall indemnify and hold harmless Seller from and against any and all damages, costs, claims and expenses (the "Indemnifiable Claims") arising by reason of the ownership, operation or control of the Assets after the Second Closing Date; provided, however, that Buyer shall not indemnify and hold harmless Seller from any Indemnifiable Claims arising under Additional Agreements as a result of actions relating to any period before Seller has obtained the approval of the parties granting the Additional Agreements to Seller's transfer of the Additional Agreements to Buyer. Anything herein to the contrary notwithstanding, there is hereby excluded from the assumed obligations, and Seller and the Cable Subsidiaries, as applicable, shall retain and discharge, and indemnify and hold Buyer and the Colorado Subsidiary, as applicable, harmless from and against, any and all Indemnifiable Claims to the extent they arise (a) out of any debt, liability or obligation arising with respect to periods prior to the Second Closing Date for which no reduction of the Purchase Price has been made pursuant to Paragraph 5(b) hereof, (b) out of any debt, liability or obligation arising under the Additional Agreements arising as a result of actions relating to any period before Seller has obtained the approval of the parties granting the Additional Agreements to Seller's or the Cable Subsidiaries' transfer of the Additional Agreements to Buyer, and (c) any debt, liability or obligation of Seller or the Cable Subsidiaries not expressly assumed hereunder, whenever arising. 7. Seller's Representations. Seller hereby represents and warrants to Buyer that: -8- 9 (a) Each of Seller and the Cable Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado. Seller and the Cable Subsidiaries each have all requisite corporate power and authority to own and operate its properties and to carry on its business as now and where being conducted. (b) All necessary consents and approvals have been obtained by Seller for the execution and delivery of this Agreement. The execution and delivery of this Agreement by Seller has been duly and validly authorized and approved by all necessary action of Seller; provided, however, that the approval of the Board of Directors of Seller of the execution, delivery and performance of this Agreement has not been obtained as of the date hereof, but Seller will use its best efforts to obtain such approval, which must be received prior to the Augusta Closing Date. This Agreement is a valid and binding obligation of Seller, enforceable against it in accordance with its terms, except insofar as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity. (c) Subject to the receipt of any required consents, Seller and the Cable Subsidiaries each have full legal power, right and authority to sell and convey to Buyer and the Colorado Subsidiary, as applicable, legal and beneficial title to the Assets, and Seller's and the Cable Subsidiaries' sale to Buyer and the Colorado Subsidiary, as applicable, shall transfer good and marketable title thereto, free and clear of all security interests, liens, pledges, charges and encumbrances of every kind, other than Permitted Liens. (d) The execution, delivery and performance of this Agreement by Seller will not violate any provision of law and will not, with or without the giving of notice or the passage of time, conflict with or result in any breach of any of the terms or conditions of, or constitute a default under, any mortgage, agreement or other instrument to which Seller is a party or by which Seller or the Assets are bound. The execution, delivery and performance of this Agreement by Seller will not result in the creation of any security interest, lien, pledge, charge or encumbrance upon the Assets. (e) The Alexandria Stock and the JCM Stock has been duly and validly authorized, and is issued and outstanding, fully paid and nonassessable. There -9- 10 are no outstanding subscriptions, options, warrants, calls, contracts, demands, commitments, conversion rights or other agreements or arrangements of any character or nature whatever (other than the rights granted to Buyer hereunder) under which Seller is or may be obligated to issue any shares of capital stock of Jones of Alexandria or JCM or warrants or options to purchase any shares of capital stock of Jones of Alexandria or JCM. (f) Litigation. There are no claims, actions, suits, proceedings or investigations pending or, to Seller's knowledge, threatened, by or before any governmental authority, or any arbitrator, by or against or affecting or relating to Seller or the Cable Subsidiaries which, if adversely determined, would restrain or enjoin the consummation of the transactions contemplated by this Agreement or declare unlawful the transactions or events contemplated by this Agreement or cause any of such transactions to be rescinded. 8. Buyer's Representations. Buyer hereby represents and warrants to Seller that: (a) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado. Buyer has all requisite corporate power and authority to own and operate its properties and to carry on its business as now and where being conducted. (b) All necessary consents and approvals have been obtained by Buyer for the execution and delivery of this Agreement. The execution and delivery of this Agreement by Buyer has been duly and validly authorized and approved by all necessary action of Buyer; provided, however, that the approval of the Board of Directors of Buyer of the execution, delivery and performance of this Agreement has not been obtained as of the date hereof, but Buyer will use its best efforts to obtain such approval, which must be received prior to the Augusta Closing Date. This Agreement is a valid and binding obligation of Buyer, enforceable against it in accordance with its terms, except insofar as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity. (c) The execution, delivery and performance of this Agreement by Buyer will not violate any provision of law and will not, with or without the -10- 11 giving of notice or the passage of time, conflict with or result in any breach of any of the terms or conditions of, or constitute a default under, any mortgage, agreement or other instrument to which Buyer is a party or by which Buyer is bound. (d) Litigation. There are no claims, actions, suits, proceedings or investigations pending or, to Buyer's knowledge, threatened, by or before any governmental authority, or any arbitrator, by or against or affecting or relating to Buyer which, if adversely determined, would restrain or enjoin the consummation of the transactions contemplated by this Agreement or declare unlawful the transactions or events contemplated by this Agreement or cause any of such transactions to be rescinded. 9. Conditions Precedent to Buyer's Obligations - Augusta Transaction. The obligations of Buyer under this Agreement with respect to the purchase and sale of the Augusta Purchase Rights shall be subject to the fulfillment on or prior to the Augusta Closing Date of each of the following conditions: (a) All of the representations and warranties by Seller contained in this Agreement shall be true and correct in all material respects at and as of the Augusta Closing Date. Seller shall have complied with and performed all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the Augusta Closing Date. Seller shall have furnished Buyer with an executed certificate of an authorized officer of Seller dated as of the Closing, certifying to the fulfillment of the foregoing conditions. (b) Seller shall have delivered to Buyer evidence of the approval by the Board of Directors of Seller of the execution, delivery and performance of this Agreement. (c) No judgment shall have been entered and not vacated by any governmental authority of competent jurisdiction in any litigation or arising therefrom, which (i) enjoins, restrains, makes illegal, or prohibits consummation of the transaction contemplated by this Agreement or (ii) would prohibit Buyer's ownership or operation of any portion of the any of the Augusta System. -11- 12 10. Conditions Precedent to Seller's Obligations - Augusta Transaction. The obligations of Seller under this Agreement with respect to the Augusta Purchase Rights shall be subject to the fulfillment on or prior to the Augusta Closing Date of each of the following conditions: (a) All of the representations and warranties by Buyer contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date. Buyer shall have complied with and performed all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the Augusta Closing Date. Buyer shall have furnished Seller with an executed certificate of an authorized officer of Buyer dated as of the Augusta Closing Date, certifying to the fulfillment of the foregoing conditions. (b) Buyer shall have delivered to Seller evidence of the approval by the Board of Directors of Buyer of the execution, delivery and performance of this Agreement. (c) No judgment shall have been entered and not vacated by any governmental authority of competent jurisdiction in any litigation or arising therefrom, which (i) enjoins, restrains, makes illegal, or prohibits consummation of the transaction contemplated by this Agreement or (ii) would prohibit Buyer's ownership or operation of any portion of any of the Augusta System. 11. Conditions Precedent to Buyer's Obligations - Second Transaction. The obligations of Buyer under this Agreement with respect to the purchase and sale of the Assets other than the Augusta Purchase Rights shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions: (a) All of the representations and warranties by Seller contained in this Agreement shall be true and correct in all material respects at and as of the Second Closing Date. Seller shall have complied with and performed all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the Second Closing Date. Seller shall have furnished Buyer with an executed certificate of an authorized officer of Seller dated as of the Second Closing Date, certifying to the fulfillment of the foregoing conditions. -12- 13 (b) Seller shall have delivered to Buyer such instruments, consents and approvals of third parties as are necessary to transfer the Assets (other than the Augusta Purchase Rights) to Buyer (and, with respect to the Subsidiary Systems and the Clear Creek System, to the Colorado Subsidiary) pursuant to this Agreement, including, without limitation, evidence of the approval by the Board of Directors of Seller of the execution, delivery and performance of this Agreement. (c) No judgment shall have been entered and not vacated by any governmental authority of competent jurisdiction in any litigation or arising therefrom, which (i) enjoins, restrains, makes illegal, or prohibits consummation of the transaction contemplated by this Agreement or (ii) would prohibit Buyer's or the Colorado Subsidiary's, as applicable, ownership or operation of any portion of the any of the Assets. 12. Conditions Precedent to Seller's Obligations - Second Transaction. The obligations of Seller under this Agreement with respect to the purchase and sale of the Assets other than the Augusta Purchase Rights shall be subject to the fulfillment on or prior to the Second Closing Date of each of the following conditions: (a) All of the representations and warranties by Buyer contained in this Agreement shall be true and correct in all material respects at and as of the Second Closing Date. Buyer shall have complied with and performed all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the Second Closing Date. Buyer shall have furnished Seller with an executed certificate of an authorized officer of Buyer dated as of the Second Closing Date, certifying to the fulfillment of the foregoing conditions. (b) Buyer shall have delivered to Seller evidence of the approval by the Board of Directors of Buyer of the execution, delivery and performance of this Agreement. (c) No judgment shall have been entered and not vacated by any governmental authority of competent jurisdiction in any litigation or arising therefrom, which (i) enjoins, restrains, makes illegal, or prohibits consummation of the transaction contemplated by this Agreement or (ii) -13- 14 would prohibit Buyer's or the Colorado Subsidiary's, as applicable, ownership or operation of any portion of the any of the Assets. 13. Closing. Two closings shall be held hereunder as follows: (a) The closing of the purchase and sale of the Augusta Purchase Rights (the "Augusta Closing") shall be held in the office of Seller, 9697 E. Mineral Avenue, Englewood, Colorado 80112, on such date as the parties shall mutually agree (the "Augusta Closing Date"). (i) At the Augusta Closing, Seller shall deliver to Buyer: (A) An executed form of an Assignment and Assumption Agreement acceptable to Seller and Buyer covering the assignment by Seller to Buyer and the assumption by Buyer of the Augusta Purchase Rights (the "Augusta Assignment and Assumption Agreement"); (B) The certificate described in Paragraph 9(a); (C) The cash described in Paragraph 4(a); and (D) Such other documents and instruments as shall be necessary to effect the intent of this Agreement with respect to the Augusta Purchase Rights and consummate the transactions contemplated by this Agreement with respect to the Augusta Purchase Rights (collectively, the "Additional Augusta Closing Documentation"). (ii) At the Augusta Closing, Buyer shall delivery to Seller: (A) The executed Assignment and Assumption Agreement; (B) The certificate described in Paragraph 10(a); (C) The Augusta Note; and -14- 15 (D) The Additional Augusta Closing Documentation. (b) The closing of the purchase and sale of the Assets other than the Augusta Purchase Rights (the "Second Closing") shall be held in the offices of Seller, 9697 E. Mineral Avenue, Englewood, Colorado 80112, on such date as the parties shall agree (the "Second Closing Date"). (i) At the Second Closing, Seller shall deliver to Buyer: (A) An executed Assignment and Assumption Agreement acceptable to Seller and Buyer covering the assignment by Seller and the assumption by Buyer of all intangible assets included in the Assets other than the Augusta Purchase Rights (the "Second Assignment and Assumption Agreement"); (B) The certificate described in Paragraph 11(a); (C) The cash described in Paragraph 4(b); (D) The stock certificates evidencing all of the Alexandria Stock and the JCM Stock, with any necessary stock powers attached; and (E) All such other documents and instruments as shall be necessary to effect the intent of this Agreement with respect to the Assets (other than the Augusta Purchase Rights) and consummate the transactions contemplated by this Agreement (other than the transfer by Seller and assumption by Buyer of the Augusta Purchase Rights), including without limitation, any necessary deeds, bills of sale and certificates of title (collectively, the "Additional Second Closing Documentation"). (ii) At the Second Closing, Buyer shall deliver to Seller: -15- 16 (A) The executed Assignment and Assumption Agreement; (B) The certificate described in Paragraph 12(a); (C) The Second Note; and (D) The Additional Second Closing Documentation. 14. Brokerage. Seller represents and warrants to Buyer that Seller will be solely responsible for, and pay in full, any and all brokerage or finder's fees or agent's commissions or other like payment owing in connection with Seller's use of any broker, finder or agent in connection with this Agreement or the transactions contemplated hereby. Buyer represents and warrants to Seller that Buyer will be solely responsible for, and pay in full, any and all brokerage or finder's fees or agent's commissions or other like payment owing in connection with Buyer's use of any broker, finder or agent in connection with this Agreement or the transactions contemplated hereby. Each party hereto shall indemnify and hold the other party hereto harmless against and in respect of any breach by it of the provisions of this Paragraph 14. 15. Miscellaneous. (a) Buyer shall have the right, upon notice to Seller, to assign prior to the Closing Date, in whole or in part, its rights and obligations hereunder to any affiliate of Buyer, including, without limitation, any direct or indirect subsidiary of Buyer, any public limited partnership or partnerships of which Buyer or any affiliate of Buyer is a general partner or any joint venture or general partnership of which Buyer, or any affiliate of Buyer, or any of such public limited partnership or partnerships is a constituent partner, or to any subsidiary of Buyer or other entity controlled by, controlling or under common control with Buyer, or, subject to Seller's consent, to any other entity. (b) From time to time after the Closing Date, Seller shall, if requested by Buyer, (or, if applicable, shall cause the Cable Subsidiaries, to ) make, execute and deliver to Buyer or the Colorado Subsidiary, as applicable, such additional assignments, bills of sale, deeds and other instruments of transfer, as may be necessary or proper to transfer to Buyer or the Colorado Subsidiary, as -16- 17 applicable, all of Seller's and the Cable Subsidiaries' right, title and interest in and to the Assets covered by this Agreement. Such efforts and assistance shall be without cost to Buyer. (c) This Agreement embodies the entire understanding and agreement among the parties concerning the subject matter hereof and supersedes any and all prior negotiations, understandings or agreements in regard thereto. This Agreement shall be interpreted, governed and construed in accordance with the laws of the State of Colorado. This Agreement may not be modified or amended except by an agreement in writing executed by both Buyer and Seller. (d) Any sales, use, transfer or documentary taxes imposed in connection with the sale and delivery of the Assets and the rights acquired by Buyer under this Agreement shall be paid by Buyer. IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written. SELLER: ------ JONES INTERCABLE, INC., a Colorado corporation By: /s/ Kevin P. Coyle -------------------------------- Title: Group Vice President/Finance BUYER: ----- JONES CABLE HOLDINGS, INC., a Colorado corporation By: /s/ J. Roy Pottle -------------------------------- Title: Treasurer -17- 18 EXHIBIT A (Attached to and made a part of that certain Purchase and Sale Agreement dated as of October 18, 1995 by and between Jones Intercable, Inc. and Jones Cable Holdings, Inc.) Assets Not Transferred at Closing (to be transferred automatically upon receipt of third party consents) PIMA COUNTY SYSTEM 1. Town of Marana, Arizona franchise (consent required to transfer franchise from JIC to JCH) 2. Town of Oro Valley, Arizona franchise (consent required to transfer franchise from JIC to JCH) 3. Pima County, Arizona franchise (consent required to transfer franchise from JIC to JCH) 4. Commercial Lease dated February 3, 1987, with 4-D Properties (consent required to transfer from JIC to JCH) 5. Pima County Headend Lease dated September 9, 1988, with Carlyle Real Estate Limited Partnership-XIII (consent required to transfer from JIC to JCH) 6. Pima County Headend Lease dated June 22, 1988, with Riverbend Estates Homeowners ASsociation (consent required to transfer from JIC to JCH) 7. Standard Industrial Lease - Net, dated April 15, 1991, with Martin and Donnabeth Lippman, successors in interest to James M. and Patsy I. Chamberlain (consent required to transfer from JIC to JCH) 8. License Agreement for Attachment on Tucson Electric Power Company Poles and Anchors in the County of Pima, dated January 1, 1988, with Tucson Electric Power Company to serve Pima County, Arizona (consent required to transfer from JIC to JCH). 19 9. License Agreement for Attachment on Tucson Electric Power Company Poles and Anchors in the Town of Marana, dated January 1, 1988, with Tucson Electric Power Company to serve the Town of Marana, Arizona (consent required to transfer from JIC to JCH). 10. License Agreement for Attachment on Tucson Electric Power Company Poles and Anchors in the Town of Oro Valley, dated January 1, 1988, with Tucson Electric Power Company to serve the Town of Oro Valley, Arizona (consent required to transfer from JIC to JCH). 11. License Agreement for Attachment on Trico Electric Cooperative, Inc. Poles, dated November 22, 1988, with Trico Electric Cooperative, Inc. to serve Pima County, Arizona (consent required to transfer from JIC to JCH). 12. General License Agreement for Pole Attachments and/or Conduit Occupancy dated February 22, 1922, with U S WEST Communications, Inc. (formerly The Mountain States Telephone and Telegraph Company) to serve Pima County, Arizona (consent required to transfer from JIC to JCH). 13. Business Radio License WT-744-2653 (FCC filing required to transfer license from JIC to JCH) 14. CARS License WHZ-572 (FCC filing required to transfer license from JIC to JCH) 15. Earth Station License E880935 (FCC filing required to transfer license from JIC to JCH) 16. Microwave License WNTB-819 (FCC filing required to transfer license from JIC to JCH) 17. Microwave License WNTB-820 (FCC filing required to transfer license from JIC to JCH) CLEAR CREEK COUNTY SYSTEM 1. City of Idaho Springs, Colorado franchise (consent required to transfer franchise from JIC to JCC) 2. Clear Creek County, Colorado franchise (consent required to transfer franchise from JIC to JCC) 3. 0Lease Agreement dated September 1, 1993, with James Maxwell, Sr. requires written notice to be given in the event of an assignment 20 4. License for Pole Usage, as amended, dated February 23, 1995, with Public Service Company of Colorado to provide cable television service to the area in and around Empire, Colorado (consent required to transfer from JIC to JCC). 5. License for Pole Usage, as amended, dated February 23, 1995, between Public Service Company of Colorado and Colorado Intercable, Inc.to provide cable television service to the area in and around Georgetown, Colorado (consent required to transfer from JIC to JCC). 6. License for Pole Usage, as amended, dated February 23, 1995, with Public Service Company of Colorado to provide cable television service to the area in and around Idaho Springs, Colorado (consent required to transfer from JIC to JCC). 7. Earth Station License E 8928 (FCC filing required to transfer license from JIC to JCC) 8. Earth Station License E930372 (FCC filing required to transfer license from JIC to JCC) JEFFERSON COUNTY SYSTEM (EVERGREEN) 1. Jefferson County, Colorado franchise (Evergreen) (consent required to transfer franchise from Evergreen to JCC) 2. Cable TV License for Pole Usage Document No. 12142 (Evergreen) dated March 16, 1993, with Public Service Company of Colorado to serve the area of Evergreen, Colorado (consent is required to transfer from Evergreen to JCC) 3. Earth Station License KR-95 (Evergreen) (FCC filing required to transfer license from Evergreen to JCC) JEFFERSON COUNTY SYSTEM (TRI-CITY) 1. Jefferson County, Colorado franchise (Tri-City) (consent is required to transfer franchise from Tri-City to JCC) 2. Arapahoe County, Colorado franchise (consent is required to transfer franchise from Tri-City to JCC) 21 3. Agreement for Joint Use of Electric System Poles for Cable Television Attachments dated May 1, 1987, with The Intermountain Rural Electric Association (Willow Springs, Willowbrook, Dakotah at Willow Springs); (consent is required to transfer from Tri-City to JCH). 6. Cable TV License for Pole Usage Document No. 37827 dated September 19, 1994, with Public Service Company of Colorado (consent is required to transfer from Tri-City to JCC and to grant a security interest). 7. Business Radio License WNQV-232 (FCC filing required to transfer license from Tri-City to JCC) 8. Business Radio License WQP 395 (FCC filing required to transfer license from Tri-City to JCC) 9. Earth Station License E3092 (FCC filing required to transfer license from Tri-City to JCC) 10. Earth Station License E5292 (FCC filing required to transfer license from Tri-City to JCC) ALEXANDRIA, VIRGINIA SYSTEM 1. Business Radio License WNVX 206 (stock transfer will require consent of FCC, and name change will require an FCC filing) NORTH AUGUSTA SYSTEM 1. City of North Augusta, South Carolina franchise (consent is required to transfer franchise from JIC to JCH). 2. Agreement for Joint Use of Electric System Poles for Television Antenna Service Attachments dated October 1, 1984, as amended, with Aiken Electric Cooperative, Inc. to serve North Augusta and Clearwater, South Carolina (consent is required to transfer from JIC to JCH). 3. Pole Attachment Agreement - Community Antenna Television (CATV) dated January 8, 1991, as amended, with Georgia Power Company to serve the City of Thomson, Georgia (consent is required to transfer from JIC to JCH). 22 4. License Agreement for Pole Attachments and/or Conduit Occupancy dated March 16, 1994, with BellSouth Telecommunications, Inc. d/b/a Southern Bell Telephone and Telegraph Company to serve the corporate limits of North Augusta, plus unincorporated areas of Aiken County, South Carolina (consent is required to transfer from JIC to JCH). 5. License Agreement for Pole Attachments and/or Conduit Occupancy in Georgia dated October 1, 1984, as amended, with Southern Bell Telephone and Telegraph Company to serve the City of Thomson plus unincorporated McDuffie County, Georgia (consent is required to transfer from JIC to JCH). 6. Master Agreement for Attachments of Cables, Amplifiers and Associated Equipment for the Distribution of Television Signals dated November 10, 1994, with South Carolina Electric & Gas Company to serve unincorporated areas of Aiken and Edgefield Counties, and the City of North Augusta and Town of Trenton, South Carolina; Facilities Transfer Agreement dated November 10, 1994, with South Carolina Electric & Gas Company (consent is required to transfer from JIC to JCH). 7. Wireline Crossing Agreement dated March 20, 1989, as amended, with CSX Transportation, Inc. for crossings at or near Dearing, McDuffie County, Georgia (consent is required to transfer from JIC to JCH). 8. Agreement dated February 6, 1995, with Norfolk Southern Railway Company for aerial wireline crossings at or near Trenton, South Carolina (consent is required to transfer from JIC to JCH). CHARLES COUNTY, MARYLAND SYSTEM 1. Indian Head Naval Ordnance Station franchise (consent is required to transfer franchise from JIC to JCM). 2. CATV License Agreement for Pole Attachments and/or Conduit Occupancy in the State of Maryland (Agreement No. 73233) dated August 1, 1993, with The Chesapeake and Potomac Telephone Company of Maryland (consent is required to transfer from JIC to JCM). 3. Utility Pole, Underground Duct Rental and Real Estate Agreement (No. N6247788RP00015) dated December 8, 1987, as amended, with the United States Department of Navy, Naval Ordnance Station, Indian Head, Maryland (consent is required to transfer from JIC to JCM). 23 4. Agreement for Joint Use of Poles for Television Antenna Service Attachments dated April 1, 1990, with Southern Maryland Electric Cooperative, Inc. to serve a certain area of Charles County, Maryland (consent is required to transfer from JIC to JCM). 5. License Agreement For Wire, Pipe and Cable Transverse Crossings and Longitudinal Occupations No. C2025 dated April 19, 1982, as amended, with Consolidated Rail Corporation for Valuation Station 1512+74+-, located 2217 feet east of MP 29 at a point 2.42 miles east of the Station of Waldorf, Charles County, Maryland (consent is required to transfer from JIC to JCM). 6. License Agreement For Wire, Pipe and Cable Transverse Crossings and Longitudinal Occupations No. C2026 dated April 20, 1982, as amended, with Consolidated Rail Corporation for a location 298 feet east of MP 31 at a point .07 of a mile east of the Station of Waldorf, Charles County, Maryland (consent is required to transfer from JIC to JCM). 7. License Agreement For Wire, Pipe and Cable Transverse Crossings and Longitudinal Occupations No. C2524 dated February 25, 1986, as amended, with Consolidated Rail Corporation for a location at Valuation Station 1829+95+-, 2223 feet north of MP 35 at a point .53 of a mile south of the Station of Indian Head Junction, Charles County, Maryland (consent is required to transfer from JIC to JCM). 8. Wire Line License Agreement No. C2066 dated May 26, 1982, as amended, with Consolidated Rail Corporation for a location at Valuation Station 2049+82+-, located 1363 feet north of MP 39 and .06 of a mile south of the station at La Plata, Charles County, Maryland (consent is required to transfer from JIC to JCM). 9. License for Nonfederal Use of Real Property No. N6247791RP00005 dated November 8, 1990, with the United States Department of the Navy, Naval Ordnance Station, Indian Head, Maryland (consent is required to transfer from JIC to JCM). 10. Business Radio (SMRS) license WNMO677 (FCC filing required to transfer license from JIC to JCM) 11. CARS license WLY-453 (FCC filing required to transfer license from JIC to JCM). 12. Earth Station license E6748 (FCC filing required to transfer license from JIC to JCM). 24 13. Earth Station license E950383 (FCC filing required to transfer license from JIC to JCM). ANNE ARUNDEL, MARYLAND SYSTEM 1. County of Anne Arundel, Maryland franchise (consent is required to transfer franchise from JIC to JCM). 2. County of Anne Arundel, Maryland (Heritage Harbour) franchise (consent is required to transfer franchise from JIC to JCM). 3. County of Anne Arundel, Maryland (North Anne Arundel County) franchise (consent is required to transfer franchise from JIC to JCM). 4. Fort George G. Meade, Maryland franchise (consent is required to transfer franchise from JIC to JCM). 5. Pole/Trench License Agreement dated May 19, 1987, as amended, with Baltimore Gas and Electric Company (consent is required to transfer from JIC to JCM). 6. Pole/Trench License Agreement dated March 7, 1986, as amended, with Baltimore Gas and Electric Company to serve Heritage Harbour (consent is required to transfer from JIC to JCM). 7. CATV License Agreement for Pole Attachments and/or Conduit Occupancy in the State of Maryland (Agreement #73234) dated August 1, 1993, with The Chesapeake and Potomac Telephone Company of Maryland (consent is required to transfer from JIC to JCM). 8. Duct Lease Agreement dated October 6, 1988, with Baltimore Gas and Electric Company for Marley Station Road and State Route 10 (consent is required to transfer from JIC to JCM). 9. Duct Lease Agreement dated July 7, 1989, with Baltimore Gas and Electric Company for East Frontage Road and Benfield Blvd. (consent is required to transfer from JIC to JCM). 10. License Agreement No. 19-04-423 dated March 23, 1994, with National Railroad Passenger Corporation (d/b/a Amtrak) for a crossing at Milepost 113+3512, at or near Odenton Station, Anne Arundel County, Maryland (consent is required to transfer from JIC to JCM). 25 11. License Agreement for Wire, Pipe and Cable Transverse Crossings and Longitudinal Occupations dated December 7, 1983, as amended, with Consolidated Rail Corporation for a crossing at Valuation Station 9+10+- located 904 feet west of point of switch 0+06+-, at a point in the vicinity of the Station of Odenton, Anne Arundel County, Maryland (consent is required to transfer from JIC to JCM). 12. Business Radio license KNBF768 (FCC filing required to transfer license from JIC to JCM). 13. Business Radio license WPHX754 (FCC filing required to transfer license from JIC to JCM). 14. Earth Station license WX24 (FCC filing required to transfer license from JIC to JCM). 26 EXHIBIT B (Attached to and made a part of that certain Purchase and Sale Agreement dated as of October 18, 1995 by and between Jones Intercable, Inc. and Jones Cable Holdings, Inc.) Form of Note THE INDEBTEDNESS OR OTHER OBLIGATIONS EVIDENCED BY THIS INTERCOMPANY NOTE ARE SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF THE OBLIGATIONS (AS DEFINED IN THE INTERCOMPANY SUBORDINATED DEBT AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THE INTERCOMPANY SUBORDINATED DEBT AGREEMENT TO BE ENTERED INTO BY JONES INTERCABLE, INC. AND JONES CABLE HOLDINGS, INC. IN FAVOR OF THE HOLDERS (AS DEFINED IN SUCH INTERCOMPANY SUBORDINATED DEBT AGREEMENT), THE PROVISIONS OF WHICH ARE INCORPORATED HEREIN AND BY THIS REFERENCE MADE A PART HEREOF. Variable Interest Rate Note _____________, 1995 ($______________) Jones Cable Holdings, Inc., a Colorado corporation (the "Maker"), for value received hereby promises to pay on _____________, 2005 (the "Maturity Date") to the order of Jones Intercable, Inc. (the "Payee") at 9697 East Mineral Avenue, Englewood, Colorado 80112, in lawful money of the United States of America in immediately available funds, at such location in the United States of America as the Payee shall from time to time designate, the lessor of (a) ___________ and No/100th Dollars ($_________) and (b) the unpaid principal amount of all loans made hereunder by the Payee to the Maker. The Maker promises also to pay interest on the unpaid principal amount hereof in like money at said location from the date hereof until paid, at a rate per annum equal to the Payee's weighted average interest rate applicable from time to time with respect to the Payee's indebtedness. Subject to the provisions of the Intercompany Subordinated Debt Agreement, interest shall be paid as follows: On March 1 and September 1 of each year, the Maker shall pay to the Payee all or a portion of the interest due hereunder in an amount equal to (i) the amount required to be paid by the Payee in respect of interest payments on the 9 5/8% Senior Notes due 2000 and the 10 1/2% Senior Subordinated Debentures Due 2008 less (ii) amount otherwise available to the Payee for the payment of such obligations. Subject to the provisions of the Intercompany Subordinated Debt Agreement, on January 1 and July 1 of each year, the Maker shall pay to the Payee all or a portion of the interest due hereunder in an 27 amount equal to (i) the amount required to be paid by the Payee in respect of interest payments 11 1/2% Senior Subordinated Debentures Due 2004 less (ii) amount otherwise available to the Payee for the payment of such obligations. Any interest not paid pursuant to the above provisions or otherwise shall be paid on the Maturity Date. Notwithstanding anything to the contrary contained herein, the Maker shall not be required to make any payment of interest hereunder if such payment would result in a violations of or cause a Default or Event of Default under the hereinafter defined Credit Agreement. The principal of this Intercompany Subordinated Note may be prepaid from time to time without premium or penalty. This Intercompany Subordinated Note is an "Intercompany Subordinated Note" contemplated by and as such term is defined in the Credit Agreement to be entered into among the Maker, as borrower, the Restricted Subsidiaries of the Maker from time to time parties thereto, the several lenders from time to time parties thereto (the "Lenders"), the Managing Agents, the Syndication Agent and the Documentation Agent named therein and NationsBank of Texas, N.A., as administrative agent thereunder, as the same may be amended, supplemented or otherwise modified from time to time (the "Credit Agreement"). This Intercompany Subordinated Note shall become immediately due and payable (the "Payee Acceleration") at such time as the Lenders have declared the indebtedness of the Maker under the Credit Agreement to be due and payable thereunder prior to its stated maturity (the "Credit Agreement Acceleration"); provided, however, if the Lenders under the Credit Agreement rescind the Credit Agreement Acceleration or otherwise reinstate the Credit Agreement, then the Payee agrees that the Payee Acceleration shall be automatically rescinded and this Intercompany Subordinated Note shall be automatically reinstated. The Payee is authorized to endorse on a schedule to be annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date and amount of each loan made by the Payee to the Maker hereunder. Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error or any error in any such endorsement shall not affect the obligations of the Maker in respect of any such loan. All payments under this Intercompany Note shall be made without offset, counterclaim or deduction of any kind. The Maker hereby waives presentment, demand, protest or notice of any kind in connection with this Intercompany Note. So long as the Obligations (as defined in the Credit Agreement) remain outstanding, the Payee shall not transfer or assign this Intercompany Note other than to the Administrative Agent (as defined in the Credit Agreement) for the benefit of the 28 Lenders to secure the payment of the Obligations or transferees of such holders, without the prior written consent of the Lenders. THE INTERCOMPANY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO. IN WITNESS WHEREOF, the Maker has caused this Intercompany Note to be duly executed as of the above written date. JONES CABLE HOLDINGS, INC. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- By its execution hereinbelow, the Payee consents and agrees to be bound by the provisions of this Intercompany Note applicable to it. JONES INTERCABLE, INC. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- EX-10.5.5 4 CREDIT AGREEMENT JONES CABLE & NATIONS BANK 1 EXHIBIT 10.5.5 CREDIT AGREEMENT AMONG JONES CABLE, HOLDINGS, INC., AS THE BORROWER THE RESTRICTED SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTIES HERETO THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO NATIONSBANK OF TEXAS, N.A. AND THE BANK OF NOVA SCOTIA, AS THE MANAGING AGENTS, THE BANK OF NOVA SCOTIA, AS THE SYNDICATION AGENT, AND NATIONSBANK OF TEXAS, N.A., AS THE ADMINISTRATIVE AGENT AND THE DOCUMENTATION AGENT DATED AS OF OCTOBER 31, 1995 2 TABLE OF CONTENTS
PAGE ---- SECTION 1. DEFINITIONS................................................................. 1 1.1 Defined Terms............................................................. 1 1.2 Other Definitional Provisions............................................. 20 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................................. 21 2.1 Commitments............................................................... 21 2.2 Notes..................................................................... 21 2.3 Procedure for Borrowing................................................... 21 2.4 Unavailable Commitment.................................................... 22 2.5 Repayment of Loans........................................................ 22 SECTION 3. LETTERS OF CREDIT........................................................... 23 3.1 L/C Commitment............................................................ 23 3.2 Procedure for Issuance of Letters of Credit............................... 23 3.3 Fees, Commissions and Other Charges....................................... 24 3.4 L/C Participations........................................................ 24 3.5 Reimbursement Obligation of the Borrower.................................. 25 3.6 Obligations Absolute...................................................... 26 3.7 Letter of Credit Payments................................................. 26 3.8 Application............................................................... 27 SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT................ 27 4.1 Interest Rates and Payment Dates.......................................... 27 4.2 Optional and Mandatory Commitment Reductions and Prepayments.............. 27 4.3 Commitment Fees, etc...................................................... 29 4.4 Computation of Interest and Fees.......................................... 30 4.5 Conversion and Continuation Options....................................... 30 4.6 Minimum Amounts of Tranches............................................... 31 4.7 Inability to Determine Interest Rate...................................... 31 4.8 Pro Rata Treatment and Payments........................................... 32 4.9 Requirements of Law....................................................... 32 4.10 Taxes..................................................................... 34 4.11 Indemnity................................................................. 36
-i- 3 4.12 Change of Lending Office.................................................. 36 SECTION 5. REPRESENTATIONS AND WARRANTIES.............................................. 36 5.1 Financial Condition....................................................... 36 5.2 No Change................................................................. 37 5.3 Existence; Compliance with Law............................................ 37 5.4 Power; Authorization; Enforceable Obligations............................. 37 5.5 No Legal Bar.............................................................. 38 5.6 No Material Litigation.................................................... 38 5.7 No Default................................................................ 39 5.8 Ownership of Property; Intellectual Property.............................. 39 5.9 No Burdensome Restrictions................................................ 39 5.10 Taxes..................................................................... 39 5.11 Federal Regulations....................................................... 40 5.12 ERISA..................................................................... 40 5.13 Investment Company Act; Other Regulations................................. 40 5.14 Subsidiaries.............................................................. 40 5.15 Insurance................................................................. 41 5.16 Certain Cable Television Matters.......................................... 41 5.17 Environmental Matters..................................................... 41 5.18 Accuracy of Information................................................... 43 5.19 Security Documents........................................................ 43 5.20 Solvency.................................................................. 44 5.21 Indebtedness.............................................................. 44 5.22 Labor Matters............................................................. 44 5.23 Prior Names............................................................... 44 5.24 Franchises................................................................ 44 5.25 Chief Executive Office; Chief Place of Business........................... 45 5.26 Full Disclosure........................................................... 45 5.27 Intercompany Subordinated Debt............................................ 45 SECTION 6. CONDITIONS PRECEDENT........................................................ 45 6.1 Conditions to Initial Extensions of Credit................................ 45 6.2 Conditions to Each Extension of Credit.................................... 48 SECTION 7. AFFIRMATIVE COVENANTS....................................................... 49 7.1 Financial Statements...................................................... 49 7.2 Certificates; Other Information........................................... 50 7.3 Payment of Obligations.................................................... 50 7.4 Conduct of Business and Maintenance of Existence, etc..................... 51
-ii- 4 7.5 Maintenance of Property; Insurance........................................ 51 7.6 Inspection of Property; Books and Records; Discussions.................... 51 7.7 Notices................................................................... 52 7.8 Environmental Laws........................................................ 52 7.9 Collateral................................................................ 53 SECTION 8. NEGATIVE COVENANTS.......................................................... 54 8.1 Financial Condition Covenants............................................. 55 8.2 Limitation on Indebtedness................................................ 55 8.3 Limitation on Liens....................................................... 56 8.4 Limitation on Fundamental Changes......................................... 57 8.5 Limitation on Sale of Assets.............................................. 57 8.6 Restricted/Unrestricted Designation of Subsidiaries....................... 58 8.7 Limitation on Restricted Payments; Other Payment Limitations.............. 59 8.8 Limitation on Acquisitions................................................ 60 8.9 Investments, Loans, Etc................................................... 60 8.10 Limitation on Transactions with Affiliates................................ 61 8.11 Certain Intercompany Matters.............................................. 61 8.12 Limitation on Restrictions on Subsidiary Distributions.................... 61 8.13 Limitation on Lines of Business........................................... 61 8.14 No Negative Pledge........................................................ 61 8.15 Tax Sharing Agreement..................................................... 62 SECTION 9. EVENTS OF DEFAULT........................................................... 62 SECTION 10. THE ADMINISTRATIVE AGENT................................................... 65 10.1 Appointment............................................................... 65 10.2 Delegation of Duties...................................................... 65 10.3 Exculpatory Provisions.................................................... 66 10.4 Reliance by the Administrative Agent...................................... 66 10.5 Notice of Default......................................................... 66 10.6 Non-Reliance on the Administrative Agent and the Other Lenders............ 67 10.7 Indemnification........................................................... 67 10.8 The Administrative Agent in Its Individual Capacity....................... 68 10.9 Successor Administrative Agent............................................ 68 10.10 Managing Agents and Co-Agents............................................. 69 SECTION 11. NEW RESTRICTED SUBSIDIARIES................................................ 69
-iii- 5 SECTION 12. MISCELLANEOUS.............................................................. 69 12.1 Amendments and Waivers.................................................... 69 12.2 Notices................................................................... 70 12.3 No Waiver; Cumulative Remedies............................................ 71 12.4 Survival of Representations and Warranties................................ 71 12.5 Payment of Expenses and Taxes............................................. 71 12.6 Successors and Assigns; Participations and Assignments.................... 72 12.7 Adjustments; Set-off...................................................... 75 12.8 Counterparts; When Effective.............................................. 76 12.9 Severability.............................................................. 76 12.10 Integration............................................................... 76 12.11 GOVERNING LAW............................................................. 76 12.12 SUBMISSION TO JURISDICTION; WAIVERS....................................... 77 12.13 Acknowledgements.......................................................... 78 12.14 WAIVERS OF JURY TRIAL..................................................... 78 12.15 Confidentiality........................................................... 78
-iv- 6
SCHEDULES --------- Schedule 1.1 Commitments and Addresses of the Lenders Schedule 5.1 Financial Disclosure Schedule 5.4 Required Consents and Authorizations Schedule 5.6 Litigation Disclosure Schedule 5.8(a) Real Property and Personal Property Locations Schedule 5.14 Subsidiaries and Designation Schedule 5.24 Franchise Agreements Schedule 5.25 Chief Executive Office/Chief Places of Business Schedule 6.1(f) Stock Ownership of the Borrower and the Restricted Subsidiaries Schedule 6.1(o) Exceptions to Asset Transfer Schedule 7.9(a) Excluded Collateral Schedule 8.3(c) Existing Liens Schedule 8.10 Existing Affiliated Transactions
EXHIBITS - -------- A Form of Assignment and Acceptance B Form of Compliance Certificate C Form of Intercompany Subordinated Debt Agreement D Negative Pledge Agreement E Form of Intercompany Subordinated Note F Form of Pledge Agreement(s) G Form of Security Agreement H Form of Note I-1 Form of Notice of Borrowing I-2 Form of Notice of Conversion/Continuation J Form of Closing Certificate K Form of Legal Opinion of Davis, Graham & Stubbs, counsel to the Borrower L Form of Legal Opinion of the General Counsel or the acting General Counsel of the Parent M Form of FCC Opinion N Form of Alternative Note
-v- 7 THIS CREDIT AGREEMENT is entered into as of October 31, 1995, among JONES CABLE HOLDINGS, INC., a Colorado corporation (the "Borrower"), the Restricted Subsidiaries (hereinafter defined) of the Borrower from time to time parties to this Agreement, the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders"), NATIONSBANK OF TEXAS, N.A. and THE BANK OF NOVA SCOTIA, as the Managing Agents (in such capacity, the "Managing Agents"), THE BANK OF NOVA SCOTIA, as the Syndication Agent (in such capacity, the "Syndication Agent"), and NATIONSBANK OF TEXAS, N.A., as the Documentation Agent (in such capacity, the "Documentation Agent") and as the Administrative Agent for the Lenders hereunder. WITNESSETH: WHEREAS, Jones Intercable, Inc., a Colorado corporation (the "Parent") and owner of 100% of the Capital Stock of the Borrower has transferred or will (a) transfer to the Borrower (i) 100% of the Capital Stock of Jones Communications of Virginia, Inc. (formerly known as Jones of Alexandria, Inc.) and Jones Communications of Maryland, Inc.; (ii) the Cable Systems serving North Augusta, South Carolina, Augusta, Georgia, Pima County, Arizona; and (iii) $250,000,000 in cash; (b) cause Evergreen Intercable, Inc. and Jones Tri-City Intercable, Inc. (both Subsidiaries of the Parent) to transfer to Jones Communications of Colorado, Inc. ("JCC"), a Wholly Owned Subsidiary of the Borrower, the Cable Systems serving Evergreen, Colorado and Jefferson County, Colorado and; (c) transfer to JCC the Cable System serving Clear Creek County, Colorado (collectively, the "Asset Transfer"), all in consideration of the Borrower's execution and delivery to the Parent of an Intercompany Subordinated Note (hereinafter defined); and WHEREAS, the Borrower has requested the Lenders to furnish the extensions of credit provided for herein, which shall be used by the Borrower (a) to finance permitted acquisitions, (b) for capital expenditures to expand and upgrade Cable Systems of the Borrower and the Restricted Subsidiaries, (c) to make dividends or distributions permitted under this Agreement, and (d) for general corporate purposes; NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: 1 8 "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in Dallas, Texas (the Prime Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors); and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR. "Administrative Agent": NationsBank, together with its affiliates, as the agent for the Lenders under this Agreement and the other Loan Documents. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if such Person (acting alone or with a group of Persons acting in concert) possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through ownership of voting securities, by contract or otherwise. "Aggregate Outstandings of Credit": as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans made by such Lender then outstanding and (b) such Lender's Specified Percentage of the L/C Obligations then outstanding. "Agreement": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Alternative Note": as defined in Section 12.6(d). "Alternative Noteholder": as defined in Section 12.6(e). "Annualized Operating Cash Flow": for the most recently ended fiscal quarter, an amount equal to Operating Cash Flow for such period multiplied by four. 2 9 "Applicable Margin": at the time of any determination thereof, for purposes of all Loans, the margin of interest over the ABR or the Eurodollar Rate, as the case may be, which is applicable at the time of any determination of interest rates under this Agreement, which Applicable Margin shall be subject to adjustment (upwards or downwards, as appropriate) based on the Leverage Ratio, as follows:
APPLICABLE MARGIN APPLICABLE MARGIN FOR FOR EURODOLLAR LEVERAGE RATIO ABR LOANS RATE LOANS ----------------------------------------------------- --------- ----------------- Greater than 5.00 to 1................................. 0.125% 1.125% Greater than or equal to 4.50 to 1 but less than or equal to 5.00 to 1.................. 0.000% 0.875% Less than 4.50 to 1.................................... 0.000% 0.625%
For the purposes of this definition, the Applicable Margin shall be determined as at the end of each of the first three quarterly periods of each fiscal year of the Borrower and as at the end of each fiscal year of the Borrower, based on the relevant financial statements delivered pursuant to Section 7.1(a) or (b) and the Compliance Certificate delivered pursuant to Section 7.2(b); changes in the Applicable Margin shall become effective on the date which is the earlier of (i) two Business Days after the date the Administrative Agent receives such financial statements and the corresponding Compliance Certificate and (ii) the 60th day after the end of each of the first three quarterly periods of each fiscal year or the 120th day after the end of each fiscal year, as the case may be, and shall remain in effect until the next change to be effected pursuant to this definition; provided, that (a) until the first such financial statements and Compliance Certificate are delivered after the date hereof, the Applicable Margin shall be determined by reference to the Leverage Ratio set forth in the Closing Certificate delivered to the Administrative Agent pursuant to Section 6.1(b) and (b) if any financial statements or the Compliance Certificate referred to above are not delivered within the time periods specified above, then, for the period from and including the date on which such financial statements and Compliance Certificate are required to be delivered to but not including the date on which such financial statements and Compliance Certificate are delivered, then the Applicable Margin as at the end of the fiscal period that would have been covered thereby shall be deemed to be the Applicable Margin which would be applicable when the Leverage Ratio is greater than 5.00 to 1.00. "Application": an application, in form and substance consistent with this Agreement and mutually satisfactory to the Borrower and the Issuing Lender, requesting the Issuing Lender to open a Letter of Credit. "Asset Transfer": as defined in the recitals hereto. "Assignee": as defined in Section 12.6(c). 3 10 "Assignment and Acceptance": an Assignment and Acceptance substantially in the form of Exhibit A. "Authorizations": all filings, recordings and registrations with, and all validations or exemptions, approvals, orders, authorizations, consents, Licenses, certificates and permits from, the FCC, applicable public utilities and other Governmental Authorities, including, without limitation, Franchises, FCC Licenses and Pole Agreements. "Available Commitment": at any time, as to any Lender, an aggregate amount, not to exceed at any one time outstanding, equal to such Lender's Commitment, minus, the product of (i) the Unavailable Commitment, multiplied by, (ii) such Lender's Specified Percentage. "BCI": Bell Canada International Inc. "Board": the Board of Governors of the Federal Reserve System or any successor. "Borrower": as defined in the preamble hereto. "Borrowing Date": any Business Day specified in a notice pursuant to Section 2.3 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in Section 5.17(b). "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York or Dallas, Texas are authorized or required by law to close. "Cable Systems": all cable television facilities and distribution systems that are operated and maintained by the Borrower or a Restricted Subsidiary pursuant to the terms of the related licenses, franchises and permits issued under federal, state or municipal laws from time to time in effect, which authorize a person to receive or distribute, or both, by cable, optical, antennae, microwave, satellite or otherwise, audio, video, digital, other broadcast signals or information or telecommunications and visual signals within a defined geographical area for the purpose of providing entertainment or other services, together with all the property, tangible and intangible, owned or used in connection with the services provided pursuant to said licenses, franchises and permits, and each other cable television facility from time to time operated by the Borrower and the Restricted Subsidiaries. A Cable System means one of such Cable Systems. 4 11 "Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all classes of partnership interests (including, without limitation, general, limited and preference units) in a partnership, any and all equivalent ownership interests in a Person (other than a corporation or partnership), and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 by Standard and Poor's Ratings Group ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, or by any political subdivision or taxing authority of any such state, commonwealth or territory, the securities of which state, commonwealth, territory, political subdivision, taxing authority (as the case may be) are rated at least A by S&P or A-2 by Moody's, or (f) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (e) of this definition. "Change of Control": shall be deemed to have occurred at such time as any of the following occur: (a) if Glenn R. Jones and/or BCI shall no longer have the power to elect a majority of the board of directors of the Parent or to direct or cause the direction of the management and policies of the Parent through the ownership of voting securities; or (b) (i) if Glenn R. Jones and/or BCI shall no longer have the power, directly or indirectly, to elect a majority of the board of the Borrower or to direct or cause the direction of the management and policies of the Borrower or (ii) the Parent shall create, incur, assume or suffer to exist any Lien on any Capital Stock of the Borrower. 5 12 "Closing Certificate": as defined in Section 6.1(b). "Co-Agents": CoreStates Bank, N.A., PNC Bank, National Association, Royal Bank of Canada, Credit Lyonnais Cayman Island Branch and Societe Generale. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets of the Borrower and all Capital Stock of the Restricted Subsidiaries, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "Commitment": as to any Lender, its obligation, if any, to make Loans to, and/or issue or participate in Letters of Credit issued on behalf of, the Borrower in an aggregate amount not to exceed at any one time outstanding the amount set forth opposite such Lender's name in Schedule 1.1 under the heading "Commitment" or, in the case of any Lender that is an Assignee, the amount of the assigning Lender's Commitment assigned to such Assignee pursuant to Section 12.6(c) and set forth in the applicable Assignment and Acceptance (in each case, as the same may be increased, reduced or otherwise adjusted from time to time as provided herein). "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414(b) or (c) of the Code. "Compliance Certificate": a certificate of a Responsible Officer of the Borrower, substantially in the form of Exhibit B. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Default": any of the events specified in Section 9, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Designation Notice": as defined in Section 2.4. "Disposition": as defined in Section 8.5. "Documentation Agent": as defined in the preamble hereto. "Dollars" and "$": dollars in lawful currency of the United States of America. 6 13 "Effective Date": as defined in Section 12.8. "Environmental Laws": any and all Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at which NationsBank is offered Dollar deposits at or about 10:00 A.M., Dallas, Texas time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "Eurodollar Loans": Loans, the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ---------------------------------------------- 1.00 -- Eurocurrency Reserve Requirements "Event of Default": any of the events specified in Section 9, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excluded Collateral": as defined in Section 7.9(a). 7 14 "Existing Credit Agreement": the $300,000,000 Credit Agreement dated as of December 8, 1992 among the Parent, as the borrower, and NationsBank, as managing agent, Barclays Bank PLC, Corestates Bank, N.A., and The Bank of Nova Scotia, as co-agents and the lenders named therein, as amended through the date hereof. "Facility": the Commitments and the extensions of credit made thereunder. "FCC": the Federal Communications Commission and any successor thereto. "FCC License": any community antenna relay service, broadcast auxiliary license, earth station registration, business radio, microwave or special safety radio service license issued by the FCC pursuant to the Communications Act of 1934, as amended. "Franchise": any franchise, permit, wire agreement or easement, License or other Authorization granted by any Governmental Authority, including all laws, regulations and ordinances relating thereto, for the construction, operation and maintenance of a Cable System or satellite master antenna television system and the reception and transmission of signals by microwave, and shall include, without limitation, all FCC Licenses and all certificates of compliance and cable television registration statements which are required to be issued by or filed with the FCC. "Franchise Agreement": any ordinance, agreement, contract or other document stating the terms and conditions of any Franchise, including, without limitation, all exhibits and schedules thereto, all amendments thereof and consents, waivers and extensions issued thereunder, any documents incorporated therein by reference and the application from which such Franchise was granted. "GAAP": generally accepted accounting principles in the United States of America in effect from time to time. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) 8 15 for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable principal amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum principal amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum principal amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be the principal amount of such guaranteeing person's reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. For the purposes of Section 8.2, Guarantee Obligations by the Borrower or any of the Restricted Subsidiaries in respect of Indebtedness of the Borrower or any of the Restricted Subsidiaries shall be calculated without duplication of any other Indebtedness. It is understood that obligations pursuant to indemnities which (a) are granted in the ordinary course of business, are related to officer or director liability for officers and directors of the Borrower or the Restricted Subsidiaries, or made in connection with asset Dispositions and (b) do not cover Indebtedness of the types described in clauses (a) through (d) of the definition thereof shall not constitute "Guarantee Obligations" for the purposes of this Agreement. "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or which is evidenced by a note, bond, debenture or similar instrument, (b) all indebtedness of such Person for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (c) all Capital Lease Obligations of such Person, (d) all obligations of such Person in respect of the principal amount of acceptances or letters of credit issued or created for the account of such Person, (e) all Guarantee Obligations of such Person and (f) all liabilities of the type described in clauses (a) through (e) above secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof; provided that the amount of any nonrecourse Indebtedness of such Person shall be not more than an amount equal to the fair market value of the property subject to such Lien, as determined by the Borrower in good faith. The Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such Person in respect thereof. 9 16 "Information": written information, including, without limitation, certificates, reports, statements (other than financial statements, budgets, projections and similar financial data) and documents. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intercompany Subordinated Debt": any Indebtedness of the Borrower related to or resulting from any loan or advance from, or any non-equity investment in the Borrower by, or any management or similar fees payable by the Borrower to, or any other obligation of the Borrower to pay to, BCI or an Affiliate of the Borrower (excluding a Restricted Subsidiary), and all such present and future Indebtedness of the Borrower owing to, or non-equity investment in the Borrower by, or management or similar fees payable by the Borrower to, or any other obligation of the Borrower to pay to, BCI or an Affiliate of the Borrower (excluding a Restricted Subsidiary) now or hereafter existing (whether created directly or acquired by assignment or otherwise), fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, whether evidenced in writing or not, and interest, premiums and fees, if any, thereon and other amounts payable in respect thereof, and all rights and remedies of such obligees with respect thereto. Notwithstanding the foregoing, Intercompany Subordinated Debt shall not include (a) payments under the agreements described in Schedule 8.10(c), or (b) payments relating to any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate of the Borrower (other than a Restricted Subsidiary) which is (i) entered into in the ordinary course of the Borrower's business, (ii) the terms of which are fair and reasonable and in the best interests of the Borrower and (iii) which is approved by the Board of Directors of the Borrower. "Intercompany Subordinated Debt Agreement": the agreement executed and delivered pursuant to Section 6.1 (a) by and among the Parent, the Borrower and any other Affiliate of the Borrower who becomes a party thereto pursuant to the terms thereof, substantially in the form of Exhibit C. "Intercompany Subordinated Note": a note substantially in the form of Exhibit E, evidencing Intercompany Subordinated Debt. "Interest Expense": for any fiscal quarter or fiscal year of the Borrower, as applicable, the aggregate of all letter of credit fees, commitment fees and interest accrued or paid by the Borrower or any of the Restricted Subsidiaries, during such period in respect of Total Debt, all as determined on a consolidated basis in accordance with GAAP. 10 17 "Interest Payment Date": (a) as to any ABR Loan, (i) the last Business Day of each March, June, September and December prior to the Termination Date and (ii) the Termination Date, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period and (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter (or, to the extent available from all Lenders, nine or twelve months thereafter), as selected by the Borrower in its Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter (or, to the extent available from all Lenders, nine or twelve months thereafter), as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period that would otherwise extend beyond the Termination Date shall end on the Termination Date; and (iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month. "Interest Rate Hedge Agreement": any interest rate protection agreement, interest rate futures contract, interest rate option, interest rate cap or other interest rate hedge arrangement, to or under which the Borrower or any Restricted Subsidiary is a party or a beneficiary. 11 18 "Investments": as defined in Section 8.9. "Issuing Lender": NationsBank, provided that, in the event that NationsBank shall be replaced as the Administrative Agent pursuant to Section 10.9, (i) no Letter of Credit shall be issued by NationsBank on or after the date of such replacement and (ii) the replacement Administrative Agent shall be an Issuing Lender from and after the date of such replacement. "L/C Fee Payment Date": the last Business Day of each March, June, September and December. "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of all unpaid Reimbursement Obligations. "Lenders": as defined in the preamble hereto. "Letters of Credit": as defined in Section 3.1(a). "Leverage Ratio": as of the last day of the most recently ended fiscal quarter, the ratio of (i) Total Debt as of such day to (ii) Annualized Operating Cash Flow based on such fiscal quarter. "License": as to any Person, any license, permit, certificate of need, authorization, certification, accreditation, franchise, approval, or grant of rights by any Governmental Authority or other Person necessary or appropriate for such Person to own, maintain, or operate its business or property, including FCC Licenses. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Documents": this Agreement, the Applications, the Intercompany Subordinated Notes, the Intercompany Subordinated Debt Agreement, any Notes, the Negative Pledge, any Interest Rate Hedge Agreements with any of the Lenders and the Security Documents. "Loan Parties": the collective reference to the Borrower and the Restricted Subsidiaries. 12 19 "Majority Lenders": at any time when no Loans or Letters of Credit are outstanding, the Lenders having Commitments equal to or more than 51% of the Total Commitment, and at any time when Loans or Letters of Credit are outstanding, the Lenders with outstanding Loans and participations in L/C Obligations having an unpaid principal balance and face amount, respectively, equal to or more than 51% of all Loans and L/C Obligations outstanding, excluding from such calculation the Lenders which have failed or refused to fund a Loan or their respective portion of an unpaid Reimbursement Obligation. "Managing Agents": as defined in the preamble hereto. "Managing Agents Fee Letter": the letter agreement, dated August 29, 1995, among the Borrower, NationsBank and Scotiabank. "Material Adverse Effect": a material adverse effect on (a) the business, assets, operations or condition (financial or otherwise) of the Borrower or any of the Restricted Subsidiaries, (b) the ability of any Loan Party to perform its obligations under the Loan Documents or (c) the rights or remedies of the Administrative Agent or the Lenders under this Agreement or any of the other Loan Documents. "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Maximum Permitted Indebtedness": shall mean, at the date of determination, an amount equal to the product of (i) Annualized Operating Cash Flow based on the preceding fiscal quarter and (ii) the Leverage Ratio permitted pursuant to Section 8.1(a) on the date of determination. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NationsBank": NationsBank of Texas, N.A. "NationsBank Fee Letter": the letter agreement, dated August 29, 1995, between the Borrower and NationsBank. "Negative Pledge": the Negative Pledge Agreement to be executed and delivered by the Parent, substantially in the form of Exhibit D hereto, as the same may be amended, supplemented or otherwise modified from time to time, whereby the Parent agrees not to create, incur, assume or suffer to exist any Lien upon the Capital Stock of the Borrower or any Intercompany Subordinated Note from the Borrower in favor of the Parent. 13 20 "Net Unrestricted Designated Subsidiaries Three Month Cash Flow": shall mean, for any period, the excess, if any, of (i) the Three Month Cash Flow attributable to all Restricted Subsidiaries which have been designated during such period as Unrestricted Subsidiaries pursuant to Section 8.6, including, if applicable, the Three Month Cash Flow attributable to any Restricted Subsidiary which is then being designated as an Unrestricted Subsidiary pursuant to Section 8.6 (calculated at the time of each such designation), over (ii) the Three Month Cash Flow attributed to all Unrestricted Subsidiaries which have been designated during such period as the Restricted Subsidiaries pursuant to Section 8.6, including, if applicable, the Three Month Cash Flow attributable to any Unrestricted Subsidiary which is then being designated as a Restricted Subsidiary pursuant to Section 8.6 (calculated at the time of each such designation). "Non-Excluded Taxes": as defined in Section 4.10(a). "Non-U.S Lender": as defined in Section 4.10(b). "Notes": as defined in Section 2.2. "Notice of Borrowing": as defined in Section 2.3. "Notice of Conversion/Continuation": as defined in Section 4.5. "Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Loan Party, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and Reimbursement Obligations and all other obligations and liabilities of any Loan Party to the Administrative Agent or to any Lender (or, in the case of any Interest Rate Protection Agreement, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Interest Rate Protection Agreement entered into with any Lender (or any affiliate of any Lender) or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all reasonable fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by any Loan Party pursuant hereto) or otherwise. "Operating Cash Flow": for any period the total revenues (excluding the gain on the sale of any assets to the extent included therein) of the Borrower and the Restricted Subsidiaries, less the sum of (a) operating expenses of the Borrower and the Restricted Subsidiaries for such period, and (b) general and administrative expenses of the Borrower 14 21 and the Restricted Subsidiaries for such period, in each case determined and consolidated in accordance with GAAP and calculated after giving effect to acquisitions, exchanges and dispositions of assets of the Borrower and any of the Restricted Subsidiaries (and designations of the Restricted Subsidiaries and the Unrestricted Subsidiaries) during such period as if such transactions had occurred on the first day of such period; provided, that for purposes of determining Operating Cash Flow for any such period during which (a) the Borrower or any of the Restricted Subsidiaries acquired or disposed of any assets, or (b) any Restricted Subsidiaries were designated Unrestricted Subsidiaries or Unrestricted Subsidiaries were designated Restricted Subsidiaries, then such Operating Cash Flow shall be increased (in the case of asset acquisitions or the designation of a Unrestricted Subsidiary as a Restricted Subsidiary) or reduced (in the case of asset dispositions or the designation of a Restricted Subsidiary as an Unrestricted Subsidiary), by the Operating Cash Flow that would have been contributed by such assets or Restricted Subsidiary or Unrestricted Subsidiary, as the case may be during such period, determined on a pro forma basis in a manner reasonably satisfactory to the Managing Agents, as though the Borrower or the relevant Restricted Subsidiary acquired or disposed of such assets or the designations of the Restricted Subsidiaries or the Unrestricted Subsidiaries took place, on the first day of such period. "Parent": as defined in the preamble hereto. "Participant": as defined in Section 12.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Perfection Certificate": as defined in Section 6.1(p). "Permitted Line of Business": as defined in Section 8.13. "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) a "contributing sponsor" as defined in Section 4001(a)(13) of ERISA or a member of such contributing sponsor's "control group" as defined in Section 4001(a)(14) of ERISA. "Pledge Agreements": the Pledge Agreement(s) to be executed and delivered by the Borrower and the Restricted Subsidiaries, substantially in the form of Exhibit F hereto, as the same may be amended, supplemented or otherwise modified from time to time. 15 22 "Pledged Subsidiary": any Restricted Subsidiary of the Borrower. "Pole Agreement": any pole attachment agreement or underground conduit use agreement entered into in connection with the operation of any Cable System. "Prime Rate": as defined in the definition of "ABR". "Pro Forma Debt Service": on any date of determination, without duplication, for the succeeding twelve-month period from the end of the most recently ended fiscal quarter, the sum of (a) all Interest Expense scheduled to be paid on Total Debt during such twelve-month period (including without limitation any amounts scheduled to be paid pursuant to any Interest Rate Hedge Agreement), plus (b) all rentals (other than insurance premiums and property taxes) scheduled to be paid under Capital Lease Obligations during such twelve-month period, plus (c) required principal payments on Total Debt and/or payments associated with reductions in the Total Commitment for such twelve-month period; provided that, for purposes of this definition, the rates of interest payable during any period on Total Debt (x) bearing interest at a variable rate or at different fixed rates or (y) on which interest does not become payable until a specified date after the end of such quarter shall, in each case, be the interest rates per annum payable on such Total Debt as of the date for which such calculation is made. "Properties": as defined in Section 5.17(a). "Quarterly Percentage Reduction": as defined in Section 4.2(c). "Redesignation Notice": as defined in Section 2.4. "Register": as defined in Section 12.6(g). "Reimbursement Obligations": the obligations of the Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under Sections .13, .14, .16, .18, .19 or .20 of PBGC Reg. sec. 2615. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental 16 23 Authority (including any Authorization), in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": the chief executive officer, the president, the chief financial officer or the treasurer of the relevant Loan Party. "Restricted Payments": as defined in Section 8.7. "Restricted Subsidiary": (a) each of the Subsidiaries designated as such on Schedule 5.14 attached hereto and (b) any other Subsidiary of the Borrower or another Restricted Subsidiary organized under the laws of any state of the United States or the District of Columbia which has been designated as a Restricted Subsidiary in accordance with Section 8.6, unless and until designated as an Unrestricted Subsidiary pursuant to Section 8.6; provided that not less than one hundred percent (100%) of the voting control thereof and not less than one hundred percent (100%) of the overall economic equity therein, at the time of which any determination is being made, is owned, directly or indirectly, beneficially and of record by the Borrower. "Scotiabank": The Bank of Nova Scotia. "Security Agreement": the Security Agreement to be executed and delivered by the Borrower, substantially in the form of Exhibit G hereto, as the same may be amended, supplemented or otherwise modified from time to time. "Security Documents": the collective reference to the Pledge Agreements, the Security Agreement and any other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and under any of the other Loan Documents or to secure any guarantee of any such obligations and liabilities. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "fair value" or "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the fair value or present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, 17 24 (i) "debt" means liability on a "claim", (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured and (iii) unliquidated, contingent, disputed and unmatured claims shall be valued at the amount that can be reasonably expected to be actual and matured. "Specified Percentage": at any time, as to any Lender, the percentage of the Total Commitment then constituted by such Lender's Commitment. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors (or Persons holding equivalent positions) of such corporation, partnership or other entity are at the time owned, or the management and policies of which are otherwise ultimately controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Syndication Agent": as defined in the preamble hereto. "Tax Sharing Agreement": that certain Jones Intercable, Inc. and its Qualifying Subsidiaries Income Tax Sharing Agreement, dated as of October 31, 1995, among the Parent and certain of its Subsidiaries, including without limitation the Borrower. "Termination Date": the earlier of (i) December 31, 2004, (ii) the date the Lenders' Commitments to lend under this Agreement are otherwise cancelled or terminated and (iii) the date any Note shall become due and payable, whether at stated maturity, by acceleration or otherwise. "Three Month Cash Flow": for a Person or group of Persons or the assets of any Person as the context requires that portion of Operating Cash Flow derived from or produced by such Person, Persons or assets for the three-month period ending on the last day of the month immediately preceding the date of designation, transfer, sale or exchange of such Person, Persons or assets or, in the case of the Borrower and the Restricted Subsidiaries, immediately prior to the date of determination thereof. "Total Available Commitment": the sum of the Available Commitments of all the Lenders. 18 25 "Total Commitment": the sum of the Commitments (in each case, as the same may be increased, reduced or otherwise adjusted from time to time as provided herein) not to exceed $500,000,000. "Total Debt": for the Borrower and the Restricted Subsidiaries as of any date, without duplication, the sum of (a) Indebtedness outstanding on such date excluding any Intercompany Subordinated Debt, (b) Capital Lease Obligations outstanding on such date and (c) Guarantee Obligations, determined on a consolidated basis in accordance with GAAP. "Total Extensions of Credit": at any time, the sum of the Aggregate Outstandings of Credit of each Lender at such time. "Tranche": the collective reference to Eurodollar Loans made by the Lenders, the then current Interest Periods of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Transferee": as defined in Section 12.6(i). "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan. "Unavailable Commitment": as defined in Section 2.4. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "Unrestricted Subsidiary": (a) any Subsidiary that is not designated as a Restricted Subsidiary or that is designated as an Unrestricted Subsidiary in accordance with the terms hereof and (b) any Subsidiary of such designated Subsidiary, provided, that (i) at no time shall any creditor of any such Subsidiary have any claim (whether pursuant to a Guarantee Obligation or otherwise) against the Borrower or any of its other Subsidiaries (other than another Unrestricted Subsidiary) in respect of any Indebtedness or other obligation of any such Subsidiary; (ii) neither the Borrower nor any of its Subsidiaries (other than another Unrestricted Subsidiary) shall become a general partner of any such Subsidiary; (iii) no default with respect to any Indebtedness of any such Subsidiary (including any right which the holders thereof may have to take enforcement action against any such Subsidiary) shall permit (upon notice, lapse of time or both) any holder of any Indebtedness of the Borrower or its other Subsidiaries (other than another Unrestricted Subsidiary) to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity; (iv) no such Subsidiary shall own any Capital Stock of, or own or hold any Lien on any property of, the Borrower or any other Subsidiary of the Borrower (other than another Unrestricted Subsidiary); (v) no Investments may be made in any such 19 26 Subsidiary by the Borrower or any of its Subsidiaries (other than another Unrestricted Subsidiary); and (vi) at the time of such designation, no Default or Event of Default shall have occurred and be continuing or would result therefrom. It is understood that the Unrestricted Subsidiaries shall be disregarded for the purposes of any calculation pursuant to this Agreement relating to financial matters with respect to the Borrower. "Unrestricted Subsidiary Designation": as defined in Section 8.6. "Wholly Owned Subsidiary": as to any Person, any other Person at least 100% of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly or indirectly through one or more other Wholly Owned Subsidiaries. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any other Loan Document or any certificate or other document made or delivered pursuant hereto or thereto. (b) Unless otherwise specified herein, all accounting terms used herein (and in any other Loan Document and any certificate or other document made or delivered pursuant hereto or thereto) shall be interpreted, all accounting determinations shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time; provided, however, that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Section 8 to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Majority Lenders wish to amend Section 8 for such purpose), then compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Majority Lenders. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (e) References in this Agreement or any other Loan Document to knowledge by the Borrower or any Restricted Subsidiary of events or circumstances shall be deemed to refer to events or circumstances of which any Responsible Officer has actual knowledge or reasonably should have knowledge. (f) References in this Agreement or any other Loan Document to financial statements shall be deemed to include all related schedules and notes thereto. 20 27 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Commitments. (a) Subject to and in reliance upon the terms, conditions, representations and warranties contained in the Loan Documents, each Lender severally agrees to make revolving credit Loans to the Borrower from time to time until the Termination Date, provided that in no event shall the Aggregate Outstandings of Credit of any Lender at any time exceed such Lender's Available Commitment. Until the Termination Date, the Borrower may use the Available Commitments by borrowing, prepaying the Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.3 and 4.5, provided that no Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Termination Date. 2.2 Notes. In order to evidence the Loans, the Borrower will execute and deliver to each Lender a promissory note substantially in the form of Exhibit H, with appropriate insertions as to payee, date and principal amount (each, as amended, supplemented, replaced or otherwise modified from time to time, a "Note"), payable to the order of each Lender and in a principal amount equal to each such Lender's Commitment. Each Note shall (x) be dated the Effective Date or the date of any reissuance of such Note, (y) be stated to mature on the Termination Date and (z) provide for the payment of interest in accordance with Section 4.1. 2.3 Procedure for Borrowing. Subject to the terms and conditions contained in the Loan Documents, the Borrower may borrow under the Available Commitments, prior to the Termination Date, on any Business Day by delivery to the Administrative Agent of an irrevocable notice substantially in the form of Exhibit I-1 (a "Notice of Borrowing"). A Notice of Borrowing must be received by the Administrative Agent prior to 11:00 A.M., Dallas, Texas time, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Loans are to be initially Eurodollar Loans, or (b) on the requested Borrowing Date. A Notice of Borrowing shall specify (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective amounts of each Tranche and the respective lengths of the initial Interest Periods therefor. Each borrowing under the Total Available Commitment shall be in an amount equal to (x) in the case of ABR Loans, $5,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then Total Available Commitment is less than $5,000,000, such lesser amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon receipt of any such Notice of Borrowing from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each such Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 12.2 prior to 1:00 P.M., Dallas, Texas time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to 21 28 the Borrower by the Administrative Agent crediting the account of the Borrower as so directed by the Borrower in a Notice of Borrowing with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. 2.4 Unavailable Commitment. On the Effective Date, the Borrower may give the Administrative Agent notice designating (a "Designation Notice") up to a maximum principal amount of $200,000,000 of the Total Commitment, in increments of $25,000,000, as being unavailable for borrowing (the total of all such designated amounts at any time being herein referred to as the "Unavailable Commitment"). In no event may the Borrower designate an amount as unavailable for borrowing after the Effective Date or if, after giving effect to the applicable Designation Notice, the Aggregate Outstandings of Credit of all the Lenders would exceed the Total Available Commitment. At any time until the date which is the second anniversary of the Effective Date, the Borrower may redesignate all or any portion of the Unavailable Commitment as available for borrowing or the issuance of Letters of Credit by giving the Administrative Agent notice (a "Redesignation Notice") specifying the amount, in increments of $25,000,000, of the Unavailable Commitment which shall again be available for borrowing. The amount so specified in the Redesignation Notice shall be available for borrowing on the date which is three Business Days after the Administrative Agent's receipt of such Redesignation Notice; provided, however, that for purposes of Section 4.3 such Redesignation Notice shall be deemed to be effective as of the date which is 90 days prior to the date of such Redesignation Notice. Notwithstanding anything to the contrary contained herein, on the date which is the second anniversary of the Effective Date the amounts, if any, remaining designated as the Unavailable Commitment shall be deemed to be available for borrowing or the issuance of Letters of Credit on such date subject to the terms and conditions of this Agreement. 2.5 Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender, (i) the then unpaid principal amount of each Loan of such Lender, on the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 9) and (ii) the amounts specified in Section 4.2, on the dates specified in Section 4.2. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 4.1. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain the Register pursuant to Section 12.6(g), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder, the Type thereof and each Interest Period, if any, applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower 22 29 to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (d) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 12.6(g) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. SECTION 3. LETTERS OF CREDIT 3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, Issuing Lender, in reliance on the agreements of the other Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day in such form as may be approved from time to time by such Issuing Lender; provided that Issuing Lender shall not issue any Letter of Credit if, after giving effect to such issuance, either (i) the L/C Obligations would exceed the lesser of (x) $30,000,000 or (y) the Total Available Commitment or (ii) the Aggregate Outstandings of Credit of all the Lenders would exceed the Total Available Commitment. Each Letter of Credit shall (i) be denominated in Dollars and shall be either (x) a standby letter of credit issued for the account of the Borrower, which finances the working capital and business needs of the Borrower and/or the Subsidiaries of the Borrower, including, without limitation, good faith deposits in connection with permitted acquisitions by the Borrower and/or the Subsidiaries of the Borrower, or (y) a commercial letter of credit issued for the account of the Borrower in respect of the purchase of goods or services by the Borrower and/or any of the Subsidiaries of the Borrower and (ii) expire no later than the earlier of (x) the Termination Date and (y) the date which is 12 months after its date of issuance. (b) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of Texas. (c) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any other Lender to exceed any limits imposed by, any applicable Requirement of Law. 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender, at its address for notices specified herein, an Application therefor, completed to the reasonable satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and 23 30 shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. 3.3 Fees, Commissions and Other Charges. (a) The Borrower shall pay to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to each Letter of Credit, computed for the period from and including the date of issuance of such Letter of Credit to the date such Letter of Credit is no longer outstanding, computed at a percentage rate per annum equal to the Applicable Margin from time to time applicable to Loans bearing interest at the Eurodollar Rate, calculated on the basis of a 360-day year, of the aggregate average daily amount available to be drawn under such Letter of Credit for the period as to which payment of such fee is made, payable on each L/C Fee Payment Date to occur while such Letter of Credit remains outstanding and on the date such Letter of Credit expires, is cancelled or is drawn upon. Such fee shall be nonrefundable. (b) In addition to the foregoing fees, the Borrower shall pay to the Issuing Lender the fees set forth in the NationsBank Fee Letter. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to each Lender all fees received by the Administrative Agent for each such Lender's account pursuant to this Section. 3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each Lender, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each Lender irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such Lender's own account and risk an undivided interest equal to such Lender's Specified Percentage in the Issuing Lender's obligations and rights under each Letter of Credit issued by the Issuing Lender and the amount of each draft paid by the Issuing Lender thereunder. Each Lender unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit issued by the Issuing Lender for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with Section 3.5(a), such Lender shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such Lender's Specified Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) If any amount required to be paid by any Lender to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such Lender shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective 24 31 Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any Lender pursuant to Section 3.4(a) is not in fact made available to the Issuing Lender by such Lender within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such Lender, on demand, such amount with interest thereon calculated from such due date at a rate per annum equal to the ABR plus the Applicable Margin. A certificate of the Issuing Lender submitted to any Lender with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any Lender its pro rata share of such payment in accordance with Section 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of Collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will, if such payment is received prior to 1:00 p.m., Dallas, Texas time, on a Business Day, distribute to such Lender its pro rata share thereof on the same Business Day or if received later than 1:00 p.m. on the next succeeding Business Day; provided, however, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such Lender shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. (d) Notwithstanding anything to the contrary in this Agreement, each Lender's obligation to make the Loans referred to in Section 3.5(b) and to purchase and fund participating interests pursuant to Section 3.4(a) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against the Issuing Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 6; (iii) any adverse change in the condition (financial or otherwise) of any Loan Party; (iv) any breach of this Agreement or any other Loan Document by any Loan Party or any Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees to reimburse the Issuing Lender (it being understood that such reimbursement shall be effected by means of a borrowing of Loans unless the Managing Agents shall determine in their sole discretion that such Loans may not be made for such purpose as a result of a Default or Event of Default pursuant to Section 9(f)), upon receipt of notice from the Issuing Lender of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender, for the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender, at its address for notices specified herein in Dollars and in immediately available funds, on the date 25 32 on which the Borrower receives such notice, if received prior to 11:00 A.M., Dallas, Texas time, on a Business Day and otherwise on the next succeeding Business Day, (b) Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Section 3.5, (i) from the date the draft presented under the affected Letter of Credit is paid to the date on which the Borrower is required to pay such amounts pursuant to paragraph (a) above at a rate per annum equal to the ABR plus the Applicable Margin and (ii) thereafter until payment in full at the rate which would be payable on any Loans which were then overdue. Except as otherwise specified in Section 3.5(a), each drawing under any Letter of Credit shall constitute a request by the Borrower to the Administrative Agent for a borrowing of Loans that are ABR Loans pursuant to Section 2.3 in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of payment of such drawing and the proceeds of such Loans shall be applied by the Administrative Agent to reimburse the Issuing Lender for the amounts paid under such Letter of Credit. 3.6 Obligations Absolute. Subject to the penultimate sentence of this Section 3.6, the Borrower's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender, any Lender or any beneficiary of a Letter of Credit. The Borrower also agrees with the Issuing Lender that the Issuing Lender and the Lenders shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender and the Lenders shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by such Person's gross negligence or willful misconduct. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of Texas, shall be binding on the Borrower and shall not result in any liability of either the Issuing Lender or any Lender to the Borrower. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower and the Lenders of the date and amount thereof. Subject to Section 3.6, the responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit. 26 33 3.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Agreement, the provisions of this Agreement shall apply. SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT 4.1 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin in effect for such day. (b) Each ABR Loan shall bear interest for each day that it is outstanding at a rate per annum equal to the ABR for such day plus the Applicable Margin in effect for such day. (c) (i) After the occurrence and during the continuance of an Event of Default, all Loans and Reimbursement Obligations shall bear interest at a rate per annum which is equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section 4.1 plus 2% or (y) in the case of Reimbursement Obligations, at a rate per annum equal to the ABR plus the Applicable Margin plus 2% and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to ABR plus the Applicable Margin plus 2%, in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand. 4.2 Optional and Mandatory Commitment Reductions and Prepayments. (a) The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty (it being understood that amounts payable pursuant to Section 4.11 do not constitute premium or penalty), upon at least three Business Days' irrevocable notice to the Administrative Agent (in the case of Eurodollar Loans) or at least one Business Day's irrevocable notice to the Administrative Agent (in the case of ABR Loans), specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, in each case if a combination thereof, the principal amount allocable to each. Upon the receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with (if a Eurodollar Loan is prepaid other than at the end of the Interest Period applicable thereto) any amounts payable pursuant to Section 4.11. Partial prepayments of 27 34 Loans shall be in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. (b) The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent (which will promptly notify the Lenders thereof), to terminate the Total Commitment or, from time to time, to reduce the amount of the Total Commitment; provided that (i) any such reduction of the Total Commitment shall first be applied as a reduction in the Unavailable Commitment until the same is eliminated and then as a reduction in the Total Available Commitment; and (ii) no such termination or reduction of the Total Commitment shall be permitted if, after giving effect thereto and to any prepayments of the Loans made on the effective date thereof, the sum of the Aggregate Outstanding Extensions of Credit of all the Lenders would exceed the aggregate Total Available Commitment then in effect. Any such reduction shall be in a minimum amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently the Total Commitment then in effect. (c) On the last Business Day of each March, June, September and December, commencing March 31, 1999, through the Termination Date, the Total Commitment shall automatically and permanently be reduced by the percentage (the "Quarterly Percentage Reduction") of the original Total Commitment, as set forth below. Notwithstanding anything contained in this Agreement to the contrary, on the Termination Date the Total Commitment shall automatically reduce to zero.
QUARTERLY TOTAL PERCENTAGE CALENDAR PERCENTAGE REDUCTION FOR THE YEAR REDUCTION CALENDAR YEAR - -------- ---------- ----------------- 1999.......................................................... 1.875% 7.50% 2000.......................................................... 3.750% 15.00% 2001.......................................................... 4.375% 17.50% 2002.......................................................... 5.000% 20.00% 2003.......................................................... 5.000% 20.00% 2004.......................................................... 5.000% 20.00%
(d) If at any time the sum of the Aggregate Outstanding Extensions of Credit of all the Lenders exceeds the Total Available Commitment then in effect, the Borrower shall, without notice or demand, immediately repay the Loans in an aggregate principal amount equal to such excess, together with interest accrued to the date of such payment or repayment and any amounts payable under Section 4.11. To the extent that, after giving effect to any prepayment of the Loans required by the preceding sentence, the sum of the Aggregate Outstanding Extensions of Credit of 28 35 all the Lenders still exceeds the Total Available Commitment then in effect, the Borrower shall, without notice or demand, immediately cash collateralize the then outstanding L/C Obligations in an amount equal to such excess upon terms reasonably satisfactory to the Administrative Agent. (e) In the case of any reduction of the Total Commitment the Borrower shall, if applicable, comply with the requirements of Section 4.2(d). Each repayment of the Loans under this Section 4.2 shall be accompanied by accrued interest to the date of such repayment on the amount repaid. Any amounts deposited in any cash collateral account established pursuant to this Section 4.2 shall be invested in Cash Equivalents having a one-day maturity or such other Cash Equivalents as shall be acceptable to the Administrative Agent and the Borrower. 4.3 Commitment Fees. etc. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender, a commitment fee, on the average daily amount of the unutilized Available Commitment and on the Unavailable Commitment computed at a rate per annum based on the Leverage Ratio in effect for the fiscal quarter preceding the payment date, determined as follows:
LEVERAGE AVAILABLE UNAVAILABLE RATIO COMMITMENT COMMITMENT - ----------- ---------- ---------- >5.00:1.00........................................................ 0.375% 0.1875% <5.00:1.00........................................................ 0.250% 0.1875%
For purposes of calculating the commitment fee due hereunder, the Leverage Ratio shall be determined as at the end of each of the first three quarterly periods of each fiscal year of the Borrower and as at the end of each fiscal year of the Borrower, based on the relevant financial statements delivered pursuant to Section 7. 1 (a) or (b) and the Compliance Certificate delivered pursuant to Section 7.2(b); changes in the Leverage Ratio shall become effective on the date which is the earlier of (i) two Business Days after the date the Administrative Agent receives such financial statements and the corresponding Compliance Certificate and (ii) the 60th day after the end of each of the first three quarterly periods of each fiscal year or the 120th day after the end of each fiscal year, as the case may be, and shall remain in effect until the next change to be effected pursuant to this Section 4.3; provided, that (a) until the first such financial statements and Compliance Certificate are delivered after the date hereof, the Applicable Margin shall be determined by reference to the Leverage Ratio set forth in the Closing Certificate delivered to the Administrative Agent pursuant to Section 6.1(b), and (b) if any financial statements or the Compliance Certificate referred to above are not delivered within the time periods specified above, then, for the period from and including the date on which such financial statements and Compliance Certificate are required to be delivered until the date on which such financial statements and Compliance Certificate are delivered, then the Leverage Ratio as at the end of the fiscal period that would have been covered thereby shall be deemed to be greater than 5.00 to 1.00. 29 36 Such commitment fee shall be payable quarterly in arrears on the last Business Day of each March, June, September and December and on the date on which all of the Commitments shall have terminated. (b) The Borrower shall pay (without duplication of any fee payable under Section 4.3(a)) to the Managing Agents, for their respective accounts, the fees in the amounts and on the dates agreed to in the Managing Agents Fee Letter. 4.4 Computation of Interest and Fees. (a) Interest based on the Eurodollar Rate and fees shall be calculated on the basis of a 360-day year for the actual days elapsed; and interest based on the ABR shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower; deliver to the Borrower a statement showing in reasonable detail the calculations used by the Administrative Agent in determining any interest rate pursuant to Section 4.1 (a). 4.5 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Administrative Agent an irrevocable notice substantially in the form of Exhibit I-2 (a "Notice of Conversion/Continuation"), at least one Business Day prior to such election, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans or to continue Eurodollar Loans as Eurodollar Loans by giving the Administrative Agent a Notice of Conversion/Continuation at least three Business Days prior to such election. Any such Notice of Conversion/Continuation to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such Notice of Conversion/Continuation the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and (ii) no Loan may be converted into a Eurodollar Loan if the Interest Period selected therefor would expire after the Termination Date. 30 37 (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, of the length of the next Interest Period to be applicable to such Loans, determined in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing or (ii) after the date that is one month prior to the Termination Date, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice of continuation pursuant to this Section 4.5(b), the Administrative Agent shall promptly notify each Lender thereof. 4.6 Minimum Amounts of Tranches. All borrowings, conversions, continuations and payments of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Tranche shall be equal to $5,000,000 or a whole multiple of $ 1,000,000 in excess thereof. In no event shall there be more than six Tranches outstanding at any time. 4.7 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or (b) the Administrative Agent shall have received notice from the Majority Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give facsimile notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent or the Majority Lenders, as the case may be, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 31 38 4.8 Pro Rata Treatment and Payments. (a) Each borrowing of Loans hereunder shall be made, each payment by the Borrower on account of any commitment fee hereunder shall be allocated by the Administrative Agent, and any reduction of the Total Commitment shall be allocated by the Administrative Agent, pro rata according to the respective Specified Percentages of the Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on, or commitment fees related to, the Loans or Reimbursement Obligations shall be allocated by the Administrative Agent pro rata according to the respective Specified Percentages of such Loans and Reimbursement Obligations then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder and under any Notes, whether on account of principal, interest, fees, Reimbursement Obligations or otherwise, shall be made without set-off or counterclaim and shall be made prior to 1:00 P.M., Dallas, Texas time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Administrative Agent's office specified in Section 12.2, in Dollars and in immediately available funds. Payments received by the Administrative Agent after such time shall be deemed to have been received on the next Business Day. If any payment hereunder becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless, with respect to payments of Eurodollar Loans only, the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this Section 4.8 shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall notify the Borrower of the failure of such Lender to make such amount available to the Administrative Agent and the Administrative Agent shall also be entitled to recover, on demand from the Borrower, such amount with interest thereon at a rate per annum equal to the ABR plus the Applicable Margin in effect on the Borrowing Date. 4.9 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: 32 39 (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 4.10, net income taxes and franchise taxes (imposed in lieu of net income taxes)); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable. (b) If any Lender shall have determined in good faith that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this Section 4.9, it shall promptly deliver a certificate to the Borrower (with a copy to the Administrative Agent), setting forth in reasonable detail an explanation of the basis for requesting such compensation. Such certificate as to any additional amounts payable pursuant to this Section 4.9 submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The Borrower shall pay each Lender the amount shown as due on any such certificate delivered by it within 15 days after the Borrower's receipt thereof. The agreements in this Section 4.9 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 33 40 4.10 Taxes. (a) All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding (i) net income taxes; (ii) franchise and doing business taxes imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note); (iii) any Taxes, levies, imposts, deductions, charges or withholdings that are in effect and that would apply to a payment to such Lender as of the Effective Date; and (iv) if any Person acquires any interest in this Agreement or any Note pursuant to the provisions hereof, including without limitation a participation (whether or not by operation of law), or a foreign Lender changes the office in which the Loan is made, accounted for or booked (any such Person or such foreign Lender in that event being referred to as a "Tax Transferee"), any Taxes, levies, imposts, deductions, charges or withholdings to the extent that they are in effect and would apply to a payment to such Tax Transferee as of the date of the acquisition of such interest or change in office, as the case may be. If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Note, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Non-U.S. Lender if such Lender fails to comply with the requirements of paragraph (b) of this Section. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If, when the Borrower is required by this Section 4.10(a) to pay any Non-Excluded Taxes, the Borrower fails to pay such NonExcluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. (b) Each Lender (or Transferee) that is not a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America, or any estate or trust that is subject to federal income taxation regardless of the source of its income (a "Non-U.S. Lender" ) shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal 34 41 withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, an annual certificate representing that such Non-U.S. Lender (i) is not a "bank" for purposes of Section 881(c) of the Code (and is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank in any filing with or submission made to any Governmental Authority or rating agency), (ii) is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and (iii) is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents, along with such other additional forms as the Borrower, the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) may reasonably request to establish the availability of such exemption. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of Section 4.10, a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 4.10(b) that such Non-U.S. Lender is not legally able to deliver, it being understood and agreed that, in the event that a Non-U.S. Lender fails to deliver any forms otherwise required to be delivered pursuant to this Section 4.10(b), or notifies the Borrower that any previously delivered certificate is no longer in force, the Borrower shall withhold such amounts as the Borrower shall reasonably determine are required by law and shall not be required to make any additional payment with respect thereto to the Non-U.S. Lender, unless such failure to deliver or notify is a result of change in law subsequent to the date hereof. (c) If a Lender (or Transferee) or the Administrative Agent shall become aware that it is entitled to receive a refund in respect of Non-Excluded Taxes paid by the Borrower, or as to which it has been indemnified by the Borrower, which refund in the good faith judgment of such Lender (or Transferee) is allocable to such payment made pursuant to this Section 4.10, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after receipt of a request by the Borrower, apply for such refund. If any Lender (or Transferee) or the Administrative Agent receives a refund in respect of any Non-Excluded Taxes paid by the Borrower, or as to which it has been indemnified by the Borrower, which refund in the good faith judgment of such Lender (or Transferee) is allocable to such payment made pursuant to this Section 4.10, it shall promptly notify the Borrower of such refund and shall, within 15 days after receipt, repay such refund to the Borrower. The agreements in this Section 4.10 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 35 42 4.11 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of Eurodollar Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to, but not including, the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Bank on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 4.12 Change of Lending Office. Each Lender agrees that if it makes any demand for payment under Section 4.9 or 4.10(a), it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Borrower to make payments under Section 4.9 or 4.10(a) or would eliminate or reduce the effect of any adoption or change described in Section 4.9. SECTION 5. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and to issue Letters of Credit, the Borrower and the Restricted Subsidiaries hereby represent and warrant to the Administrative Agent and each Lender that: 5.1 Financial Condition. (a) The consolidated balance sheet of the Parent and its consolidated Subsidiaries as at May 31, 1995 and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by Arthur Andersen L.L.P., copies of which have heretofore been furnished to each Lender, present fairly in all material respects the consolidated financial condition of the Parent and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants and as disclosed therein). Neither the Parent, the Borrower nor any of their consolidated Subsidiaries had, as of May 31, 1995, any material Guarantee Obligation, 36 43 contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the schedules or notes thereto. Except as set forth on Schedule 5.1, during the period from May 31, 1995 to and including the date hereof there has been no sale, transfer or other disposition by the Parent or any of its consolidated Subsidiaries of any material part of its business, assets or property and no purchase or other acquisition of any business, assets or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of the Parent and its consolidated Subsidiaries at May 31, 1995, other than the Asset Transfer. (b) The financial statements of the Borrower and the Restricted Subsidiaries and other information most recently delivered under Sections 7.1(a) and (b) were prepared in accordance with GAAP and present fairly the consolidated financial condition, results of operations, and cash flows of the Borrower and the Restricted Subsidiaries as of, and for the portion of the fiscal year ending on the date or dates thereof (subject in the case of interim statements only to normal year-end audit adjustments). There were no material liabilities, direct or indirect, fixed or contingent, of the Borrower or the Restricted Subsidiaries as of the date or dates of such financial statements which are not reflected therein or in the notes thereto. Except for transactions directly related to, or specifically contemplated by, the Loan Documents, there have been no changes in the consolidated financial condition of the Borrower or the Restricted Subsidiaries from that shown in such financial statements after such date which could reasonably be expected to have a Material Adverse Effect, nor has the Borrower or any Restricted Subsidiary incurred any liability (including, without limitation, any liability under any Environmental Law), direct or indirect, fixed or contingent, after such date which could reasonably be expected to have a Material Adverse Effect. 5.2 No Change. Since the Effective Date there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. 5.3 Existence; Compliance with Law. The Borrower and each of its Subsidiaries (a) is duly organized, validly existing and, where applicable, in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or partnership power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified and, where applicable, in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. 5.4 Power; Authorization; Enforceable Obligations. Each Loan Party and the Parent have the power and authority, and the legal right, to make, deliver and perform each of the Loan Documents to which it is a party and, in the case of the Borrower, to consummate the Asset Transfer and borrow hereunder, and has taken all necessary corporate or partnership action to 37 44 authorize the consummation of the Asset Transfer and the execution, delivery and performance of each of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the borrowings on the terms and conditions of this Agreement. Prior to March 31, 1996, except as set forth on Schedule 5.4, no consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person (including any partner or shareholder of any Loan Party or any Affiliate of any Loan Party) is required to be obtained or made by any Loan Party, the Parent or any Subsidiary of any Loan Party in connection with the Asset Transfer other than (a) the filings referred to in Section 6.1(k), and (b) such as have been obtained or made and are in full force and effect; provided, that with respect to third party approvals necessary for the Asset Transfer, Schedule 5.4 lists only the material third party approvals required. On and after March 31, 1996, no consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person (including any partner or shareholder of any Loan Party or any Affiliate of any Loan Party) is required to be obtained or made by any Loan Party, the Parent or any Subsidiary of any Loan Party in connection with the Asset Transfer other than (a) the filings referred to in Section 6.1(k), and (b) such as have been obtained or made and are in full force and effect. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person (including any partner or shareholder of the Parent, any Loan Party or any Affiliate of the Parent or any Loan Party) is required to be obtained or made by the Parent or any Loan Party or any Subsidiary of any Loan Party in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents other than (a) the filings referred to in Section 6.1(k), and (b) such as have been obtained or made and are in full force and effect. Each Loan Document to which the Parent and each Loan Party is a party has been duly executed and delivered on behalf of the Parent and each such Loan Party. Each Loan Document constitutes a legal, valid and binding obligation of the Parent, to the extent the Parent is a party thereto, and each Loan Party party thereto enforceable against the Parent and each such Loan Party in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 5.5 No Legal Bar. The Asset Transfer, the execution, delivery and performance of the Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not (a) violate, result in a default under or conflict with any Requirement of Law or any material Contractual Obligation, in any material respect, of the Parent, the Borrower or of any of the Restricted Subsidiaries or (b) violate any provision of the charter or bylaws of the Parent, the Borrower or the Restricted Subsidiaries and will not result in a default under, or result in or require the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation (other than pursuant to the Security Documents). 5.6 No Material Litigation. Except as set forth on Schedule 5.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of the Restricted Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of 38 45 the Loan Documents, the Asset Transfer or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. No attachment, prejudgment or judgment Lien encumbers any asset of the Borrower or any of the Restricted Subsidiaries other than in respect of (i) claims as to which payment in full above any applicable customary deductible is covered by insurance or a bond or (ii) other claims aggregating not more than $10,000,000. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Parent with respect to the Asset Transfer or any of the Loan Documents to which the Parent is a party. 5.7 No Default. Neither the Parent, the Borrower nor any of the Restricted Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 5.8 Ownership of Property; Intellectual Property. (a) Each of the Borrower and the Restricted Subsidiaries has good record and indefeasible title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other material property, and none of such property is subject to any Lien except as permitted by Section 8.3. Schedule 5.8(a) (as supplemented from time to time) accurately describes the location of all real property owned or leased by the Borrower and all tangible personal property associated with Cable Systems owned by the Borrower. (b) The Borrower and the Restricted Subsidiaries have the right to use all trademarks, tradenames, copyrights, technology, know-how or processes ("Intellectual Property") that are necessary for the conduct of the business of the Borrower or any of the Restricted Subsidiaries. 5.9 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Parent, the Borrower or any of their respective Subsidiaries could reasonably be expected to have a Material Adverse Effect. 5.10 Taxes. (a)(i) Each of the Borrower and its Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable by it on said returns and all other material taxes, fees or other charges (collectively, the "Specified Taxes") imposed on it or any of its property by any Governmental Authority due and payable by it and (ii) to the knowledge of the Borrower, no material claim is being asserted with respect to any Specified Tax, other than, in each case with respect to this clause (a), Specified Taxes the amount or validity of which are currently being contested in good faith by appropriate proceedings diligently pursued and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or the relevant Subsidiary, as the case may be, and (b) no tax Lien has been filed with respect to any Specified Tax. 39 46 5.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation G or Regulation U of the Board as now and from time to time hereafter in effect. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-I referred to in said Regulation G or Regulation U, as the case may be. 5.12 ERISA. Except as, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect: (a) neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code; (b) no termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period; (c) the present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits; (d) neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made; and (e) no such Multiemployer Plan is in Reorganization or Insolvent. 5.13 Investment Company Act; Other Regulations. No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board) which limits its ability to incur Indebtedness under this Agreement or the other Loan Documents. 5.14 Subsidiaries. Except for changes otherwise permitted by this Agreement, Schedule 5.14 sets forth a true and complete list of each of the Borrower's Subsidiaries and accurately designates as of the date hereof whether each such Subsidiary is a Restricted Subsidiary or an Unrestricted Subsidiary for purposes of this Agreement. The outstanding shares of Capital Stock of each Restricted Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable, and, except as otherwise indicated on Schedule 5.14 or otherwise permitted by this Agreement, all of the outstanding shares of each class of the Capital Stock of each Restricted Subsidiary are owned, directly or indirectly, beneficially and of record, by the Borrower, free and clear of all Liens. 40 47 5.15 Insurance. Each Loan Party maintains with financially sound, responsible, and reputable insurance companies or associations (or, as to workers' compensation or similar insurance, with an insurance fund or by self-insurance authorized by the jurisdictions in which it operates) insurance covering its properties and businesses against such casualties and contingencies and of such types and in such amounts (and with co-insurance and deductibles) as is customary in the case of same or similar businesses. 5.16 Certain Cable Television Matters. Except as could not reasonably be expected to result in a Material Adverse Effect: (a) the Borrower and the Restricted Subsidiaries possess all Authorizations necessary to own, operate and construct the Cable Systems or otherwise for the operations of their businesses and are not in violation thereof. All such Authorizations are in full force and effect and no event has occurred that permits, or after notice or lapse of time could permit, the revocation, termination or material and adverse modification of any such Authorization; (b) neither the Borrower nor any of the Restricted Subsidiaries is in violation of any duty or obligation required by the Communications Act of 1934, as amended, or any FCC rule or regulation applicable to the operation of any portion of any of the Cable Systems; (c) there is not pending or, to the best knowledge of the Borrower, threatened, any action by the FCC to revoke, cancel, suspend or refuse to renew any FCC License held by the Borrower or any of the Restricted Subsidiaries. There is not pending or, to the best knowledge of the Borrower, threatened, any action by the FCC to modify adversely, revoke, cancel, suspend or refuse to renew any other Authorization; and (d) there is not issued or outstanding or, to the best knowledge of the Borrower, threatened, any notice of any hearing, violation or complaint against the Borrower or any of the Restricted Subsidiaries with respect to the operation of any portion of the Cable Systems and the Borrower has no knowledge that any Person intends to contest renewal of any Authorization. 5.17 Environmental Matters. Except as could not reasonably be expected to result in a Material Adverse Effect: (a) the facilities and properties owned by the Borrower or any of its Subsidiaries (the "Owned Properties") do not contain, and, to the knowledge of the Borrower to the extent not owned, leased or operated during the past five years, have not contained during the past five years, any Materials of Environmental Concern in amounts or concentrations which constitute or constituted a violation of, or could reasonably be expected to give rise to liability under, any Environmental Law; 41 48 (b) the facilities and properties leased or operated by the Borrower or any of its Subsidiaries, but not owned by them (the "Leased and Operated Properties"), to the knowledge of the Borrower, do not contain and have not contained during the past five years, any Materials of Environmental Concern in amounts or concentrations which constitute or constituted a violation of, or could reasonably be expected to give rise to liability under, any Environmental Law; (c) the Owned Properties and all operations at the Owned Properties are in compliance, and, to the knowledge of the Borrower to the extent not owned, leased or operated during the past five years, have in the last five years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Owned Properties or violation of any Environmental Law with respect to the Owned Properties or the business operated by the Borrower or any of its Subsidiaries (the "Business") which could interfere with the continued operation of the Owned Properties or impair the fair saleable value thereof; (d) to the knowledge of the Borrower, the Leased and Operated Properties and all operations at the Leased and Operated Properties are in compliance, and, in the last five years been in compliance, with all applicable Environmental Laws, and to the knowledge of the Borrower there is no contamination at, under or about the Leased and Operated Properties or violation of any Environmental Law with respect to the Leased and Operated Properties or the Business operated by the Borrower or any of its Subsidiaries which could interfere with the continued operation of the Leased and Operated Properties or impair the fair saleable value thereof; (e) neither the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Owned Properties or the Leased and Operated Properties (together, the "Properties") or the Business, nor does the Borrower have any knowledge that any such notice will be received or is being threatened; (f) the Borrower has not transported or disposed of Materials of Environmental Concern nor, to the Borrower's knowledge, have Materials of Environmental Concern been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability to the Borrower or any Restricted Subsidiary under, any Environmental Law, nor has the Borrower generated any Materials of Environmental Concern nor, to the Borrower's knowledge, have Materials of Environmental Concerns been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability to the Borrower or any Restricted Subsidiary under, any applicable Environmental Law; 42 49 (g) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any applicable Environmental Law with respect to the Properties or the Business; and (h) the Borrower has not released, nor, to the Borrower's knowledge, has there been any release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably be expected to give rise to liability under Environmental Laws. 5.18 Accuracy of Information. (a) All Information made available to the Administrative Agent or any Lender by the Borrower pursuant to this Agreement or any other Loan Document did not, as of the date such Information was made available, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made. (b) All pro forma financial information and projections made available to the Administrative Agent or any Lender by the Borrower pursuant to this Agreement or any other Loan Document have been prepared and furnished to the Administrative Agent or such Lender in good faith and were based on estimates and assumptions that were believed by the management of the Borrower to be reasonable in light of the then current and foreseeable business conditions of the Borrower and the Subsidiaries. The Administrative Agent and the Lenders recognize that such pro forma financial information and projections and the estimates and assumptions on which they are based may or may not prove to be correct. 5.19 Security Documents. The Security Documents are effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof and, after satisfaction of the conditions specified in Section 6.1(j) and the making of the filings referred to in Section 6.1(k), the Security Documents shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of, the Borrower and the Restricted Subsidiaries in such Collateral and the proceeds thereof (subject to Section 9-306 of the Uniform Commercial Code), as security for the Obligations, in each case prior and superior in right to any other Person. 43 50 5.20 Solvency. As of the date on which this representation and warranty is made or deemed made, each Loan Party is Solvent, both before and after giving effect to the transactions contemplated hereby consummated on such date and to the incurrence of all Indebtedness and other obligations incurred on such date in connection herewith and therewith. 5.21 Indebtedness. No Loan Party is an obligor on any Indebtedness except as permitted under Section 8.2. 5.22 Labor Matters. There are no actual or overtly threatened strikes, labor disputes, slow downs, walkouts, or other concerted interruptions of operations by the employees of any Loan Party which could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of the Loan Parties have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters, other than any such violations, individually or collectively, which could reasonably be expected to have a Material Adverse Effect. All payments due from any Loan Party on account of employee health and welfare insurance have been paid or accrued as a liability on its books, other than any such nonpayments which could not, individually or collectively, reasonably be expected to have a Material Adverse Effect. 5.23 Prior Names. Neither the Borrower nor any Restricted Subsidiary has used or transacted business under any other corporate or trade name in the five-year period preceding the Effective Date, other than Jones Communications of Virginia, Inc. (formerly known as Jones of Alexandria, Inc.). 5.24 Franchises. Schedule 5.24, as supplemented to reflect any renewals and extensions of Franchise Agreements and to reflect any acquisition, lists all Franchise Agreements of the Borrower and the Restricted Subsidiaries relating to the Cable Systems owned by the Borrower and the Restricted Subsidiaries. The Parent and all the Loan Parties have taken all action required by applicable Governmental Authorities to lawfully transfer or grant the Franchise Agreements to the Loan Parties other than as described on Schedule 5.4. To the knowledge of the Borrower, all Franchise Agreements of the Loan Parties were lawfully transferred or granted to the Borrower or a Restricted Subsidiary pursuant to the rules and regulations of applicable Governmental Authorities. The Franchise Agreements authorize the Borrower or a Restricted Subsidiary as indicated on Schedule 5.24 (as supplemented to reflect any renewals and extensions of Franchise Agreements and to reflect any acquisition) to operate one or more Cable Systems until the respective expiration dates listed on Schedule 5.24 or, will authorize the Borrower or a Restricted Subsidiary as indicated on Schedule 5.24 (as supplemented to reflect any renewals and extensions of Franchise Agreements and to reflect any acquisition), and no other further approval, filing or other action of any Governmental Authority is or will be necessary or advisable as of the Effective Date or, with respect to the Cable Systems acquired after the date hereof, as of the date of acquisition, in order to permit the Borrower's or such Restricted Subsidiaries' operation of the Cable Systems in accordance with the terms thereof. Schedule 5.24 (as supplemented from time to time) correctly identifies the franchisee and accurately describes the franchise area, the exclusive or nonexclusive 44 51 nature of each such Franchise Agreement and all limitations contained in the Franchise Agreement or related statutes on the assignment, sale or encumbering of the Franchise Agreement or the related Cable System's assets. The Borrower or the Restricted Subsidiary that is the franchisee is in compliance in all material respects with all material terms and conditions of all Franchise Agreements relating to the Cable Systems owned by it, and on and after the date of acquisition of any Cable System will be in compliance in all material respects with all material terms and conditions of all Franchise Agreements relating to such Cable Systems so acquired and no event has occurred or exists which permits, or, after the giving of notice, or the lapse of time or both would permit, the revocation or termination of any Franchise Agreement. 5.25 Chief Executive Office, Chief Place of Business. Schedule 5.25 (as supplemented from time to time) accurately sets forth the location of the chief executive office and chief place of business (as such terms are used in the Uniform Commercial Code of each state whose law would purport to govern the attachment and perfection of the security interests granted by the Security Documents) of the Borrower and each Restricted Subsidiary. 5.26 Full Disclosure. There is no material fact or condition relating to the Loan Documents or the financial condition, business, or property of any Loan Party which could reasonably be expected to have a Material Adverse Effect and which has not been disclosed, in writing, to the Managing Agents and the Lenders. 5.27 Intercompany Subordinated Debt. As of the date hereof, there is no Intercompany Subordinated Debt other than the Indebtedness evidenced by the Intercompany Subordinated Notes from the Borrower to the Parent, a copy of which has been delivered to the Administrative Agent pursuant to Section 6. 1 (a). SECTION 6. CONDITIONS PRECEDENT 6.1 Conditions to Initial Extensions of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, immediately prior to or concurrently with the making of such extension of credit of the following conditions precedent: (a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, duly executed and delivered by the Borrower and each of the Restricted Subsidiaries; (ii) the Pledge Agreements, duly executed and delivered by the Borrower and each of the Restricted Subsidiaries; (iii) the Security Agreement, duly executed and delivered by the Borrower; (iv) the Negative Pledge duly executed and delivered by the Parent; (v) a copy of the Intercompany Subordinated Notes duly executed and delivered by the Borrower and the Parent and (vi) a copy of the Intercompany Subordinated Debt Agreement duly executed and delivered by the Borrower and the Parent. 45 52 (b) Closing Certificate. The Administrative Agent shall have received a certificate (the "Closing Certificate") of each Loan Party, dated the date hereof, substantially in the form of Exhibit J, with appropriate insertions and attachments, in each case reasonably satisfactory in form and substance to the Administrative Agent, executed by a Responsible Officer and the Secretary or any Assistant Secretary of the appropriate Loan Party. (c) Fees. The Administrative Agent and the Managing Agents shall have received all fees and expenses required to be paid on or before the date hereof referred to in Section 4.3(b) and the Co-Agents shall have received all fees required to be paid on or before the date hereof pursuant to that certain letter agreement from the Borrower to all of the Co-Agents, dated October 30, 1995. (d) Legal Opinions . The Administrative Agent shall have received, with a counterpart for each Lender, the following executed legal opinions: (i) the executed legal opinion of Davis, Graham & Stubbs, counsel to the Parent, substantially in the form of Exhibit K; (ii) the executed legal opinion of the General Counsel or the acting General Counsel of the Parent, substantially in the form of Exhibit L; and (iii) the executed legal opinion of Dow, Lohnes and Albertson, substantially in the form of Exhibit M. (e) Financial Statements. The Lenders shall have received audited consolidated financial statements of the Parent for the 1995 fiscal year, which financial statements shall have been prepared in accordance with GAAP and shall be accompanied by an unqualified report thereon prepared by Arthur Andersen L.L.P. (f) Satisfactory Organizational and Capital Structure. The stock ownership of the Borrower and each of the Restricted Subsidiaries shall be consistent with the structure described in Schedule 6.1(f). The Existing Credit Agreement shall have been terminated and all liens created in connection therewith shall have been assigned to the Administrative Agent and/or amended in a manner satisfactory to the Administrative Agent to the extent that the assets covered thereby are to constitute Collateral under this Agreement and otherwise such liens shall be terminated and all Indebtedness outstanding thereunder shall be paid in full concurrently with the making of the initial Loans hereunder. All necessary intercreditor arrangements, including those relating to the Intercompany Subordinated Note from the Borrower to the Parent, shall be satisfactory to the Lenders and the Borrower. (g) Governmental and Third Party Approvals. Prior to March 31, 1996, except as set forth on Schedule 5.4, all governmental approvals and material third party approvals necessary in connection with the Asset Transfer shall have been obtained and be in full force 46 53 and effect. On and after March 31, 1996, all governmental approvals and material third party approvals necessary in connection with the Asset Transfer shall have been obtained and be in full force and effect. All governmental approvals and material third party approvals necessary in connection with the financing contemplated hereby shall have been obtained and be in full force and effect. (h) No Material Adverse Information. The Lenders shall not have become aware of any previously undisclosed materially adverse information with respect to (i) the ability of the Loan Parties to perform their respective obligations under the Loan Documents in any material respect or (ii) the rights and remedies of the Lenders. (i) No Material Default Under Other Agreements. There shall exist no material event of default (or condition which would constitute such an event of default with the giving of notice or the passage of time) under any agreements relating to Capital Stock or any material financing agreements, lease agreements or other material Contractual Obligation of the Parent, the Borrower or any of the Restricted Subsidiaries. (j) Pledged Stock, Stock Powers. The Administrative Agent shall have received the certificates representing the shares of Capital Stock pledged pursuant to each Pledge Agreement, together with, an undated stock power for each such certificate executed in blank by a duly authorized officer of the Borrower and each of the Restricted Subsidiaries. (k) Actions to Perfect Liens. All filing documents, necessary or, in the opinion of the Administrative Agent, desirable to perfect the Liens created by the Pledge Agreements and the Security Agreement shall have been executed by the Borrower and each of the Restricted Subsidiaries. All Collateral shall be free and clear of other Liens except for (i) Liens permitted by Section 8.3 and (ii) other Liens approved by the Lenders. (l) Material Adverse Change. There shall exist no material adverse change in the financial condition, business operations or properties of the Parent or its Subsidiaries since May 31, 1995. (m) Additional Document. All other documentation, including, without limitation, any tax sharing agreement, employment agreement, management compensation arrangement or other financing arrangement of the Borrower or any of the Restricted Subsidiaries shall be reasonably satisfactory in form and substance to the Lenders. (n) Lien Searches. The Administrative Agent shall have received the results of a recent search by a Person satisfactory to the Administrative Agent, of the Uniform Commercial Code, judgment and tax lien filings which may have been filed with respect to personal property of the Borrower in each of the jurisdictions where such personal property is located or in which financing statements will be filed to perfect the security interests granted pursuant to the Pledge Agreements, and such search shall reveal no Liens relating 47 54 to the personal property of the Borrower or the Restricted Subsidiaries or to the Collateral except for Liens which will be terminated on or before the Effective Date, Liens referred to in Section 6.1(k) and other Liens approved by the Lenders. (o) The Asset Transfer. The Asset Transfer shall have been consummated except as set forth on Schedule 61(o). (p) Perfection Certificate. The Administrative Agent shall have received a certificate, in form and substance satisfactory to the Administrative Agent, dated on or before the Effective Date, duly executed and delivered by the Borrower (the "Perfection Certificate"). (q) Insurance. The Administrative Agent shall have received certificates of insurance naming the Administrative Agent as loss payee for the benefit of the Lenders and as additional insured for the benefit of the Lenders, as required by Section 7.5(b). (r) Tax Sharing Agreement. The Tax Sharing Agreement between the Parent and the Borrower shall be in form and substance satisfactory to the Managing Agents. 6.2 Conditions to Each Extension of Credit. The obligation or agreement of each Lender to make any Loan or to issue any Letter of Credit requested to be made or issued by it on any date (including, without limitation, its initial extension of credit) is subject to the satisfaction, immediately prior to or concurrently with the making of such Loans or the issuing of such Letters of Credit, of the following conditions precedent: (a) Initial Conditions Satisfied. Each of the conditions precedent set forth in Section 6.1 (other than subsection (1) thereof) shall have been satisfied and shall continue to be satisfied on the date of such Loans. (b) No Material Litigation. Except as disclosed on Schedule 5.6, no litigation, inquiry, injunction or restraining order shall be pending, entered or threatened in writing which could reasonably be expected to have a Material Adverse Effect. (c) No Material Adverse. There shall not have occurred any change, development or event which could reasonably be expected to have a Material Adverse Effect. (d) Representations and Warranties. Each of the representations and warranties made by any Loan Party or the Parent in or pursuant to the Loan Documents to which it is a party shall be true and correct in all material respects on and as of such date as if made on and as of such date, after giving effect to the Loans requested to be made or the Letters of Credit to be issued on such date and the proposed use of the proceeds thereof. 48 55 (e) No Default. No Default or Event of Default shall have occurred and be continuing on such date or will occur after giving effect to the extension of credit requested to be made on such date and the proposed use of the proceeds thereof. (f) Notice of Borrowing; Application. The Borrower shall have submitted a Notice of Borrowing in accordance with Section 2.3 and certifying to the matters set forth in Section 6.2(a) through and including (e) and/or an Application in accordance with Section 3.2. (g) Pro Forma Covenant Compliance. Prior to the earlier to occur of (i) the date the Asset Transfer has been fully consummated and all governmental approvals and material third party approvals necessary in connection with the Asset Transfer shall have been obtained and are in full force and effect and (ii) March 31, 1996, the Managing Agents shall have received reasonably satisfactory calculations evidencing the Borrower's pro forma compliance with Sections 8.1 (a), (b) and (c), both before and after giving effect to the requested borrowing. Each borrowing by or issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the applicable conditions contained in this Section 6.2 have been satisfied. SECTION 7. AFFIRMATIVE COVENANTS The Borrower and each of the Restricted Subsidiaries hereby agree that, so long as any Commitment remains in effect, any Loan or Letter of Credit shall be outstanding or any other Obligation is due and payable to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower and each of the Restricted Subsidiaries shall: 7.1 Financial Statements. Furnish to the Administrative Agent for subsequent distribution to each Lender: (a) as soon as available, but in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and the Restricted Subsidiaries as at the end of such year and the related consolidated statements of income and shareholders' capital (deficit) and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Arthur Andersen L.L.P. or other independent certified public accountants of nationally recognized standing; and 49 56 (b) as soon as available, but in any event not later than 60 days after the end of each of the first three fiscal quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and the Restricted Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments). All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 7.2 Certificates; Other Information. Furnish to the Administrative Agent for subsequent distribution to each Lender: (a) concurrently with the delivery of the financial statements referred to in Section 7.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in Sections 7.1(a) or (b), a Compliance Certificate executed by a Responsible Officer of the Borrower and each of the Restricted Subsidiaries; (c) without duplication of the financial statements delivered pursuant to Section 7.1, within five days after the same are sent, copies of all financial statements and reports which the Borrower sends to the holders of any class of its debt securities, and within five days after the same are filed, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (d) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 7.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or the relevant Restricted Subsidiary, as the case may be. 50 57 7.4 Conduct of Business and Maintenance of Existence, etc. (a) Continue to engage in business of the same general type as now conducted by it, except as otherwise permitted by Section 8.13, and preserve, renew and keep in full force and effect its organizational existence and take all reasonable action to maintain all material rights, privileges and franchises necessary in the normal conduct of its business except as otherwise permitted pursuant to Section 8.4. (b) Comply with all Contractual Obligations and applicable Requirements of Law, except to the extent that failure to comply therewith could not be reasonably expected to have a Material Adverse Effect. 7.5 Maintenance of Property; Insurance. (a) Keep all material property useful and necessary in its business in good working order and condition (ordinary wear and tear excepted) consistent with customary practices in the cable industry; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to the Administrative Agent certificates of insurance from time to time received by it for each such policy of insurance evidencing the Borrower's compliance with Section 7.5(b). (b) The Borrower shall cause (i) the Administrative Agent to be named, in a manner reasonably satisfactory to the Administrative Agent, (a) as lender loss payee for the benefit of the Lenders under all policies of casualty insurance maintained by the Borrower and (b) as an additional insured for the benefit of the Lenders on all policies of liability insurance maintained by the Borrower; and (ii) all insurance policies to contain a provision that the policy may not be canceled, terminated or modified without thirty (30) days' prior written notice to the Administrative Agent. 7.6 Inspection of Property; Books and Records; Discussions. Keep and maintain a system of accounting established and administered in accordance with sound business practices and keep and maintain proper books of record and accounts; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records during normal business hours and as often as may reasonably be requested and upon reasonable notice and to discuss the business, operations, properties and financial and other condition of the Borrower and the Restricted Subsidiaries with officers and employees of the Borrower and the Restricted Subsidiaries and with their independent certified public accountants; provided that representatives of the Borrower designated by a Responsible Officer may be present at any such meeting with such accountants. 51 58 7.7 Notices. Promptly after the Borrower obtains knowledge thereof, give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Parent, the Borrower or any of the Restricted Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Parent, the Borrower or any of the Restricted Subsidiaries and any Governmental Authority, which in either case could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of the Restricted Subsidiaries (i) which could reasonably be expected to result in an adverse judgment of $10,000,000 or more and not covered by insurance or (ii) in which injunctive or similar relief is sought which in the case of this clause (ii) could reasonably be expected to materially interfere with the ordinary conduct of business of the Borrower or the Restricted Subsidiaries; (d) the following events, as soon as possible and in any event within 30 days after the Borrower knows thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; and (e) any development or event which could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action is proposed to be taken with respect thereto. 7.8 Environmental Laws. (a) Comply with, and use reasonable efforts to require compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and use reasonable efforts to require that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except, in each case, to the extent that failure to do so could not be reasonably expected to have a Material Adverse Effect. 52 59 (b) Comply with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings diligently pursued. 7.9 Collateral. (a) To secure full and complete payment and performance of the Obligations, the Borrower shall grant and convey to and create in favor of, the Administrative Agent for the ratable benefit of the Lenders a continuing first priority perfected Lien and security interest in, to and on all of the assets of the Borrower (except to the extent prohibited by law) including but not limited to the following: (i) all of the Borrower's present and future assets, including, without limitation, its equipment, inventory, accounts receivable, instruments, general intangibles, intellectual property and real estate; and (ii) all of the Capital Stock of each direct or indirect Restricted Subsidiary of the Borrower and any other direct or indirect Restricted Subsidiary of the Borrower, now owned or hereafter acquired and/or designated by the Borrower, and the Restricted Subsidiaries shall grant and convey to and create in favor of, the Administrative Agent for the ratable benefit of the Lenders a continuing first priority perfected Lien and security interest in, to and on all of the Capital Stock of each Restricted Subsidiary owned by a Restricted Subsidiary, now owned or hereafter acquired. Notwithstanding anything to the contrary contained herein, the Borrower shall not be required to grant to the Administrative Agent a security interest in any general intangibles or other rights arising under contracts of the Borrower which are listed and described on Schedule 7.9(a) (the "Excluded Collateral") until such time as any required consents with respect thereto have been obtained; provided, however, that the Borrower shall grant to the Administrative Agent for the ratable benefit of the Lenders a continuing first priority perfected Lien and security interest in and to all proceeds (cash or otherwise) of such Excluded Collateral. The Borrower agrees to use its commercially reasonable efforts to obtain all necessary consents for the grant of a security interest in the Excluded Collateral to the Administrative Agent for the ratable benefit of the Lenders. (b) With respect to any new Restricted Subsidiary created, acquired or designated after the date hereof, the Borrower or a Restricted Subsidiary, as applicable, shall promptly (i) execute and deliver to the Administrative Agent such amendments to the Pledge Agreements as the Administrative Agent or the Majority Lenders deem necessary or advisable in order to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such Restricted Subsidiary, (ii) in the case of any such Restricted Subsidiary, deliver to the Administrative Agent the certificates representing the Capital Stock of such Restricted Subsidiary, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower or a Restricted Subsidiary, as applicable, (iii) take such other actions as shall be necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in such Capital Stock, including, without 53 60 limitation, the filing of such Uniform Commercial Code financing statements as may be requested by the Administrative Agent, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in the preceding clauses (i), (ii) and (iii), which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (c) With respect to any newly acquired assets or transfers of assets to the Borrower, promptly after acquiring or receiving any such asset, execute and deliver or cause to be delivered to the Administrative Agent in a form reasonably acceptable to the Administrative Agent (i) one or more mortgages and/or security agreements which grant to the Administrative Agent a first priority perfected security interest in such assets (subject to any Liens permitted by Section 8.3) and (ii) such additional agreements and other documents as the Administrative Agent reasonably deems necessary to establish a valid, enforceable and perfected first priority security interest in such assets (subject to any Liens permitted by Section 8.3). (d) Upon request of the Administrative Agent, promptly execute and deliver or cause to be executed and delivered to the Administrative Agent in a form reasonably acceptable to the Administrative Agent (i) one or more mortgages, pledge agreements and/or security agreements which grant to the Administrative Agent a first priority perfected security interest (subject to any Liens permitted by Section 8.3) in such property of the Borrower (including Capital Stock of direct or indirect Restricted Subsidiaries) as shall be specified by the Administrative Agent and (ii) such additional agreements and other documents as the Administrative Agent reasonably deems necessary to establish a valid, enforceable and perfected first priority security interest in such property or Capital Stock. 7.10 Use of Proceeds. The Borrower shall use the proceeds of the Loans and the Letters of Credit only for (a) financing permitted acquisitions, (b) capital expenditures to expand and upgrade Cable Systems of the Borrower and the Restricted Subsidiaries, (c) dividends or distributions permitted under this Agreement, and (d) general corporate purposes. SECTION 8. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any Commitment remains in effect, any Loan or Letter of Credit is outstanding, or any other Obligation is due and payable to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall not, and the Borrower shall not permit any of the Restricted Subsidiaries to, directly or indirectly: 54 61 8.1 Financial Condition Covenants. (a) Leverage Ratio. Permit the Leverage Ratio at any time during any period set forth below to be greater than the ratio set forth opposite such period below:
PERIOD RATIO ---------------------------------------------------------------- ------------- Effective Date through and including 6/30/99 5.50 to 1.00 7/01/99 through and including 6/30/2000 5.00 to 1.00 7/01/2000 and thereafter 4.50 to 1.00
(b) Interest Coverage Ratio. Permit the ratio of Operating Cash Flow for any fiscal quarter of the Borrower ending during any period set forth below to Interest Expense for such fiscal quarter to be less than the ratio set forth opposite such period below:
PERIOD RATIO ----------------------------------------------------------------- ------------ Effective Date through 6/30/99 1.50 to 1.0 7/l/99 and thereafter 2.00 to 1.0
(c) Pro Forma Debt Service Ratio. Permit, at any time, the ratio of Annualized Operating Cash Flow based on the most recently ended fiscal quarter to Pro Forma Debt Service to be less than 1.1 to 1.0. 8.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness of the Borrower or any Restricted Subsidiary of the Borrower, except: (a) Indebtedness under this Agreement other than Letters of Credit issued for the account of the Borrower but are for the benefit of or support the obligations of any Person other than the Borrower or a Restricted Subsidiary; (b) Indebtedness of the Restricted Subsidiaries resulting from any loan or advance from the Borrower and Intercompany Subordinated Debt, provided that the Intercompany Subordinated Debt is unsecured and subordinated pursuant to the terms and conditions of the Intercompany Subordinated Debt Agreement. (c) [INTENTIONALLY DELETED] (d) Interest Rate Hedge Agreements entered into with the Lenders or any of them for the purpose of hedging against interest rate fluctuations with respect to variable rate Indebtedness of the Borrower or any of the Restricted Subsidiaries; and 55 62 (e) Indebtedness of the Borrower and/or any Restricted Subsidiary not otherwise permitted by this Section 8.2, provided that immediately prior to and after giving effect to the creation, incurrence or assumption of such Indebtedness (i) the aggregate outstanding principal amount of all such other Indebtedness of the Borrower and the Restricted Subsidiaries, on a combined basis plus (without duplication) the aggregate amount of all Indebtedness secured by Liens permitted under subsection (e) of Section 8.3 shall not at any time exceed 5% of Maximum Permitted Indebtedness and (ii) no Default exists and would then be continuing. 8.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes, assessments or governmental charges arising in the ordinary course of business which are not yet due and payable or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or the Restricted Subsidiary, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not yet due and payable; (c) Liens in existence on the date hereof listed on Schedule 8.3(c), securing Indebtedness permitted by Section 8.2(c), provided that (x) no such Lien is spread to cover any additional property and (y) the amount of Indebtedness secured thereby is not increased; (d) Liens created pursuant to the Security Documents; (e) other Liens securing Indebtedness of the Borrower or any Restricted Subsidiary, provided that immediately prior to and after giving effect to the creation of any such Liens (i) the aggregate amount of Indebtedness secured by Liens permitted under this subsection (e) plus (without duplication) the aggregate amount of all Indebtedness of the Borrower and the Restricted Subsidiaries permitted under Section 8.2(e) shall not at any time exceed 5% of Maximum Permitted Indebtedness and (ii) no Default or Event of Default exists and would then be continuing; (f) encumbrances consisting of zoning restrictions, easements, or other restrictions on the use of real property, none of which impair in any material respect the use of such property by the Person in question in the operation of its business, and none of which is violated by existing or proposed structures or land use; and 56 63 (g) any attachment, prejudgment or judgment Lien in existence less than sixty consecutive calendar days after the entry thereof, or with respect to which execution has been stayed, or with respect to which payment in full above any applicable customary deductible is covered by insurance or a bond. 8.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation with any Person, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets to any Person, or make any material change in its present method of conducting business, except: (a) a Restricted Subsidiary may merge into or be acquired by the Borrower if the Borrower is the survivor thereof; (b) a Restricted Subsidiary may merge into or be acquired by another Restricted Subsidiary; and (c) the Borrower or any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets in a transaction permitted under Section 8.5. 8.5 Limitation on Sale of Assets. Convey, sell, lease, assign, exchange, transfer or otherwise dispose of (a "Disposition") any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired to any Person or, in the case of any Restricted Subsidiary, issue or sell any shares of or other interests in such Restricted Subsidiary's Capital Stock to any Person other than the Borrower, except: (a) the Disposition of property in the ordinary course of business (which shall not be construed to include the Disposition of any License, Franchise or Cable System); (b) Dispositions of property between the Borrower and the Restricted Subsidiaries or between the Restricted Subsidiaries provided that in the case of the Borrower, such Disposition is less than substantially all of its assets; (c) the Borrower may designate any Restricted Subsidiary as an Unrestricted Subsidiary in accordance with Section 8.6 and may make Restricted Payments in accordance with Section 8.7; and (d) other Dispositions, provided that in the case of the Borrower, such Disposition is less than substantially all of its assets and in the case of the Borrower or any Restricted Subsidiary, as the case may be, all of the following conditions are satisfied: (i) the Borrower or such Restricted Subsidiary receives consideration that represents the fair market value of such assets at the time of such Disposition, (ii) any such Disposition shall be on a nonrecourse basis (except that the Borrower or such Restricted Subsidiary may make 57 64 commercially reasonable representations, warranties and indemnities with respect to such properties or assets that are normal and customary in the cable television business ("Permitted Sale Representations"), (iii) no Default or Event of Default shall have occurred and be continuing either before or after the consummation of such transaction and (iv) either (1) the Leverage Ratio is less than or equal to 3.75 to 1.00 after giving effect to such Disposition or (2) if the Leverage Ratio is greater than 3.75 to 1.00 after giving effect to such Disposition then the Borrower and the Restricted Subsidiaries may make other Dispositions so long as after giving effect to such proposed Disposition (x) the sum, without duplication, of (A) the Net Unrestricted Designated Subsidiaries Three Month Cash Flow for the prior twelve month period (or shorter period commencing on the Effective Date) ending on the date of such proposed transaction, (B) the Three Month Cash Flow attributable to the assets to be sold, leased, transferred, assigned or otherwise disposed of and (C) the Three Month Cash Flow attributable to all assets sold, leased, transferred, assigned or otherwise disposed of during the prior twelve month period (or shorter period commencing on the Effective Date) ending on the date of such proposed transaction shall not exceed 15% of the Three Month Cash Flow of the Borrower and the Restricted Subsidiaries, and (y) the sum, without duplication of (A) the Net Unrestricted Designated Subsidiaries Three Month Cash Flow for the five-year period (or shorter period commencing on the Effective Date) ending on the date of such proposed transaction, (B) the Three Month Cash Flow attributable to the assets to be sold, leased, transferred, assigned or otherwise disposed of and (C) the Three Month Cash Flow attributable to all assets sold, leased, transferred, assigned or disposed of during the five-year period (or shorter period commencing on the Effective Date) ending on the date of such proposed transaction shall not exceed 30% of the Three Month Cash Flow of the Borrower and the Restricted Subsidiaries. Notwithstanding anything to the contrary contained in the foregoing, if the Leverage Ratio is less than or equal to 3.75 to 1.00 for a period of twelve consecutive months all prior Dispositions and Unrestricted Subsidiary Designations shall be excluded from subsequent determinations pertaining to the foregoing clause (y). Upon request by and at the expense of the Borrower, the Administrative Agent shall release any Liens arising under the Security Documents with respect to any Collateral which (i) is permitted to be disposed of pursuant to Section 8.5(a), (ii) consists of the Capital Stock of a Restricted Subsidiary which is designated as an Unrestricted Subsidiary pursuant to Section 8.6, or (iii) is sold or otherwise disposed of in compliance with the terms of Section 8.5(d). 8.6 Restricted/Unrestricted Designation of Subsidiaries. Be permitted to designate a Restricted Subsidiary as an Unrestricted Subsidiary or an Unrestricted Subsidiary as a Restricted Subsidiary unless (a) the Borrower delivers to the Administrative Agent and the Lenders a written notice, not later than ten (10) days prior to such designation, certifying that all conditions set forth in this Section 8.6 are satisfied as of the proposed effective date of such designation, which certification shall state the proposed effective date of such designation and shall be signed by a Responsible Officer of the Borrower; (b) no Default or Event of Default shall exist immediately before or after the effective date of such designation; (c) after giving effect to such designation, there 58 65 shall not be any material and adverse effect on the Borrower and the Restricted Subsidiaries on a consolidated basis with respect to the prospects for the future generation of Operating Cash Flow, the general mix of assets or the condition, quality and development level of technical equipment, and such designation shall not render the Borrower and the Restricted Subsidiaries on a consolidated basis insolvent or generally unable to pay its or their respective debts as they become due; (d) in the case of the designation of an Unrestricted Subsidiary as a Restricted Subsidiary, such notice shall also serve as the certification of the Borrower that, with respect to such Restricted Subsidiary, the representations and warranties contained herein are true and correct on and as of the effective date of such designation; and (e) in the case of the designation of any Restricted Subsidiary as an Unrestricted Subsidiary (an "Unrestricted Subsidiary Designation"), either (1) the Leverage Ratio is less than or equal to 3.75 to 1.00 after giving effect to such Unrestricted Subsidiary Designation or (2) if the Leverage Ratio is greater than 3.75 to 1.00 after giving effect to such Unrestricted Subsidiary Designation, then the Borrower may make an Unrestricted Subsidiary Designation so long as after giving effect to such Unrestricted Subsidiary Designation the following additional conditions are satisfied as of the effective date of such proposed designation: (i) the sum, without duplication, of (x) the Net Unrestricted Designated Subsidiaries Three Month Cash Flow for the prior twelve month period (or shorter period commencing on the Effective Date) ending on the date of such proposed designation and (y) the Three Month Cash Flow attributable to all asset Dispositions made pursuant to Section 8.5(d) during the twelve month period (or shorter period commencing on the Effective Date) ending on the date of such proposed designation shall not exceed fifteen percent (15%) of the Three Month Cash Flow of the Borrower and the Restricted Subsidiaries, and (ii) the sum, without duplication, of (x) the Net Unrestricted Designated Subsidiaries Three Month Cash Flow for the five-year period (or shorter period commencing on the Effective Date) ending on the date of such proposed designation and (y) the Three Month Cash Flow attributable to all asset Dispositions made pursuant to Section 8.5(d) during the five-year period (or shorter period commencing on the Effective Date) ending on the date of such proposed designation shall not exceed thirty percent (30%) of the Three Month Cash Flow of the Borrower and the Restricted Subsidiaries. Notwithstanding the foregoing, if the Leverage Ratio is less than or equal to 3.75 to 1.00 for a period of twelve consecutive months, all previous Unrestricted Subsidiary Designations and asset Dispositions shall be excluded from subsequent determinations pertaining to the foregoing clause (ii). 8.7 Limitation on Restricted Payments; Other Payment Limitations. Declare or pay any dividend or distribution in respect of, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of or interests in any class of Capital Stock of the Borrower, whether now or hereafter outstanding, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any of its Subsidiaries, or make, or permit any payments of principal, interest, premium or fees on account of Intercompany Subordinated Debt or make any payment in respect of any fees payable to any Person (other than to the Borrower or a Restricted Subsidiary) for management, consulting, oversight or similar services (collectively, "Restricted Payments"), except that the Borrower may make Restricted Payments in cash or Capital Stock so long as both 59 66 immediately before and after making such Restricted Payment no Default or Event of Default shall have occurred and be continuing or would result therefrom. 8.8 Limitation on Acquisitions. Purchase any stock, bonds, notes, debentures or other securities of or any assets constituting all or any significant part of a business unit of any Person (collectively, "Acquisitions"), except acquisitions (substantially all of which consist of Cable Systems or telecommunications systems) through the purchase of stock or assets in any Permitted Line of Business, provided, that (i) no such acquisition may be made if a Default or an Event of Default shall have occurred and be continuing or would result therefrom and (ii) prior to such Acquisition, the Borrower provides evidence of pro forma compliance with all of the terms and conditions of this Agreement, and in the case of Acquisitions in excess of $50,000,000 a ten year cash flow projection for any such Cable System or telecommunications system being acquired, demonstrating such compliance. 8.9 Investments, Loans, Etc. Purchase or otherwise acquire or invest in the Capital Stock of, or any other equity interest in, any Person (including, without limitation, the Capital Stock of the Borrower), or make any loan to, or enter into any arrangement for the purpose of providing funds or credit to, or, guarantee or become contingently obligated in respect of the obligations of or make any other investment, whether by way of capital contribution or otherwise, in, to or with any Person, or permit any Restricted Subsidiary so to do (all of which are sometimes referred to herein as "Investments"), provided that nothing contained in this Section 8.9 shall be deemed to prohibit the Borrower or any Restricted Subsidiary from making Investments: (a) in certificates of deposit with maturities of 270 days or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000; (b) in repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (a) of this Section 8.9, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States Government; (c) in commercial paper of a domestic issuer maturing not in excess of 270 days from the date of acquisition and rated at least A-1 by S&P or P-1 by Moody's; (d) in indebtedness of a domestic issuer maturing not in excess of 270 days from the date of acquisition and having the highest rating by S&P and Moody's; and (e) in the Subsidiaries or for the creation of new Subsidiaries, provided that such Investments are otherwise in compliance with Sections 8.2, 8.5, 8.6 and 8.8. 60 67 8.10 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate (other than a Restricted Subsidiary) other than transactions (a) otherwise permitted under this Agreement, (b) entered into in the ordinary course of the Borrower's or such Restricted Subsidiary's business, the terms of which are fair and reasonable and in the best interests of the Loan Party which is party to the transaction and which transaction is approved by the Board of Directors of the Borrower or (c) which are existing transactions set forth on Schedule 8.10 and future transactions which are in renewal or replacement of the transactions set forth in Schedule 8.10 provided that such future transactions are of a type and upon terms consistent with the transactions set forth on Schedule 8.10. 8.11 Certain Intercompany Matters. Fail to (i) satisfy customary formalities with respect to organizational separateness, including, without limitation, (x) the maintenance of separate books and records and (y) the maintenance of separate bank accounts in its own name; (ii) act solely in its own name and through its authorized officers and agents; (iii) commingle any money or other assets of the Parent or any Unrestricted Subsidiary with any money or other assets of the Borrower or any of the Restricted Subsidiaries; or (iv) take any action, or conduct its affairs in a manner, which could reasonably be expected to result in the separate organizational existence of the Parent, each Unrestricted Subsidiary, the Borrower and the Restricted Subsidiaries being ignored under any circumstance. 8.12 Limitation on Restrictions on Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary of the Borrower to (a) pay dividends or make any other distributions in respect of any Capital Stock of such Restricted Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Restricted Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any other Restricted Subsidiary of the Borrower or (c) transfer any of its assets to the Borrower or any other Restricted Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents or any other agreements in effect on the date hereof, or (ii) any restrictions with respect to a Restricted Subsidiary imposed pursuant to an agreement which has been entered into in connection with the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary or any restrictions arising under Franchise Agreements, Pole Agreements or leases entered into in the ordinary course of business. 8.13 Limitation on Lines of Business. Enter into any business, either directly or through any Restricted Subsidiary, except for the domestic cable and telecommunications business (each, a "Permitted Line of Business"). 8.14 No Negative Pledge. Covenant or agree with any other lender or other Person, not to create, or not to allow to be created or otherwise exist, any Lien upon any asset of the Borrower or any of the Restricted Subsidiaries or covenant or agree with any other lenders or other Persons to any other arrangement that is functionally equivalent or similar to a negative pledge. 61 68 8.15 Tax Sharing Agreement. Pay any Taxes under the Tax Sharing Agreement or other similar agreement greater than the lesser of (i) the amount that would have been payable by the Borrower if there were no Tax Sharing Agreement or other similar agreement and (ii) the amount actually paid by the Parent in respect of such Taxes. Amend, supplement or in any manner modify, without the written consent of the Majority Banks, the terms of the Tax Sharing Agreement. SECTION 9. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder, on or prior to the date which is five days (or, if later, three Business Days) after any such interest or other amount becomes due in accordance with the terms hereof; or (b) Any representation or warranty made or deemed made by the Parent, the Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any Information furnished at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in Section 7.7(a) or Section 8 of this Agreement or in Section 5(b) of the Pledge Agreements; or (d) The Borrower, the Parent or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the Administrative Agent shall have given the Borrower notice thereof; or (e) (i) The Parent, the Borrower or any of the Restricted Subsidiaries shall default in making any payment of any principal of any Indebtedness (including, without limitation, any Guarantee Obligation, but excluding the Loans and Reimbursement Obligations) beyond the period of grace or cure, if any, provided in the instrument or agreement under which such Indebtedness was created; or (ii) the Parent, the Borrower or any of the Restricted Subsidiaries shall default in making any payment of any interest on any such Indebtedness beyond the period of grace or cure, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) the Parent, the Borrower or any of the Restricted Subsidiaries shall default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or 62 69 condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due or to be purchased or repurchased prior to its stated maturity (or, in the case of any such Indebtedness constituting a Guarantee Obligation, to become payable prior to the stated maturity of the primary obligation covered by such Guarantee Obligation); provided that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not constitute an Event of Default under this Agreement unless, at the time of such default, event or condition one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $10,000,000; or (f) (i) The Parent, the Borrower or any of the Restricted Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Parent, the Borrower or any of the Restricted Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Parent, the Borrower or any of the Restricted Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Parent, the Borrower or any of the Restricted Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Parent, the Borrower or any of the Restricted Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Parent, the Borrower or any of the Restricted Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, 63 70 which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Majority Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Majority Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or (h) One or more judgments or decrees shall be entered against the Parent, the Borrower or any of the Restricted Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $10,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days after the entry thereof; or (i) (i) Any material provision of the Loan Documents shall cease, for any reason, to be in full force and effect, or the Borrower or any other Loan Party shall so assert or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; (j) A Change of Control shall occur; (k) The Capital Stock of the Borrower or any portion thereof or any Intercompany Subordinated Note shall become subject to or covered by the Lien of any Person; or (l) The Asset Transfer shall not have been fully consummated or all governmental and material third party approvals necessary in connection therewith shall not have been obtained or shall not be in full force and effect by March 31, 1996 or the Managing Agents shall not have received evidence satisfactory to the Managing Agents to that effect by such date. then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section 9 with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon such Commitments shall 64 71 immediately terminate; and (ii) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other Obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied, all Loans shall have been paid in full and no other Obligations shall be due and payable, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 10. THE ADMINISTRATIVE AGENT 10.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. 10.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 65 72 10.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower. 10.4 Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, facsimile, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 10.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender (except in the case of a Default under Section 9(a)) or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated 66 73 to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 10.6 Non-Reliance on the Administrative Agent and the Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 10.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Specified Percentages in effect on the date on which indemnification is sought (or, if indemnification is sought after the date upon which the Loans shall have been paid in full, ratably in accordance with their Specified Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. 67 74 10.8 The Administrative Agent in Its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not the Administrative Agent hereunder and under the other Loan Documents. With respect to the Loans made by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 10.9 Successor Administrative Agent. (a) The Administrative Agent may resign as the Administrative Agent upon 30 days' notice to the Lenders and the appointment of a successor Administrative Agent as hereinafter provided. If the Administrative Agent shall resign as the Administrative Agent under this Agreement and the other Loan Documents, then, unless an Event of Default shall have occurred and be continuing (in which case, the Majority Lenders shall appoint a successor), the Borrower shall appoint from among the Lenders a successor Administrative Agent for the Lenders, which successor Administrative Agent shall be approved by the Majority Lenders (which approval shall not be unreasonably withheld). If no successor Administrative Agent shall have been so appointed by the Borrower (or in the case of an Event of Default, by the Majority Lenders) and such successor Administrative Agent has not accepted such appointment within 30 days after such resignation, then the resigning Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which successor Administrative Agent hereunder shall be either a Lender or, if none of the Lenders is willing to serve as successor Administrative Agent, a major international bank having combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor Administrative Agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as the Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as the Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement and the other Loan Documents. (b) In the event that the Administrative Agent shall have breached any of its material obligations to the Lenders hereunder, the Majority Lenders may remove the Administrative Agent, effective on the date specified by them, by written notice to the Administrative Agent and the Borrower. Upon any such removal, the Borrower, provided that no Event of Default shall have occurred and be continuing (in which case the Majority Lenders shall make the appointment), shall have the right to appoint a successor Administrative Agent, which successor Administrative Agent shall be approved by the Majority Lenders (which approval shall not be unreasonably withheld). If no successor Administrative Agent shall have been so appointed by the Borrower (or in the case of an Event of Default, by the Majority Lenders) and such successor Administrative Agent has not 68 75 accepted such appointment within 30 days after notification to the Administrative Agent of its removal, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which successor Administrative Agent hereunder shall be either a Lender or, if none of the Lenders is willing to serve as successor Administrative Agent, a major international bank having combined capital and surplus of at least $500,000,000. Such successor Administrative Agent, provided that no Event of Default shall have occurred and be continuing, shall be reasonably satisfactory to the Borrower. Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. The Borrower and the Lenders shall execute such documents as shall be necessary to effect such appointment. After any retiring Administrative Agent's removal hereunder as the Administrative Agent, the provisions of this Section 10.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement and the other Loan Documents. If at any time there shall not be a duly appointed and acting Administrative Agent, the Borrower agrees to make each payment due hereunder and under the Notes directly to the Lenders entitled thereto during such time. 10.10 Managing Agents and Co-Agents. No Managing Agent or Co-Agent in their respective capacities as such shall have any duties or responsibilities hereunder, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against any Managing Agent or Co-Agent in their respective capacities as such. SECTION 11. NEW RESTRICTED SUBSIDIARIES The Borrower and each Restricted Subsidiary hereby agree to promptly, after the creation, acquisition and/or designation of a Restricted Subsidiary, notify the Administrative Agent of the existence thereof and to promptly cause each such new Restricted Subsidiary to execute and deliver to the Administrative Agent (a) an assumption agreement, in form satisfactory to the Lenders, pursuant to which, inter alia, any such new Restricted Subsidiary shall become a party to this Agreement, shall assume all obligations of a Restricted Subsidiary under this Agreement and shall agree that it is a Restricted Subsidiary for all purposes of this Agreement; and (b) a Pledge Agreement in the form of Exhibit F hereto. SECTION 12. MISCELLANEOUS 12.1 Amendments and Waivers. Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 12.1. The Majority Lenders and each relevant Loan Party may, or, with the written consent of the Majority Lenders, the Administrative Agent and each relevant Loan Party may, from time to time, (a) enter into written amendments, supplements or 69 76 modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Majority Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Commitment of any Lender, or make any change in the method of application of any payment of the Loans specified in Section 4.2 or Section 4.8 without the consent of each Lender directly affected thereby, (ii) waive, extend or reduce any mandatory Commitment reduction pursuant to Section 4.2, (iii) amend, modify or waive any provision of the Intercompany Subordinated Debt Agreement, this Section 12.1 or reduce any percentage specified in the definition of Majority Lenders, or consent to the assignment or transfer by any Loan Party of any of its rights and obligations under this Agreement and the other Loan Documents, (iv) release the Collateral except for any Collateral which is (x) permitted to be disposed of pursuant to Section 8.5(a) or (y) the subject of a transaction permitted under Sections 8.5(c) or (d), which Collateral may be released by the Administrative Agent pursuant to Section 8.5, (v) amend, modify or waive any condition precedent to any extension of credit set forth in Section 6, in each case of (i), (ii), (iii), (iv) and (v) above, without the written consent of all of the Lenders, (vi) amend, modify or waive any provision of Section 10 without the written consent of the then Administrative Agent or (vii) amend, modify or waive any provision of Section 3 without the written consent of the Issuing Lender. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Notes. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 12.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three Business Days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Restricted Subsidiaries and the Administrative Agent, and as set forth in Schedule 1.1 (or, with respect to any Lender that is an Assignee, in the applicable Assignment and Acceptance) in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: 70 77 The Borrower: Jones Cable Holdings, Inc. 9697 East Mineral Avenue Englewood, Colorado 80112 Attention: Treasurer Fax: (303) 790-7324 (with a copy to General Counsel) Fax: (303) 799-1644 The Restricted Subsidiaries: c/o Jones Cable Holdings, Inc. 9697 East Mineral Avenue Englewood, Colorado 80112 Attention: Treasurer Fax: (303) 790-7324 (with a copy to General Counsel) Fax: (303) 799-1644 The Administrative Agent: NationsBank of Texas, N.A. 901 Main Street, 64th Floor Dallas, Texas 75202 Attention: Douglas E. Roper Fax: (212) 508-9390 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to Section 2 or 3 shall not be effective until received. 12.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 12.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 12.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement 71 78 or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to each Lender and of counsel to the Administrative Agent, (c) without duplication of amounts payable pursuant to Sections 4.9 and 4.10, to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) without duplication of amounts payable pursuant to Sections 4.9 and 4.10, to pay, indemnify, and hold each Lender, each Issuing Lender and the Administrative Agent, and their respective officers, directors, employees, affiliates, advisors, agents and controlling persons (each, an "indemnitee"), harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents or the use of the proceeds of the Loans (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), provided, that the Borrower shall have no obligation hereunder to any indemnitee with respect to indemnified liabilities arising from the gross negligence or willful misconduct of such indemnitee. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder. 12.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent and their respective successors and assigns, except that neither the Borrower nor the Restricted Subsidiaries may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. In no 72 79 event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, or postpone the date of the final scheduled maturity of the Loans, in each case to the extent subject to such participation. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 12.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 4.9, 4.10 and 4.11 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it were a Lender; provided that, in the case of Section 4.10, such Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Person (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit A, executed by such Assignee and such assigning Lender and delivered to the Administrative Agent for its acceptance and recording in the Register (with a copy to the Borrower); provided that, (i) no such assignment (other than to any Lender or any affiliate thereof) shall be in an aggregate principal amount of less than $5,000,000 and $1,000,000 multiples thereof, (ii) after giving effect to any such assignment, the assigning Lender (together with any Lender which is an affiliate of such assigning Lender) shall retain no less than 49% of its original Commitment, unless otherwise agreed to by the Borrower and (iii) each assignment (other than to any Lender or any affiliate thereof) shall be subject to the prior written consent of the Borrower (which consent shall not be unreasonably withheld). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement. 73 80 (d) Any Non-U.S. Lender that could become completely exempt from withholding of any tax, assessment or other charge or levy imposed by or on behalf of the United States or any taxing authority thereof ("U.S. Taxes") in respect of payment of any Obligations due to such Non-U.S. Lender under this Agreement if the Obligations were in registered form for U.S. federal income tax purposes may request the Borrower (through the Administrative Agent), and the Borrower agrees thereupon, to exchange any promissory note(s) evidencing such Obligations for promissory note(s) registered as provided in paragraph (f) below and substantially in the form of Exhibit N (an "Alternative Note"). Alternative Notes may not be exchanged for promissory notes that are not Alternative Notes. (e) Each Non-U.S. Lender that could become completely exempt from withholding of U.S. Taxes in respect of payment of any Obligations due to such Non-U.S. Lender if the Obligations were in registered form for U.S. Federal income tax purposes and that holds Alternative Note(s) (an "Alternative Noteholder") (or, if such Alternative Noteholder is not the beneficial owner thereof, such beneficial owner) shall deliver to the Borrower prior to or at the time such Non-U.S. Lender becomes an Alternative Noteholder a Form W-8 (Certificate of Foreign Status of the U.S. Department of Treasury) (or any successor or related form adopted by the U.S. taxing authorities), together with an annual certificate stating that (i) such Alternative Noteholder or beneficial owner, as the case may be, is not a "bank" within the meaning of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign corporation related to the Company (within the meaning of Section 864(d)(4) of the Code) and (ii) such Alternative Noteholder or beneficial owner, as the case may be, shall promptly notify the Borrower if at any time such Alternative Noteholder or beneficial owner, as the case may be, determines that it is no longer in a position to provide such certification to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purposes). (f) An Alternative Note and the Obligation(s) evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Alternative Note and the Obligation(s) evidenced thereby on the Register (and each Alternative Note shall expressly so provide). Any assignment or transfer of all or part of such Obligation(s) and the Alternative Note(s) evidencing the same shall be registered on the Register only upon surrender for registration of assignment or transfer of the Alternative Note(s) evidencing such Obligation(s), duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the Alternative Noteholder thereof, and thereupon one or more new Alternative Note(s) in the same aggregate principal amount shall be issued to the designated Assignee(s). No assignment of an Alternative Note and the Obligation(s) evidenced thereby shall be effective unless it has been recorded in the Register as provided in this Section 12.6(f). (g) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in Section 12.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders (including Alternative Noteholders) and the Commitments of, and principal 74 81 amounts of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (h) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee together with payment to the Administrative Agent of a registration and processing fee of $3,000, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. (i) Subject to Section 12.15, the Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the Transferee agreeing to be bound by the provisions of Section 12.15, any and all financial information in such Lender's possession concerning the Borrower and the Restricted Subsidiaries which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Restricted Subsidiaries prior to becoming a party to this Agreement. (j) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. 12.7 Adjustments, Set-off. (a) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 9(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be 75 82 rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount, to the extent permitted by applicable law, any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that, to the extent permitted by applicable law, the failure to give such notice shall not affect the validity of such set-off and application. 12.8 Counterparts; When Effective. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. This Agreement shall become effective when the Administrative Agent has received counterparts hereof executed by the Borrower, the Administrative Agent and each Lender (such date herein referred to as the "Effective Date"). 12.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 12.10 Integration. This Agreement and the other Loan Documents represent the agreement of the Parent, the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 12.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 76 83 12.12 SUBMISSION TO JURISDICTION: WAIVERS. (A) EACH PARTY HERETO, IN EACH CASE FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY AND UNCONDITIONALLY: (I) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (II) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (III) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SECTION 12.2 OR SCHEDULE 1.1, AS APPLICABLE, OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 12.2; AND (IV) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION. (B) THE BORROWER AND EACH SUBSIDIARY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 77 84 12.13 Acknowledgements. The Borrower and each Restricted Subsidiary hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower or any Subsidiary arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent and the Lenders, on one hand, and the Borrower or any Subsidiary, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower, the Subsidiaries and the Lenders. 12.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE SUBSIDIARIES, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 12.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by or on behalf of the Borrower or any of the Restricted Subsidiaries pursuant to this Agreement or any other Loan Document; provided that nothing herein shall prevent any Lender from disclosing any such information (i) to the Administrative Agent or any other Lender, (ii) to any Assignee or Participant, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGES FOLLOW.] 78 85 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. JONES CABLE HOLDINGS, INC. By: /s/ J. ROY POTTLE -------------------------------- Name: J. Roy Pottle ------------------------------ Title: Treasurer ----------------------------- By their execution hereinbelow, the Restricted Subsidiaries agree to be bound by each agreement, covenant, representation, warranty and term and condition contained in this Agreement which, by their terms, apply to the Restricted Subsidiaries. JONES COMMUNICATIONS OF VIRGINIA, INC. By: /s/ J. ROY POTTLE -------------------------------- Name: J. Roy Pottle ------------------------------ Title: Treasurer ----------------------------- JONES COMMUNICATIONS OF COLORADO, INC. By: /s/ J. ROY POTTLE -------------------------------- Name: J. Roy Pottle ------------------------------ Title: Treasurer ----------------------------- 86 JONES COMMUNICATIONS OF MARYLAND, INC. By: /s/ J. ROY POTTLE -------------------------------- Name: J. Roy Pottle ------------------------------ Title: Treasurer ----------------------------- The Administrative Agent, the Documentation Agent and the Syndication Agent: NATIONS BANK OF TEXAS, N.A., as the Administrative Agent and Documentation Agent By: /s/ DOUGLAS E. ROPER -------------------------------- Name: Douglas E. Roper ------------------------------ Title: Senior Vice President ----------------------------- THE BANK OF NOVA SCOTIA, as the Syndication Agent By: /s/ CLAUDIA J. CHIFOS -------------------------------- Name: Claudia J. Chifos ------------------------------ Title: Authorized Signatory ----------------------------- 87 The Managing Agents and the Lenders: NATIONSBANK OF TEXAS, N.A., as Managing Agent and as a Lender By: /s/ DOUGLAS E. ROPER -------------------------------- Name: Douglas E. Roper ------------------------------ Title: Senior Vice President ----------------------------- THE BANK OF NOVA SCOTIA, as Managing Agent and as a Lender By: /s/ CLAUDIA J. CHIFOS -------------------------------- Name: Claudia J. Chifos ------------------------------ Title: Authorized Signatory ----------------------------- The Co-Agents and the Lenders: CORESTATES BANK, N.A., as a Co-Agent and as a Lender By: /s/ PHILIP D. HARRISON -------------------------------- Name: Philip D. Harrison ------------------------------ Title: Assistant Vice President ----------------------------- PNC BANK, NATIONAL ASSOCIATION, as a Co-Agent and as a Lender By: /s/ THOMAS P. CARDEN -------------------------------- Name: Thomas P. Carden ------------------------------ Title: Vice President ----------------------------- 88 ROYAL BANK OF CANADA, as a Co-Agent and as a Lender By: /s/ MARK D. THURSHEIM -------------------------------- Name: Mark D. Thursheim ------------------------------ Title: Manager ----------------------------- CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Co-Agent and as a Lender By: /s/ [ILLEGIBLE] -------------------------------- Name: [ILLEGIBLE] ------------------------------ Title: ----------------------------- SOCIETE GENERALE, as a Co-Agent and as a Lender By: /s/ MARK VIGIL -------------------------------- Name: Mark Vigil ------------------------------ Title: Vice President ----------------------------- CHEMICAL BANK, as a Lender By: /s/ JOHN J. HUBER III -------------------------------- Name: John J. Huber III ------------------------------ Title: Managing Director ----------------------------- 89 MELLON BANK, N.A., as a Lender By: /s/ MICHAEL P. HOYEINCO -------------------------------- Name: Michael P. Hoyeinco ------------------------------ Title: Assistant Vice President ----------------------------- THE TORONTO-DOMINION BANK, as a Lender By: /s/ LISA ALLISON -------------------------------- Name: Lisa Allison ------------------------------ Title: Mgr. Cr. Admin. ----------------------------- SHAWMUT BANK, as a Lender By: /s/ ROBERT F. WEST -------------------------------- Name: Robert F. West ------------------------------ Title: Director ----------------------------- BANQUE PARIBAS, as a Lender By: /s/ SONIA ISAACS -------------------------------- Name: Sonia Isaacs ------------------------------ Title: Vice President ----------------------------- By: /s/ JOHN G. ACKER -------------------------------- Name: John G. Acker ------------------------------ Title: Group Vice President ----------------------------- 90 NATIONAL WESTMINSTER BANK, as a Lender By: /s/ ROSELYN REID -------------------------------- Name: Roselyn Reid ------------------------------ Title: Vice President ----------------------------- COLORADO NATIONAL BANK, as a Lender By: /s/ LESLIE M. KELLY -------------------------------- Name: Leslie M. Kelly ------------------------------ Title: Vice President ----------------------------- FIRST NATIONAL BANK OF MARYLAND, as a Lender By: /s/ MARK L. COOK -------------------------------- Name: Mark L. Cook ------------------------------ Title: Vice President ----------------------------- 91 DRESDNER BANK AG, New York and Grand Cayman Branches as a Lender By: /s/ CHARLES H. HILL -------------------------------- Name: Charles H. Hill ------------------------------ Title: Vice President ----------------------------- By: /s/ WILLIAM E. LAMBERT -------------------------------- Name: William E. Lambert ------------------------------ Title: Assistant Treasurer ----------------------------- THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY, as a Lender By: /s/ MASATAKE YASHIRO -------------------------------- Name: Masatake Yashiro ------------------------------ Title: General Manager ----------------------------- ABN AMRO BANK, as a Lender By: /s/ JOANNA M. RIOPELLE -------------------------------- Name: Joanna Riopelle ------------------------------ Title: Group Vice President ----------------------------- By: /s/ JAMES JOHNSTON -------------------------------- Name: James Johnston ------------------------------ Title: Vice President ----------------------------- 92 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., Los Angeles Agency as a Lender By: /s/ Y. KAMISAWA -------------------------------- Name: Yutada Kamisawa ------------------------------- Title: Deputy General Manager ------------------------------ BANQUE NATIONALE DE PARIS, as a Lender By: /s/ C. BETTLES -------------------------------- Name: C. Bettles ------------------------------- Title: Sr. Vice President and Manager ------------------------------ By: /s/ JANICE HO -------------------------------- Name: Janice Ho ------------------------------- Title: Vice President ------------------------------ FUJI BANK, LIMITED as a Lender By: /s/ NOBUHIRO UMEMURA -------------------------------- Name: Nobuhiro Umemura ------------------------------- Title: Joint General Manager ------------------------------ SUMITOMO BANK, LTD. as a Lender By: /s/ HIROYUKI IWAMI -------------------------------- Name: Hiroyuki Iwami ------------------------------- Title: Joint General Manager ------------------------------ EX-10.6.58 5 FRANCHISE DUMFRIES, VA 1 EXHIBIT 10.6.58 RESOLUTION NO. 95-0-2 RESOLUTION APPROVING THE TRANSFER OF THE CABLE TELEVISION FRANCHISE FOR THE TOWN OF DUMFRIES, VIRGINIA HELD BY COLUMBIA ASSOCIATES, L.P. WHEREAS, by that certain CATV Ordinance adopted on June 16, 1992 by the Council of the Town of Dumfries, Virginia (the "Council"), the Council granted to Columbia Associates, L.P. ("Columbia") a franchise (the "Franchise") to construct, own, operate and maintain a cable television system within the Town (the "System"); and WHEREAS, Columbia has agreed to sell the System to Jones Intercable, Inc. ("Jones") and Jones has agreed to purchase the System from Columbia; and WHEREAS, Columbia has requested pursuant to the Franchise that the Council of the Town of Dumfries, Virginia approve the transfer of the Franchise to Jones Intercable of Alexandria, Inc., a Colorado corporation; WHEREAS, Jones Intercable of Alexandria, Inc. and any affiliate of Jones then holding the Franchise has agreed to be bound by the terms, provisions and conditions of the Franchise. NOW, THEREFORE, BE IT HEREBY RESOLVED by the Council of the Town of Dumfries, Virginia (the "Town") that: 1. The Town does hereby consent to the transfer of the System and the Franchise from Columbia to Jones Intercable of Alexandria, Inc. which shall be bound by the terms of this Resolution and the Franchise. Any subsequent transfer of the Franchise from Jones Intercable of Alexandria, Inc. requires the written approval of the Town. The Town shall review and act upon a request to transfer the Franchise within 30 days of such request if accompanied by adequate documentation to permit the Town to evaluate the financial and technical ability of the Affiliate or other entity. If the transfer is approved, the transferee shall be bound by the terms of this Resolution and of the Franchise. 2. The Town does hereby consent to a grant from time to time by Jones or Jones Intercable of Alexandria, Inc. of a security interest in the System and in all of its rights, powers and privileges under the Franchise and all of its other assets to such lending institution or institutions as may be designated from time to time by Jones or Jones Intercable of Alexandria, Inc. which lending institution or institutions shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code. 2 3. The foregoing consent to the transfer and assignment of the Franchise shall be effective upon the closing of the sale of the System by Columbia to Jones Intercable of Alexandria, Inc. Notice of such closing date shall be given to the Town. 4. The Town hereby confirms that, to its knowledge; (a) the Franchise is currently in full force and effect; (b) Columbia is currently the valid holder and authorized grantee of the Franchise; (c) Columbia is in compliance in all material respects with the Franchise; and (d) no event has occurred or exists which would permit the Town to revoke or terminate the Franchise. Subject to compliance with the terms of this Resolution, all action necessary to approve the transfer of the Franchise and the System to Jones Intercable of Alexandria, Inc. has been duly and validly taken. Adopted by the Council of the Town of Dumfries, Virginia on this 3rd day of October, 1995. TOWN OF DUMFRIES, VIRGINIA /s/ SAMUEL W. BURCHMAN --------------------------- TITLE: Mayor -------------------- ATTEST: /s/ RETTA LADD - -------------------------- TOWN CLERK 3 TOWN OF DUMFRIES [LOGO] Chartered 1749 Incorporated 1961 Virginia's Oldest Town 5 October 1994 Mr. Troy Fitzhugh, General Manager Columbia Cable 4391 Dale Boulevard Woodbridge, Virginia 22913 Dear Mr. Fitzhugh: This letter responds to your correspondence dated 20 September 1994 in which you notified the Town of Dumfries of your intent to sell the cable system to a qualified buyer and provide the Town with a right of first refusal to purchase the cable system. At a special work session of Town Council, held on Tuesday, 27 September 1994, members of Council voted not to exercise their right of first refusal. We wish you success in finding a new owner for the cable system. Sincerely, /s/ MICHAEL E. LONG MICHAEL E. LONG Town Manager cc: Town Council TELEPHONE 221-4133 - 101 SOUTH MAIN STREET - P.O. BOX 56 - DUMFRIES, VIRGINIA 22026 - FAX 221-3544 4 [COLUMBIA CABLE LETTERHEAD] September 20, 1994 Mr. Michael E. Long Town Manager Town of Dumfries 101 South Main Street Dumfries, Virginia 22026 Dear Mr. Long: This letter is official notification from Columbia Associates, L.P. d/b/a Columbia Cable of Virginia ("Columbia") to the Town of Dumfries ("Town") of our intention to sell our cable system to a qualified buyer. Per Section 7(f) of the Dumfries Cable Television Franchise, the Grantee, Columbia, is required to notify the Town of its intentions and provide the Town with a right of first refusal to purchase the cable system at the price offered by a bona fide purchaser. Any interest on the Town's part must be confirmed within ten (10) working days of such notice and the Town must conclude said purchase within thirty (30) days unless mutually agreed to by both parties. As of September 9, 1994, Columbia has received an offer from a bona fide party for the purchase of Columbia's system for $136,000,000.00. The purchase would include all of the assets of Columbia's Virginia operation serving Eastern Prince William County including the Town of Dumfries, the Town of Quantico, Quantico Marine Base, and Fort Belvoir. Please keep in mind that the information provided in this paragraph is confidential, and I am requesting that the purchase amount not be disclosed to the public. Obviously, should the Town not elect to exercise its right of first refusal, Columbia will still be required under Section 7(a) of the current franchise to obtain all necessary approvals for the transfer of its franchise to a new owner. Please feel free to contact me if you have any questions regarding the Town's right of first refusal or any other issues regarding the potential transfer of the Dumfries cable television franchise. I can be reached at 670-0189 extension 234. Sincerely, /s/ TROY FITZHUGH Troy Fitzhugh General Manager 5 Is your RETURN ADDRESS completed on the reverse side? - ------------------------------------------------------------------------------------------ SENDER: I also wish to receive the following services (for an - - Complete items 1 and/or 2 for additional services extra fee): - - Complete items 3, and 4a & b - - Print your name and address on the reverse of this form 1. / / Addressee's Address so that we can return this card to you. - - Attach this form to the front of the mailpiece, or on 2. / / Restricted Delivery the back if space does not permit. - - Write "Return Receipt Requested" on the mailpiece below Consult postmaster for fee. the article number. - - The Return Receipt will show to whom the article was delivered and the date delivered. - ------------------------------------------------------------------------------------------ 3. Article Addressed to: 4a. Article Number / / Insured Mr. Michael E. Long P341 012 604 / / COD Town Manager /X/ Return Receipt for Town of Dumfries --------------------- Merchandise 101 South Main Street Dumfries, VA 22026 4b. Service Type / / Registered /X/ Certified / / Express Mail --------------------- 7. Date of Delivery [STAMP] ------------------------------------------------------------------------------------------ 5. Signature (Addressee) 8. Addressee's Address (Only if requested and fee is paid) - ------------------------------------------- 6. Signature (Agent) R. Ladd ------------------------------------------------------------------------------------------
PS FORM 3811, December 1991 U.S. GPO: 1993-352-714 DOMESTIC RETURN RECEIPT Thank you for using Return Receipt Service. 6 FRANCHISE AGREEMENT BETWEEN DUMFRIES, VIRGINIA AND COLUMBIA ASSOCIATES, L.P. D/B/A COLUMBIA CABLE OF VIRGINIA 7 AN ORDINANCE TO AMEND THE CODE OF ORDINANCES, TOWN OF DUMFRIES, VIRGINIA (1989), AS AMENDED, BY ADDING A SECTION NUMBERED 14-12, RELATING TO CABLE TV SERVICE IN RESIDENTIAL SUBDIVISIONS BE IT ORDAINED by the Council of the Town of Dumfries, Virginia, meeting in session this day of , 1992: 1. That the Code of Ordinances, Town of Dumfries, Virginia (1989), is hereby amended by adding a section numbered 14-12 as follows: Sec. 14-12. Cable TV Service in Residential Subdivisions. Every subdivider shall provide cable TV franchises with access to residential units in the subdivision so that the franchisee can install its cables. Plats of dedicated or condemned utility easements shall show that they are open to cable TV use. 2. This ordinance shall become effective on . BY ORDER OF THE COUNCIL ----------------------- Mayor Attest: -------------------- Town Clerk 8 DUMFRIES CABLE TELEVISION FRANCHISE Table of Contents
SECTION PAGE 1 Definitions 1 2 Grant of Authority 4 3 Duration of Franchise 4 4 Service Availability and Records 4 5 CATV System Construction 5 6 Construction and Technical Standards 6 7 Transfer and Assignments 7 8 Subscriber Service Rates 8 9 Payment of Franchise Fee 8 10 Use of Streets 9 11 Indemnification and Insurance 10 12 Maintenance Bond 11 13 Construction Bond 11 14 Service Standards 12 15 Continuity of Service Mandatory 12 16 Complaint Procedures Applications 13 17 Availability of Books and Records 14 18 Other Petitions and Applications 14 19 Fiscal Reports 14 20 Forfeiture and Termination 14 21 Liquidated Damages 16 22 Rights of Individuals 16 23 Purchase of CATV System by Town 17 24 Performance Evaluation Sessions 17 25 Cable Service of Government Buildings 18 26 Provisions of Origination Cablecasting 18 27 New Developments 18 28 Town Procedures for New License(s) 19 29 Time is of the Essence 21 30 Failure of Town to Enforce Franchise, No Waiver of the Terms Thereof 21 31 Choice of Law; Change of Law 22 32 Severability 22 33 Address for Official Notices 22 Signature Page 22
9 "An Ordinance granting a franchise to Columbia Associates, L.P., d/b/a Columbia Cable of Virginia, its successors and assigns, to install, construct, operate and maintain in the Town of Dumfries a cable television system. BE IT ORDAINED by The Council of the Town of Dumfries, Virginia, meeting in session this day of , 1991, that: A. Name: This Ordinance shall be known as the CATV Ordinance. B. There be and there is hereby granted to Columbia Associates, L.P., its successors and assigns, hereinafter called the Grantee, a nonexclusive franchise, right and authority, subject to the conditions and restrictions hereinafter set forth, and such as may be imposed by the laws and ordinances of the Commonwealth of Virginia, the U.S. Federal Authorities, and the Town of Dumfries, to use the streets, alleys and public places of the Town of Dumfries and to that end the Town adopts this Franchise Ordinance: 1. To regulate the erection, construction, reconstruction, installation, operation, maintenance, dismantling, testing, repair, and use of cable communications system in, upon, along, across, above, over or under or in any manner connected with the streets, public ways or public places within the jurisdiction of the Town of Dumfries as now or in the future may exist. 2. To provide for the payment of certain franchise fees and other valuable considerations to the Town which, among other purposes, may be used to regulate the construction and operation, use, and development of such system within the Town; and 3. To provide conditions under which such franchised system will serve present and future needs of government, public institutions commercial enterprises, public and private organizations, and the citizens and general public of the Town; and 4. To provide remedies and prescribe liquidated damages for any violation of this Ordinance. SECTION 1. DEFINITIONS For the purpose of this Ordinance, the following terms, phrases, words, abbreviations and their derivations shall have the meaning given herein. When not inconsistent with the context, words used in the present tense include the future, words in the plural number include the singular number, and words in the singular number include the plural number, and the use of any gender shall be applicable to all genders whenever the sense requires. The words "shall" and "will" are mandatory and the word "may" is permissive. Words not defined shall be given their common and ordinary meaning. a. "Access channel" shall mean a single channel; dedicated in whole or in part for local programming which is not originated by the Company. b. Applicant -- shall mean any person submitting an application to the Town for a franchise to operate a cable television system under the terms and conditions set forth by the Town Council. c. "Basic Service" shall mean any or all of the different combinations of basic program services in Company including the delivery of broadcast signals, satellite signals, local origination, and access signals, covered by the regular monthly charges paid by 10 subscribers, excluding the optional premium services for which separate charges are made. d. "Broad Categories of Programming" means the types of video services such as those listed in Appendix 3. Those types are news, informational, educational, network affiliate broadcast, superstations, sports, movies, government, and access. The Town may, from time to time, request Grantee to add new categories of video services and Grantee may add those if economically feasible and desired by a substantial number of residents. e. "Cablecasting" is programming carried on the cable system, exclusive of broadcast signals, whether originated by the cable operator or any other party. f. "Cable Communications System," "Cable Television system," "Cable System," or "CATV System," shall mean the entire system of antennas, cables, wires, lines, towers, wave guides, or other conductors, converters, equipment, or facilities, designed and constructed for the purpose of producing, receiving, transmitting, amplifying, and distributing, audio, video, and other forms of electronic or electrical signals. Said definition shall not include any such facility that serves or will serve only subscribers in one or more multiple unit dwellings under common ownership, control, or management, and does not use the Town rights-of-way. g. "Certificate of Compliance" -- shall mean the approval required by the FCC for a Grantee of a cable television franchise. h. "Construction." The terms "completion of construction," "complete system construction," "satisfactorily complete and fully activate" shall mean that strand has been put up and all necessary cable (including trunk and feeder cable) has been lashed -- or, for underground construction, that all cable has been laid and trenches refilled and, except as prevented by weather conditions or delayed because of seasons, landscaping restored; that all amplifier housings and modules have been installed (including modules for return path signals); that power supplies have been installed and all bonding and grounding has been completed; that all necessary connectors, splitters, and taps have been installed; that construction of the headends or hubs have been completed and all necessary processing equipment has been installed; and that any and all other construction necessary for the system to be ready to deliver cable service to subscribers has been completed. Proof of performance tests shall have been conducted on each otherwise completed segment of the cable system before direct marketing of that segment begins. It is expected that segments of less than the entire system will be activated and proofed when completed. Construction of any segment or of the entire system will not be considered complete until proof of performance tests have been conducted on such segment (or in the case of the entire system, on all segments of the cable system) and any problems found during testing have been corrected. The term "completion of construction" does not include marketing and installation of subscriber service. "Significant replacement construction" shall mean the replacement/rebuild to 50% or more of the CATV system within any consecutive 18 month period. i. "Council" shall mean the governing body of the Town of Dumfries. -2- 11 j. "Dedicate Channel" shall mean to make available channel space and equipment for exclusive use of the designated user, subject to the authority of the Town Council to authorize reassignment of channels. k. "Franchise" shall mean the non-exclusive right granted hereunder to construct, install, maintain, and operate a cable television system in the incorporated Town of Dumfries. It does not include such license, permit, or tax for the privilege of conducting a business in the Town as may be required by other Town ordinances. l. "Grantee" or "Company" is the party or parties to which a franchise under this ordinance is granted by the Council, and its or their lawful successors and assigns. m. "Gross Revenues" shall mean all cash, barter, property of any kind or nature, or other consideration received directly or indirectly by the grantee, its affiliates, subsidiaries, parent, and any person in which grantee has a financial interest, or from any source whatsoever, arising from or attributable to the sale or exchange of cable television communications services by grantee within the Town derived from the operation of its cable television service, including, but not limited to, basic service, monthly fees, optional service or pay cable fees, installation and reconnections fees, and converter rentals or sales. These gross revenues shall not be reduced for any purposes other than provided herein, and shall be the basis for computing the fee imposed pursuant to Section 9. These gross revenues shall not include any taxes on services furnished by Grantee imposed upon any subscriber or user by the State, City, or other governmental unit and collected by grantee on behalf of said governmental unit, converter deposits, or refunds to subscribers by the grantee. Gross revenue includes a fraction of Grantee's revenues from selling advertising time, lease channel fees studio rental, and other income attributed to the cable system, the fraction being the number of subscribers in Dumfries divided by the total number of Grantee's subscribers. n. "Initial activation of service," or "initially providing cable communication service" shall mean with respect to a particular segment, group of segments or the entire cable system, as the case may be, that, all proposed services and system capabilities as stated in the Proposal are available and/or in place, construction has been completed (see definition of construction) and the completed segment or segments in question or the entire cable system, as the case may be, has been activated. o. "Local Origination Programming" shall mean programming locally produced by the Grantee. p. "Proposal" or "Application" refers to a formal response by the cable applicant to a specific invitation by the Town asking for proposals in accordance with the Town specifications to provide cable communications services to residents, businesses, industries, and institutions in the Town of Dumfries. q. "Subscriber" is a recipient of cable communications service. r. "Town" is the Town of Dumfries in its present incorporated form or as it may be changed by annexation or interjurisdictional agreement or otherwise. s. "Town Executive" -- shall mean the Town Administrator. -3- 12 t. "Two-way communications" means the transmission of telecommunications signals from subscriber locations or other points throughout the system back to the system's control center as well as transmission of signals from the control center to subscriber locations. u. "User" means a party utilizing a cable communications system channel for purposes of production or transmission of material to subscribers, as contrasted with receipt in a subscriber capacity. v. The terms "will be available," "will be equipped," "will use," "will be designed," "will perform," "will be utilized," "will permit," "will allow," "will be activated," "will be initially connected," "will be capable," "will provide," "will include," "will employ," "will be established," "will be able," "will be implemented," "will be delivered," "will utilize," and other similar uses of terms in a company's Proposal denoting the activation of cable service or the delivery of equipment, facilities, or services, shall be interpreted to mean delivery or accomplishment at a date no later than the initial activation of service (see definition) unless otherwise expressly and clearly stated or qualified in the company's Proposal to mean a more specific or different time. SECTION 2. GRANT OF AUTHORITY Columbia Associates, L.P., d/b/a Columbia Cable of Virginia is hereby granted the right and privilege to construct, erect, operate, and maintain, in, upon, along, across, above, over, and under the streets, alleys, public ways, and public places now laid out or dedicated and all extensions thereof, and additions thereto, in the Town poles, wires, cables, underground conduits, manholes, and other cable conductors and fixtures necessary for the maintenance and operation in the Town of Dumfries a cable communications system, to be used for the sale and distribution of cable services to the residents of the Town. SECTION 3. DURATION OF FRANCHISE The duration of the rights, privileges, and authorization granted in a franchise agreement shall terminate June 30, 2011, unless sooner terminated as set forth herein. SECTION 4. SERVICE AVAILABILITY AND RECORDS The Grantee shall provide cable communications services to all residential units throughout the entire franchise area pursuant to the provisions of this ordinance and shall keep a current file of all requests for service received by the Grantee for at least the three (3) most recent years. This record shall be maintained during the entire life of the franchise and be available for public inspection at the local office of the Grantee during regular office hours. -4- 13 SECTION 5. CATV SYSTEM CONSTRUCTION Construction Map and Schedule a. Map and Plan Grantee shall submit a construction plan of new construction and of significant replacement construction for approval by the Public Works Department of the Town which shall be incorporated by reference and made a part of this franchise agreement. The plan consists of a map of the entire franchise area clearly delineating the following: (1) The area within the Franchise where the cable television lines are currently located. (2) The area within the Franchise where the cable television lines will be placed. (3) Location of headend facilities. (4) A schedule of construction that will identify, by section or phase, how Grantee will complete new construction to all residential units in the Town within 18 months of grant or franchise. (5) A schedule of replacement construction that will identify by section or phase how Grantee will complete reconstruction within 18 months after notification of reconstruction. b. Early Construction and Extension Nothing in this section shall prevent the Grantee from constructing the system earlier than planned. However, any delay in the system construction beyond the times specified in the plan report timetable shall require application to and consent by the Council. C. Delay in Construction Timetable Any delay beyond the terms of construction timetable, unless approved by the Council, will be considered a violation of this Ordinance for which the provisions of either Sections 20 or 21 shall apply, as determined by the Council. d. Commencement of Construction Construction in accordance with the plan submitted by Grantee shall commence as soon after the grant and acceptance of a franchise as is reasonably possible. Failure to proceed expeditiously shall be grounds for revocation of this franchise. Failure to proceed expeditiously shall be presumed in the event construction is not commenced within twelve (12) months of the grant and acceptance of a franchise. e. Underground and Overhead Construction In all sections of the Town where all cables, wires, or other like facilities of public utilities are placed underground the cable television cable shall be placed underground; where the cables, wires, or other like facilities are placed overhead the cable television cable may be placed overhead or underground. If at any time the Town determines that existing wire, cable, or other like facilities of public utilities anywhere in the Town shall be changed from an overhead to an underground installation, the Grantee shall also, at Grantee's sole expense, convert its system to an underground installation. f. All residential areas in the Town shall be served by CATV and no additional cost shall be assessed by the Grantee to any citizen receiving CATV service. In cases of new construction or property development where -5- 14 utilities are to placed underground, unless the requirement is waived by the Town, Grantee shall use the same trenching as the Town or public utility. The Town shall give Grantee five (5) days notice of such construction or development, and of the particular data on which open trenching will be available for Grantee's installation of conduit, and/or cable. Grantee shall also provide specifications as needed for trenching. Trenches shall be closed within 24 hours upon completion of placement of utility lines, conduit and/or cable. Costs of trenching and easements required to bring service to the development shall be borne equally by the developer/property owner, and those sharing the trench, except that if Grantee fails to install its conduit, and/or cable within the specified time limitation indicated above, then the cost of new trenching is to be borne by Grantee (except for the notice of the particular date on which trenching will be available to Grantee). g. Special Agreements Nothing herein shall be construed to prevent Grantee from serving areas not covered under this section upon agreement with developers, property owners or residents. SECTION 6. CONSTRUCTION AND TECHNICAL STANDARDS a. Compliance with Construction and Technical Standards Grantee shall construct, install, operate, and maintain its system in a manner consistent with all laws, ordinances, construction standards, governmental requirements, FCC technical standards, and detailed standards submitted by Grantee as part of its application, which standards submitted by Grantee as part of its application, which standards are incorporated by reference in the franchise agreement. In addition, Grantee shall provide the Town, upon request, with a written report of the results of Grantee's annual proof of performance tests conducted pursuant to FCC standards and requirements. Grantee shall reimburse the cost incurred by the Town for qualified technical assistance as deemed necessary by the Town to resolve disputes concerning compliance of technical standards, if Grantee is found to be in non-compliance of standards. b. Additional Specifications Construction, installation, and maintenance of the cable communications system shall be performed in an orderly and workmanlike manner. All cables and wires shall be installed, where possible, parallel with and in the same manner as electric and telephone lines. Multiple cable configurations shall be arranged in parallel and bundled with due respect for engineering considerations. Installations shall be in accordance with applicable codes. The Grantee shall maintain equipment capable of providing standby power for headend, transportation, and trunk amplifiers for a minimum of approximately four (4) hours. Grantee shall at all time comply with: (1) National Electrical Safety Code (National Bureau of Standards): (2) National Electrical Code (National Fire Protection Association); -6- 15 (3) Bell System Code of Pole Line Construction or Columbia Cable construction manual as approved by Town of Dumfries; (4) Applicable FCC or other federal, state, and local ordinances and regulations; (5) Requirements of Dumfries Public works Department as provided in exhibit A.; and In any event, the system shall not endanger or interfere with the safety of persons or property in the franchise area or other areas where the Grantee may have equipment located. c. The cable television plant, including all applicable trunk and feeder distribution lines, shall be designed and constructed so as to allow for "community exclusive" cablecasting, as community now exists, of one or more channels. This shall include insertion equipment and switching equipment, if appropriate, and will provide the capability for the Town to cablecast programming to all grantee cable customers which reside within the Town limits. This feature may be used for purposes and times determined appropriate by the Town. SECTION 7. TRANSFER AND ASSIGNMENTS a. This franchise shall not be assigned or transferred, either in whole or in part, or leased, sublet, or mortgaged in any manner, nor shall title thereto, in part, or leased, sublet, or mortgaged in any manner, nor shall title thereto, either legal or equitable or any right, interest or property therein, pass to or vest in any person without the prior written consent of the Town. The proposed assignee must show technical ability, financial capability, legal qualifications and general character qualifications as determined by the Town and must agree to comply with all provisions of this franchise. b. The Grantee shall promptly notify the Town of any actual or proposed change in, or transfer of, or acquisition by any other party of, control of the Grantee. The work "control" as used herein is not limited to major stockholders but includes actual working control in whatever manner exercised. Every change, transfer, or acquisition of control of the Grantee shall make the franchise subject to cancellation unless and until the Town shall have consented thereto, which consent will not be unreasonably withheld. For the purpose of determining whether it shall consent to such change, transfer or acquisition of control, the Town may inquire into the qualifications of the prospective controlling party and the Grantee shall assist the Town in any such inquiry. c. A rebuttable presumption that a transfer of control has occurred shall arise upon the acquisition or accumulation by any person or group of persons of 10 percent of the voting interest of the Grantee. d. The consent of approval of the Town Council to any transfer of the franchise shall not constitute a waiver or release of the right of the Town in and to the streets, and any transfer shall by its terms, be expressly subordinate to the terms and conditions of this franchise. e. In any absence of extraordinary circumstances, the Town will not approve any transfer or assignment of a franchise prior to -7- 16 substantial completion of construction of proposed system. f. The Town Council reserves the first right of refusal to purchase the cable communications system at the price offered by any bona fide purchaser if and when it is placed on the market for sale. The Town must confirm interest within ten (10) working days of such notice and conclude said purchase within thirty (30) days unless mutually agreed upon by both parties. g. The Town Council reserves the right to review the purchase price of any transfer or assignment of a cable system. Any negotiated sale value which a mutually agreed upon appraisal firm deems to be in excess of fair market value will not, to the extent of such excess, be considered in the rate base for any subsequent request for rate increases subject to Town regulation as provided for in Section 8. h. In no event shall a transfer of ownership or control be approved until purchaser complies with and is approved in accordance with Section 28 of this agreement. If approved, successor in interest shall become a signatory to the franchise agreement. SECTION 8. SUBSCRIBER SERVICE RATES Upon application by Grantee for increase of rates, Town may review proposed rate increase and may adjust, to the extent permitted by applicable law, that proposal in accordance with procedures established by or recommended by the FCC or applicable federal or state law in the absence of such procedures, in accordance with procedures negotiated and agreed to by Grantee and Town. Any rate for service not regulated by the Town may be increased by Grantee only following at least thirty (30) days prior notice to the Town and all affected subscribers. SECTION 9. PAYMENT OF FRANCHISE FEE a. For the reason that the streets to be used by the Grantee in the operation of its system within the boundaries of the Town are valuable public properties acquired and maintained by the Town at great expense to its taxpayers, and that the grant to the Grantee to the said streets is a valuable property right without which the Grantee would be required to invest substantial capital in right-of-way costs and acquisitions, and because the Town will incur costs in regulating and administering the franchise, and at the option of the Council, the Town may make available a portion of the franchise fee to further the development of public and community uses of cable TV, the Grantee shall pay to the Town a franchise fee in an amount equal to four percent (4%) of gross revenue, as defined, from all sources attributable to the operation of Grantee within the confines of the Town of Dumfries beginning July 1, 1992. This fee will increase to five percent (5%) on July 1, 1996 and shall remain five percent (5%) for remainder of the term of this ordinance. b. The franchise fee and any other cost of liquidated damages assessed shall be payable quarterly to the Office of the Town Treasurer. The Grantee shall file a complete and accurate verified statement of all collected gross revenue within the Town during the period for which said quarterly payment is made, and said payment -8- 17 shall be made to the Town not later than sixty (60) days after the expiration of quarter for which payment is due. c. The Town shall have the right to inspect the Grantee's income records and the access to an annual audit and to recompute any amounts determined to be payable under this ordinance; provided, however, that such audit shall take place within thirty-six (36) months following the close of each of the Grantee's fiscal years. Any additional non-disputed amount due to the Town as a result of the audit shall be paid within thirty (30) days following written notice to the Grantee by the Town which notice shall include a copy of the audit report. Any disputed amount shall be resolved by a mutually agreed upon arbitrator. d. In the event that any franchise payment or recomputed amount, cost, or penalty, is not made on or before the applicable dates heretofore specified, interest shall be charged daily from such date at the annual rate equivalent to the then existing prime rate of local banking institutions in Dumfries, Virginia. SECTION 10. USE OF STREETS a. All transmission and distribution structures, lines, and equipment erected by the Grantee within the Town shall be so located as to cause minimum interference with the rights and reasonable convenience of property owners who adjoin any of the said streets. b. In case of disturbance of any street easement or paved area or other property the Grantee shall, at its own cost and expense and in a manner approved by the Town, replace and restore such street easement or paved area or other property in as good a condition as before the work involving such disturbance was done. c. If at any time during the period of a franchise the Town shall lawfully elect to alter or change the grade or other aspects of any street, the Grantee, upon reasonable notice by the Town, shall remove, relay, and relocate its poles, wires, cables, underground conduits, manholes, and other fixtures at its own expense. Any poles or other fixtures placed in or adjacent to any street by the Grantee shall be placed in such manner as to cause minimum interference with the rights and reasonable convenience of property owners who adjoin said streets. The Grantee shall, at the request of any person holding a moving permit issued by the Town, temporarily raise or lower its wires to permit the moving of buildings. The expense of such temporary removal or raising or lowering of wires shall be paid by the person requesting the same, and the Grantee shall have the authority to require such payment in advance. The Grantee shall be given not less than forty-eight (48) hours notice to arrange for such temporary wire changes. The Grantee shall have the authority to trim trees upon and overhanging streets of the Town so as to prevent the branches of such trees from coming in contact with the wires and cables of the Grantee, except that at the option of the Town, such trimming may be done by it or under its supervision and direction at the expense of the Grantee. -9- 18 At the expiration of the term of this franchise, or upon its termination and cancellation, as provided for herein, the Town shall have the right to require the Grantee to remove at its own expense all portions of the cable television system from all streets within the Town. SECTION 11. INDEMNIFICATION AND INSURANCE a. Grantee hereby expressly covenants and agrees to hold the Town and its agents and employees harmless from and against all claims, damages, losses, and expenses, including attorney's fees sustained by the Town on account of any suit, judgement, execution, claim, or demand whatsoever arising out of but not limited to copyright infringements and all other damages arising out of the installation, operation, or maintenance of its cable system whether or not any act or omission complained of is authorized, allowed or prohibited by this ordinance. b. The Grantee shall maintain and by its acceptance of this franchise specifically agrees that it will maintain throughout the term of its franchise, liability insurance insuring the Town and the Grantee in the minimum amount of: (1) Workmen's Compensation: as required by all applicable Federal, State, Maritime or other laws. (2) Grantee's Liability: each occurrence $1,000,000 (3) Comprehensive General Liability: Bodily injury, each occurrence $1,000,000; Property damage, each accident $1,000,000 and aggregate $2,000,000. (4) Comprehensive Vehicle Liability: including non-ownership and hired car coverage as well as owned vehicles with minimum limited as follows: Bodily injury for each occurrence $1,000,000; Property damage for each occurrence $1,000,000. c. The insurance policy obtained by the Grantee in compliance with this section must be approved by the Town Attorney and such insurance policy, along with written evidence of payment of required premiums, shall be filed and maintained with the Office of the Town Clerk during the term of this franchise and may be changed from time to time to reflect changing liability limits. Grantee shall immediately advise the Town Attorney of any litigation that may develop that would affect the insurance. d. Neither the provisions of this section nor any damages recovered by the Town hereunder, shall be construed to or limit the liability of Grantee under this franchise or for damages. e. All insurance policies made of continued under this franchise shall name the Town of Dumfries as an additional insured. Grantee shall have the Town of Dumfries a Certificate of Insurance from a reputable insurance company. The Certificate shall state that Grantee has at least the minimum coverage that this franchise allows. Grantee's insurance policy shall provide that the insurer shall not cancel or refuse to renew Grantee's policy until at least thirty (30) days after the Town of Dumfries receives written notice of such intention of cancel or not renew. Notice shall be by registered mail and the Town shall not refuse delivery. -10- 19 SECTION 12. MAINTENANCE BOND a. Within thirty (30) days after the award of this franchise, Grantee shall deposit with the Town a cash security bond in the amount of $50,000. The cash bond shall be used to insure the faithful performance by Grantee of all provisions of this ordinance franchise; and compliance with all orders, permits, and directions of any agency, commission, board, department, division, or office of the Town having jurisdiction over its acts or defaults under this franchise and the payment by the Grantee of any liquidated damages, claims, liens, and taxes due the Town which arise by reason of the construction, operation, or maintenance of the system. b. The cash bond shall be maintained at $50,000 during the entire term of this franchise, even if amounts have to be withdrawn pursuant to subdivision a. or c. of this section. c. if Grantee fails to pay to the Town any compensation within the time fixed herein; or fails, after ten (10) days notice to pay to the Town any taxes due and unpaid; or fails to repay the Town within ten (10) days, any damage costs or expenses which the Town is compelled to pay by reason of any act or default of the Grantee in connection with a franchise; or, fails, after three (3) days notice by the Town of such failure to comply with any provision of this franchise which the Town reasonably determines can be remedied by demand on the cash bond the Town may immediately require payment of the amount thereof, with interest and any liquidated damages, from the cash bond. d. The rights reserved to the Town with respect to the cash bond are in addition to all other rights of the Town, whether reserved by a franchise or authorized by law, and no action, proceeding or exercise of a right with respect to such cash bond shall affect any other right the Town may have. SECTION 13. CONSTRUCTION BOND a. Within thirty (30) days after the award of this franchise and thirty (30) days prior to the start of any significant replacement construction, Grantee shall obtain and maintain at its cost and expense, and file with the Town Clerk, a corporate surety bond in a company authorized to do business in the State of Virginia, and found acceptable by the Town Attorney, in the amount of Five Hundred Thousand Dollar ($500,000) or, in the case of replacement construction, an appropriate fraction as determined by the Town Council, to guarantee the timely construction and full activation of the CATV system and the safeguarding of damage to private and/or public property and restoration of damages incurred. The bond shall provide, but not be limited to, the following condition: There shall be recoverable by the Town, jointly and severally from the principal and surety, any and all damages, loss or costs suffered by the Town resulting from the failure of Grantee to satisfactorily complete and fully activate the CATV system throughout the franchise area pursuant to the terms and conditions of this ordinance franchise agreement. b. Any extension to the prescribed construction time limit must be authorized by the Council. Such extension shall be -11- 20 authorized only when the Council finds that such extension is necessary and appropriate due to causes beyond the control of Grantee. c. The construction bond shall be terminated only after the Council finds that Grantee has satisfactorily completed initial construction and activation of the CATV system pursuant to the terms and conditions of this ordinance franchise agreement. d. The rights reserved to the Town with respect to the construction bond are in addition to all other rights of the Town whether reserved by this ordinance or authorized by law, and no action, proceeding or exercise of a right with respect to such bond shall affect any other rights the Town may have. e. The construction bond shall contain language similar to the following endorsement: It is hereby understood and agreed that this bond may not be cancelled by the surety nor the intention not to renew be stated by the surety until sixty (60) days after receipt by the Town, by registered mail, of written notice of such intent to cancel or not to renew. SECTION 14. SERVICE STANDARDS a. Grantee shall put, keep, and maintain all parts of the system in good condition throughout the entire franchise period. b. Upon termination of service to any subscriber, Grantee shall promptly remove all its facilities and equipment from the premises of such subscriber upon subscriber's request. c. Grantee shall render efficient service, make repairs promptly, and interrupt service only for good cause and for the shortest time possible. Such interruptions, insofar as possible, shall be preceded by notice and shall occur during periods of minimum system use. d. Grantee shall not allow its cable or other operations to interfere with television reception of persons not served by Grantee, nor shall the system interfere with, obstruct or hinder in any manner, the operation of the various utilities serving the residents of the Town. e. Grantee shall continue, through the term of this franchise, to maintain the technical, operational, and maintenance standards and quality of service set forth in this ordinance. Should the Town find, by resolution, that Grantee has failed to maintain these standards and quality of service, and should it, by resolution specifically enumerate improvements to be made, Grantee shall make such improvements. Failure to make such improvements within three (3) months of such resolution will constitute a breach of condition for which the remedy of Section 21 is applicable. SECTION 15. CONTINUITY OF SERVICE MANDATORY a. It shall be the right of all subscribers to continue receiving service insofar as their financial and other obligations to Grantee are honored. In the event that Grantee elects to over-build, rebuild, modify, or sell the system, or the Town gives -12- 21 notice of intent to terminate or fails to renew franchise, the Grantee shall act so as to ensure that all subscribers receive continuous, uninterrupted service regardless of the circumstances. In the event of a change of Grantee, or in the event a new operator acquires the system, Grantee shall cooperate with the Town, new Grantee or operator in maintaining continuity of service to all subscribers. During such period, Grantee shall be entitled to the revenues for any period during which it operates the system. b. In the event Grantee fails to operate the system for four (4) consecutive days without prior approval of the Town or without just cause, the Town may, at its option, operate the system or designate an operator until such time as Grantee restores service under conditions acceptable to the Town or a permanent operator is selected. If the Town is required to fulfill this obligation for Grantee, the Grantee shall reimburse the Town for all reasonable costs or damages. SECTION 16. COMPLAINT PROCEDURE APPLICATIONS a. Grantee shall maintain a central office within the Town which shall be open during all usual business hours. Grantee shall have a local publicly-listed telephone number and be so operated that complaints and request for repairs or adjustments may be received on a twenty-four (24) hour basis. b. Grantee shall maintain a repair and maintenance crew capable of responding to subscriber complaints or requests for service within twenty-four (24) hours after receipt of the complaint or request. No charge shall be made to the subscriber for this service unless such maintenance or repair is required as a result of damage caused by subscriber. Grantee may charge for service calls to the subscriber's home that are not the result of cable failure upon approval of a rate and equitable procedure by the Town. c. Grantee shall establish procedures for receiving, acting upon, and resolving subscriber complaints to the satisfaction of the Town Manager's Office. Grantee shall furnish a notice of such procedure to each subscriber at the time of initial subscription to the system. d. Grantee shall keep maintenance service records which will indicate the nature of each service complaint, the date and time it was received, the disposition of said complaint and the time and date thereof. This information shall be made available for periodic inspection by representatives of the Town Manager's Office. All service complaint entries shall be retained on file for a period consisting of the most recent three (3) years. e. When there have been similar complaints made or when there exists other evidence, which, in the judgement of the Town Manager casts doubt on the reliability of quality of cable service, the Town Manager shall have the right and authority to compel Grantee to test, analyze, and report on the performance of the system. Such report shall be delivered to the Town Manager no later than fourteen (14) days after the Town Manager formally notifies the Grantee and shall include the following information: the nature of the complaints which precipitated the special tests; what system -13- 22 component was tested, the equipment used, and procedures employed in said testing; the results of such tests; and the method in which said complaints were resolved. f. The Town Manager may require that tests and analyses shall be supervised by a professional engineer not on the permanent staff of Grantee. The aforesaid engineer should sign all records of the special tests and forward to the Town Manager such records with a report interpreting the results of the tests and recommending actions to be taken by Grantee and the Town. g. The Town's right under this section, shall be limited to requiring tests, analyses, and reports covering specific subjects and characteristics based on said complaints or other evidence when and under such circumstances as the Town has reasonable grounds to believe that the complaints or other evidence requires that tests be performed to protect the public against substandard cable services. SECTION 17. AVAILABILITY OF BOOKS AND RECORDS Grantee shall fully cooperate in making available at reasonably scheduled times, and the Town Manager or his designate shall have the right to inspect the books, records, maps, plans, and other like materials of the Grantee applicable to the CATV system, at any time during normal business hours; provided where volume and convenience necessitate, Grantee may require inspection to take place on Grantee's premises. SECTION 18. OTHER PETITIONS AND APPLICATIONS Copies of all petitions, applications, communications, and reports submitted by Grantee to the Federal Communications Commission, Securities and Exchange Commission, or any other federal or state regulatory commission or agency having jurisdiction in respect to any matters affecting cable television operations authorized pursuant to this franchise, shall be provided simultaneously to the Town. SECTION 19. FISCAL REPORTS The Grantee shall file annually with the office of the Town Clerk, no later than one hundred twenty (120) days after the end of the Grantee's fiscal year, a copy of an audited financial report applicable to the CATV system serving the Town of Dumfries, including an income statement applicable to its operations during the preceding twelve (12) month period, a balance sheet and a statement of its properties devoted to CATV system operations, by categories, giving its investment in such properties on the basis of original cost, less applicable depreciation. These reports shall be certified as correct by an authorized officer of Grantee and there shall be submitted along with them such other reasonable information as the Council shall request. SECTION 20. FORFEITURE AND TERMINATION a. In addition to all other rights and powers retained by the Town under this ordinance or otherwise, the Town reserves the right -14- 23 to forfeit and terminate this franchise and all rights and privileges of Grantee in the event of a material breach of its terms and conditions. A material breach by Grantee shall include, but shall not limited to the following; (1) Violation of any material provision of this franchise or any material rule, order, regulation, or determination of the Town made pursuant to this franchise; (2) Attempt to dispose of any of the facilities or property of its CATV system to prevent the Town from purchasing it, as provided for herein; (3) Attempt to evade any material provision of this franchise or practices any fraud or deceit upon the Town of its subscriber or customers; (4) Failure to begin or complete system construction or system extension as provided under this franchise; (5) Failure to restore service after ninety-six (96) consecutive hours of interrupted service, except when approval of such interruption is obtained from the Town; (6) Material misrepresentation of fact in the application for or negotiation of this franchise; (7) Bankruptcy or assignment for the benefit of creditors; receivership, or other insolvency of Grantee; (8) Failure to pay franchise fees as required in Section 9; (9) Failure to provide "Broad categories" video programming of other services. b. This Franchise and all rights and privileges of Grantee shall not be terminated or forfeited pursuant to this section for any act or omission beyond the licensee's control. Grantee shall not be excused by mere economic hardship nor by misfeasance or malfeasance of its shareholders, directors, officers, or employees. c. The Town may make a written demand that Grantee comply with any such provision, rule, order, or determination under or pursuant to this ordinance. If the violation by the Grantee continues for a period of thirty (30) days following such written demand without written proof that the corrective action has been taken or is being actively and expeditiously pursued, the Town may place the issue of termination of this franchise before the Town Council. The Town shall cause to be served upon Grantee, at least twenty (20) days prior to the date of such a Council meeting, a written notice of intent to request such termination and the time and place of the meeting. Public notice shall be given of the meeting and issue which the Council is to consider. d. The Town Council shall hear and consider the issue and shall hear any person interested therein, and shall determine in its discretion, whether or not any violation by the Grantee has occurred. e. If the Town Council shall determined that a material breach exist, the Council may, by resolution, declare that the franchise of the Grantee shall be forfeited and terminated unless there is compliance within such period as the Town Council may fix, such period not to be less than sixty (60) days, provided no opportunity for compliance need be granted for fraud or misrepresentation. f. The issue of forfeiture and termination shall automatically be placed upon the Council agenda at the expiration of -15- 24 the time set by it for compliance. The Council then may terminate this franchise forthwith upon finding that Grantee has failed to achieve compliance or may further extend the period, in its discretion. SECTION 21. LIQUIDATED DAMAGES By acceptance of this franchise granted by the Town, Grantee understands and agrees that failure to comply with any time and performance requirements as stipulated in this ordinance will result in damage to the Town, and that it is and will be impracticable to determine the actual amount of such damage in the event of delay or nonperformance; and Grantee thereof shall agree that, in addition to any other damage suffered by the Town, the Grantee will pay to the Town the following amounts which will be chargeable to the security fund: a. For failure to complete system construction in accordance with Section 5, unless the Council specifically approves the delay by motion or resolution, due to the occurrence of conditions beyond Grantee's control, Grantee shall pay One Thousand Dollars ($1,000) per day for each day, or part thereof, the deficiency continues. b. For failure to provide upon written request, data, documents, reports, information or to cooperate with Town during an application process or CATV system review, Grantee shall pay Fifty Dollars ($50) per day, or part thereof, each violation occurs or continues. c. For failure to test, analyze, and report on the performance of the system following a written request pursuant to this ordinance, Grantee shall pay to Town Two Hundred Dollars ($200) per day for each day, or part thereof, that such noncompliance continues. d. Forty-five (45) days following adoption of a resolution by the Town Council in accordance with Section 14e determining a failure of Grantee to comply with operational, maintenance or technical standards, Grantee shall pay to the Town One Thousand Dollars ($1,000) for each day, or part thereof, that such noncompliance continues. e. For failure to provide in a continuing manner the broad categories of video programming or other services such as those listed in Appendix B, unless the Council specifically approves Grantee a delay or change, Grantee shall pay to the Town one thousand dollars ($1,000.) per day for each day, or part thereof, that non-compliance continues. SECTION 22. RIGHTS OF INDIVIDUALS a. Grantee shall not deny service, deny access, or otherwise discriminate against subscribers, channel users, or general citizens on the basis of race, color, religion, national origin, sex, or disability. Grantee shall comply at all times with all other applicable federal, state, and local laws and regulations, and all executive and administrative orders relating to nondiscrimination which are hereby incorporated and made part of this ordinance by reference. -16- 25 b. Grantee shall strictly adhere to the equal employment opportunity requirements of federal, state, and local regulations, and as amended from time to time. c. No signals shall be transmitted from a subscriber terminal for purposes of monitoring individual viewing patterns or practices without the express written permission of the subscriber. The request for such permission shall be contained in a separate document with a prominent statement that the subscriber is authoring the permission in full knowledge of its provision. The authorization shall be revocable at any time by the subscriber without penalty of any kind whatsoever. Grantee shall be entitled to conduct system wide or individually addressed "sweeps" for the purpose of verifying system integrity, controlling return-path transmission or billing for any pay services including "shop at home." d. Grantee, or any of its agents or employees, shall not, without the specific written or electronic consent of the subscriber involved, sell, or otherwise make available to any party: (1) lists of the names and addresses of such subscribers, or (2) any list which identifies the individual viewing habits of subscribers. SECTION 23. PURCHASE OF CATV SYSTEM BY TOWN a. Rights to Purchase In the event Grantee forfeits or Town terminates this franchise pursuant to provisions of this ordinance, or at the normal expiration of the franchise term, Town shall have the right to purchase the CATV system. b. Franchise Valuation (1) In the event Grantee forfeits or Town terminates this Franchise, The Town may purchase the system at a fair market price. (2) Upon expiration of this Franchise, the Town may purchase the system at fair market value determined on the basis of the cable system valued as a going concern but with no value allocated to this Franchise itself. c. Date of Valuation The date of valuation shall be no earlier than the day following the date of expiration or termination and no later than the date Town makes a fair and reasonable offer for the system or the date of transfer of ownership, whichever occurs first. d. Transfer to Town Upon exercise of this option and the payment of the above sum by the Town and its service of official notice of such action upon Grantee, the Grantee shall immediately transfer to the Town possession and title to all facilities and property, real and personal, of the CATV system, free from any and all liens and encumbrances not agreed to be assumed by the Town in lieu of some portion of the purchase price set forth above; and the Grantee shall execute such warranty deeds or other instruments of conveyance to Town as shall be necessary for this purpose. SECTION 24. PERFORMANCE EVALUATION SESSIONS a. The Town and Grantee may hold scheduled performance -17- 26 evaluation sessions within thirty (30) days of the first, third, sixth, ninth, and twelfth anniversary dates of Grantee's award of the franchise and as may be required by federal and state law. b. Special evaluation sessions may be held at any time during the term of this franchise at the request of the Town or the Grantee. c. All evaluation sessions shall be open to the public and announced in a newspaper of general circulation in accordance with legal notice. Grantee shall notify its subscribers of all evaluation sessions by announcements on at least one (1) channel of its system to include the hours of 7:00 PM and 9:00 PM, for five (5) consecutive days preceding each session. d. Topics which may be discussed at any scheduled or special evaluation session may include, but not be limited to, service rate structures; franchise fee; liquidated damages; free or discounted services; application of new technologies; system performance; services provided; programming offered; customer complaints; privacy; amendments to this ordinance; judicial and FCC rulings or any applicable federal or state law; line extension policies; and Grantee or Town rules. SECTION 25. CABLE SERVICE TO GOVERNMENT BUILDINGS Grantee shall provide one outlet of basic cable service upon request and approval by Town Council, to each municipally operated public building at no monthly cost including, but not limited to, Town Hall, fire stations, schools, recreation center, community center, and library. SECTION 26. PROVISIONS OF ORIGINATION CABLECASTING Grantee shall provide cablecasting equipment or equivalent as specified in Appendix A. The equipment shall be used by Town employees or designates for the purpose of live cablecasting or tape recording of Town meetings or events as approved by the Town Council. The Town or designate shall, at the sole discretion and convenience of the Town, cablecast noncommercial, locally produced video and audio programming of live or taped Town meetings or Town wants as approved by the Town Council. These programs may be cablecast on channel 3 or other channels as mutually agreed upon by the Town and Grantee and shall preempt that programming normally carried on said channel. SECTION 27. NEW DEVELOPMENTS At regular intervals, approximately every five years, Grantee and Town Council will meet to discuss developments in technology as it relates to current technical capabilities of the CATV system. During such conference, the Town Council and Grantee will (1) seek to determine if there exists a reasonable need and demand for additional channel capacity and/or technology or upgrade of facilities, and (2) that provisions will be made for any applicable additional customer rate charges which will allow Grantee a fair rate of return on its' investment (including the investment required -18- 27 to provide the additional channels and/or technology or upgrade of facilities) and will not result in economic waste for the Grantee. The Town Council and Grantee will negotiate, in good faith, to provide appropriate additional channels and/or specified technology or upgrade of facilities. SECTION 28. TOWN PROCEDURES FOR NEW LICENSE(S) a. Application filing Approval Required. Any person desiring to apply for a License to install and operate a cable television system in the incorporated areas of the Town of Dumfries shall first appear before the Town Council to obtain approval for the filing of the License application. A copy of the application form is provided in Appendix C. The Town Council shall determine whether it would be in the public interest to receive, review, and evaluate an application for a new License. The Council will consider both whether the public interest would be served by the possible grant of a new License and whether the expenditure of Town time and resources in reviewing and evaluating the application is warranted by the public interest. b. License Required. Any person desiring to install and operate a cable television system in the incorporated areas of the Town of Dumfries shall, after receiving Town approval pursuant to Section 28a, apply to the Town Council for a License pursuant to this Ordinance and in compliance with the Request for Proposal issued under Section 28a. The License shall be for a period specified in the License Agreement and shall be non-exclusive. Applications shall be submitted in writing and at the office of the Town Clerk, together with a non-refundable application fee in the amount of One Thousand Dollars ($1,000.) to defray those costs of processing the application as set forth in Section 28c. c. License Processing Costs. For either a new license award or a license renewal, costs to be borne by Grantee shall include all costs of publications or notices prior to any public meeting provided for pursuant to a license, development and publication of relevant ordinances and License Agreement, fees, and any reasonable out-of-pocket cost not covered by the applications, including, consultant and attorneys' fees and Grantor staff time. Prior to commencing evaluation processing, the Town shall, by registered mail, notify the applicant(s) of the projected processing costs, and require each applicant to submit a cashier's check in the specified amount no later than five (5) days from receipt of said notice. These license processing costs are over and above any construction, inspection and permit fees, but may be offset against the franchise fee in the case of a license renewal. d. Application Required. An applicant desiring to install and operate a cable television system in the incorporated areas of the Town of Dumfries shall be required to complete the application forms for a Cable Television System License, as prescribed by the Town, and which shall incorporate by reference hereto, including, but not limited to, details of the applicant's qualifications and experience, applicant's financial capability, financial background, subscriber rates, proposed system technical configuration and operational system description, proposed initial service area(s) and -19- 28 construction timetable, programming and other services, all administrative practices and policies. Existing Licenses operating in the Town are not required to provide the application described herein. However, any existing License shall submit at the time of renewal of the franchise and, upon request by the Town any or all of the information set forth above, and the Town may also request the License to submit any or all of the information at any time during the franchise upon ninety (90) days written notice to the Licensee. Additionally, if the applicant is requesting an overlapping Franchise within the Town, the Town shall make a further determination in the public interest as to whether the economic impact upon the existing cable operator will result in a loss of or degradation of cable service to existing or potential cable subscribers in the Town. e. Evaluation Criteria -- General. The applicant's legal, character, financial, technical, and other corporate qualifications, the adequacy of its construction arrangements and system design, service proposals, and the proposed rates and charges as specified in Section 28d will be evaluated by the Grantor and/or its designated agent. In the event multiple applications are filed for the same License Territory, the applicable criteria will be evaluated on a comparative basis and Grantor may conclude that the public convenience, safety and general welfare would be best served by denying any and all License Applications. (1) The economic impact upon private property within the franchise area; (2) The public need for such franchise, if any; (3) The capacity of public rights-of-way to accommodate the cable system; (4) The present and future use of the public rights-of-way to be used by the cable system; (5) The potential disruption to existing rights-of-way to be used by the cable system and the resulting inconvenience which may occur to the public; (6) the financial ability of the franchise applicant to perform; (7) Other societal interests as are generally considered in cable television franchising; (8) Such other additional matters, both procedural and substantive, as Town may, in its sole discretion, determine to be relevant. E. License Applications. Applicants for a license shall submit to the Grantor written applications utilizing the standard format provided by the Grantor, at the time and place designated by the Grantor for accepting applications, and including the designated application fees. g. Overlapping Applications. In the event a License application is filed proposing a License Territory which overlaps in whole or in part an existing area, a copy thereof shall be served by the applicant by registered mail upon the current licensed Grantee or Grantees. Proof that a copy of the License Application has been served upon the current Grantee(s) shall be provided to the Town. No application for overlapping License Territory shall be processed until proof of service has been furnished Grantor, and no such -20- 29 application shall be granted without full public hearing on the request. Notwithstanding any other provisions of this Ordinance, it is not the intent of this Ordinance to either require or prohibit over-building. SECTION 29. TIME IS OF THE ESSENCE Whenever this franchise shall set forth any time for an act to be performed by or on behalf of the Grantee, such time shall be deemed of the essence and any failure of the Grantee to perform within time allotted shall always be sufficient ground for the Town to invoke liquidated damages or revocation of this franchise. SECTION 30. FAILURE OF TOWN TO ENFORCE FRANCHISE, NO WAIVER OF THE TERMS THEREOF Grantee shall not be excused from complying with any of the terms and conditions of this franchise ordinance by any failure of the Town upon any one or more occasions to insist upon or to seek compliance with any such terms or conditions. SECTION 31. CHOICE OF LAW; CHANGE OF LAW This franchise is entered into in the Commonwealth of Virginia and is governed by its laws. When change occurs in federal or state laws or regulations affecting this franchise, the Grantee and Town shall renegotiate, in good faith, to accommodate the change. If both parties agree that the change in law requires no change in the franchise, they may waive the renegotiation. For the purpose of this section, "federal or state law or regulations" includes, but is not limited to regulations of the FCC and other federal agencies, executive orders, opinions of courts of competent jurisdiction, international treaties, interstate compacts, the Town's charter, and state and federal constitutions. "Change" includes, but is not limited to, new provisions, repeal, amendment, declaratory explanations, and procedural modifications. SECTION 32. SEVERABILITY If any section, sentence, clause, or phrase of this ordinance is held unconstitutional or otherwise invalid, such infirmity shall not affect the validity of the ordinance, and any portions in conflict are hereby repealed. Provided, however, that in the event that the state or federal government laws or regulations renders any section invalid, then such section or sections shall be renegotiated by the Town and Grantee. -21- 30 SECTION 33. ADDRESS FOR OFFICIAL NOTICES All notices, requests, and demands of an official nature that are pursuant to requirements of this Franchise Ordinance shall be in writing and shall be deemed to have been duly given if delivered or certified mailed to: a. Columbia Cable of Virginia 4391 Dale Blvd. Woodbridge, VA 22193 Attn: General Manager b. Town Manager Town of Dumfries 101 South Main Street Dumfries, VA 22026 I declare that I have read all the terms and conditions of this franchise agreement and accept and agree to abide by same. Richard H. Rosencrans, Vice President /s/ Richard H. Rosencrans June 16, 1992 - -------------------------------------------------------------------------------- Signature Date Scott N. Ledbetter, Vice President /s/ Scott N. Ledbetter June 17, 1992 - -------------------------------------------------------------------------------- Signature Date Thomas Harris, Dumfries Town Manager /s/ Thomas Harris June 16, 1992 - -------------------------------------------------------------------------------- Signature Date Samuel W. Bauckman, Mayor, Dumfries /s/ Samuel W. Bauckman June 16, 1992 - -------------------------------------------------------------------------------- Signature Date -22- 31 Certificate of Acknowledgments: City/County of Pr Wm State of VA The foregoing instrument was acknowledged before me this 16th day of June, 1992, by Richard H. Rosencrans. [ILLEGIBLE] ------------------------------------ Notary Public My commission expires June 19, 1992. County of Fairfield State of Conn. The foregoing instrument was acknowledged before me this 17th day of June, 1992, by Scott N. Ledbetter. /s/ CLARA P. GRACE ------------------------------------ Notary Public My commission expires October 31, 1997. County of Pr Wm State of VA The foregoing instrument was acknowledged before me this 16th day of June, 1992, by Thomas E. Harris. /s/ [ILLEGIBLE] ------------------------------------ Notary Public My commission expires June 19, 1992. County of Pr Wm State of VA The foregoing instrument was acknowledged before me this 16th day of June, 1992, by Samuel W. Bauckman. /s/ [ILLEGIBLE] ------------------------------------ Notary Public My commission expires June 19, 1992. -23- 32 APPENDIX A 9 Unidirectional microphones 1 Audio mixer (16 input) 1 Audio headset 1 Dual cassette audio recorder 1 Audio power amplifier 1 Video passive switcher 1 Triple 5" B&W monitor 1 S-VHS recorder 1 Cart Installation, set-up, and initial training. 33 [DIAGRAM] 34 PROGRAM INSERTION EQUIPMENT [CHART] 35 APPENDIX B [CHART] EX-10.6.59 6 FRANCHISE FORT BELVOIR, VA 1 EXHIBIT 10.6.59 [COLE, RAYWID & BRAVERMAN, LLP LETTERHEAD] November 21, 1995 VIA TELECOPIER AND FEDERAL EXPRESS Mr. Richard Rosencrans Columbia International, Inc. 9 Greenwich Park P.O. Box 4624 Greenwich, CT 06830 Elizabeth Steele, Esq. General Counsel Jones Intercable, Inc. 9697 E. Mineral Avenue P.O. Box 3309 Englewood, CO 80155-3309 RE: FORT BELVOIR TRANSFER Dear Mr. Rosencranz and Ms. Steele: This letter will confirm the status of Columbia International, Inc.'s ("Columbia") request for consent to transfer from Fort Belvoir, Virginia to Jones Intercable, Inc. ("Jones"). An official at Fort Belvoir has expressed his belief that no action on the request is necessary because the nearby base at Quantico has approved transfer of a separate franchise from Columbia to Jones. The short answer is that consent will be deemed granted by law after November 28, 1995, if the Fort fails to act. Columbia filed its FCC Form 394 requesting consent to the proposed transfer of the franchise on July 13, 1994. The Form provides a franchising authority with the information 2 Mr. Richard Rosencrans Elizabeth Steele, Esq. November 21, 1995 Page -2- necessary to render a decision on a cable operator's request for consent to a transfer. The FCC created this form pursuant to Section 617(e) of the Cable Act, which establishes a 120-day time limit in which the franchising authority must approve or deny a request for such consent where the franchise has been held by the operator for more than three years. Columbia has held the Fort Belvoir franchise for more than three years. The FCC has explained the purposes of Section 617(e) and the FCC Form 394: In enacting 617(e), Congress imposed a 120-day approval period on the sale of transfer of cable systems held by three or more years because Congress wanted to ensure that the local franchise approval process not unduly delay the consummation of transactions that do not implicate the concerns underlying the anti-trafficking provision . . . We believe Congress sought to provide a degree of regulatory certainty to cable operators when it established the 120-day time period for franchising authority action on transfer requests pertaining to cable systems held for three or more years. Implementation of Sections 11 and 13 of the Cable Television Consumer Protection and Competition Act of 1992, MM Docket 92-264, FCC 95-21 at para.para.52-53 (Released January 30, 1995). The statute is unequivocal that "[i]f the franchising authority fails to render a final decision on the request within the 120 days, such request shall be deemed granted unless the requesting party and the franchising authority agree to an extension of time." 47 U.S.C. sec. 537(e). The 120-day period for consideration of Columbia's request for consent to transfer from Fort Belvoir expires on November 28, 1995. After this date, if the Fort has not acted on the request, consent will be deemed granted by law. Columbia may thereafter transfer its Fort Belvoir franchise to Jones in full compliance with franchise provisions that require consent to the transfer or sale. 3 Mr. Richard Rosencrans Elizabeth Steele, Esq. November 21, 1995 Page -3- Please contact this office if you have any further questions regarding this matter. Very truly yours, /s/ ROBERT G. SCOTT, JR. Robert G. Scott, Jr. RGS/nyr cc: Kit LeVoy 4 Fort Belvoir FEDERAL COMMUNICATIONS COMMISSION APPROVED BY OMB WASHINGTON, D.C. 20554 3060-0573 EXPIRES 08/31/96 INSTRUCTIONS FOR FCC 394 APPLICATION FOR FRANCHISE AUTHORITY CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL OF CABLE TELEVISION FRANCHISE A. This form shall be used when applying for franchise authority approval to assign or transfer control of a cable television system owned for three years or more pursuant to the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"). As required by Section 617(e) of the 1992 Cable Act, the franchise authority shall have 120 days from the date of filing of this form, complete with all exhibits and any information required by the franchise agreement or applicable state or local law, to act upon such request. If the franchise authority fails to render a final decision on such request within 120 days, such request shall be deemed granted unless the requesting party and the franchise authority agree to an extension of time. This form consists of the following sections: I. General Information: Transferor/Assignor (Part I); Transferee/Assignee (Part II) II. Transferee's/Assignee's Legal Qualifications III. Transferee's/Assignee's Financial Qualifications IV. Transferee's/Assignee's Technical Qualifications V. Certification: Transferor/Assignor (Part I); Transferee/ Assignee (Part II) The transferor/assignor will fill out Part I of Section I and Part I of Section V. The transferee/assignee will fill out Part II of Section I; all of Sections II, III and IV, as appropriate; and Part II of Section V. B. In addition to the information requested on this form, cable operators are required to submit all information required by the cable franchise agreement or applicable local law or that the franchising authority deems necessary or appropriate in connection with the transfer determination. Requests for such additional information by the franchise authority shall not toll the 120 day limit on franchise authority consideration of transfer requests. C. This form should be filed with the local franchising authority. Prepare and submit an original and two copies of this form and all exhibits associated therewith. Number exhibits serially in the space provided in the body of the form and date each exhibit. D. The names of the applicants shall be the exact corporate names, if corporation; if partnerships, the names of all general partners and limited partners with equity interests above 5%, and the names under which the partnerships do business; if unincorporated associations, the names of executive officers, their offices, and the names of the associations. E. This application shall be personally signed by the applicant, if the applicant is an individual; by one of the partners, if the applicant is a partnership; by an officer, if the applicant is a corporation; by a member who is an officer, if the applicant is an unincorporated association; or by the applicant's attorney in case of the applicant's physical disability or of his/her absence from the United States. The attorney shall, in the event the attorney signs for the applicant, separately set forth the reason why the application is not signed by the applicant. In addition, if any matter is stated on the basis of the attorney's belief only (rather than his/her knowledge), he/she shall separately set forth his/her reason for believing that such statements are true. F. All items must be answered fully and all necessary information furnished. Time and care should be devoted to all replies, which should reflect accurately the applicants' responsible consideration of the questions asked. If any items of the application are not applicable, write N.A. Defective or incomplete applications may be returned without consideration. FCC NOTICE TO INDIVIDUALS REQUIRED BY THE PRIVACY ACT AND THE PAPERWORK REDUCTION ACT The disclosure of said information is solicited under the Communications Act of 1934, as amended, 47 U.S.C. Section 537. The disclosure of said information is required to obtain the requested authority. The principal purpose of said information is to provide basic legal, technological, financial and ownership data concerning the qualifications of the proposed transferee/assignee. All information provided in this form will be available for public inspection, subject to local requirements. Public reporting burden for this collection of information is estimated to average 5 hours per application, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing the burden, to the Federal Communications Commission, Records Management Division, AMD-PIRS, Washington, D.C. 20554, and the Office of Management and Budget Paperwork Reduction Project (3060-0573), Washington, D.C. 20503. THE FOREGOING NOTICE IS REQUIRED BY THE PRIVACY ACT OF 1974, P.L. 93-579, DECEMBER 31, 1974, U.S.C. 552a(e)3, AND THE PAPERWORK REDUCTION ACT OF 1980, P.L. 95-511, DECEMBER 11, 1980, 44 U.S.C. 3507. FCC 394 Instructions October 1993 5 Federal Communications Commission Approved by OMB Washington, D.C. 20554 3060-0573 Expires 08/31/96 FCC 394 APPLICATION FOR FRANCHISE AUTHORITY CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL OF CABLE TELEVISION FRANCHISE --------------------------------------- FOR FRANCHISE AUTHORITY USE ONLY --------------------------------------- SECTION I. GENERAL INFORMATION - -------------------------------------------------------------------------------------------------------------------------------- DATE July 28, 1995 1. Community Unit Identification Number: - -------------------------------------------------------------------------------------------------------------------------------- 2. Application for: [X] Assignment of Franchise [ ] Transfer of Control - -------------------------------------------------------------------------------------------------------------------------------- 3. Franchising authority: The United States of America, by the Directorate of Contracting, United States Army Fort Belvoir, Virginia - -------------------------------------------------------------------------------------------------------------------------------- 4. Identify community where the system/franchise that is the subject of the assignment or transfer of control is located: U.S. Army Fort Belvoir, Virginia - -------------------------------------------------------------------------------------------------------------------------------- 5. Date system was acquired or (for systems constructed by the transferor/assignor) the date on which service was provided to the first subscriber in the franchise area: August 1, 1986 - -------------------------------------------------------------------------------------------------------------------------------- 6. Proposed effective date of closing of the transaction assigning or transferring ownership of the system to transferee/assignee: On or prior to 12/28/95 - -------------------------------------------------------------------------------------------------------------------------------- 7. Attach as an Exhibit a schedule of any and all additional information or material Exhibit No. filed with this application that is identified in the franchise as required to be provided to the franchising authority when requesting its approval of the type of -------------------- transaction that is the subject of this application.Exhibit No.
PART I -- TRANSFEROR/ASSIGNOR 1. Indicate the name, mailing address, and telephone number of the transferor/assignor. - -------------------------------------------------------------------------------------------------------------------------------- Legal name of Transferor/Assignor (if individual, list last name first) Columbia Associates, L.P. - -------------------------------------------------------------------------------------------------------------------------------- Assumed name used for doing business (if any) Columbia Cable of Virginia - -------------------------------------------------------------------------------------------------------------------------------- Mailing street address or P.O. Box 9 Greenwich Office Park - -------------------------------------------------------------------------------------------------------------------------------- City State ZIP CODE Telephone No. (include area code) Greenwich CT 06830 (203) 661-1509 - -------------------------------------------------------------------------------------------------------------------------------- 2.(a) Attach as an Exhibit a copy of the contract or agreement that provides for the assignment Exhibit No. or transfer of control (including any exhibits or schedules thereto necessary in order to 2.(a) understand the terms thereof). If these is only an oral agreement, reduce the terms to -------------------- writing and attach. (Confidential trade, business, pricing or marketing information, or other information not otherwise publicly available, may be redacted). [X] Yes [ ] No (b) Does the contract submitted in response to (a) above embody the full and complete -------------------- agreement between the transferor/assignor and the transferee/assignee? Exhibit No. If No, explain in an Exhibit. --------------------
6 PART II -- TRANSFEREE/ASSIGNEE 1.(a) Indicate the name, mailing address, and telephone number of the transferee/assignee. - ----------------------------------------------------------------------------------------------------------------------- Legal name of Transferee/Assignee (if individual, list last name first) Jones Intercable of Alexandria, Inc. - ----------------------------------------------------------------------------------------------------------------------- Assumed name used for doing business (if any) - ----------------------------------------------------------------------------------------------------------------------- Mailing street address or P.O. Box 9697 East Mineral Avenue - ----------------------------------------------------------------------------------------------------------------------- City State ZIP Code Telephone No. (include area code) Englewood CO 80122 (303) 792-3111 - ----------------------------------------------------------------------------------------------------------------------- (b) Indicate the name, mailing address, and telephone number of person to contact, if other than transferee/assignee. - ----------------------------------------------------------------------------------------------------------------------- Name of contact person (list last name first) LeVoy, Katherine - ----------------------------------------------------------------------------------------------------------------------- Firm or company name (if any) Jones Intercable, Inc. - ----------------------------------------------------------------------------------------------------------------------- Mailing street address or P.O. Box 9697 East Mineral Avenue - ----------------------------------------------------------------------------------------------------------------------- City State ZIP Code Telephone No. (include area code) Englewood CO 80112 (303) 792-3111 - ----------------------------------------------------------------------------------------------------------------------- (c) Attach as an Exhibit the name, mailing address, and telephone number of each Exhibit No. additional person who should be contacted, if any. n/a -------------------- (d) Indicate the address where the system's records will be maintained. - ----------------------------------------------------------------------------------------------------------------------- Street Address 4391 Dale Boulevard - ----------------------------------------------------------------------------------------------------------------------- City State ZIP Code Woodbridge Virginia 22193 - ----------------------------------------------------------------------------------------------------------------------- 2. Indicate on an attached exhibit any plans to change the current terms and conditions Exhibit No. of service and operations of the system as a consequence of the transaction for which n/a approval is sought. --------------------
There are no current plans to change the current terms and conditions of service and operations of the system as a consequence of the transaction for which approval is sought. 7 SECTION I. TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS 1. Transferee/Assignee is: ----------------------------------------------------------------------------- [XX] Corporation a. Jurisdiction of incorporation: d. Name and address of registered Colorado agent in jurisdiction: ---------------------------------- b. Date of incorporation: The Corporation Company September 17, 1992 1600 Broadway ---------------------------------- Denver, CO 80202 c. For profit or not-for-profit: For profit ----------------------------------------------------------------------------- [ ] Limited a. Jurisdiction in which formed: c. Name and address of registered Partnership agent in jurisdiction: ---------------------------------- b. Date of formation: ----------------------------------------------------------------------------- [ ] General a: Jurisdiction whose laws govern b. Date of formation: Partnership formation: ----------------------------------------------------------------------------- [ ] Individual Exhibit No. [ ] Other. Describe in an Exhibit. ----------------- 2. List the transferee/assignee, and, if the transferee/assignee is not a natural person, each of its officers, directors, stockholders beneficially holding more than 5% of the outstanding voting shares, general partners, and limited partners holding an equity interest of more than 5%. Use only one column for each individual or entity. Attach additional pages if necessary. (Read carefully -- the lettered items below refer to corresponding lines in the following table.) (a) Name, residence, occupation or principal business, and principal place of business. (If other than an individual, also show name, address and citizenship of natural person authorized to vote the voting securities of the applicant that it holds.) List the applicant first, officers, next, then directors and, thereafter, remaining stockholders and/or partners. (b) Citizenship. (c) Relationship to the transferee/assignee (e.g., officer, director, etc.). (d) Number of shares or nature of partnership interest. (e) Number of votes. (f) Percentage of votes. - -------------------------------------------------------------------------------------------------------- (a) See Exhibit I92) - -------------------------------------------------------------------------------------------------------- (b) - -------------------------------------------------------------------------------------------------------- (c) - -------------------------------------------------------------------------------------------------------- (d) - -------------------------------------------------------------------------------------------------------- (e) - -------------------------------------------------------------------------------------------------------- (f) - --------------------------------------------------------------------------------------------------------
8 3. If the applicant is a corporation or a limited partnership, is /X/ Yes / / No the transferee/assignee formed under the laws of, or duly qualified to transact business in, the State or other jurisdiction in which the system operates? If the answer is No, explain in an Exhibit. Exhibit No. 4. Has the transferee/assignee had any interest in or in / / Yes /X/ No connection with an application which has been dismissed or denied by any franchise authority? If the Answer is Yes, describe circumstances in an Exhibit. Exhibit No. 5. Has an adverse finding been made or an adverse final action / / Yes /X/ No been taken by any court or administrative body with respect to the transferee/assignee in a civil, criminal or administrative proceeding, brought under the provisions of any law or regulation related to the following: any felony; revocation, suspension or involuntary transfer of any authorization (including cable franchises) to provide video programming services; mass media related antitrust or unfair competition; fraudulent statements to another governmental unit; or employment discrimination? If the answer is Yes, attach as an Exhibit a full description Exhibit No. of the persons and matter(s) involved, including an identification of any court or administrative body and any proceeding (by dates and file numbers, if applicable), and the disposition of such proceeding. 6. Are there any documents, instruments, contracts or / / Yes /X/ No understandings relating to ownership or future ownership rights with respect to any attributable interest as described in Question 2 (including, but not limited to, non-voting stock interests, beneficial stock ownership interests, options, warrants, debentures)? If Yes, provide particulars in an Exhibit. 7. Do documents, instruments, agreements or understandings for the /X/ Yes / / No pledge of stock of the transferee/assignee, as security for loans or contractual performance, provide that: (a) voting rights will remain with the applicant, even in the event of default on the obligation; (b) in the event of default, there will be either a private or public sale of the stock; and (c) prior to the exercise of any ownership rights by a purchaser at a sale described in (b), any prior consent of the FCC and/or of the franchising authority, if required pursuant to federal, state or local law or pursuant to the terms of the franchise agreement will be obtained? If No, attach as an Exhibit a full explanation. Exhibit No. SECTION III -- TRANSFEREE'S/ASSIGNEE'S FINANCIAL QUALIFICATIONS 1. The transferee/assignee certifies that it has sufficient net /X/ Yes / / No liquid assets on hand or available from committed resources to consummate the transaction and operate the facilities for three months. 2. Attach as an Exhibit the most recent financial statements, Exhibit No. prepared in accordance with generally accepted accounting III(2) principles, including a balance sheet and income statement for at least one full year, for the transferee/assignee or parent entity that has been prepared in the ordinary course of business, if any such financial statements are routinely prepared. Such statements, if not otherwise publicly available, may be marked CONFIDENTIAL and will be maintained as confidential by the franchise authority and its agents to the extent permissible under local law. SECTION IV -- TRANSFEREE'S/ASSIGNEE'S TECHNICAL QUALIFICATIONS Set forth in an Exhibit a narrative account of the transferee's/ assignee's technical qualifications, experience and expertise Exhibit No. regarding cable television systems, including, but not limited IV to, summary information about appropriate management personnel that will be involved in the system's management and operations. The transferee/assignee may, but need not, list a representative sample of cable systems currently or formerly owned or operated.
9 SECTION V -- CERTIFICATIONS Part I -- Transferor/Assignor All the statements made in the application and attached exhibits are considered material representations, and all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application. - ------------------------------------------------------------------------------------------------------------- I CERTIFY that the statements in this Signature application are true, complete and correct to the best of my knowledge and belief and /s/ RICHARD H. ROSENCRANS are made in good faith. - ------------------------------------------------------------------------------------------------------------- Date WILLFUL FALSE STATEMENTS MADE ON THIS FORM July 28, 1995 ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT. ------------------------------------------------------------- U.S. CODE, TITLE 18, SECTION 1001. Print full name Richard H. Rosencrans - ------------------------------------------------------------------------------------------------------------- Check appropriate classification / / Individual / / General Partner /X/ Corporate Officer / / Other -- Explain: (Indicate Title) Vice President of Columbia International, Inc., the general partner of Columbia Associates, L.P. - -------------------------------------------------------------------------------------------------------------
Part II -- Transferee/Assignee All the statements made in the application and attached Exhibits are considered material representations, and all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application. The transferee/assignee certifies that he/she: (a) Has a current copy of the FCC's Rules governing cable television systems. (b) Has a current copy of the franchise that is the subject of this application, and of any applicable state laws or local ordinances and related regulations. (c) Will use its best efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related regulations, and to effect changes, as promptly as practicable, in the operation of the system, if any changes are necessary to cure any violations thereof or defaults thereunder presently in effect or ongoing. - ------------------------------------------------------------------------------------------------------------- I CERTIFY that the statements in this Signature application are true, complete and correct JONES INTERCABLE OF ALEXANDRIA, INC. to the best of my knowledge and belief and By: /s/ ELIZABETH STEELE are made in good faith. --------------------------------- - ------------------------------------------------------------------------------------------------------------- Date WILLFUL FALSE STATEMENTS MADE ON THIS FORM July 24, 1995 ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT. ------------------------------------------------------------- U.S. CODE, TITLE 18, SECTION 1001. Print full name Elizabeth Steele - ------------------------------------------------------------------------------------------------------------- Check appropriate classification / / Individual / / General Partner /X/ Corporate Officer / / Other -- Explain: (Indicate Title) Vice President/General Counsel - -------------------------------------------------------------------------------------------------------------
10 JONES COMMUNICATIONS OF COLUMBIA ASSOCIATES, L.P. VIRGINIA, INC., f/k/a 9 Greenwich Office Park JONES INTERCABLE OF Post Office Box 4624 ALEXANDRIA, INC. Greenwich, Connecticut 06830 9697 East Mineral Avenue Englewood, Colorado 80155-33009
November 21, 1995 Department of the Army U.S. Army Fort Belvoir Fort Belvoir, Virginia, 22060 Attention: Mr. Mark Newton Contracting Officer Directorate of Contracting Contracting Division Re: Assignment of Cable Television Franchise Agreement No. DAHC35-90-H-0018, Fort Belvoir, Virginia Ladies and Gentlemen: Reference is hereby made to the Cable Television Franchise Agreement, No. DAHC 35-90-H-0018, dated August 8, 1990 (the "Franchise Agreement"), between the United States of America as represented by the Contracting Officer of the Directorate of Contracting of the Contracting Division of the United States Army Fort Belvoir (the "U.S. Army Fort Belvoir") and Columbia Associates, L.P., a Delaware limited partnership ("Columbia"). Reference is also hereby made to the Asset Purchase Agreement, dated as of June 30, 1995 (the "Purchase Agreement"), by and between Columbia and Jones Intercable, Inc., a Colorado corporation ("Jones"), pursuant to which Columbia agreed to sell to Jones (or any wholly-owned subsidiary of Jones) substantially all of Columbia's assets comprising its cable television systems in the Commonwealth of Virginia (the "Systems"), including, without limitation, the cable television system currently owned by Columbia which serves the U.S. Army Fort Belvoir in Fort Belvoir, Virginia. Please be advised that Jones has assigned all of its rights and obligations under the Purchase Agreement to its wholly-owned subsidiary, Jones Communications of Virginia, Inc., a Colorado corporation formerly known as Jones Intercable of Alexandria, Inc., ("Jones of Virginia"). It is currently contemplated that the sale of the Systems by Columbia to Jones of Virginia shall be consummated on November 29, 1995. Columbia and Jones of Virginia hereby agree that upon the consummation of the sale of the Systems by Columbia to Jones of Virginia, Columbia shall transfer and assign all of its rights, obligations, duties and liabilities under the Franchise Agreement to Jones of Virginia and Jones of Virginia shall assume all such rights, obligations, duties and liabilities from Columbia. Jones of Virginia hereby also agrees that upon the consummation of the sale of the Systems from Columbia to it, Jones of Virginia shall perform all of its duties, liabilities and 11 obligations under the Franchise Agreement in accordance with the terms and conditions of the Franchise Agreement. Columbia and Jones of Virginia hereby jointly request that the U.S. Army Fort Belvoir sign this letter agreement in the space provided for its signature below in order to signify its consent to and agreement with the following items: 1. The U.S. Army Fort Belvoir hereby consents to the sale of the Systems from Columbia to Jones of Virginia pursuant to the terms of the Purchase Agreement and to the transfer and assignment by Columbia to Jones of Virginia of all of Columbia's rights, obligations, duties and liabilities under the Franchise Agreement. The foregoing consent to the sale of the Systems from Columbia to Jones of Virginia and to the transfer and assignment of all of Columbia's rights, obligations, duties and liabilities under the Franchise Agreement to Jones of Virginia shall be effective upon the closing of the sale of the Systems by Columbia to Jones of Virginia. Such closing is currently expected to occur on November 29, 1995 and notice of any cancellation, change or termination of such closing date shall be given to the U.S. Army Fort Belvoir by Columbia or Jones of Virginia. 2. The U.S. Army Fort Belvoir hereby confirms that, to its knowledge, the Franchise Agreement is currently in full force and effect, Columbia is currently the authorized grantee under the Franchise Agreement, Columbia is in compliance in all material respects with the terms and conditions of the Franchise Agreement and no event has occurred or exists which would permit the U.S. Army Fort Belvoir to revoke or terminate the Franchise Agreement. 3. By virtue of the fact that in conjunction with the sale of the Systems from Columbia to Jones of Virginia, Columbia and Jones of Virginia will be entering into a Novation Agreement with the United States of America, as represented by the Commanding General of the Marine Corps Base of Quantico, Virginia, it is not necessary under any laws, rules, regulations, decrees or orders of the United States of America for Columbia, Jones of Virginia and the United States of America, as represented by the U.S. Army Fort Belvoir, to enter into a separate Novation Agreement with respect to the sale of the Systems from Columbia to Jones of Virginia or the transfer and assignment by Columbia to Jones of Virginia of all of Columbia's rights, obligations, duties and liabilities under the Franchise Agreement. 4. Upon the execution of this letter agreement by the U.S. Army Fort Belvoir, all actions and steps necessary to approve the sale of the Systems from Columbia to Jones of Virginia and the transfer and assignment by Columbia to Jones of Virginia of all of Columbia's rights, obligations, duties and liabilities under the Franchise Agreement shall have been duly and validly taken and no further actions or steps are required to be taken by the U.S. Army Fort Belvoir, or any representative thereof, or by Columbia or Jones of Virginia, or any representative thereof, in order to effectuate such sale, transfer and assignment. -2- 12 Columbia and Jones of Virginia hereby jointly request that the U.S. Army Fort Belvoir indicate its agreement with all of the foregoing terms of this letter agreement by signing the three (3) enclosed copies of this letter agreement in the space provided for its signature below, retaining one executed copy of this letter agreement for its records and returning two executed (2) copies of this letter agreement to Mr. Troy Fitzhugh, c/o Columbia Cable of Virginia, 4391 Dale Boulevard, Woodbridge, Virginia 22193 ((703) 670-0189) as soon as possible. This letter agreement may be executed in separate counterpart copies, each of which shall be deemed to be an original, but all of which taken together shall be deemed to be a single instrument. Thank you for your consideration of this request. Very truly yours, COLUMBIA ASSOCIATES, L.P. By: Columbia International, Inc., its managing general partner By: ------------------------------------ Name: Richard H. Rosencrans Title: Vice-President Date: November 21, 1995 JONES COMMUNICATIONS OF VIRGINIA, INC., JONES INTERCABLE OF ALEXANDRIA, INC. By: /s/ Elizabeth Steele ------------------------------------ Name: Title: Date: November 21, 1995 ACCEPTED AND AGREED IN ALL RESPECTS AS OF THE DATE HEREOF: DIRECTORATE OF CONTRACTING CONTRACTING DIVISION UNITED STATES ARMY FORT BELVOIR FORT BELVOIR, VIRGINIA By: ------------------------------------ Name: Mr. Mark Newton Title: Contracting Officer Date: -3- 13 FRANCHISE AGREEMENT BETWEEN FORT BELVOIR ARMY FORT BELVOIR, VIRGINIA AND COLUMBIA ASSOCIATES, L.P. D/B/A COLUMBIA CABLE OF VIRGINIA 14 CABLE TELEVISION FRANCHISE AGREEMENT NO. DAHC35-90-H-0018 (SUPERSEDING DABT56-8I-C-0022) FORT BELVOIR, VIRGINIA AUGUST 8, 1990 THROUGH MAY 31, 2005 15 RENEWAL OF CABLE TELEVISION FRANCHISE AGREEMENT FORT BELVOIR, VIRGINIA, DAHC35-90-H-0018 TABLE OF CONTENTS
PAGE ---- ARTICLE I: FRANCHISE TERM Section 1. Renewal of Franchise Agreement 1 ARTICLE II: GRANT OF AUTHORITY Section 1. Designated Franchising Authority 1 Section 2. Franchise Non-Exclusivity 1 Section 3. Notice to the Grantee 1 ARTICLE III: DEFINITIONS 1 ARTICLE IV: FRANCHISE CONDITIONS Section 1. Franchise Review and Modification 4 Section 2. Performance Evaluation Session 5 Section 3. Renewal of Franchise 6 Section 4. Franchise Revocation Procedures 7 Section 5. Termination of Franchise 8 Section 6. Franchise Fee 8 Section 7. Insurance-Bonds-Indemnity 9 Section 8. Transfer of Franchise 10 ARTICLE V: SUBSCRIBER FEES AND RECORDS Section 1. Subscriber Fees 11 Section 2. Books and Records 12 ARTICLE VI: SYSTEM OPERATIONS Section 1. System Description and Service 13 Section 2. Operational Requirements and Records 13 Section 3. Tests and Performance Monitoring 14 Section 4. Service, Adjustment and Complaint Procedure 15 Section 5. Construction & Upgrading of Cable Systems 16 Section 6. Protection of Privacy 17 Section 7. Area-Wide Interconnection of Cable System 17 Section 8. Use of Cable System By Utilities 18 ARTICLE VII: DESIGNATED FRANCHISING AUTHORITY'S ADVISORY ROLE Section 1. Establishment of Advisory Committee 18 ARTICLE VIII: GENERAL PROVISIONS Section 1. Limits on Grantee's Recourse 18 Section 2. Compliance With State and Federal Law 19 Section 3. Special License 19 Section 4. Franchise Validity 19 Section 5. Failure to Enforce Franchise 20 Section 6. Rights Reserved to the Grantor 20 Section 7. Employment Requirement 20 Section 8. Time Essence of Agreement 20 Section 9. Liquidated Damages 21 Section 10. Grantee May Promulgate Rules 21 Section 11. Delegation of Powers 21 Section 12. Severability 22 Section 13. Purchase Orders 22 Section 14. Incorporation of Provisions 22 Section 15. Incorporation of Grantee's Proposal 21 Section 16. Acceptance 22 Signature Page 23
i 16 RENEWAL OF CABLE TELEVISION FRANCHISE AGREEMENT FORT BELVOIR, VIRGINIA, DAHC35-90-H-0018 TABLE OF CONTENTS
PAGE ---------- APPENDIX A: Preconstruction Checklist (4 pages) APPENDIX B: List of Subscriber Locations (17 pages) APPENDIX C: Forms Form A -- Ownership and Control Information Form B -- Ownership Qualifications Form C -- Character Qualifications Form D -- Cable Holdings Form E -- Former Franchises or Ownership Interests Form F -- Financial Resources, Existing Capital Commitments, and Potential Building Commitments Form G -- Financial Pro Forma Form H -- Service Areas, Construction Schedules, and Construction Practices Form I -- Channel Capacity And System Design Form J -- Proposed Signal Carriage And Channel Allocations Form K -- Command Channel and Access Programming Form L -- Proposed Rates Form M -- Employment Practices
ii 17 RENEWAL OF CABLE TELEVISION FRANCHISE AGREEMENT, FORT BELVOIR, VA. ARTICLE I: FRANCHISE TERM SECTION I. RENEWAL OF FRANCHISE AGREEMENT. A. Franchise Agreement No. DABT56-81-C-0022 granted on December 20, 1980 and expiring May 31, 1990 to provide cable television services to U.S. Army Fort Belvoir, Virginia, is hereby superseded by this renewal agreement number DAHC35-90-H-0018. B. The term of this renewed franchise agreement shall be no more than fifteen (15) years and is effective on date of Grantee's acceptance and agreement through May 31, 2005. ARTICLE II: GRANT OF AUTHORITY SECTION 1. DESIGNATED FRANCHISING AUTHORITY. A. The Installation Commander of U.S. Army Fort Belvoir or his designate shall act as the Designated Franchising Authority. SECTION 2. FRANCHISE NON-EXCLUSIVITY. A. Without regard to whether the terms "exclusive" or "non-exclusive" may be used in the franchise agreement, no franchise granted shall be deemed to preclude the Designated Franchising Authority from granting such other franchise(s) to use and occupy the rights-of-way of the Installation for cable television or any other purposes as the Designated Franchising Authority may deem appropriate in order to serve the needs and interests of the U.S. Army, the Installation and its personnel. Provided, however, if an additional franchise(s) or other similar rights are granted, they shall not be granted on terms more favorable than those contained in any preexisting franchise unless the preexisting franchisee (Grantee) is permitted to abide by the most favorable terms and conditions. SECTION 3. NOTICE TO THE GRANTEE A. Except as otherwise provided in the franchise, the Designated Franchising Authority shall not take any final action involving the review, renewal, revocation or termination of the Grantee's franchise unless the Designated Franchising Authority has advised the Grantee in writing, at least thirty (30) days prior to such action, as to the proposed action and permits the Grantee to submit a response. The notice provided for in this Section shall be in addition to, and not in lieu of, the notice to Grantee and opportunity to cure any default provided for herein. ARTICLE III: DEFINITIONS The following terms, phrases, acronyms, words and their derivations shall have the meaning given herein, unless the context clearly indicates that another meaning is intended. When not inconsistent with the context, words used in the present tense include the future, words in the plural number include the singular number, and words in the singular number include the plural number. The word "shall"is always mandatory and not merely directory. 1 18 Franchise Agreement No. DAHC35-90-H-0018 A. "AR 25-1" -- Army Regulation 25-1, The Army Information Resources Management Program. Army's policies and regulations for the management of information and information systems in accordance with Information Mission Area concept throughout the Army. B. "Auxiliary Services" means any communications services in addition to "regular subscriber services" including, but not limited to services for which a per-program or per-channel charge is made, pay TV, burglar alarm services, data or other electronic transmission services, facsimile reproduction services, meter reading services and home shopping services, interactive two-way services and any other service utilizing any facility or equipment of a cable television system operating pursuant to a franchise granted under the franchise. C. "Cable Retail Rate" means the rate charged for a single outlet of basic cable television service charged to a cable customer. D. "Cable Television System" (or "Cable Communications System") means any non-broadcast facility consisting of a set of transmission paths and associated signal generation, reception, and control equipment, that distributes or is designed to distribute to subscribers audio, video and other forms of electronic or electrical signals, but such term shall not include any such facility that serves or will service only subscribers in one or more multiple unit dwellings under common ownership, control or management, which does not use municipal or installation rights-of-way. E. "Channel (Video)" is a band of frequencies, six megahertz wide in the electromagnetic spectrum capable of carrying one audio-visual television signal. F. "Converter" means an electronic device which converts signals to a frequency not susceptible to interference within the television receiver of a subscriber, and by an appropriate channel selector also permits a subscriber to view all signals delivered at designated dial locations. G. "Designated Franchising Authority" means the person, department, office or agency designated by the Installation Commander to act in matters related to cable television. In the absence of any specific designation by the Installation Commander, the Installation Commander or his designate shall act as the designated franchising authority. H. "Installation Commander" means the Commander of the U.S. Army Installation which encompasses the cable television franchise area. I. Installation Cable Television (CATV) Management Functions: 1. Director of Information Management (DOIM): Provides overall staff management and oversight. Operates the reserved government channels and maintains the compliance log for monitoring compliance with the franchise. 2. Director of Personnel and Community Affairs (DPCA) or a corresponding Nonappropriated Fund Instrumentality. When 2 19 Franchise Agreement No. DAHC35-90-H-0018 designated, functions as the primary authority for the CATV franchising/renewal processes. 3. Director, Facilities Engineer (DEH). Advises on construction and installation sites. 4. Public Affairs Officer. Advises and provides programming for the reserved government channels. 5. Contracting Officer, Directorate of Contracting (DOC) solicits and negotiates proposals, and awards the franchise agreement. 6. Chief, T-ASA, USAISEC. Assists the DOIM and the Contracting Officer on technical aspects of the franchise agreement when requested. I. "Fair Market Value" means the price that a willing buyer would pay to a willing seller for a going concern. J. "Federal Communications Commission" or "FCC" means the federal agency of that name as constituted by the Communications Act of 1934, or any successor agency created by the United States Congress. K. "Franchise" means the non-exclusive rights granted hereunder to construct and operate a cable television system along the public ways in the Installation, or within specified areas in the Installation, and is not intended to include any license or permit required for the privilege of transacting and carrying on a business within the Installation as may be required by other franchises and laws of the Installation. L. "Franchise Area" means that portion of the Installation for which a franchise is granted. If not otherwise stated in the franchise, the Franchise Area shall be the geographic limits of the Installation including all territory thereafter annexed to the Installation. M. "Franchisee" -- see "Grantee" N. "Grantee" means the natural person, partnership, domestic or foreign corporation, association, joint venture, or organization of any kind granted a franchise by the Designated Franchising Authority or his designee or its lawful and approved successor, transferee or assignee. Formerly known as franchises. O. "Gross Revenues" means all revenue derived directly or indirectly from the operation or use of all or part of the franchise cable television system by the Grantee, its affiliates, subsidiaries, parents, and any person in which the Grantee has a financial interest including, but not limited to, revenue from regular subscriber service fees, auxiliary service fees, installation and reconnection fees, leased channel fees, converter rentals, studio rental, production equipment and personnel fees, and advertising revenues; provided, however, that this shall not include any taxes on services furnished by the Grantee herein imposed directly upon any subscriber or user 3 20 Franchise Agreement No. DAHC35-90-H-0018 by the State, local or other governmental unit and collected by the Grantee on behalf of said governmental unit. P. "Installation" means the U.S. Army Installation upon which the cable television system shall be operated and the rights of way of which Installation shall be utilized by the franchisee. Q. "Persons" means any people, firms, corporations, associations or other legally recognized entities. R. "Right-of-Way" means the surface, the air space above the surface, and the area below the surface of any street, highway, lane, path, alley, sidewalk, boulevard, drive, bridge, tunnel, park, parkways, waterways, or other right-of-way including utility easements or rights-of-way, and any temporary or permanent fixtures or improvements located thereon now or hereafter held by the Installation which shall entitle the Installation and the Grantee to the use thereof for the purpose of installing and maintaining the Grantee's cable television system. S. "Regular Subscriber Service" means the distribution to subscribers of signals over the cable television system on all channels except those for which a per-program or per-channel charge is made, two-way services, and those intended for reception by equipment other than a television broadcast receiver. T. "Schools" means all public, or private tax-exempt educational institutions, including qualified day care facilities, elementary and secondary schools, or other educational facilities which may be located within or adjacent to the franchise area. U. "Subscriber" means any person who receives the regular subscriber service and/or any one or more of such other services as may be provided by the Grantee's cable television system, and does not further distribute such service(s). V. "Two-way Service" means the subscriber or any other location shall have the capability to choose whether or not to respond immediately or by sequential delay by utilizing any type of terminal equipment whatever, by push-button code, dial code, meter, voice, video including, but not limited to, audio and video, electrical or mechanically produced signal, display and/or interrogation. W. "User" means a person or organization utilizing a system channel or system equipment and facilities for purposes of production and/or transmission of material, as contrasted with receipt thereof in a subscriber capacity. ARTICLE IV: FRANCHISE CONDITIONS SECTION 1. FRANCHISE REVIEW AND MODIFICATION. A. It shall be the policy of the Designated Franchising Authority to amend a franchise, upon application of the Grantee, when necessary to enable the Grantee to take advantage of 4 21 Franchise Agreement No. DAHC35-90-H-0018 advancements in the state-of-the-art which will afford it an opportunity to more effectively, efficiently, or economically serve its subscribers; provided, however, that this Section shall not be construed to require the Designated Franchising Authority to make any amendment. Further, during the term of the franchise, the Designated Franchising Authority may set forth the time and place of a special meeting, the purpose of which will be to consider system performance, system design modifications, and the possible need for the adoption of reasonable and appropriate modifications of the franchise of a nature that would not result in effectively terminating same. SECTION 2. PERFORMANCE EVALUATION SESSION: A. The Designated Franchising Authority and the Grantee shall hold scheduled performance evaluation sessions once every three years within thirty (30) days anniversary date of the Grantee's award of the franchise. The Designated Franchising Authority shall notify the Grantee in writing, at least sixty (60) days in advance, of each of the specified performance evaluation sessions of the subject matter to be evaluated and any information required to be presented by the Grantee. B. Special evaluation sessions may be held at any time during the term of the franchise at the request of the Designated Franchising Authority or the Grantee. C. Topics which may be discussed at any scheduled or special evaluation session may include, but are not limited to, payment of franchise fees, penalties, free or discounted services, applications of new technologies, system performance, services provided, programming offered, customer complaints, amendments to the franchise, judicial or regulatory rulings, line extension policies and rules or procedures of either the Grantee or Designated Franchising Authority. D. During a review and evaluation by the Designated Franchising Authority, the Grantee shall fully cooperate with the Designated Franchising Authority and shall provide such information and documents as the Designated Franchising Authority may need to reasonably perform its review. E. If at any time during its review, the Designated Franchising Authority determines that reasonable evidence exists of inadequate cable system performance, it may require the Grantee to perform tests and analyses directed toward the suspected inadequacies. The Grantee shall fully cooperate with the Designated Franchising Authority in performing such testing and shall prepare results and a report if requested within thirty (30) days after notice. Such report shall include the following information. 1. The nature of the complaint or problem which precipitated the special tests; 2. What system component was tested; 3. The equipment used and procedures employed in testing; 5 22 Franchise Agreement No. DAHC35-90-H-0018 4. The method, if any, in which such complaint or problem was resolved; 5. Any other information pertinent to said tests and analyses which may be required. 6. The Designated Franchising Authority may require the test to be supervised at Grantee's expense by a professional engineer to be approved by the Designated Franchising Authority not on the permanent staff of the Grantee. The engineer shall sign all records of special tests and forward to the Designated Franchising Authority such records with a report interpreting the results of the test and recommending actions to be taken. F. The Designated Franchising Authority's right under this section shall be limited to requiring tests, analysis and reports covering specific subjects and characteristics based on said complaints or other evidence when and under such circumstances as the Designated Franchising Authority has reasonable grounds to believe that the complaints or other evidence require that tests be performed to protect the public against substandard cable service. SECTION 3. RENEWAL OF FRANCHISE A. At the expiration of the term for which a franchise is granted the Designated Franchising Authority may grant a renewal franchise pursuant to procedures consistent with the Cable Communications Act of 1984, or other applicable Federal Law, for a term of such reasonable length as may be determined by the Designated Franchising Authority in its discretion. If such Federal procedures are repealed, any franchise holder desirous of renewing its franchise shall file an application for renewal at least twelve (12) months prior to expiration of the term of its currently existing franchise. All renewal applications shall contain the information required by the Designated Franchising Authority and shall be accompanied by such application fee as has been determined by the Designated Franchising Authority. Upon receipt of said renewal application the Designated Franchising Authority shall determine whether the application/proposal meets the Installation's present and future telecommunications needs and interests. Upon the conclusion of said public hearing, the Board may issue a renewal franchise for an additional period of up to fifteen (15) years, based upon a consideration of the applicable factors specified in Federal Law. Nothing contained in this section shall be construed or interpreted to grant to any franchise holder any vested right to a renewal term at the expiration of the original term of its franchise or any renewal period granted under the provisions of this subsection. B. In the event the Designated Franchising Authority elects not to grant a renewal of the franchise under the provisions of Section A of this article, the franchise holder shall have a period of one (1) year to sell its CATV system to a person approved by the Designated Franchising Authority, which approval shall not be unreasonably withheld. In the alternative, the franchisee shall have a period of one year after termination of service to remove, at its expense, all portions of the CATV 6 23 Franchise Agreement No. DAHC35-90-H-0018 system from the public rights-of-way. In the event such previous franchise holder does not effectuate a sale of its CATV system to a person approved by the Designated Franchising Authority or does not remove all portions of its CATV system from said public rights-of-way within said period of one (1) year, the portions of the CATV system that remain within said public rights-of-way shall be forfeited to and shall thereby become the property of C. In the period between termination of the franchise and the granting of another franchise, which period shall not exceed ten (10) months, the Grantee shall continue to provide service to the public as if its franchise were still in effect. SECTION 4. FRANCHISE REVOCATION PROCEDURES A. Whenever a Grantee shall refuse, neglect or willfully fail to construct, operate or maintain its cable television system or to provide service to its subscribers in accordance with the material terms of the franchise, or to make required extensions of service, or in any other way substantially violates the material terms and conditions of the franchise or practices any fraud or deceit upon the Designated Franchising Authority or its subscribers, or if a Grantee becomes insolvent, or unable to or unwilling to pay its uncontested debts, or is adjudged bankrupt, or seeks relief under the bankruptcy laws, then the franchise may be revoked. B. In the event the Designated Franchising Authority believes that grounds for revocation exist or have existed, the Designated Franchising authority shall notify Grantee, in writing, setting forth the nature and facts of such noncompliance. If, within thirty (30) days following such written notification, the Grantee has not furnished reasonably satisfactory evidence that corrective action has been taken or is being actively and expeditiously pursued, or that the alleged violations did not occur, or that the alleged violations were beyond the Grantee's control, the Designated Franchising Authority may schedule a hearing in accordance with procedures established herein. C. The Designated Franchising Authority shall not revoke a franchise pursuant to this Section until it has given written notice to the Grantee that it proposes to take such action, and the grounds therefor. The Designated Franchising Authority shall not revoke a franchise until the Grantee, or its representative, has had reasonable opportunity to be heard before the Designated Franchising Authority and show that the proposed grounds for revocation did not or do not exist, as the case may be. D. At such hearing, the Designated Franchising Authority shall be required to present evidence establishing Grantee's breach of its obligations under the franchise and Grantee shall have the right to examine witnesses and present evidence on its behalf. At the conclusion of the public hearing, the Designated Franchising Authority shall determine whether the franchise should be revoked and shall set forth in writing, the facts and reasons upon which its decision is based. E. A Grantee shall not be subject to the sanctions of this Section for any act or omission wherein such act or omission was 7 24 Franchise Agreement No. DAHC35-90-H-0018 beyond the Grantee's control. An act or omission shall not be deemed to be beyond a Grantee's control if committed, omitted, or caused by a corporation or other business entity which holds a controlling interest in the Grantee, whether held directly or indirectly. Further, the inability of a Grantee to obtain financing, for whatever reason, shall not be an act or omission which is "beyond the Grantee's control." SECTION 5. TERMINATION OF FRANCHISE A. In the event the franchise is terminated, whether by revocation, expiration, or otherwise, the Grantee may continue to operate the cable system pursuant to the terms and conditions of the terminated franchise, until the happening of one of the following: 1. A new franchise or an extension of an expired franchise is granted; 2. In the case of a revocation, or a denial of renewal or extension, the Grantee has acquiesced in such decision or a final adjudication has been made, including any appeal, and has resulted in a finding or order that Grantee is not entitled to a reinstatement, renewal or extension of the Franchise and is not otherwise entitled by law to continue operation of the cable system. The passage of six months with no appeal to an appellate court. 3. In the event that the Designated Franchising Authority denies renewal or revokes the franchise, Grantee shall be afforded a period of one (1) year, from the effective date of the final order denying renewal or revoking the franchise, including any appeal to transfer or convey the cable system. Approval of such a transfer shall not be unreasonably withheld. In the alternative the Grantee shall have a period of one year to remove, at its expense, all portions of the CATV system from the public rights-of-way. In the event the Grantee does not effectuate a sale of its CATV system to a person approved by the Designated Franchising Authority for a new franchise or does not remove all portions of its CATV system from the said public rights-of-way within said period of one (1) year, the portions of the CATV which remain within the public rights-of-way shall be forfeited to and shall thereby become the property of the Installation. B. Nothing contained in the franchise shall be construed to limit any power the U.S. Army, the Installation, or the Designated Franchising Authority may have to condemn any property of the Grantee or to obtain such property through the power or eminent domain or through other lawful exercise of its power. SECTION 6. FRANCHISE FEE A. In conjunction with the Grantee's provision of free cable service to various locations as described in Article VI, Section 1.B, and Grantee's intention to provide cable television service to post subscribers at lower rates than those generally charged for equivalent cable service in the Washington, D.C. area, the Army waives its right to a franchisee fee in order to allow post 8 25 Franchise Agreement DAHC35-90-H-0018 subscribers the best variety of quality programming/stations at the lowest rates possible. However, the Designated Franchising Authority may request to negotiate a fee if in its opinion rates are increased for post subscribers to a level that does not reflect the absence of a franchisee fee. SECTION 7. INSURANCE-BONDS-INDEMNITY A. Upon the granting of a renewal and at all times during the term of the franchise, including the time for removal of facilities or management as a trustee as provided for herein, the Grantee shall obtain, pay all premiums for, and file with the Installation written evidence of payment of premiums and executed duplicate copies of the following: 1. A general comprehensive liability policy indemnifying, defending and saving harmless the Installation, its officers, agents or employees from any and all claims by any person whatsoever on account of injury to or death of a person or persons occasioned by the operations of the Grantee under the franchise herein granted, or alleged to have been so caused or occurred, with a minimum liability of One Million Dollars ($1,000,000) per personal injury or death of any one person and Three Million Dollars ($3,000,000) for personal injury or death of any two or more persons in any one occurrence. 2. Property damage insurance indemnifying, defending, and saving harmless the Installation, its officers, boards, commissions, agents and employees from and against all claims by any person whatsoever for property damage occasioned by the operation of Grantee under the franchise herein granted, or alleged to have been so caused or occurred, with a minimum liability of One Million Dollars ($1,000,000) for property damage to the property of any one person and Three Million Dollars ($3,000,000) for property damage to the property of two or more persons in any one occurrence. 3. A performance bond running to the Installation with good and sufficient surety approved by the Installation in the amount specified in the franchise, or if no amount is specified therein, then in the sum of Five Hundred Thousand Dollars ($500,000), conditioned upon the faithful performance and discharge of the obligations imposed by the franchise. The Installation's right to recover under the bond shall be in addition to any other rights retained by the Installation under this franchise and other applicable law. Any proceeds recovered under the bond may be used to reimburse the Installation for the loss of valuable consideration given for the grant of the franchise and such additional expenses as may be incurred by the Installation as a result of Grantee's failure to comply with the obligations imposed by this franchise and the franchise including, but not limited to, attorney's fees and costs of any action or proceeding, the cost of refranchising, and the cost of removal or abandonment of any property, or other costs which may be in default. B. The bond and all insurance policies called for herein shall be issued by companies licensed to do business within the Installation, and shall be in a form satisfactory to the Army and 9 26 Franchise Agreement No. DAHC35-90-H-0018 shall require thirty (30) days written notice of any cancellation to both the Designated Franchising Authority and the Grantee. The Grantee shall, in the event of any such cancellation notice, obtain, pay all premiums for, and file with the Installation, written evidence of the issuance of replacement bond or policies within thirty (30) days following receipt by the Designated Franchising Authority or the Grantee of any notice of cancellation. C. The Grantee shall, at its sole cost and expense, indemnify and hold harmless the Installation, its officials, boards, commissions, consultants, agents and employees against any and all claims, suits, causes of action, proceedings, and judgments for damage arising out of the award of a franchise to the Grantee and its operation of the cable television system under the franchise. These damages shall include, but not be limited to, penalties arising out of copyright infringements and damages arising out of any failure by Grantee's cable television system whether or not any act or omission complained of is authorized, allowed, or prohibited by the franchise. Indemnified expenses shall include, but not be limited to, all out-of pocket expenses, such as attorney fees, and shall also include the reasonable value of any services rendered by the Designated Franchising Authority or any consultants, agents and employees of the Designated Franchising Authority. SECTION 8. TRANSFER OF FRANCHISE A. A franchise shall be a privilege to be held in personal trust by the Grantee. It shall not be assigned, transferred, sold or disposed of, in whole or in part, by voluntary sale, sale and leaseback, merger, consolidation or otherwise or by forced or involuntary sale, without prior consent of the Designated Franchising Authority expressed by resolution and then on only such conditions as may therein be prescribed. Any sale, transfer or assignment not made according to the procedures set forth in the franchise shall render the franchise void. The sale, transfer or assignment in bulk of the major parts of the tangible assets of the Grantee shall be considered an assignment and shall be subject to the provisions of this Section. B. Any sale, transfer or assignment authorized by the Designated Franchising Authority shall be made by a bill of sale or similar document, an executed copy of which shall be filed with the Designated Franchising Authority within thirty (30) days after any such sale, transfer or assignment. The Designated Franchising Authority shall not withhold its consent unreasonably; provided, however, the proposed assignee agrees to comply with all the provisions of the franchise and amendments thereto, and must be able to provide proof of legal, technical, financial, and character qualifications as determined by the Designated Franchising Authority. C. No such consent shall be required for a transfer in trust, mortgage, or other instrument of hypothecation, in whole or in part, to secure an indebtedness except when such hypothecation shall exceed seventy-five percent (75%) of the fair market value (as defined in Article III) of the property used by the Grantee in the operation of its cable television system. Prior 10 27 Franchise Agreement No. DAHC35-90-H-0018 consent of the Designated Franchising Authority, expressed by resolution, shall be required for such transfer and said consent shall not be withheld unreasonable. D. Prior approval of the Designated Franchising Authority shall be required where ownership or control of twenty percent (20%) or more of the right of control of the Grantee is acquired during the term of the franchise in any transaction or series of transactions by a person or group of persons acting in concert, none of whom owned or controlled twenty percent (20%) or more of such right of control, singularly or collectively on the effective date of the franchise. By its acceptance of this franchise the Grantee specifically grants and agrees that any such acquisition occurring without prior approval of the Designated Franchising Authority shall render the franchise void. E. The consent of the Designated Franchising Authority to any sale, transfer, lease, trust, mortgage or other instrument of hypothecation shall not constitute a waiver or release of any of the rights of the Installation under the franchise. ARTICLE V: SUBSCRIBER FEES AND RECORDS SECTION 1. SUBSCRIBER FEES A. The Grantee agrees that the Designated Franchising Authority shall have the authority and right to cause the Grantee's fees for all services, to the extent permitted by law or FCC rules and regulations, to conform to the provisions contained herein. B. All charges to subscribers shall be consistent with a schedule of fees for all services offered as established by the Grantee. Changes in the fee schedule shall not take effect until at least thirty (30) days after notification of same is delivered to the Designated Franchising Authority and to current subscribers and users. C. The Grantee shall not, with regard to fees, discriminate or grant any preference or advantage to any person; provided, however, that the Grantee may establish different rates for different classes of subscribers, provided that the Grantee not discriminate between any subscribers of the same class. D. The Grantee shall be required to apprise in writing each new subscriber of all applicable fees and charges for providing cable television service. E. Grantee may, at its own discretion, in a non-discriminatory manner, waive, reduce or suspend connection fees and/or monthly service fees for promotional purposes. F. Except as may be otherwise provided in a franchise, a subscriber shall have the right to have its service disconnected without charge; such disconnection shall be made as soon as practicable and in no case later than thirty (30) days following notice to the Grantee of same. No Grantee shall enter into any agreement with a subscriber which imposes any charge following disconnection of service, except for reconnection and subsequent monthly or periodic charges, and those charges shall be no 11 28 Franchise Agreement No. DAHC35-90-H-0018 greater than charges for new customers. This Section shall not prevent a Grantee from refusing service to any person because the Grantee's prior accounts with that person remain due and owing. G. Except as may be otherwise provided in a franchise, a Grantee may offer service which requires advance payment of periodic service charges for no more than one (1) year in advance subject to the conditions contained in this paragraph. A customer shall have the right, at any time, to have its service disconnected without charge and with a refund of unused service charges paid to the customer within thirty (30) days from the date of service. H. Bulk Rate: In addition to the individually billed subscribers served by the Grantee, the Grantee will enter into annual appropriated and nonappropriated fund contracts/orders. The bulk rate described in Form L, page 3 of 3, will apply to those buildings that contain nine (9) or more cable outlets. Any increase in the bulk rates will take effect on the first day of the Government fiscal year, currently October 1st. SECTION 2. BOOKS AND RECORDS. A. A Grantee shall, (1) within thirty (30) days following the acceptance of a franchise, and (2) at least yearly thereafter, and (3) within thirty (30) days of the change of ownership of three percent (3%) or more of the outstanding stock or equivalent ownership interest of a Grantee, furnish the Designated Franchising Authority a list, showing the names and addresses of persons owing three percent (3%) or more of the outstanding stock or equivalent ownership interest of the Grantee. Such a list shall include a roster of the Grantee's officers and directors (or equivalent managerial personnel) and their addresses. B. A Grantee shall maintain books and records of its operations within the Installation to show total revenues by service category in sufficient detail, consistent with generally accepted accounting principles. C. A Grantee shall maintain such books and records for the Franchise Area specified in the franchise separately from any other operations; provided, however, that any expenses or expenditures which apply to both the system in said Franchise Area and any other operations shall be reasonably allocated between all such operations, consistent with generally accepted accounting principles. Such books and records shall be retained, in any reasonable form, for a period of not less than fifteen (15) years. The Designated Franchising Authority shall have the right to extend the retention period through the term of any renewed franchise. D. The books and records of the Grantee's operation within the Installation shall be made available during normal business hours for inspection and audit by the Designated Franchising Authority within thirty (30) days after such request has been made. E. Copies of the Grantee's schedule of charges, contract or application forms for subscriber service, policy regarding the processing of subscriber complaints, delinquent subscriber disconnect and reconnect procedures and any other terms and 12 29 Franchise Agreement No. DAHC35-90-H-0018 conditions adopted as the Grantee's policy in connection with its subscribers, including amendments thereto or changes thereof, shall be filed with the Designated Franchising Authority and shall be made available for inspection by the public in the Grantee's local office. ARTICLE VI: SYSTEM OPERATIONS SECTION 1. SYSTEM DESCRIPTION AND SERVICE A. The cable television system installed by Grantee shall comply in all respects with the technical performance requirements set forth in the FCC's Rules for Cable Television including applicable amendments thereto; provided, however, that nothing contained herein shall be construed to prohibit the Grantee from proposing to comply with more rigid technical performance requirements, in which case the Grantee's application shall be incorporated by reference in the franchise and will be binding on the Grantee. If the FCC should delete said requirements, the Designated Franchising Authority hereby reserves the right to amend the franchise to incorporate similar standards and every franchise granted shall be subject to such reserved power whether or not expressly so conditioned. B. Grantee shall provide without charge a single outlet of basic service to post firehouses, hospitals, barrack dayrooms and recreation centers. Any other government buildings requiring cable television service would contract for services through normal contract/order procedures as per Article VIII, Section 13. However, if it is necessary to extend Grantee's trunk or feeder lines more than three hundred (300) feet solely to provide service to any such public building, the Installation or such other building occupant shall have the option either of paying Grantee's direct costs for such extension in excess of three hundred (300) feet, or of releasing Grantee from the obligation to provide service to such building. C. The Grantee shall not permit the transmission of any programming which by law is under its control that is obscene otherwise constitutionally unprotected speech. At the option of the subscriber, the Grantee shall provide at cost a device capable of locking out any premium programming video and audio signals. SECTION 2. OPERATIONAL REQUIREMENTS AND RECORDS A. Grantee shall construct, operate, and maintain the cable television system in full compliance with the rules and regulations, including applicable amendments, of the Federal Communications Commission and all other applicable Federal, State, or local laws and regulations, including the latest editions of the National Electrical Safety Code and the National Fire Protection Association National Electrical Code. The cable television system and all its parts shall be subject to inspection by the Designated Franchising Authority, to review a Grantee's construction plans prior to the commencement of construction. B. Grantee shall not be required to maintain an office on the installation except the Grantee shall be required to maintain 13 30 Franchise Agreement No. DAHC35-90-H-0018 a location on post for the drop-off of converters by disconnecting subscribers. The SOSA office would be deemed as an appropriate location for this purpose. Grantee shall employ an operator or maintain a telephone answering service twenty-four (24) hours per day, each day of the year, to receive subscriber complaints. C. Grantee shall exercise its best effort to design, construct, operate, and maintain the systems at all times so that signals carried are delivered to subscribers without material degradation in quality (within the limitations imposed by the technical state-of-the art). D. A listing of all correspondence, petitions, reports, applications and other documents sent or received by Grantee from Federal or State agencies having appropriate jurisdiction in matters affecting cable television operation shall be furnished by the Grantee to the Designated Franchising Authority within sixty (60) days of submission or receipt of such documents by Grantee upon request by the Designated Franchising Authority, copies of any such document shall be submitted to the Designated Franchising Authority by the Grantee within thirty (30) days of such request. E. In the case of any emergency or disaster, the Grantee shall, upon request of the Designated Franchising authority, make available its facilities to the Installation, without costs, for emergency use during the emergency or disaster period. SECTION 3. TESTS AND PERFORMANCE MONITORING. A. Not later than ninety (90) days after any new or substantially rebuilt portion of the system is made available for service to subscribers, technical performance tests shall be conducted by the Grantee to demonstrate full compliance with the Technical Standards of the Federal Communications Commission and the terms of the franchise granted hereunder. Such tests shall be performed by, or under the supervision of, a qualified registered professional engineer or an engineer with proper training and experience. A copy of the report shall be submitted to the Designated Franchising Authority, describing test results and test procedures, and the qualifications of the engineer responsible for the tests. B. System monitor test points shall be established at or near the output of the last amplifier in the longest feeder line, at or near trunk line extremities, or at the locations to be specified in the franchise. Such periodic tests shall be made at the test points as shall be described by the Designated Franchising Authority, consistent with FCC rules. C. At any time after commencement of service to subscribers, the Designated Franchising Authority may require additional reasonable tests, including full or partial repeat tests, different test procedures, or tests involving a specific subscriber's terminal, at the Grantee's expense to the extent such tests may be performed by the Grantee's employees utilizing its existing facilities and equipment; provided, however, that the Designated Franchising authority reserves the right to 14 31 Franchise Agreement No. DAHC35-90-H-0018 conduct its own tests upon reasonable notice to the Grantee and if non-compliance is found, the expense thereof shall be borne by the Grantee. The Designated Franchising Authority will endeavor to arrange its request for such special tests so as to minimize hardship or inconvenience to Grantee or to the subscriber. D. A copy of the annual performance tests report required by the Federal Communications Commission shall be submitted to the Designated Franchising Authority within thirty (30) days of its completion. E. The Designated Franchising Authority shall have the right to employ qualified consultants if necessary or desirable to assist in the administration of this, or any other, section of the franchise. SECTION 4. SERVICE, ADJUSTMENT AND COMPLAINT PROCEDURE A. Except for circumstances beyond the Grantee's control such as strikes, acts of God, weather, wars, riots and civil disturbances, the Grantee shall establish a maintenance service capable of locating and correcting major system malfunctions promptly. Said maintenance service shall be available at all hours, to correct such major system malfunctions affecting a number of subscribers. B. A listed local telephone number shall be made available to subscribers for service calls at any time of the day or night. Investigative action shall be initiated in response to all service calls, other than major outages, not later than the next business day after the call is received. Corrective action shall be completed as promptly as practicable. Appropriate records shall be made of service calls showing when and what corrective action was completed. Such records shall be available to the Designated Franchising Authority during normal business hours and retained in Grantee's files for not less than three (3) years. C. The Grantee shall furnish each subscriber at the time service is installed written instructions that clearly set forth procedures for placing a service call, or requesting an adjustment. Said instructions shall also include the name, address and telephone number of the designated employee of the Designated Franchising Authority and a reminder that the subscriber can call or write the designated employee for information regarding terms and conditions of the Grantee's franchise if the Grantee fails to respond to the subscriber's request for installation, service or adjustment within a reasonable period of time. D. In the event a subscriber does not obtain a satisfactory response or resolution to his request for service or an adjustment within a reasonable period of time, he may advise the Designated Franchising Authority in writing of his dissatisfaction and the Designated Franchising Authority shall have the authority to investigate the matter and order corrective action as may be appropriate. E. The Grantee shall interrupt system service after 7:00 a.m. and before 1:00 a.m. of the following day only with good cause 15 32 Franchise Agreement No. DAHC35-90-H-0018 and for the shortest time possible and, except in emergency situations, only after cablecasting notice of service interruption at least twenty-four (24) hours in advance of the service interruption. Service may be interrupted between 1:00 a.m. and 7:00 a.m. for routine testing, maintenance, and repair, with notification, on any day except Saturday or Sunday, or a holiday. SECTION 5. CONSTRUCTION & UPGRADING OF CABLE SYSTEMS A. All transmission lines, equipment and structures shall be so installed and located as to cause minimum interference with the rights and appearance of the franchise area. The Grantee shall at all times employ reasonable care and shall install and maintain in use commonly accepted methods and devices for preventing failures and accidents which are likely to cause damage, injuries, or nuisances to the installation. Suitable barricades, flags, lights, flares, or other devices shall be used at such times and places as are reasonably required for the safety of the Installation. B. All plans for construction, rebuild or upgrading of more than five (5) miles of system shall be approved by the appropriate Government personnel identified by the Government to the Grantee. Any change in the identities of the appropriate Governmental personnel will be communicated to the Grantee as soon as the change in personnel takes place. The following steps presented below will apply in cases of Government approved projects: 1. Preconstruction Meeting. The basic purpose of the preconstruction meeting is coordination and an exchange of knowledge as to Army installation's construction standards, available resources and various other construction related requirements. The preconstruction checklist at Appendix A shall be utilized by the operator. 2. First Construction Meeting. The preconstruction checklist shall be completed prior to the first construction meeting and all design issues should be resolved. Issues include permissible cable routes, available poles and conduits, special service locations and internal building wiring design. The operator shall provide a construction schedule to include the following items: a. System Activitation Date b. System Completion Date c. Technical Performance and Picture Quality Check (estimated date) d. Begin Marketing (estimated date) e. Begin Installations (estimated date) Monthly construction reports shall be submitted. The reports shall include amount of feet of cable installed, the amount of electronics spliced, amount of feet of plant activated and status of permits and easements required. The report should note the barracks which have been wired, operator comments and any revision of the construction schedule. 3. Construction Completion. A Technical Performance and Picture Quality Check Report shall be completed. The operator would then be permitted to commence normal operations. 16 33 Franchise Agreement No. DAHC35-90-H-0018 SECTION 6. PROTECTION OF PRIVACY A. Grantee shall not permit the transmission of any signal, aural, visual or digital, including "polling" the channel selection, from any subscriber's premises without first obtaining the informed consent of the subscriber, which shall not have been obtained from the subscriber as a condition of any service for which transmission is not an essential element. The request for such consent shall be contained in a separate document which enumerates and describes the transmissions being authorized and includes a prominent statement that the subscriber is authorizing the permission in full knowledge of its provision, and shall be revocable at any time by the subscriber without penalty of any kind whatsoever. This provision is not intended to prohibit the use or transmission of signals useful only for the control or measurement of system performance or used only for billing subscribers. B. Grantee shall not permit the Designated Franchising Authority of any special terminal equipment in any subscriber's premises that will permit transmission from the subscriber's premises of two-way services utilizing aural, visual or digital signals without first obtaining written permission of the subscriber as provided in Paragraph A of this Section. C. Grantee, or any of its agents or employees, shall not, without the specific written authorization of the subscriber involved as provided in Paragraph A of this Section, sell or otherwise make available to any party any list which identifies the viewing habits or responses of individual subscribers. SECTION 7. AREA-WIDE INTERCONNECTION OF CABLE SYSTEM A. Grantee, if ordered to do so by the Designated Franchising Authority, shall interconnect Access Channels and/or Local Origination Channels of its cable television system with any or all other cable systems providing service in adjacent areas. B. Upon receiving an order to interconnect, the Grantee shall make a good faith effort to obtain agreements for the sharing of interconnection costs among all interconnecting companies. The Designated Franchising Authority may extend the time to interconnect or may rescind its order to interconnect upon finding that the Grantee has made a good faith effort but has been unable to obtain a reasonable interconnection agreement or that the cost of the interconnection would cause an unreasonable increase in subscriber rates. C. Grantee shall cooperate with any entity established for the purpose of regulating, financing, or otherwise providing for the interconnection of cable television systems. D. The Designated Franchising Authority does not require Grantee to provide Local Origination equipment that is compatible with that used by other cable systems within the adjacent areas. E. Grantee shall make every reasonable effort to cooperate with cable television franchise holders in contiguous communities in order to provide cable service in areas outside the Grantee's Franchise Area. 17 34 Franchise Agreement No. DAHC35-90-H-0018 SECTION 8. USE OF CABLE SYSTEM BY UTILITIES A. Grantee shall, upon request by the Designated Franchising Authority, provide channel capacity and technical assistance to permit appropriate public or private utilities companies to utilize the cable system in conjunction with utility service or other necessary services. The Grantee shall provide such channel capacity as may be needed for government services. Reasonable charges may be made for provision of additional equipment or labor which may be needed in order to provide or facilitate such uses of the system by the Designated Franchising Authority. The Grantee shall use its best efforts to provide the services and facilities required to accommodate the use of the cable systems for these purposes. ARTICLE VII: DESIGNATED FRANCHISING AUTHORITY'S ADVISORY ROLE SECTION 1. ESTABLISHMENT OF ADVISORY COMMITTEE A. The Designated Franchising Authority may create a committee to act as an advisory body to the Designated Franchising Authority with regard to issues affecting the operation of government, public or educational access channels, and the programs offered on such channels on the cable television system(s) on the Installation. In its advisory capacity, the Committee shall endeavor to promote and develop maximum involvement and utilization of the public and educational/cultural access channels. B. The Committee may have the following specific functions, but not necessarily be limited to these functions: 1. Develop a plan for maximum involvement and utilization of the public and educational or government access channels. 2. Submit annually a written advisory report to the Designated Franchising Authority reviewing said plan, recommending changes thereto, and describing fully the actions of the Committee for the preceding year. 3. Assure that the operation of the non-government access channels remains free from direct or indirect program censorship, and governmental interference with, or control of, program content. 4. Adopt rules and regulations governing its meetings and other activities. 5. Perform such other advisory functions as the Designated Franchising Authority may direct. 6. The Committee may appear before the Designated Franchising Authority in any proceedings on matters pertaining to the cable communications system. ARTICLE VIII: GENERAL PROVISIONS SECTION 1. LIMITS ON GRANTEE'S RECOURSE A. Except as expressly provided in the franchise, the Grantee shall have no recourse against the Designated Franchising 18 35 Franchise Agreement No. DAHC35-90-H-0018 Authority for any loss, expense or damage resulting from the terms and conditions of the franchise or because of the Designated Franchising authority's enforcement thereof nor for the Designated Franchising Authority's failure to have the authority to grant the franchise. The Grantee expressly agrees that upon its acceptance of the franchise it does so relying upon its own investigation and understanding of the power and authority of the Designated Franchising Authority to grant said franchise. B. The Grantee, by accepting the franchise, acknowledges that it has not been induced to accept same by any promise, verbal or written, by or on behalf of the Designated Franchising Authority or by any third person regarding any term or condition of the franchise not expressed therein. The Grantee further pledges that no promise or inducement, oral or written, has been made to any Installation employee or official regarding receipt of the cable television franchise. C. The Grantee further acknowledges by acceptance of the franchise that it has carefully read the terms and conditions of the franchise and accepts without reservation the obligations imposed by the terms and conditions herein. D. The decision of the Designated Franchising Authority concerning Grantee selection and awarding of the franchise shall be final. SECTION 2. COMPLIANCE WITH STATE AND FEDERAL LAW A. The Grantee shall, at all times, comply with all laws of the State and Federal government and the rules and regulations of any Federal or State administrative agency; provided, however, this Section shall not be construed to require the Designated Franchising Authority to make an initial determination of any such violation. SECTION 3. SPECIAL LICENSE A. The Designated Franchising Authority reserves the right to issue a license, easement or other permit to anyone other than the Grantee to permit that person to traverse any portion of the Grantee's franchise area within the Installation in order to provide service outside the Installation. Such license or easement, absent a grant of a franchise which shall not authorize nor permit said person to provide a cable television service of any nature to any home or place of business within the Installation, nor to render any service or connect any subscriber within the Installation to the Grantee's cable television system. SECTION 4. FRANCHISE VALIDITY A. The Grantee agrees, by the acceptance of the franchise renewal, to accept the validity of the terms and conditions of the renewal in its entirety and that it will not, at any time, proceed against the Designated Franchising Authority in any claim or proceeding challenging any term or provision of the franchise as unreasonable, arbitrary or void, or that the Designated Franchising Authority did not have the authority to impose such term or condition. 19 36 Franchise Agreement No. DAHC35-90-H-0018 SECTION 5. FAILURE TO ENFORCE FRANCHISE A. The Grantee shall not be excused from complying with any of the terms and conditions of the franchise by any failure of the Designated Franchising Authority, upon any one or more occasions, to insist upon the Grantee's performance or to seek Grantee's compliance with any one or more of such terms or conditions. SECTION 6. RIGHTS RESERVED TO THE GRANTOR. A. The Designated Franchising Authority hereby expressly reserves the following rights: 1. To exercise its governmental powers, now or hereafter, to the full extent that such powers may be vested in or granted to 2. To adopt, in addition to the provisions contained in the franchise and in any existing applicable rules or regulations such additional reasonable regulations as it shall find necessary in the exercise of its authority. Grantee will have the opportunity to object to any proposed regulations unilaterally imposed by the Franchising Authority and will be given an opportunity to offer alternatives to the desired new regulations. However, Grantee does not give up its right to refuse such new regulations and seek an equitable resolution to any disagreements resulting from proposed regulations. 3. To renegotiate any provision of a franchise granted pursuant hereto, which is declared or rendered void or unenforceable by any court or administrative body having jurisdiction thereof, or by changes in state or Federal laws enacted after the award of the franchise. 4. To renegotiate the entire franchise should decision(s) of courts or administrative bodies have appropriate jurisdiction, or State or Federal laws enacted after the award of a franchise, render void or unenforceable substantial and material portions of a franchise granted pursuant hereto, where the result thereof is to make the balance of the franchise meaningless or where the authority of the Designated Franchising Authority to regulate cable communications systems within the Installation is substantially and materially abrogated. SECTION 7. EMPLOYMENT REQUIREMENT A. The Grantee shall not refuse to hire, nor discharge from employment, nor discriminate against any person regarding compensation, terms, conditions, or privileges of employment because of age, sex, race, color, creed, or national origin. The Grantee shall take affirmative action to insure that employees are treated during employment without regard to their age, sex, race, color, creed or national origin. This condition includes, but is not limited to, the following: recruitment advertising, employment interviews, employment, rates of pay, upgrading, transfer, demotion, lay-off, and termination. SECTION 8. TIME ESSENCE OF AGREEMENT A. Whenever the franchise sets forth any time for any act to be performed by or on the behalf of the Grantee, such time shall be 20 37 Franchise Agreement No. DAHC35-90-H-0018 deemed of the essence and the Grantee's failure to perform within the time allotted shall, in all cases, be sufficient grounds for the Designated Franchising Authority to invoke the remedies available under the terms and conditions of the franchise. The Designated Franchising Authority recognizes that time is of the essence in its fulfillment of its responsibilities to approve contracts/orders, construction projects, facilities markings and any other acts required to allow Grantee to operate its business in manner convenient to its cable television customers. SECTION 9. LIQUIDATED DAMAGES A. Notwithstanding any other remedies provided for in the franchise or otherwise available under law, the Designated Franchising Authority shall have the power to collect liquidated damages in the following amounts in the event the Grantee violates any provision of the franchise or any rule or regulation lawfully adopted thereunder. The fines listed below can only be effective with 30 days' prior written notice to the Grantee from the Designated Franchise Authority. Grantee would have 30 days to remedy any of the defaults listed below before any of the fines below would begin accruing: 1. For failure to submit plans to the Designated Franchising Authority indicating expected dates of completion of various parts of the system -- up to $100 per day. 2. For failure to commence operations in accordance with herein stated provisions -- up to $200 per day. 3. For failure to complete construction and installation of system within proper time -- up to $300 per day. 4. For failure to supply data requested by the Designated Franchising Authority in connection with installation, construction, customers, finances or financial reports, -- up to $50 per day. 5. For failure to comply with reasonable recommendations of the Designated Franchising Authority relating to services and/or interconnection and such other reasonable requests or recommendations as may be made pursuant to authority granted by the franchise, or to respond to subscriber complaints within the proper time -- up to $50 per day as the Designated Franchising Authority may determine. SECTION 10. GRANTEE MAY PROMULGATE RULES A. Grantee shall have the authority to promulgate such rules, regulations, terms and conditions of its business as shall be reasonably necessary to enable it to exercise its rights and perform its services under the franchise and the Rules of the FCC, and to assure uninterrupted service to each and all of its subscribers. Such rules and regulations shall not be deemed to have the force of law. SECTION 11. DELEGATION OF POWERS A. Any delegable power, right or duty of the Installation Commander, the Designated Franchising Authority, or any official 21 38 Franchise Agreement No. DAHC35-90-H-0018 of the Installation may be transferred or delegated with the written approval of the Installation Commander transmitted to an appropriate officer, employee, or Department of the Army. Grantee will be given written notice of such delegation of power as soon as possible to allow for its compliance with the terms and conditions of this document. SECTION 12. SEVERABILITY A. If any section of the franchise, or any portion thereof, is held invalid or unconstitutional by any court of competent jurisdiction or administrative agency, such decision shall not affect the validity of the remaining portions hereof, except as otherwise provided for herein. SECTION 13. PURCHASE ORDERS. The Contracting Officer, Directorate of Contracting (DOC), will issue purchase orders for all For Belvoir cable television requirements. The orders will be for appropriated and nonappropriated fund activities. With the exception of orders issued by a nonappropriated fund Contracting Officer, the Grantee shall not honor orders, contracts or agreements that are issued by individuals other than the Contracting Officer, DOC. All Fort Belvoir and tenant administrative offices will contract through the DOC. Grantee maintains the right to contract with and provide service directly to individually billed subscribers such as private residences located on post. SECTION 14. INCORPORATED OF PROVISIONS A. The foregoing provisions are hereby incorporated into the basic franchise agreement. When the provisions of the basic agreement conflict with the provisions of this renewal agreement, the provisions of this renewal agreement will govern. SECTION 15. INCORPORATION OF GRANTEE'S PROPOSAL. The forms at Appendix C are incorporated into this agreement. SECTION 16. ACCEPTANCE A. The Grantee shall, in its acceptance of the renewed franchise agreement, declare that it has carefully read the foregoing and accepts all of the terms and conditions imposed by the renewed franchise and agrees to abide by same. 22 39 Franchise Agreement No. DAHC35-90-H-0018 COLUMBIA CABLE I declare that I have read all the terms and conditions of the renewed franchise agreement and accept and agree to abide by same. (Type or Print Name and Title) - -------------------------------------------------------------------------------- Signature Date (Type or Print Name and Title) - -------------------------------------------------------------------------------- Signature Date DIRECTORATE OF CONTRACTING UNITED STATES ARMY FORT BELVOIR FORT BELVOIR, VA - -------------------------------------------------------------------------------- WILLIAM E. CAMPBELL, JR., Contracting Officer, (Date) 23 40 INDIVIDUAL SUBSCRIBERS
ESTIMATED NUMBER AREAS TO BE SERVED LOCATION OF OUTLETS - ------------------------------------------------------------ ---------------- ---------------- 1. Family Housing (Belvoir Village) Area 1-99 61 2. Family Housing Area 400 119 3. Family Housing (Dogue Creek) Area 900 270 4. Family Housing (George Washington) Area 800 & 1500 244 5. Family Housing (Colyer Village) Area 800 92 6. Family Housing (Fairfax Village) Area 500 152 7. Family Housing (Gerber Village) Area 100 73 8. Family Housing (Woodlawn Village) North Post 444 9. Family Housing (River Village) Area 1600 188 10. Family Housing (Lewis Heights) North Post 446 ------ 2,089
41 Franchise Agreement No. DAHC35-90-H-0018 COLUMBIA CABLE I declare that I have read all the terms and conditions of the renewed franchise agreement and accept and agree to abide by same. (Type or Print Name and Title) - -------------------------------------------------------------------------------- Signature Date (Type or Print Name and Title) - -------------------------------------------------------------------------------- Signature Date DIRECTORATE OF CONTRACTING UNITED STATES ARMY FORT BELVOIR FORT BELVOIR, VA - -------------------------------------------------------------------------------- WILLIAM E. CAMPBELL, JR., Contracting Officer, (Date) 23 42 Franchise Agreement No. DAHC35-90-H-0018 COLUMBIA CABLE I declare that I have read all the terms and conditions of the renewed franchise agreement and accept and agree to abide by same. (Type or Print Name and Title) - -------------------------------------------------------------------------------- Signature Date (Type or Print Name and Title) - -------------------------------------------------------------------------------- Signature Date DIRECTORATE OF CONTRACTING UNITED STATES ARMY FORT BELVOIR FORT BELVOIR, VA - -------------------------------------------------------------------------------- WILLIAM E. CAMPBELL, JR., Contracting Officer, (Date) 23 EX-10.6.60 7 FRANCHISE LAKE RIDGE, VA 1 EXHIBIT 10.6.60 [LOGO] August 4, 1995 Lake Ridge Parks and Recreation Association Mrs. Martha Kaczmarskyj 12350 Oakwood Drive Lake Ridge, Virginia 22192-1928 Dear Mrs. Kaczmarskyj: Columbia Associates, L.P., a Delaware limited partnership ("Columbia") is a party to an Agreement with you, dated January 15, 1982, ("the Agreement"), in connection with its operation of a cable television system serving the communities of Dale City, Lake Ridge, Woodbridge, Fort Belvoir, Triangle, Dumfries, Quantico, Occoquan and Prince William County, Virginia (the "Systems"). Pursuant to an agreement (the "Purchase Agreement") dated as of June 30, 1995, Columbia agreed to sell substantially all of the assets employed in the System to Jones Intercable, Inc. a Colorado corporation, or its permitted assigns ("Jones"). We hereby request your consent to the assignment, transfer and conveyance by Columbia to Jones (and to subsequent assignments to and among affiliates of Jones) of all of Columbia's rights, obligations and liabilities under the Agreement from the date of the closing of the transaction, going forward. Kindly execute the enclosed copy of this letter, and return it to us in the enclosed postage paid pre-addressed envelope, to evidence your acknowledgement and consent to the following: 1. There is no known uncured material default by Columbia which would cause a forfeiture of the rights granted to Columbia under the Agreement and the Agreement is valid and in full force and effect at the date hereof. 2. You hereby consent to Columbia's assignment to Jones (and to subsequent assignments to and among affiliates of Jones) of all of Columbia's right, title, and interest in and pursuant to the Agreement, all of which right, title and interest shall be vested in Jones effective upon the closing of the transactions contemplated by the Purchase Agreement. 3. You hereby consent to the grant by Jones and/or any affiliate of Jones now or hereafter having any interest in the Systems or the Agreement of a security interest in all of its right, title, and interest in and pursuant to the Agreement to such lending institution or institutions as may be selected by Jones or such affiliate, which institution or institutions shall have all of the rights and remedies of a secured party under applicable law. 2 We would appreciate receiving your consent as soon as possible. If you have any questions, please do not hesitate to call troy Fitzhugh or Marsha Sluss at (703) 670-0189 extension 231. Sincerely, /s/ TROY FITZHUGH COLUMBIA ASSOCIATES, L.P. a Delaware limited partnership d/b/a Columbia Cable of Virginia By: COLUMBIA INTERNATIONAL, INC., a Delaware corporation and its managing general partner Name: /s/ [ILLEGIBLE] --------------------------------------- Title: Vice President --------------------------------------- Date: August 24, 1995 --------------------------------------- CONSENTED AND AGREED TO: By: Lake Ridge Parks and Recreation Association Name: /s/ RICHARD ELEL --------------------------------------- Title: President --------------------------------------- Date: 15 Aug 1995 --------------------------------------- 3 NOTICE OF CLOSING DATE To: Lake Ridge Parks & Recreation Association, Inc. You are hereby given notice that the closing of the sale of the assets of Columbia Associates, L.P. ("Columbia") to Jones Communications of Virginia, Inc., formerly known as Jones Intercable of Alexandria, Inc. ("Jones") occurred and was effective as of November 29, 1995, and that the Agreement between Lake Ridge Parks and Recreation Association, Inc. ("Lake Ridge") and Columbia (the "Agreement") dated January 15, 1982, and approved for transfer to Jones by that certain Letter Agreement dated August 4, 1995 and executed by Lake Ridge on August 15, 1995, was transferred to Jones as of November 29, 1995. JONES COMMUNICATIONS OF VIRGINIA, INC. f/k/a Jones Intercable of Alexandria, Inc., a Colorado corporation By: /s/ ELIZABETH M. STEELE -------------------------------- Elizabeth M. Steele Vice President Dated: December 12, 1995 4 EASEMENT AGREEMENT BETWEEN LAKE RIDGE PARKS & RECREATION ASSOCIATION LAKE RIDGE, VIRGINIA AND COLUMBIA ASSOCIATES, L.P. D/B/A COLUMBIA CABLE OF VIRGINIA 5 EXHIBIT 2 AGREEMENT BETWEEN LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC. AND WEAVER BROS. MANAGEMENT CORP. 6 AGREEMENT BETWEEN LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC. AND WEAVER BROS. MANAGEMENT CORP. TABLE OF CONTENTS PARTIES P. 1 RECITALS P. 1 1. EASEMENT RIGHTS P. 3 2. EXCLUSIVE RIGHTS P. 3 3. TERM P. 4 4. RENEWAL P. 5 5. FEE P. 6 6. CABLE TELEVISION SYSTEM PROPOSAL P. 9 7. INSTALLATION P. 10 8. SUBSCRIPTION FEES AND RATES P. 11 9. RESTORATION AND CLEAN-UP P. 11 10. LOCAL OFFICE P. 12 11. BOOKS AND RECORDS P. 13 12. ADMINISTRATIVE FILINGS P. 13 13. PERMITS AND FEES P. 13 14. COMPLIANCE WITH LAWS P. 14 15. INDEMNIFICATION P. 14 16. INSURANCE P. 15 17. REPRESENTATIONS AND WARRANTIES BY LRPRA P. 16
i 7 18. RIGHT OF TERMINATION P. 16 19. TRANSFER OF OWNERSHIP P. 17 20. PROTECTION OF PRIVACY P. 17 21 INDEPENDENT CONTRACTOR P. 18 22. WAIVER P. 18 23. NOTICE P. 18 24. SEVERABILITY P. 19 25. APPLICABLE LAW P. 19 26. AMENDMENT P. 19 27. RELATIONSHIP BETWEEN PARTIES P. 19 28. CAPTIONS P. 20
ii 8 AGREEMENT THIS AGREEMENT is made and executed this 15th day of January, 1982, by and between LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC., a nonprofit Virginia corporation (hereinafter referred to as "LRPRA"), and WEAVER BROS. MANAGEMENT CORP., a Maryland corporation (hereinafter referred to as "Grantee"). ***** W I T N E S S E T H ***** WHEREAS, LRPRA is a nonprofit Virginia corporation created under the terms of a certain Declaration of Covenants, Conditions and Restrictions, dated March 29, 1972 and recorded among the land records of Prince William County, Virginia in Deed Book 625 at page 443 (hereinafter referred to as the "Declaration"). WHEREAS, under the terms of this Declaration, LRPRA was granted certain ownership interests in a certain parcel of real property made subject to the Declaration therein, located in Occoquan Magesterial District, Prince William County, Virginia, and containing approximately 2161.70398 acres of land, as described with more particularity in Exhibit A hereto (hereinafter referred to as the "Property"). 9 WHEREAS, Article IV, Section 2S of the Declaration created certain blanket utility easements upon, across, over and under the Property for ingress, egress, installation, replacement, repair and maintenance of utility and service lines and systems, including, but not limited to, television, cable and communication lines and systems, subject to the approval, authorization and consent of the Board of Directors of LRPRA. WHEREAS, Grantee desires to obtain the approval, authorization and consent of LRPRA to install, maintain and operate a cable television system on the Property and use the above-described blanket utility easements upon, across, over and under the Property for ingress, egress, installation, replacement, repair and maintenance of utility and service lines and systems in connection therewith. WHEREAS, LRPRA has agreed to provide its approval, authorization and consent to Grantee to install, maintain and operate a cable television system on the Property and use the above-described blanket utility easements, subject to certain terms, conditions and restrictions to be described herein. WHEREAS, it is now the desire and express intention of the parties to set forth in writing the terms of their agreement and to define and describe their respective rights, duties and obligations thereunder. NOW, THEREFORE, in consideration of the mutual covenants and undertakings provided herein, the receipt and sufficiency of which are acknowledged by both parties, LRPRA and Grantee contract and agree as follows: -2- 10 1. EASEMENT RIGHTS: In consideration of the mutual covenants and undertakings provided herein; LRPRA does hereby approve, authorize and consent to the use by Grantee of the blanket utility easements created by Article iv, Section 2S of the Declaration of Covenants, Conditions and Restrictions, dated March 29, 1972 and recorded among the land records of Prince William County, Virginia in Deed Book 625 at page 443, upon, across, over and under the Property for ingress, egress, installation, replacement, repair and maintenance of utility and service lines and systems, including television, cable and communication lines and systems, in connection with the installation, operation and maintenance of the cable television system contemplated under the terms of this Agreement (hereinafter referred to as the "cable television system"). LRPRA covenants and agrees that during the term of this Agreement, it shall not approve, authorize or consent to the use of these said blanket utility easements by any other person, firm or corporation for the purpose of installing, operating or maintaining a similar or competing cable television system, without the prior written approval of Grantee, in its sole and absolute discretion. 2. EXCLUSIVE RIGHTS: A. In consideration of the mutual covenants and undertakings provided herein, LRPRA does hereby grant to Grantee for the term of this Agreement, the exclusive right, authority and franchise to erect, install, construct, reconstruct, equip, own, test, replace, repair, use, maintain, operate and dismantle -3- 11 cable television and communication lines and systems within the confines of the Property, subject to the terms and conditions set forth in this Agreement. LRPRA covenants and agrees that during the term of this Agreement, it shall not grant to any other person, firm or corporation the exclusive or non-exclusive franchise or right to install, operate or maintain a similar or competing cable television system within the confines of the Property, without the prior written approval of Grantee, in its sole and absolute discretion. B. No provision of this Agreement shall alter or affect Grantee's ownership, during the term of this Agreement or upon any termination hereof, of all cables, equipment, facilities, fixtures and improvements installed, constructed or maintained by Grantee in connection with its cable television system. C. This Agreement shall constitute approval by the Board of Directors of LRPRA of the installation within the easements, as described in Paragraph 1, supra, of cable television and communication lines and systems at Lake Ridge. 3. TERM: The term of this Agreement shall be for an initial period of fifteen (15) years from the date of final execution of this document by the parties, subject to the provisions of this Agreement relating to renewal, set forth in Paragraph 4, infra, and rights of termination, set forth in Paragraph 18, infra. -4- 12 4. RENEWAL: A. The term of this Agreement and all of the rights, duties and obligations of the parties hereunder may be renewed and extended by LRPRA and Grantee for an additional term of fifteen (15) years. Such renewal of the term of this Agreement must be approved in advance by the Board of Directors of LRPRA, but such approval may not be unreasonably withheld by the Board. B. Prior to the approval or disapproval of any proposed renewal or extension of the term of this Agreement, LRPRA shall establish a specific time and place for a Special Meeting of its Board of Directors to review the performance of Grantee during the prior term, to consider any proposed amendments, alterations, modifications or changes that may be requested by LRPRA or Grantee to the provisions of this Agreement, and to determine the feasibility of the proposed renewal or extension of the term of this Agreement. LRPRA shall provide Grantee with at least thirty (30) days' written notice of the proposed time, place and reasons for any such meeting and shall provide Grantee with an adequate opportunity to present evidence, opinions and arguments on the issues to be decided. C. If Grantee has been in reasonable compliance with the terms and conditions of this Agreement, the Board shall approve a renewal and extension of the term of this Agreement for a period of fifteen (15) years, subject to such additional terms and conditions as the parties may deem advisable. -5- 13 D. If Grantee has not been in reasonable compliance with the terms and conditions of this Agreement, the Board may disapprove any proposed renewal or extension of the term of this Agreement. 5. FEE: A. In consideration of the grant by LRPRA to Grantee of the Exclusive franchise and right to install, operate and maintain the cable television system within the confines of the Property during the term of this Agreement, the administrative services to be rendered by LRPRA to Grantee in connection with the installation, operation and maintenance of this system, and the further mutual covenants and undertakings provided herein, Grantee shall pay to LRPRA a fee as follows: (1) The term "Basic Subscriber Revenues" is defined as all payments made to Grantee by direct home subscribers for Basic Service (as defined herein), specifically excluding any revenues received from subscribers for optional services and any revenues received from sources other than direct home subscribers. "Basic Service" is defined as the minimum charge paid by direct home subscribers to Grantee for the minimum level of cable television service. (2) The fee shall commence upon the date Grantee first provides cable television service to a subscriber in Lake Ridge. The fee for each quarter shall be due on the 15th day of the month after the expiration of each calendar quarter. -6- 14 (3) Until such time as sixty percent (60%) of all housing units passed by Grantee's cable system have subscribed to the Basic Service, Grantee shall pay to LRPRA an amount equal to three percent (3%) of all Basic Subscriber Revenues received by Grantee. (4) At such time as sixty percent (60%) of all housing units passed by Grantee's cable system have subscribed to the Basic Service, the total amount due LRPRA shall equal (1) three percent (3%) of the Basic Subscriber Revenues received by Grantee from sixty percent (60%) of the housing units passed and (2) four percent (4%) of the Basic Subscriber Revenues received by Grantee from the percentage of housing units passed in excess of sixty percent (60%). (5) At such time as seventy-five percent (75%) of all housing units passed by Grantee's cable system have subscribed to the Basic Service, the total amount due LRPRA shall equal (1) three percent (3%) of the Basic Subscriber Revenues received by Grantee form sixty percent (60%) of the housing units passed, (2) four percent (4%) of the Basic Subscriber Revenues received by Grantee from the percentage of housing units passed in excess of sixty percent (60%) but less than seventy-five percent (75%), and (3) five percent (5%) of the Basic Subscriber Revenues received by Grantee from the percentage of housing units passed in excess of seventy-five percent (75%). B. If Grantee provides Basic Service to housing units in any subdivision located adjacent to Lake Ridge, Grantee shall also pay to LRPRA a percentage fee of the Basic Subscriber -7- 15 Revenues received by Grantee from such housing units, with such fee to be computed under the formula contained in subparagraph A of this Paragraph 5; provided, however, that no such fee shall be due LRPRA unless all of the following conditions are satisfied: (1) Such housing units are served from and by the same "head-end" serving Lake Ridge; (2) Grantee is not obligated to pay to any other granting authority, association, corporation or other entity of any type, whether governmental or otherwise, in order to provide cable television to such housing units, any fees for any reason which would represent a percentage of any form of the income of Grantee; and (3) LRPRA has used and continues to use its best efforts to assist Grantee in obtaining any rights or permissions necessary to provide cable television to such housing units. C. All fees due hereunder shall be paid by Grantee to LRPRA within fifteen (15) days after the expiration of each of the fiscal quarters of Grantee's fiscal year. In the event that any fee payment is not made by Grantee within the time prescribed herein, all such unpaid principal amounts shall bear interest from the said due date in accordance with the applicable judgment rate of interest in effect in Virginia at that time, now fixed by Section 6.1-330.10 of the code of Virginia at ten percent (10%) per annum. -8- 16 D. In the event that Grantee continues to receive any additional revenues from the operation of the cable television system after the expiration of the term of this Agreement, Grantee shall remain obligated under the provisions of this Paragraph to pay LRPRA the applicable fees on all such revenues so received up until the final termination of the operation by Grantee of this system. 6. CABLE TELEVISION SYSTEM PROPOSAL: A. Grantee covenants and agrees to install, operate and maintain a cable television system on the Property during the term of this Agreement for the use, benefit and enjoyment of LRPRA and its members. This cable television system shall be installed, operated and maintained by Grantee in accordance with the terms and conditions of this Agreement and in substantial compliance with a certain written Proposal prepared by Telesystems Development, Inc., submitted to LRPRA by transmittal letter dated October 28, 1981 from Walton W. Sanderson. A copy of this Proposal is attached hereto as Exhibit B and expressly incorporated by reference as a part of this Agreement. In the case of any conflict, discrepancy or difference between the provisions of this Proposal and the other provisions of this Agreement, the other provisions of this Agreement shall control. B. Grantee covenants and agrees to provide, at its own sole cost and expense, all labor, materials, improvements, structures, cables, wires, conduits, conductors, poles, manholes, equipment, appliances, fixtures and facilities -9- 17 that are or may be necessary and proper for the installation, operation and maintenance of this cable television system during the entire term of this Agreement. C. Grantee covenants and agrees to commence installation of the cable television system within twelve (12) months of the final execution of this Agreement by the parties and to use its best efforts to complete installation of the system to all potential customers residing on the Property within five (5) years thereafter. 7. INSTALLATION: A. In accordance with the provisions of Paragraph 6B, supra, plans for the design, location and placement of all materials, improvements, structures, cables, wires, conduits, conductors, poles, manholes, equipment, appliances, fixtures and facilities that are or may be necessary and proper for the installation, operation and maintenance of the cable television system must be provided to LRPRA prior to any such construction work thereon by Grantee. B. Grantee covenants and agrees to use its best efforts to install all cables, wires, conduits, conductors and related equipment beneath the surface of the ground on the Property. C. To the extent that it is practical and economically feasible to do so, Grantee further covenants and agrees to design, locate, place and install all such materials, improvements, structures, cables, wires, conduits, conductors, -10- 18 poles, manholes, equipment, appliances, fixtures and facilities in such a manner as to cause minimum interference with the rights and reasonable convenience of LRPRA and its members. D. Grantee shall use ordinary care at all times in the installation, operation and maintenance of the cable television system and shall use all reasonable methods and devices for preventing accidents which may cause damage, injury, nuisance or unreasonable inconvenience to LRPRA, its members or the general public. Grantee shall use suitable warning signs, barriers, flags, lights, flares and devices at such times, places and circumstances as are reasonably required for the safety of LRPRA, its members and the general public. All such materials, improvements, structures, cables, wires, conduits, conductors, poles, manholes, equipment, appliances, fixtures and facilities shall be maintained by Grantee at all times in a safe, suitable and substantial condition and in good order and repair during the term of this Agreement. 8. SUBSCRIPTION FEES AND RATES: Grantee covenants and agrees that the subscription fees and rates, including connection charges, disconnection charges and monthly service charges, itemized and set forth in the written proposal attached hereto as Exhibit B, shall not be increased in any amount whatsoever for a period of two (2) years from the date of the final execution of this Agreement by the parties. 9. RESTORATION AND CLEAN-UP: Upon the completion of any installation work, maintenance work or other construction work performed by Grantee hereunder which damages, disrupts, -11- 19 disturbs or destroys any portion of the Property or the improvements, structures, streets, roads, driveways, plants, trees, lawn, shrubbery or other chattels located thereon, Grantee shall use its best efforts to restore, repair, reconstruct or replace any such affected portion to its pre-existing condition before the work was performed by Grantee. Grantee shall also maintain and keep the areas of the Property surrounding such installation work, maintenance work and construction work free from the accumulation of construction debris, waste materials, trash and rubbish and upon the completion of any such work, Grantee shall remove all such construction debris, waste materials, trash and rubbish that may be attributable to its work. 10. LOCAL OFFICE: Grantee covenants and agrees that within ninety (90) days of the final execution of this Agreement by the parties and thereafter during the entire term of this Agreement, it shall establish and maintain a local, publicly accessible business office within Lake Ridge or within a two (2) miles radius thereof to supervise the installation, operation and maintenance of the cable television system and to accept customer inquiries and/or complaints. Grantee further covenants and agrees to maintain a sufficient force of resident employees and personnel within this local office to provide safe, adequate and prompt service for all of its facilities within the cable television system. -12- 20 11. BOOKS AND RECORDS: Grantee shall maintain adequate records of its cable operations at its principal office. Upon prior notice to Grantee, authorized representatives of LRPRA shall have the right to inspect, during reasonable business hours, any records, documents, maps, plans or other materials of Grantee to determine the location of all existing and proposed installations and to insure compliance with the terms of Paragraph 5, supra. The quarterly fee payable to LRPRA shall be accompanied by a complete and accurate written statement showing the Basic Subscriber Revenues of Grantee for the quarter upon which the computation of the fee accompanying such statement is made. 12. ADMINISTRATIVE FILINGS: Grantee covenants and agrees to submit promptly to LRPRA copies of any and all filings, petitions, applications, rulings, certificates, documents or correspondence which it sends to or receives from the Federal Communications Commission, the Securities and Exchange Commission, the Commonwealth of Virginia, Prince William County or any other Federal, State, county, city, municipal or administrative office, agency, commission or organization, in connection with or affecting in any way whatsoever the installation, operation or maintenance of the cable television system. 13. PERMITS AND FEES: Grantee covenants and agrees to file for and obtain, at its own cost and expense, any and all permits, licenses, certificates, notices and approvals from the appropriate governmental and non-governmental authorities which -13- 21 are or may be necessary to carry out and complete the installation, operation and maintenance of the cable television system during the term of this Agreement. Grantee further covenants and agrees to pay any and all fees, levies, taxes, charges, costs or expenses imposed by these governmental and nongovernmental authorities in connection therewith. 14. COMPLIANCE WITH LAWS: Grantee covenants and agrees that the installation, operation and maintenance of the cable television system shall comply strictly with the provisions, terms, conditions and requirements of any and all applicable Federal, State, county, city, municipal or other governmental statutes, codes, acts, ordinances, rules, regulations and requirements. Grantee covenants and agrees to protect, indemnify and hold LRPRA harmless from any an all claims, loss, cost or expense suffered by LRPRA by reason of the nonobservance or alleged violation of any applicable laws by Grantee. 15. INDEMNIFICATION: Grantee covenants and agrees to protect, indemnify and hold LRPRA harmless form any and all claims, demands, suits, complaints and legal proceedings of every kind for damages to property or injuries to, including the death of, persons, which may be brought against LRPRA or any of its officers, directors, employees or agents, in any way arising out of or incident to the installation, operation or maintenance of the cable television system by Grantee under this Agreement, irrespective of whether such claims are based upon the relationship of master and servant, principal and agent, third-party or otherwise, except where such claims are based upon the -14- 22 sole gross negligence or willful misconduct of LRPRA or its officers, directors, employees or agents. Upon receipt of written notice from LRPRA, Grantee shall defend all such claims on LRPRA's behalf and shall bear all costs and expenses, including attorney's fees, incident thereto. 16. INSURANCE: Grantee covenants and agrees to purchase and maintain the following insurance policies or coverage during the entire term of this Agreement, containing, where applicable, waivers of subrogation in favor of LRPRA, with a reputable insurance carrier authorized to transact business in Virginia: (1) motor vehicle liability insurance, with a minimum coverage of $500,000.00 per person, $1,000,000.00 per occurrence and $250,000.00 for property damage; (2) comprehensive public liability insurance, with a minimum coverage of $500,000.00 per person, $1,000,000.00 per occurrence and $250,000.00 for property damage; and (3) unemployment and workmen's compensation insurance in accordance with all statutes, codes, acts, ordinances, regulations and requirements applicable in the Commonwealth of Virginia. Certificates of the above insurance coverage shall be filed with LRPRA before any of the construction work contemplated hereunder shall begin. Grantee further covenants and agrees to notify LRPRA immediately of any actual or anticipated cancellation of or change in this insurance coverage and to submit new certificates of insurance to LRPRA as soon as they are available. In the event that Grantee fails, refuses or neglect to obtain all or any portion of the above insurance coverage or fails to notify LRPRA immediately of any cancellation of or -15- 23 change in this coverage, LRPRA may cancel the remaining term of this Agreement under the provisions of Paragraph 18, infra, or, at its own option, LRPRA may obtain such insurance coverage on Grantee's behalf and charge any and all premiums, costs or expenses associated therewith directly to Grantee. 17. REPRESENTATIONS AND WARRANTIES BY LRPRA: It is expressly understood and agreed by Grantee that neither LRPRA, nor any of its officers, directors, employees, agents or members, shall be bound by any representations, warranties, assurances, inducements or statements to Grantee other than those set forth in this Agreement. It is further expressly understood and agreed by Grantee that neither LRPRA, nor any of its officers, directors, employees, agents or members, has made or given any such representations, warranties, assurances, inducements or statements to Grantee with respect to the interpretation, meaning, effect or enforceability of the provisions of the Declaration of Covenants, Conditions and Restrictions, dated March 29, 1972 and recorded among the land records of Prince William County, Virginia in Deed Book 625 at page 443, or with respect to the condition of the Property or its suitability for the installation, operation or maintenance of the cable television system. 18. RIGHT OF TERMINATION: In the event of any material breach by Grantee of the terms and provisions of this Agreement, LRPRA shall have the right to terminate this Agreement as its sole and exclusive remedy hereunder. -16- 24 19. TRANSFER OF OWNERSHIP: During the first seven (7) years of the term of this Agreement, Grantee will not sell or transfer its rights in the cable television system (other than to mortgage the whole of its system of any part thereof) without the prior approval of the Board of Directors of LRPRA of such transfer; provided, however, that such approval shall not be unreasonably withheld. LRPRA acknowledges and consents to Grantee's assignment of all rights and obligations hereunder to an entity to be formed by Grantee or any subsidiary thereof, specifically for the purpose of installing and operating a cable television system in Lake Ridge. If any time after seven (7) years from the date of this Agreement, Grantee desires to sell its cable television system, Grantee shall notify the Board of Directors of LRPRA of its desire to sell the cable system, and LRPRA shall have the non-exclusive right, for a period of sixty (60) days following notice to LRPRA, to submit a bid to Grantee to purchase the cable television system. If Grantee does not accept the bid offered by LRPRA, Grantee shall nevertheless consider any suggestions of the Board of Directors of LRPRA communicated in writing by the Board to Grantee concerning negotiations with other potential purchasers of the cable system, but such suggestions shall not be binding upon grantee. 20. PROTECTION OF PRIVACY: Grantee shall use its best efforts, at all times during the term of this Agreement, to protect, respect and observe the right of privacy of its customers. This Paragraph is not intended to prohibit the -17- 25 transmission or reception of any signal used solely for the control, measurement or testing of the technical performance of the cable television system. 21. INDEPENDENT CONTRACTOR: It is expressly understood and agreed by the parties that nothing contained in this Agreement shall be construed as creating a relationship of employer and employee between LRPRA and Grantee. Grantee covenants and agrees that in the performance of its duties and obligations under this Agreement, Grantee does and shall act as an independent contractor, free from any domination or control by LRPRA in the manner in which the work contemplated hereunder shall be done. 22. WAIVER: It is expressly understood and agreed by the parties that the waiver by LRPRA of any breach by Grantee of any of the provisions contained in this Agreement shall not operate and shall not be construed as a waiver by LRPRA of any subsequent breach thereof by Grantee. 23. NOTICE: Whenever written notice is required to be given under any provision of this Agreement, it shall be mailed by certified mail, return receipt requested, and shall be sent to: A. LRPRA: Lake Ridge Parks and Recreation Association, Inc. P.O. Drawer C Occoquan, Virginia 22125 Attn: Kenneth O. Thompson, President B. Grantee: Weaver Bros. Management Corp. 5530 Wisconsin Avenue Chevy Chase, Maryland 20815 Attn: Donald G. West Walton W. Sanderson -18- 26 24. SEVERABILITY: If any term, provision, section, sentence, clause, phrase or portion of this Agreement should be declared invalid, unenforceable, illegal or unconstitutional by any court of competent jurisdiction or administrative agency, such term shall be deemed a severable, separate, distinct and independent provision and shall not affect the validity of the remaining portions of this Agreement in any way, except as provided herein. 25. APPLICABLE LAW: This Agreement is being executed and delivered within the confines of the Commonwealth of Virginia and shall be interpreted, construed and enforced in accordance with the laws of the Commonwealth of Virginia. 26. AMENDMENT: This Agreement, including the Exhibits attached hereto, contains the entire agreement between the parties and may not be amended, altered, modified or otherwise changed, other than changes in the Proposal which do not substantially affect the standards of operation of the cable television system, unless such amendment, alteration, modification or change is specified in writing, approved by the Board of Directors of LRPRA, and signed by the authorized representatives of both LRPRA and Grantee. 27. RELATIONSHIP BETWEEN PARTIES: The parties hereto are not and shall not be considered as joint venturers, partners or agents of each other, and no party shall have the power to bind or obligate the other. -19- 27 28. CAPTIONS: The captions of this Agreement are for the convenience of the parties and shall not be considered a material part hereof. IN WITNESS WHEREOF, we have executed this Agreement and set our hands and seals thereto on the date and year first written above: ATTEST: LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC. By: /s/ EDNA M. WAY By: /s/ KENNETH O. THOMPSON, -------------------------------- ------------------------------ Corporate Secretary Kenneth O. Thompson, President
CORPORATE SEAL ATTEST: WEAVER BROS. MANAGEMENT CORP. GRANTEE By: /s/ DONALD WARD By: /s/ WALTON W. SANDERSON -------------------------------- ------------------------------ Corporate Secretary Walton W. Sanderson, Senior Vice President
CORPORATE SEAL -20- 28 STATE OF VIRGINIA COUNTY OF ARLINGTON, to-wit: I, undersigned, a Notary Public in and for the State and County aforesaid, do hereby certify that KENNETH O. THOMPSON, who holds the office of President of LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC., and who is authorized to execute the foregoing document on behalf of the corporation, has personally appeared before me in my County aforesaid and acknowledged the same before me this 12th day of January, 1982. My Commission Expires: August 6, 1984 /s/ ANNE M. BOSCHINI ------------------------------- Notary Public STATE OF VIRGINIA COUNTY OF ARLINGTON, to-wit: I, undersigned, a Notary Public in and for the State and County aforesaid, do hereby certify that WALTON W. SANDERSON, who holds the office of Senior Vice President of WEAVER BROS MANAGEMENT CORP., and who is authorized to execute the foregoing document on behalf of the corporation, has personally appeared before me in my County aforesaid and acknowledged the same before me this 12th day of January, 1982. My Commission Expires: August 6, 1984 /s/ ANNE M. BOSCHINI ------------------------------- Notary Public -21- 29 [LAKE RIDGE LETTERHEAD] March 16, 1989 Mr. Troy Fitzhugh Columbia Cable 4391 Dale Boulevard Woodbridge, Va. 22193 Dear Mr. Fitzhugh As requested, I am enclosing a copy of the document by which Columbia Associates effected its execution of the Lake Ridge Cable/LRPRA, Inc. agreement as amended by the LRPRA, Inc. resolution. If you have any questions or need additional information, please call. Thank you for your time and attention in this matter. Very truly yours, /s/ MARTHA KACZMARSKYJ Martha Kaczmarskyj Assistant Manager Enclosure 30 MEMORANDUM OF AGREEMENT THIS MEMORANDUM OF AGREEMENT ("Memorandum") is made this 22nd day of March, 1982, between LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC., a non-profit Virginia corporation (hereinafter referred to as "LRPRA"), and WEAVER BROS. MANAGEMENT CORP., a Maryland corporation (hereinafter referred to as "Grantee"). RECITALS: 1. LRPRA is a non-profit Virginia corporation created under the terms of a certain Declaration of Covenants, Conditions and Restrictions, dated March 29, 1972, and recorded among the land records of Prince William County, Virginia, in Deed Book 625 at page 443 (hereinafter referred to as the "Declaration"). 2. Under the terms of the Declaration, LRPRA was granted certain ownership interests in a certain parcel of real property made subject to the Declaration therein, located in Occoquan Magisterial District, Prince William County, Virginia, and containing approximately 2161.70398 acres of land, as described with more particularity in Exhibit A hereto (hereinafter referred to as the "Property"). 3. Article IV, Section 2.S. of the Declaration created certain blanket utility easements upon, across, over and under the Property for ingress, egress, installation, replacement, repair and maintenance of utility and service lines and systems, including, but not limited to, television, cable and communication lines and systems, subject to the approval, authorization and consent of the Board of Directors of LRPRA. 4. Grantee has obtained the approval, authorization and consent of LRPRA to install, maintain and operate a cable television system on the Property and to use the above-described blanket utility easements upon, across, over and under the Property for ingress, egress, installation, replacement, repair and maintenance of utility and services lines and systems in connection therewith, pursuant to the terms, conditions, and restrictions contained in the Agreement executed 31 by and LRPRA and Grantee on January 15, 1982 (the "Agreement"). Now therefore, the parties do execute this Memorandum to set forth certain of the terms of the Agreement as follows: 1. A. In consideration of the mutual covenants and undertakings provided in the Agreement, LRPRA approved, authorized and consented to the use by Grantee of the blanket utility easements created by Article IV, Section 2.S. of the Declaration of Covenants, Conditions and Restrictions, dated March 29, 1972, and recorded among the land records of Prince William County, Virginia, in Deed Book 625, at page 443, upon, across, over and under the Property for ingress, egress, installation, replacement, repair and maintenance of utility and service lines and systems, in connection with the installation, operation and maintenance of the cable television system contemplated under the terms of the Agreement (hereinafter referred to as the "cable television system"). LRPRA further covenanted and agreed that during the term of the Agreement, it shall not approve, authorize or consent to the use of these said blanket utility easements by any other person, firm or corporation for the purpose of installing, operating or maintaining a similar or competing cable television system, without the prior written approval of Grantee, in its sole and absolute discretion. B. In consideration of the mutual covenants and under takings provided in the Agreement, LRPRA granted to Grantee for the term of the Agreement, the exclusive right and authority to erect, install, construct, reconstruct, equip, own, test, replace, repair, use, maintain, operate and dismantle cable television and communication lines and systems within the confines of the Property, subject to the terms and conditions set forth in the Agreement. LRPRA further covenanted and agreed that during the term of the Agreement, it shall not grant to any other person, firm or corporation the exclusive or non-exclusive right to install, operate or maintain a 2 32 similar or competing cable television system within the confines of the Property, without the prior written approval of Grantee, in its sole and absolute discretion. C. No provision of the Agreement shall alter or affect Grantee's ownership, during the term of the Agreement or upon any termination thereof, of all cables, equipment, facilities, fixtures and improvements installed, constructed or maintained by Grantee in connection with its cable television system. D. The Agreement constituted approval by the Board of Directors of LRPRA of the installation within the easements, as described in Paragraph 1, supra, of cable television and communication lines and systems at Lake Ridge. E. The term of the Agreement is an initial period of fifteen (15) years from the date of execution thereof. The Agreement may be renewed for an additional fifteen (15) year term upon the terms and conditions contained herein. 2. The agreements between LRPRA and Grantee are more fully set forth and defined in the Agreement. In the event of any inconsistency between the terms of the Agreement and this Memorandum, the terms of the Agreement shall prevail. IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of Agreement as of the day and year first above written. LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC. By: /s/ KENNETH O. THOMPSON -------------------------------- ATTEST: /s/ MARGUERITA J. SMITH - ---------------------------- WEAVER BROS. MANAGEMENT, INC. By: /s/ WALTON W. SANDERSON -------------------------------- ATTEST: /s/ DIANNA M. BELGARD - ---------------------------- Assistant Secretary 3 33 STATE OF MARYLAND COUNTY OF MONTGOMERY to-wit: I, the undersigned, a Notary Public in and for the State and County aforesaid, do hereby certify that KENNETH O. THOMPSON and MARGUIRITA J. SMITH, who are President and Director, respectively of LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC., and whose names are signed to the foregoing Memorandum of Agreement bearing date on the 22nd day of March, 1982, have acknowledged the same before me in my State and County aforesaid. GIVEN under my hand and seal this 23rd day of April, 1982. /s/ ROXANNE McMICHAEL ----------------------------- Notary Public My commission expires: July 1, 1982 STATE OF MARYLAND COUNTY OF MONTGOMERY, to-wit: I, the undersigned, a Notary Public in and for the State and County aforesaid, do hereby certify that WALTON W. SANDERSON and DIANNA M. BOLYARD, who are Senior Vice President and Assistant Secretary, respectively of WEAVER BROS. MANAGEMENT, INC., and whose names are signed to the foregoing Memorandum of Agreement bearing date on the 22nd day of March, 1982, have acknowledged the same before me in my State and County aforesaid. GIVEN under my hand and seal this 14th day of April, 1982. /s/ ROXANNE McMICHAEL ----------------------------- Notary Public My commission expires: July 1, 1982 4 34 LAKE RIDGE PARKS AND RECREATION ASSOCIATION, INC. CERTIFIED RESOLUTION The undersigned certifies that she is the Secretary of Lake Ridge Parks and Recreation Association, Inc., a corporation duly organized and existing under the laws of the State of Virginia, and that as such she is authorized to execute this Certificate, and further certifies that the following Resolution was duly adopted by unanimous vote at a special meeting of the Board of Directors of Lake Ridge Parks and Recreation Association, Inc., held on April 23, 1985, in accordance with the Articles of Incorporation and Bylaws with all amendments thereto, of Lake Ridge Parks and Recreation Association, Inc. (LRPRA); and that such Resolution remains in full force and effect: WHEREAS, Lake Ridge Cablevision Limited Partnership has notified LRPRA of its intention to sell and transfer its interest in the Lake Ridge cable television system (System) to Columbia Associates, L.P. WHEREAS, under the agreement dated January 15, 1982, between LRPRA and Weaver Bros. Management Corporation (Agreement), the sale or transfer of rights in the System is subject to the prior approval of the Board of Directors of LRPRA of the transfer, provided that such approval shall not be unreasonably withheld, NOW, THEREFORE, BE IT RESOLVED that the Board of Directors of Lake Ridge Parks and Recreation Association, Inc., approve the sale of Lake Ridge Cablevision Limited Partnership to Columbia Associates, L.P. of all right, title, and interest in the System, including all rights under the Agreement between LRPRA and Weaver Bros. Management Corporation, and that the President of LRPRA is hereby authorized and directed to execute and deliver on behalf of LRPRA any and all such further documentation as may be necessary to carry out the terms of this resolution; provided, that this resolution of approval is subject to the following terms and conditions: 35 1. Columbia Associates, L.P. will furnish to LRPRA and to all subscribers to the System not less than ninety (90) days advance notice of any increase in rates for cable service to Lake Ridge, during its ownership of the System. 2. Columbia Associates, L.P. will not during the term of the Agreement sell or transfer its rights in the System without the prior approval of the Board of Directors of LRPRA of such transfer, which approval shall not be unreasonably withheld. Paragraph 19 of the Agreement shall be amended accordingly. 3. Columbia Associates, L.P. will furnish to LRPRA copies of any financial statement or other books and records provided to Prince William County under the Prince William County Cable Television Ordinance, at the time such materials are furnished to the County; and will further continue all disclosure of all books and records provided for under the Agreement. Paragraph 11 of the Agreement shall be amended accordingly. 4. Columbia Associates, L.P. will comply with the requirements of the Prince William County Cable Television Ordinance requiring repairs to be made within twenty-four (24) hours of receipt of notification of the need therefor. Paragraph 10 of the Agreement shall be amended accordingly. 5. Right of termination under Paragraph 18 of the Agreement shall remain in effect during the term of the Agreement. 6. Restoration and clean-up provisions of Paragraph 9 of the Agreement shall remain in effect during the term of the Agreement. 36 7. Except as provided herein, all terms and conditions of the Agreement shall remain in full force and effect as between LRPRA and Columbia Associates, L.P. 8. Columbia Associates, L.P. will execute as a principal, and assume all rights, duties, and obligations under, the Agreement, and will relieve Weaver Bros. Management Corporation and Lake Ridge Cablevision Limited Partnership thereof; and Columbia Associates, L.P. and LRPRA will execute an addendum to the Agreement reflecting the terms and conditions set forth in this Resolution. WITNESS the seal of Lake Ridge Parks and Recreation Association, Inc., and the signature of the undersigned this 23rd day of April, 1985. /s/ KENNETH O. THOMPSON /s/ MARGUERITA J. SMITH - ------------------------------- ------------------------------ Kenneth O. Thompson, President Marguerita J. Smith, Secretary 37 ASSIGNMENT AND ASSUMPTION OF LEASE, EASEMENT, AND OTHER RIGHTS This Assignment and Assumption of Lease, Easement, and Other Rights ("Assignment") is made the 30th day of April, 1985, by and among LAKE RIDGE CABLEVISION LIMITED PARTNERSHIP, a Virginia limited partnership having offices in Woodbridge, Virginia ("Seller"), WEAVER BROS. MANAGEMENT CORP., a Maryland corporation ("Weaver"), and COLUMBIA ASSOCIATES, L.P., a Delaware limited partnership having an address c/o Columbia International, Inc., 60 Round Hill Road, Greenwich, Connecticut ("Buyer"). Seller, Buyer, and Weaver entered into an "Agreement to Purchase" dated April 4, 1985, the provisions and defined terms of which are hereby incorporated herein by reference. Seller now desires to transfer certain assets of Seller to Buyer in accord with the Agreement to Purchase. Although Weaver claims no interest in and to the assets transferred by Seller to Buyer other than by virtue of Weaver's interest as a general partner in Seller, Weaver has agreed to join in the execution of this Assignment and Assumption Agreement for the purpose of acknowledging to Buyer that it claims no right, title, or interest in and to these assets and to convey to Buyer any right, title, and interest to the assets transferred hereby which Weaver may have. In consideration of good and valuable consideration paid pursuant to the Agreement to Purchase, the receipt and adequacy of which is hereby acknowledged, and subject to and 38 in further consideration of the terms and conditions of the Agreement to Purchase, each of Seller and Weaver hereby sells, transfers, conveys, assigns, and delivers to Buyer all of its right, title, and interest in and to all easement, lease, or other rights (hereinafter collectively referred to as the "Contracts") used in the operation of the System transferred pursuant to the Agreement to Purchase. Each of Seller and Weaver warrants that this transfer is effective to vest good and marketable title to the Contracts in Buyer and that the same are free and clear of all claims, liens, liabilities, and encumbrances whatsoever. These easements, leases, and other rights include, but are not limited to, those set forth on Exhibit A to this Assignment, a copy of which is attached hereto and hereby incorporated herein. Except as otherwise provided in the Agreement to Purchase, Buyer, as evidenced by its execution and acceptance of this Assignment, agrees to assume and perform all of the obligations of Seller under or associated with each of the agreements, leases, easements, or other rights assigned to Buyer by Seller hereunder arising, accruing, or attributable to periods from and after, but not prior to, the date of this Assignment. The Board of Directors of Lake Ridge Parks and Recreation Association, Inc. ("LRPRA"), by resolution dated April 23, 1985, unanimously consented to the Assignment by seller to Buyer of Seller's right, title, and interest under the agreement referred to on Exhibit A as the LRPRA Agreement. A certified copy of this resolution is attached hereto and incorporated 2 39 herein as Exhibit B. Except as otherwise provided in the Agreement to Purchase, Buyer, as evidenced by its acceptance of this Assignment, hereby accepts and consents to the terms and conditions set forth in the resolution; executes and adopts the LRPRA Agreement as principals thereto; and agrees to assume all rights, duties, and obligations of Seller and Weaver Bros. Management Corp. under the LRPRA Agreement arising, accruing, or attributable to periods from and after, but not prior to, the date of this Assignment. IN WITNESS WHEREOF, Buyer, Seller, and Weaver have executed this Assignment on the date first set forth above. SELLER: LAKE RIDGE CABLEVISION LIMITED PARTNERSHIP By: Weaver Bros. Management Corp., its general partner By: /s/ DONALD G. WEST ------------------------------ Donald G. West Executive Vice President BUYER: COLUMBIA ASSOCIATES, L.P., a Delaware limited partnership By: Columbia International, Inc., its general partner By: /s/ ROBERT M. ROSENCRANS ------------------------------ Robert M. Rosencrans President WEAVER: WEAVER BROS. MANAGEMENT CORP., a Maryland corporation By: /s/ DONALD G. WEST ------------------------------ Donald G. West, Executive Vice President 3 40 STATE OF VIRGINIA COUNTY OF FAIRFAX, to-wit: I, the undersigned Notary Public, in the state and county aforesaid, whose commission expires on the 4th day of October, 1988, do hereby certify that DONALD G. WEST, Executive Vice President of Weaver Bros. Management Corp., the general partner of LAKE RIDGE CABLEVISION LIMITED PARTNERSHIP, whose name is signed to the foregoing Assignment appeared before me and personally acknowledged the same in my jurisdiction aforesaid. GIVEN under my hand and seal this 30th day of April, 1985. /s/ JEAN M. LYON --------------------- Notary Public STATE OF VIRGINIA COUNTY OF FAIRFAX, to-wit: I, the undersigned Notary Public, in the state and county aforesaid, whose commission expires on the 4th day of October, 1988, do hereby certify that Robert M. Rosencrans, President of Columbia International, Inc., the general partner of COLUMBIA ASSOCIATES, L.P., whose name is signed to the foregoing Assignment appeared before me and personally acknowledged the same in my jurisdiction aforesaid. GIVEN under my hand and seal this 30th day of April, 1985. /s/ JEAN M. LYON --------------------- Notary Public STATE OF VIRGINIA COUNTY OF FAIRFAX, to-wit: I, the undersigned Notary Public, in the state and county aforesaid, whose commission expires on the 4th day of October, 1988, do hereby certify that DONALD G. WEST, Executive Vice President of WEAVER BROS. MANAGEMENT CORP., whose name is signed to the foregoing Assignment appeared before me and personally acknowledged the same in my jurisdiction aforesaid. GIVEN under my hand and seal this 30th day of April, 1985. /s/ JEAN M. LYON --------------------- Notary Public 4 41 EXHIBIT A (a) The Agreement dated January 15, 1982, by and between Lake Ridge Parks and Recreation Association, Inc. ("LRPRA"), and Weaver Bros. Management Corp. (the "LRPRA Agreement") evidenced by a Memorandum of Agreement dated March 22, 1982, and recorded among the land records of Prince William County, Virginia, on May 4, 1982, in Deed Book 1177, at page 1248. The Assignment Agreement dated August 5, 1982, by which Weaver Bros. Management Corp. assigned its rights under the foregoing Agreement to Lake Ridge Cablevision Limited Partnership. The Assignment Agreement was recorded on October 2, 1982, among the land records of Prince William County, Virginia, in Deed Book 1190, at page 1758. (b) The Agreement dated October 24, 1983, by and between Paul C. Kincheloe, Jr., Trustee, and Aman Kincheloe Partnership, a Virginia general partnership, and Lake Ridge Cablevision Limited Partnership. (c) The Easement Agreement dated August 25, 1982, by and between Thousand Oaks Townhouse Association, a Virginia corporation, and Lake Ridge Cablevision Limited Partnership, and recorded among the land records of Prince William County, Virginia, on October 1, 1982, in Deed Book 1190, at page 1811. (d) The Lease Agreement dated August 10, 1982, by and between Occoquan-Woodbridge/Dumfries-Triangle Sanitary District and Lake Ridge Cablevision Limited Partnership and evidenced by a Memorandum of Lease dated December 6, 1982, executed by both parties and recorded among the land records of Prince William County, Virginia, on January 20, 1983, in Book 1200, at page 1845. (e) The Lease Agreement dated August 6, 1982, by and between Ridge Development Corp., a Virginia corporation, and Lake Ridge Cablevision Limited Partnership, as amended by a First Amendment to Lease Agreement dated December 6, 1982, executed by both parties, and evidenced by a Memorandum of Lease dated December 6, 1982, executed by both parties and recorded among the land records of Prince William County, Virginia, on January 20, 1983, in Book 1200, at page 1849. (f) The Easement dated June 24, 1982, by and between Pinewood Forest Condominium Association and Lake Ridge Cablevision Limited Partnership. (g) The Easement Agreement, dated October 24, 1983, by and between the Eighth Section Community Association of Rollingwood Village, a Virginia non-stock corporation, and Lake Ridge Cablevision Limited Partnership, a Virginia limited partnership, and recorded among the land records of Prince William County, Virginia, on December 5, 1983, in Deed Book 1243, at page 0674. 5 42 (h) The Easement Agreement dated October 24, 1983, by and between the First Section Community Association of Rollingwood Village, a Virginia non-stock corporation, and Lake Ridge Cablevision Limited Partnership, a Virginia limited partnership, and recorded among the land records of Prince William County, Virginia, on December 5, 1983, in Deed Book 1243, at page 0661. (i) The Easement Agreement dated September 15, 1984, by and between Section Six Rollingwood Homeowners Association, a Virginia non-stock corporation, and Lake Ridge Cablevision Limited Partnership, a Virginia limited partnership, and recorded among the land records of Prince William County, Virginia, on February 1, 1985, in Deed Book 1301, at page 3621. (j) The Easement dated October 21, 1982, by and between Rockledge Clusters Condominium Association and Lake Ridge Cablevision Limited Partnership, and recorded among the land records of Prince William County, Virginia, on April 26, 1985, in Deed Book 1312, at page 1653. 6 EX-10.6.61 8 FRANCHISE PRINCE WILLIAM COUNTY, VA 1 EXHIBIT 10.6.61 ACCEPTANCE OF CABLE FRANCHISE BY JONES COMMUNICATIONS OF VIRGINIA, INC. Douglas N. Bourne, Cable TV Coordinator Office of Executive Management 1 County Complex Prince William, VA 22192 RE: Transfer of Cable Television License from Columbia Associates L.P. dba Columbia Cable to Jones Communications of Virginia, Inc. Dear Mr. Bourne: Pursuant to the provision of 5.5-1 et seq. of the Prince William County Code's Cable television ordinance, this letter is for the purpose of Jones Communications of Virginia, Inc.'s formal acceptance of the license as required by 5.5-6(a) of the Prince William County Code. The undersigned, as an officer of Jones Communications of Virginia, Inc. ("JCV"), and authorized to act on its behalf, has carefully read and clearly understands the terms and conditions of 5.5-1 et seq. of the Prince William County Code and of the license ordinance adopted by the Board (ord.#85-424) and agrees that JCV will strictly comply with both their terms. JCV hereby acknowledges and concedes the validity of the terms and conditions of the cable television ordinance in their entirety. Notwithstanding the terms of the license ordinance, JCV hereby acknowledges and concedes that it is at all times subject to the lawful exercise of the County's police power, and acknowledges the Board of County Supervisors' right to adopt such other ordinances or amendments as it deems necessary to protect the public health, safety and welfare. JCV fully understands that failure to comply with any section of the cable television ordinance or of the license ordinance may be grounds for revocation of the license. Sincerely, JONES COMMUNICATIONS OF VIRGINIA, INC. SIGNED: /s/ Elizabeth Steele ---------------------------- Print name: Elizabeth Steele ---------------------------- Title: Vice President ---------------------------- Date: 12/12/95 ---------------------------- 2 PRINCE WILLIAM COUNTY CODE CONSUMER AFFAIRS AND CABLE TV 3 Chapter 5.5 CABLE TELEVISION* Art. I. In General, sections 5.5-1--5.5-3 Art. II. Application for License, section 5.5-4 Art. III. Grant of License, sections 5.5-5--5.5-7 Art. IV. Consumer Protection and Subscriber Privacy, sections 5.5-8--5.5-15 Art. V. License Fee, section 5.5-16 Art. VI. Administration and Enforcement, sections 5.5-17--5.5-21 Art. VII. Renewal and Revocation of Licenses, sections 5.5-22--5.5-24 Art. VII. Creation of License Service Areas, section 5.5-25 Art. IX. Miscellaneous, sections 5.5-26--5.5-28
ARTICLE I. IN GENERAL Sec. 5.5-1. Short title; purpose; authority. (a) This chapter shall be known and may be cited as the "Prince William County Cable Television Ordinance." (b) This chapter is intended to provide for the licensing and regulation of one (1) or more cable television systems, and to impose a fee on the privilege of operating such system or systems, in the unincorporated area of Prince William county, Virginia. (c) This chapter is enacted pursuant to sections 15.1-23.1 and 15.1-512.1, Virginia Code Annotated. (No. 84-829, 10-23-84) SEC. 5.5-2. DEFINITIONS. As used in this chapter, the following words and phrases shall have the meanings herein specified, except where the context is clearly to the contrary. Consistent with context, words used in the plural contemplate and include the singular, and words used in the singular contemplate and include the plural. Context notwithstanding, the word "shall" is mandatory, never directory. Basic subscriber service shall mean the distribution to subscribers of signals over a cable television system on all channels except: (1) Those for which a per-program or per-channel charge is made; (2) Those intended for reception by equipment other than a television broadcast receiver; - --------------- *Editor's note--Res. No. 84-829, enacted Oct. 23, 1984, amended the Code by adding thereto a new Ch. 5.1 sec.sec. 5.1-1--5.1-28. In order to provide for the future addition of chapters, Ch. 5.1 was redesignated by the editor as Ch. 5.5, and the sections were also redesignated accordingly; otherwise, the chapter is included herein substantially as enacted. Cross references--Consumer protection, Ch. 6; emergency services, Ch. 7; licenses generally, Ch. 11; taxation, Ch. 26; telephones, Ch. 28. Supp. No. 16 267 4 sec. 5.5-2 PRINCE WILLIAM COUNTY CODE (3) Two-way services; (4) Services, the delivery of which are regulated or pre-empted by the Federal Communications Commission; and (5) Emergency services. Board shall mean the board of county supervisors of Prince William County, Virginia. Cable television system shall mean a community antenna television system as defined by section 15.1-23.1, Virginia Code Annotated. County shall mean Prince William County, Virginia. County executive shall mean the chief executive officer of the county, appointed by the board, or his designee so indicated in writing. Fair market value shall mean the price that property will command when sold by one who is under no need to sell, a willing seller, and bought by one who is under no need to buy, a willing buyer. Federal Communications Commission shall mean the federal agency established under the Communications Act of 1934, as amended, or any successor agency. Gross revenues shall mean any and all revenues derived from the operation of a cable television system in the county, including but not limited to monthly or periodic charges for service, installation fees and reconnect fees, revenues derived from per-program or per-channel charges, studio and equipment rentals, and subscriber and advertising revenues. License shall mean the nonexclusive right granted hereunder to construct, install, maintain, and operate a cable television system or systems in any unincorporated area of the county. It does not include any other license or permit for the privilege of conducting a business in the county, as may be required by other county ordinances. License ordinance shall mean an ordinance adopted pursuant to section 5.5-4 of this chapter, formally granting a license to construct, install, maintain, or operate a cable television system in the county. License service area shall mean the geographical area within the unincorporated area of the county for which a nonexclusive right has been granted hereunder to construct, install, maintain, and operate a cable television system. Licensee shall mean a person granted a license hereunder. Person shall mean and include any individual, firm, partnership, cooperative, nonprofit membership corporation, joint venture, association, corporation, estate, trust, business trust, trustee in bankruptcy, receiver, auctioneer, syndicate, assignee, club, society, or any other group or combination acting as a unit. Public way shall mean any highway, street, road, alley, way, easement, right-of-way, place, or other right or interest in real property, belonging to any public body, including the county, the commonwealth, or any subdivision, agency, department, or authority of either. 268 5 CABLE TELEVISION sec. 5.5-4 Subscriber shall mean any person who receives, or contracts with a licensee to receive, basic subscriber service, or one (1) or more of such other services as may be offered by the licensee's cable television system, or both. (No. 84-829, 10-23-84) Sec. 5.5-3. Requirement of license; prohibition on expansion. (a) No person shall construct, install, maintain, expand, enlarge, or otherwise increase, or operate a cable television system through, on, over, or under any public way in the unincorporated area of the county without first having applied for, been granted, and accepted a license under the provisions hereof; provided, however, that any person operating a cable television system in the county on the effective date of this chapter may continue operating such existing system as it is then constituted, without further extension of service to any additional subscriber if such extension of service requires the crossing or use of any public way. (b) Notwithstanding the permission granted hereby to continue operation of existing systems, board of supervisors Resolution No. 83-696, dated August 2, 1983, is expressly repealed upon the adoption of this chapter, and the permission granted thereby for the use of the public ways of the county for the purpose of providing cable television service is revoked, except as to those portions of existing systems grandfathered under the provisions of subsection (a) of this section. (No. 84-829, 10-23-84) ARTICLE II. APPLICATION FOR LICENSE Sec. 5.5-4. Application; fee; contents. (a) The board shall, by resolution, establish procedures and forms governing the invitation for, and submission, review, and evaluation of, written applications for a license. Each person applying for a license shall pay, by certified check to the order of "Prince William County," a nonrefundable fee in the amount of five hundred dollars ($500.00) to defray expenses incurred by the county in processing applications. In addition to such other information as the board may deem necessary or appropriate to include in the aforesaid resolution, all applications shall include, at a minimum, unless otherwise determined by the board: (1) A map delineating all areas to which cable service must be provided in accordance with the service extensions required by section 5.5-14 hereof. (2) A detailed statement of services proposed to be offered, including public, civic, or community services. (3) A schedule of initial rates, fees, and other charges to be established by the applicant. (4) Information sufficient to determine the character and business responsibility of the applicant, its financial, technical and other qualifications. (5) Full and true disclosure of the actual ownership of the applicant, including the identity of all principals and ultimate beneficial owners, however designated, specifi- 269 6 sec. 5.5-4 PRINCE WILLIAM COUNTY CODE cally including all stockholders of corporations (nominal and beneficial) owning more than one (1) percent of the issued and outstanding stock, and all partners of any general or limited partnership. (b) Submitted applications shall be amended only with the consent of the board. (c) Applications shall be signed by the applicant, or by a duly authorized representative of the applicant, evidence of whose authority shall be supplied with the application. (No. 84-829, 10-23-84) ARTICLE III. GRANT OF LICENSE Sec. 5.5-5. Form; nonexclusive term. (a) The board may, by individual ordinance adopted for the purpose, grant one (1) or more nonexclusive licenses, subject to the terms, conditions, and other provisions of this chapter. Such licenses shall be for a term of fifteen(15) years beginning with the date a written instrument accepting the license is filed with the county pursuant to this chapter. (b) Nothing in this chapter shall be deemed, construed, or applied to require the board to grant any license. Any decision or decisions of the board concerning the granting, or the refusal to grant, one or more licenses shall be final. (c) The license ordinance shall constitute the license, and shall include at a minimum a description of the area or areas to be served, the terms of any agreements which may be made between the county and licensee beyond the requirements of this chapter, and such other terms and conditions as shall be lawful and appropriate. (No. 84-829, 10-23-84) Sec. 5.5-6. Acceptance of license; police power, fee. (a) A license granted pursuant to this chapter shall not become effective unless and until accepted by written instrument filed with the county within thirty (30) days after the license ordinance has been adopted. Such instrument shall state that the licensee has carefully read and clearly understands the terms and conditions of this chapter and of the license ordinance, and agrees to strict compliance with both. By accepting a license, the licensee acknowledges and concedes the validity of the terms and conditions of this chapter and of the license ordinance in their entireties, at the time of adoption of the license ordinance. (b) By accepting a license granted pursuant to this chapter, the licensee acknowledges and concedes that, notwithstanding the terms of the license, it is at all times subject to the lawful exercise of the county's police power. The board hereby expressly reserves the right to adopt, in addition to this chapter and to the license ordinance, such other ordinances as it deems necessary to protect the public health, safety, or welfare, provided that such other ordinances are consistent with state and federal law and authorized by said police power. The board may adopt amendments to this chapter, provided that such amendments shall not deprive any licensee of rights which have vested during the license period. 270 7 CABLE TELEVISION sec. 5.5-10 (c) Upon accepting a license, the licensee shall pay to the county a fee in an amount set by resolution of the board, not to exceed one thousand dollars ($1,000.00). Such fee shall be nonrefundable, and shall be paid by a certified check to the order of "Prince William County." (No. 84-829, 10-23-84) Sec. 5.5-7. Filing with county. Unless otherwise expressly provided by resolution of the board, all materials herein required to be filed with the county shall be filed at an with the office of consumer affairs. (No. 84-829, 10-23-84) ARTICLE IV. CONSUMER PROTECTION AND SUBSCRIBER PRIVACY Sec. 5.5-8. Continuous, efficient service; pro rata refunds or credits. (a) The licensee shall provide continuous, efficient service, on a nondiscriminatory basis, in return for payment of its rates, fees, and other charges for service. Interruptions of service shall be for good cause only and for the shortest time possible. Planned interruptions of thirty (30) minutes or more shall be preceded by a least twenty-four (24) hours' advance notice to all subscribers and, to the extent feasible, shall occur during periods of minimum use of the cable television system. (b) In the event service to one-fourth ( 1/4) or more of the subscribers of any licensee is interrupted for more than twenty-four (24) consecutive hours, whether pre-planned or not, the licensee shall provide each such subscriber subject to such interruption with a pro rata credit or refund for the entire period of such interruption. (No. 84-829, 10-23-84) Sec. 5.5-9. Maintenance; complaint answering service; repairs. The licensee shall establish maintenance service capability enabling the prompt location and correction of system malfunctions, and shall make repairs promptly within twenty-four (24) hours of receipt of notification of the need therefor. The licensee shall provide a twenty-four-hour complaint answering service, and shall maintain adequate records of all complaints and requests for repairs, and their resolution, which records shall be open for public inspection. (No. 84-829, 10-23-84) Sec. 5.5-10. Local office; complaints; notice of procedures. (a) The licensee shall maintain an office within the license service area, or in the Cities of Manassas or Manassas Park, which shall be open and accessible to the public during normal business hours and which shall provide twenty-four-hour recording of subscriber complaints, including, but not limited to, billing errors, service disconnections, service loss, and equipment failure. Complaints other than those related to system malfunction addressed by section 5.5-9 shall be answered not later than the next business day after the complaint has been received, and corrective action shall be completed as soon as practical. Adequate records shall be made of all subscriber complaints, describing the nature of each complaint and showing 271 8 sec. 5.5-10 PRINCE WILLIAM COUNTY CODE when and what corrective action was completed. Such records shall be available to the public or to representatives of the board, during normal business hours, and shall be retained in the licensee's files for not less than three (3) years. Annual summaries of complaints shall be filed with the office of consumer affairs, not later than June thirtieth of each year. (b) Unresolved complaints, if any, shall be reported to the office of consumer affairs, in writing, within thirty (30) days after the end of each calendar year quarter. The nature and number of any unresolved complaints shall be taken into account by the board in considering whether to renew or to revoke a license. (c) Each licensee shall, at the time of entering into an agreement to provide cable service of any kind, inform every subscriber of the provisions of this article, and of the procedures which may be used to make complaints, requests for repairs, and to contest alleged billing errors. (d) Licensees serving more than one (1) license service area need provide a local office in only one (1) such area, or in either of the two (2) cities above. (No. 84-829, 10-23-84) Sec. 5.5-11. Notice of rate changes. Licenses shall give not less than thirty (30) nor more than ninety (90) days' prior written notice to each subscriber of any prospective increase in any rate, fee, or charge subject to local regulation. Increases made without such prior notice shall be void. (No. 84-829, 10-23-94) Sec. 5.5-12. Protection of subscriber information. (A)(1) At the time of entering into an agreement to provide any cable service or other service to a subscriber, and at least once a year thereafter, a cable operator shall provide notice in the form of a separate, written statement to such subscriber which clearly and conspicuously informs the subscriber of: (a) The nature of personally identifiable information collected or to be collected with respect to the subscriber and the nature of the use of such information; (b) The nature, frequency, and purpose of any disclosure which may be made of such information, including an identification of the types of persons to whom the disclosure may be made; (c) The period during which such information will be maintained by the licensee; (d) The times and place at which the subscriber may have access to such information in accordance with subsection (d); and (e) The limitations provided by this section with respect to the collection and disclosure of information by a licensee and the right of the subscriber under subsections (f) and (h) to enforce such limitations. In the case of subscribers who have entered into such an agreement before the effective date of this chapter, such notice shall be provided within one hundred eighty (180) days of such date, and at least once a year thereafter. (2) For purposes of this section, the term "personally identifiable information" does not include any record of aggregate data which does not identify particular persons. 272 9 CABLE TELEVISION sec. 5.5-12 (B)(1) Except as provided in paragraph (B)(2) of this subsection, no licensee shall use the cable system to collect personally identifiable information concerning any subscriber, without the prior written or electronic consent of the subscriber concerned. (2) A licensee may use the cable system to collect such information in order to: (a) Obtain information necessary to render a cable service or other service provided by the licensee to the subscriber; or (b) Detect unauthorized reception of cable communications. (C)(1) Except as provided in paragraph (C)(2), a licensee shall not disclose personally identifiable information concerning any subscriber without the prior written or electronic consent of the subscriber concerned. (2) A licensee may disclose such information if the disclosure is: (a) Necessary to render, or conduct, a legitimate business activity related to, cable service or other service provided by the licensee to the subscriber. (b) Subject to subsection (h), made pursuant to a court order authorizing such disclosure, if the subscriber is notified of such order by the person to whom the order is directed; or (c) A disclosure of the names and addresses of subscribers to any cable service or other service, if: 1. The licensee has provided the subscriber the opportunity to prohibit or limit such disclosure, and 2. The disclosure does not reveal, directly or indirectly, the: a. Extent of any viewing or other use by the subscriber of a cable service or other service provided by the licensee; or b. The nature of any transaction made by the subscriber over the cable system of the licensee. (D) A cable subscriber shall be provided access to all personally identifiable information regarding that subscriber which is collected and maintained by a licensee. Such information shall be made available to the subscriber at reasonable times and at a convenient place designated by such licensee. A cable subscriber shall be provided reasonable opportunity to correct any error in such information. (E) A licensee shall destroy personally identifiable information if the information is no longer necessary for the purpose for which it was collected and there are no pending requests or orders for access to such information under subsection (D) or pursuant to a court order. (F) Any person aggrieved by any act of a licensee in violation of this section may bring a civil action in accordance with the provisions of section 631 of the Cable Franchise Policy and Communications Act of 1984. (G) Nothing in this chapter shall be construed to prohibit the board from enacting or enforcing laws consistent with federal law for the protection of subscriber privacy. 273 10 sec. 5.5-12 PRINCE WILLIAM COUNTY CODE (H) A governmental entity may obtain personally identifiable information concerning a cable subscriber pursuant to a court order only if, in the court proceeding relevant to such court order: (1) The entity offers clear and convincing evidence that the subject of the information is reasonably suspected of engaging in criminal activity and that the information sought would be material evidence in the case; and (2) The subject of the information is afforded the opportunity to appear and contest such entity's claim. (No. 84-829, 10-23-84) SEC. 5.5-13. CONSUMER ACCESS TO CABLE SERVICE. (a) The owner of any multiple-unit residential or commercial building or manufactured home park may not prevent or interfere with the construction or installation of facilities necessary for a cable system, consistent with this section, if cable service has been requested by a lessee or owner (including a person legally entitled to occupy a unit in a cooperative project) of a unit in such building or park, provided that the owner of such property is justly compensated for any physical invasion of his property to provide such service, in accordance with this section. (b) The county executive is authorized to prescribe regulations to implement this section which provide: (1) That the safety, functioning, and appearance of premises and convenience and safety of other persons shall not be adversely affected by the installation or construction of the facilities necessary for extension of a licensee's cable system; (2) That the reasonable and just cost of the installation, construction, o peration, or removal of such facilities be borne by the licensee or subscriber, or a combination of both; (3) That the owner be justly compensated by the licensee for any taking or damage caused by the installation, construction, operation or removal of such facilities by the licensee; and (4) That methods be developed for determining just compensation under this section. In the event that a property owner declines to accept just compensation as established in accordance with regulations promulgated hereunder, and the county executive determines that it is necessary to effect the provisions of this section by other means, he is hereby authorized to initiate condemnation proceedings for the purposes hereof, and to request the county attorney to assist, or to retain qualified counsel approved by the county attorney for the purpose of conducting such proceedings, and to compensate such counsel from the proceeds of any license fee required under this chapter. (c) Any owner of such a multiple-unit building or park may not demand or accept payment from any licensee in exchange for permitting construction or installation necessary for a cable system on or within the premises in excess of any amount which constitutes just compensation as determined in accordance with regulations promulgated hereunder. 274 11 CABLE TELEVISION sec. 5.5-14 (d) In prescribing methods under subsection (b) for determining just compensation, the county executive shall give consideration to: (1) The extent to which the cable system facilities actually occupy the premises; (2) The actual long-term damage which the cable system facilitates may cost to the premises; (3) The extent to which the cable system facilities would interfere with the normal use and enjoyment of the premises; and (4) The enhancement in value of the premises resulting from the availability of cable service. (e) This section shall not apply to units which are customarily leased to a person for a period of less than thirty (30) days, or to units in a hospital. (f) This section shall not apply to any owner of a multiple unit residential or commercial building or manufactured home park who, in the opinion of the county executive, makes available to residents a diversity of information sources and services equivalent to those offered by the cable system authorized to provide cable service in the area in which such dwelling is located in accordance with regulations prescribed by the county executive (No. 84-829, 10-23-84) SEC. 5.5-14. SERVICE EXTENSIONS REQUIRED. (a) Except as may be otherwise authorized in the license ordinance, each licensee shall provide service to all continuous and contiguous areas where the number of occupied dwelling units meets or exceeds a density of fifty (50) dwelling units per mile of cable, such areas to be measured linearly from any point of existing service. Such service shall be extended as soon as practicable after the adoption of this chapter, and in any event upon request of any person residing within any area where the aforesaid density conditions exist. (b) In areas not meeting the aforementioned density of fifty (50) occupied dwellings per mile in which mandatory extension of service is provided, upon the request of fifty (50) percent of the owners of occupied dwelling units along the shortest and most direct feasible route from the nearest termination point of licensee's existing service to the dwelling of the last person requesting such nonmandatory extension, and within five hundred (500) feet on either side of such route, the licensee shall extend service to any such subscriber(s) upon their payment to the licensee of an amount equal to the proportional cost of such extension by such route, determined by multiplying the cost of such extension by a fraction with a denominator of fifty (50) and a numerator equal to fifty (50) less the density of occupied dwelling units along the route of such extension, and occupied dwellings within five hundred (500) feet of such route. (c) Nothing contained in this section shall be construed to require licensees to overbuild in any portion of a service area, and either mandatory or nonmandatory service extensions required hereby shall be provided by the licensee whose existing service terminates nearest to any occupied dwelling subject to either extension requirement. Nor shall this section be construed to preclude any person or group of persons from requesting nonmandatory connec- 275 12 sec. 5.5-14 PRINCE WILLIAM COUNTY CODE tion from any other licensee in the service area other than the nearest licensee, nor be construed to preclude voluntary overbuild in any area for which a license is held. (No. 84-829, 10-23-84) SEC. 5.5-15. SYSTEM DESIGN; CAPACITY. The licensee shall design, install, construct, operate and maintain the cable television system: (1) So as to provide high quality service, to meet or exceed the technical standards set forth in rules and regulations promulgated by the Federal Communications Commission regarding cable television, as such rules and regulations may from time to time be amended, or, in the absence of such rules and regulations, or federal pre-emption of the area, in full compliance with such technical standards as the board may, by ordinance, adopt, and the board hereby expressly reserves the right to adopt such standards; (2) So that signals are at all times within the limitations imposed by the technical standards established, and delivered to subscribers without material degradation in quality; and (3) For an audio override of all channels simultaneously, for use in case of public emergencies, or disasters. (No. 84-829, 10-23-84) ARTICLE V. LICENSE FEE SEC. 5.5-16. REQUIRED. (a) The licensee shall pay to the county for the duration of the license a license fee which shall be the sum of one dollar ($1.00) per year per basic subscriber to that licensee's system; provided, that in no event may such fee exceed five (5) percent of the annual gross revenues of the licensee. The number of subscribers upon which such fee shall be calculated shall be the number of basic subscribers to each system as of December 31st of each year. The fee shall be payable to the county in a single payment made not later than January 31st of each year. In the event that any license is granted to any cable operator after January 1, 1985, but before December 31, 1985, the licensee shall pay such license fee based on the number of basic subscribers to its system on December 31, 1984, and such fee shall be paid to the county within thirty (30) days of the grant of the license. (b) Notwithstanding subsection (a) of this section, the board reserves the right, at any time during which any license is in effect, to establish a different license fee in an amount then to be established by ordinance of the board, such license fee not to exceed five (5) percent of the licensee's gross revenues. The board may establish a lesser percentage without prejudice to its right to change the fee at any time, provided that the said fee does not exceed the foregoing five (5) percent limitation. Any such fee based on a percentage shall be paid quarterly within thirty (30) days after the expiration of the calendar year quarters ending 276 13 CABLE TELEVISION sec. 5.5-17 March 31, June 30, September 30, and December 31, at which time the licensee shall file with the county a financial statement clearly showing the gross revenues received by the licensee during the preceding quarter. In the event any quarterly payment of the license fee is not made within thirty (30) days specified herein, interest shall be charged from the thirty-first day at the interest rate permitted on judgments by general law. (c) Acceptance of any fee payment shall not constitute, and shall not be deemed, construed, or applied as, an admission or an agreement by the county that the amount paid is in fact correct, or as a waiver of its rights, hereby expressly reserved to audit the licensee's financial records at any time, and to recompute the amount of fee payable hereunder. Any additional amounts found to be due as a result of such audit shall be paid, upon demand, together with interest at the rate permitted on judgments by general law computed from the date upon which the correct fee was due. (d) In the event a license is revoked prior to its expiration date, and in the event that a percentage license fee has been imposed, the licensee shall, within thirty (30) days of the date of revocation: (1) File with the county a financial statement clearly showing the gross revenues received by the licensee since the expiration of the immediately preceding calendar year quarter; and (2) Pay the license fee accrued as of the date of revocation. (e) Nothing in this section shall be deemed construed, or applied to exempt the licensee from the payment of any taxes, fees, or charges lawfully imposed. (No. 84-829, 10-23-84) ARTICLE VI. ADMINISTRATION AND ENFORCEMENT SEC. 5.5-17. BOOKS AND RECORDS. (a) The licensee shall keep and maintain such books and records of its operations within the county as may be specified by the county executive, which he deems reasonably necessary to enable the county to properly determine the amount of any license fee due to it, and to otherwise enforce the provisions of this chapter. The licensee shall retain such books and records, in any reasonable form, for not less than five (5) years. The county shall have the right to extend the retention period through the term of any renewed license, and shall have the right to inspect, copy or audit the licensee's books and records at any reasonable time, upon twenty-four (24) hours' written notice to the licensee. (b) At the request of the county executive, within one hundred twenty (120) days following the conclusion of its fiscal year, the licensee shall, at its sole cost and expense, file with the county its financial statements for that year, examined and reported on by an independent public accountant. The licensee shall advise the office of consumer affairs of the period of its fiscal year. 277 14 sec. 5.5-18 PRINCE WILLIAM COUNTY CODE SEC. 5.5-18. INSURANCE. (a) Not later than thirty (30) days after accepting a license, and at all times during the term of the license, the licensee shall obtain, pay all premiums for, and file with the county executive written evidence of payment of premiums for and executed duplicate copies of the following: (1) A general comprehensive public liability insurance policy indemnifying, defending, and holding harmless the county, its officers, boards, commissions, agents, or employees from any and all claims by any person whatsoever on account of injury to or death of a person or persons caused by the operations of the licensee under the license herein granted, or alleged to have been so caused, with a minimum liability of one million dollars ($1,000,000.00) for personal injury or death of all persons so injured or killed in any one (1) occurrence. (2) A property damage insurance policy indemnifying, defending, and holding harmless the county, its officers, boards, commissions, agents, or employees from any and all claims by any person whatsoever for property damage caused by the operations of the licensee under the license herein granted, or alleged to have been so caused, with a minimum liability of one million dollars ($1,000,000.00) for damage to such property in any one occurrence. (b) Each of the foregoing insurance policies shall be in a form acceptable to the county and each shall require thirty (30) calendar days' notice of any cancellations to both the county and the licensee. Within thirty (30) days following receipt by the county or licensee of any cancellation notice, the licensee shall obtain, pay all premiums for, and file with the county written evidence of payment of premiums for and executed duplicate copies of a replacement policy in the same minimum amount as the canceled policy. (No. 84-829, 10-23-84) SEC. 5.5-19. INDEMNITY. (a) The licensee shall, at its sole cost and expense, indemnify, defend, and hold harmless the county, its officials, boards, commissions, agents, and employees against any and all claims, suits, causes of action, proceedings, and judgments for damages or relief, of any kind, arising out of: (1) The grant of a license to the licensee or the licensee's acceptance thereof: (2) The operations of the licensee under such license, specifically including antitrust actions under state or federal law. Indemnified expenses shall include, but not be limited to, all out-of-pocket expenses, court costs, attorneys' fees, and the reasonable value of any services rendered by county employees. (b) The foregoing indemnity is conditioned upon the county's giving the licensee prompt notice of the making of any claim or the commencement of any suit, action, or other proceeding covered by this section. Nothing in this section shall be deemed, construed, or applied to prevent the county from cooperating with the licensee and participating in the defense of any litigation by its own counsel at its sole cost and expense. (No. 84-829, 10-23-94) 278 15 CABLE TELEVISION sec. 5.5-22 SEC. 5.5-20. FAILURE TO ENFORCE LICENSE. The licensee shall not be excused from complying with any of the terms and conditions of this chapter or of the license ordinance by any delay or failure of the county, upon any one (1) or more occasions, to insist upon the licensee's performance or to seek the licensee's compliance with any one (1) or more of such terms or conditions. (No. 84-829, 10-23-84) SEC. 5.5-21. ADMINISTRATION AND ENFORCEMENT RESPONSIBILITIES. (a) The administration and enforcement of this chapter and any license granted and accepted pursuant to this chapter shall be vested in the office of consumer affairs, under the supervision and control of the county executive. (b) The county executive is hereby authorized to promulgate such rules, regulations, and orders as he shall deem necessary and appropriate to enforce, administer, and interpret, this chapter; provided that he shall cause reasonable notice of the proposed adoption of any rules or regulations to be published in a newspaper of general circulation in the county, and shall conduct at least one (1) public hearing on the adoption thereof. The county executive may not delegate this responsibility. (c) The county executive may enforce this chapter, the terms and conditions of any license, and any rules, regulations, or orders issued in the interpretation and administration thereof, by any appropriate action at law or cause in chancery. The county attorney is authorized to file and prosecute such proceedings in the name of the board, upon the written request of the county executive. This authority may not be delegated by the county executive. (No. 84-829, 10-23-84) ARTICLE VII. RENEWAL AND REVOCATION OF LICENSES SEC. 5.5-22. RENEWAL OF LICENSES. (A) Licenses may be renewed in accordance with this section, and shall terminate unless so renewed. (B) During the six-month period which begins with the thirty-sixth month before license expiration, the board may, on its own initiative, and shall upon application of the licensee, commence proceedings for the purpose of: (1) Identifying the future cable-related community needs and interests of the county; and (2) Reviewing the performance of the licensee under the license during the then-current license term. (C)(1) Upon completion of a proceeding under subsection (B), above, a licensee seeking renewal of a license may, on its own initiative or at the request of the board, submit a proposal for renewal thereof. (2) Subject to the applicable provisions of federal law and regulation, any such proposal shall contain such material as the board may require, including proposals for upgrade of the cable system. 279 16 EXHIBIT 10.6.47 sec. 5.5-22 PRINCE WILLIAM COUNTY CODE (3) The board may establish a date by which such proposals shall be submitted. (D) (1) Upon submittal by a license of a proposal for renewal of a license, the board shall provide prompt public notice of such proposal and, during the four-month period which begins on the completion of any proceedings under subsection (B), either renew the license or issue a preliminary assessment that the license should not be renewed, and at the request of the operator, or on its own initiative, commence an administrative proceeding, after providing prompt public notice of such proceeding in accordance with paragraph (D)(2) to consider whether: (a) The licensee has substantially complied with the material terms of the existing license and with the applicable law; (b) The quality of the licensee's service, including signal quality, response to consumer complaints, and billing practices, but without regard to the mix, quality, or level of cable services or other services provided over the system, has been reasonable in light of community needs; (c) The licensee has the financial, legal, and technical ability to provide the services, facilities, and equipment as set forth in the licensee's proposal; and (d) The licensee's proposal is reasonable to meet the future cable-related community needs and interests, taking into account the costs of meeting such needs and interests. (2) In any proceeding under paragraph (DX1), the licensee shall be afforded adequate notice, and both the licensee and the board, or its designee, shall be afforded fair opportunity for full participation therein, including the right to introduce evidence (including evidence related to issues raised in the proceedings under subsection (b)), to require the production of evidence, and to question witnesses. A transcript shall be made of any such proceeding. (3) At the completion of a proceeding under this subsection, the board shall issue a written decision granting or denying the proposal for renewal based upon the record of such proceeding, and transmit a copy of such decision to the licensee. Such decision shall state the reasons therefor. (E) Any denial of a proposal for renewal shall be based on one or more adverse findings made with respect to the factors described in subparagraphs (a) through (d) of subsection (DX1), pursuant to and based upon the record of the proceeding under subsection (D). The board may not base a denial of renewal on a failure to substantially comply with the material terms of the license under subsection (D)(1)(a) or on events considered under subsection (D)(1)(b) in any case in which a violation of the license or the events considered under subsection (D)(1)(b) occur after the effective date of the Cable Franchise Policy and Communications Act of 1984, unless the board has provided the licensee with notice and the opportunity to cure, or in any case in which it is documented that the board has waived its right to object, or has effectively acquiesced. (F) Any licensee whose proposal for renewal has been denied by final decision of the board made pursuant to this section, or has been adversely affected by a failure of the board to act in accordance with the procedural requirements of this section, may appeal such final 280 17 CABLE TELEVISION sec. 5.5-23 decision or failure pursuant to the provisions of sections 626 and 636 of the Cable Franchise Policy and Communications Act of 1984. (G) Notwithstanding the provisions of subsections (A) through (F) of this section, a licensee may submit a proposal for renewal of a license at any time, and the board may grant or deny such proposal at any time (including after proceedings pursuant to this section have commenced). The provisions of subsections (A) through (F) shall not apply to a decision to grant or deny a proposal under this section. The denial of a renewal under this subsection shall not affect on a renewal proposal that is submitted in accordance with subsection (A) through (F). (No. 84-829, 10-23-84) Sec. 5.5-23. Revocation of license. (a) In addition to other rights and powers provided by this chapter, or general law, the county hereby expressly reserves the right to revoke any license granted under this chapter on any one (1) or more of the following grounds: (1) The licensee's material misrepresentation of fact in an application submitted pursuant to this chapter. (2) The licensee's willful or negligent failure or refusal to construct, install, maintain, or operate its cable television system in compliance with any term or condition of this chapter or of the license ordinance. (3) The licensee's insolvency, or its seeking relief under the bankruptcy laws or having been adjudged bankrupt. (4) Foreclosure or other judicial sale of all or a substantial part of licensee's cable television system, or (5) The licensee's repeated or substantial violation of any provision of the Virginia Consumer Protection Act of 1977, as amended. (6) The licensee's repeated failure to provide efficient, continuous service, or to maintain the system in good repair, or to satisfactorily resolve bona fide subscriber complaints. (b) The board may revoke a license pursuant to this section, by ordinance, only after it has given the licensee notice of its intention to adopt such an ordinance and the grounds therefor, and has afforded the licensee a reasonable opportunity to prove in a hearing before the board that the proposed grounds for revocation never existed or do not warrant revocation. The board shall give at least the same notice of such hearing as required for the adoption of ordinances. (c) A license shall not be revoked pursuant to this section for any act or omission beyond the licensee's control; provided, however, that an act or omission shall not be deemed or construed to be beyond the licensee's control because of financial difficulties of any sort. (d) In the event that a license is revoked by the board, the county shall have the option to acquire the assets of the licensee's cable television at their then fair market value, or to select a successor licensee, consistent with the provisions of this chapter, and to permit such 281 18 sec. 5.5-23 PRINCE WILLIAM COUNTY CODE successor to acquire said assets at their then fair market value. Such option must be exercised within one (1) year of the date of revocation. (e) In the event that a license is revoked by the board, and until such time as the licensee transfers to the county or to a successor licensee possession and title to the assets of its cable television system, the licensee shall, as trustee for its successor in interest, continue to operate the cable television system under the terms and conditions of this chapter and of the license ordinance. During such interim period, the licensee shall not make any material administrative or operational change that would tend to: (1) Degrade the quality of service to subscribers; (2) Decrease income; or (3) Materially increase expenses without the express permission, in writing, of the county. For its management services during this period of trusteeship, the licensee shall be entitled to receive, as compensation, the net profit generated from the operation of its cable television system during such period. Such management services shall not be continued without the licensee's consent for more than twelve (12) months. (No. 84-829, 10-23-84) Sec. 5.5-24. Removal of materials upon termination of license. In the event a license is revoked, or otherwise terminated for any lawful reason, the licensee shall, if the system is not sold to a successor licensee, or acquired by the board within the period for exercise of its option to acquire or after said option shall have been declined, remove all supporting structures, poles, transmission and distribution systems, and other appurtenances, owned by it, from all public ways in, over, under, through, and along which installed, and restore such areas to their original condition. If not done within six (6) months from notice by the board to restore, such property shall be deemed abandoned. (No. 84-829, 10-23-84) ARTICLE VIII. CREATION OF LICENSE SERVICE AREAS Sec. 5.5-25. License service areas. The board may, by ordinance, establish one or more license service areas within which it may grant licenses as provided in this chapter. Unless and until the board determines to create other license service areas, the entire geographical area of Prince William County shall constitute the license service area for purposes of this chapter. (No. 84-829, 10-23-84) ARTICLE IX. MISCELLANEOUS Sec. 5.5-26. Time of the essence. Whenever this chapter or the license ordinance specifies any time for any act to be performed by or on the behalf of a licensee, such time shall be deemed to be of the essence and 282 19 CABLE TELEVISION sec. 5.5-28 the licensee's failure to perform within the time specified shall, in all cases, be sufficient grounds for the county to invoke the remedies available under the terms and conditions of this chapter and of the license ordinance. (No. 84-829, 10-23-84) Sec. 5.5-27. Severability. If any provision of this chapter or of the license ordinance is held invalid or unconstitutional by any court or administrative agency of competent jurisdiction, such holding shall not affect the validity of the remaining provisions thereof. (No. 84-829, 10-23-84) Sec. 5.5-28. Effect of state or federal regulation or law. The provisions of this chapter, any resolution adopted by the board hereunder, and any license ordinance or agreement entered into shall be deemed amended pro tanto to comply with any requirement of state or federal law or regulation which is applicable thereto which has been, or shall be adopted, and which is inconsistent with provisions of this chapter, and this chapter shall be deemed to include mandatory and self-effectuating provisions of such law or regulation. Nothing shall preclude the board from adopting express amendments to this chapter, and any resolution, other ordinance, or agreement to conform local law, regulation, and agreements to such federal or state law or regulation. (No. 84-829, 10-23-84) [The next page is 297] 283 20 PROPOSED AMENDMENTS TO CHAPTER 5.5 Chapter 5.5 CABLE TELEVISION * * * ARTICLE I. IN GENERAL * * * Sec. 5.5-2. Definitions. As used in this chapter, the following words and phrases shall have the meanings herein specified, except where the context is clearly to the contrary. Consistent with context, words used in the plural contemplate and include the singular, and words used in the singular contemplate and include the plural. Context notwithstanding, the word "shall" is mandatory, never directory. Basic subscriber service shall mean the distribution to subscribers of signals over a cable television system on all channels except: (1) Those for which a per-program or per-channel charge is made; (2) Those intended for reception by equipment other than a television broadcast receiver; (3) Two-way services; (4) Services, the delivery of which are regulated or pre-empted by the Federal Communications Commission; and (5) Emergency services. Board shall mean the board of county supervisors of Prince William County, Virginia. Cable televisions system shall mean a cable television system as defined by section 15.1-23.1, Virginia Code Annotated. County shall mean Prince William County, Virginia. County Executive shall mean the chief executive officer of the county, appointed by the board, or his designee so indicated in writing. Fair market value shall mean the price that property will command when sold by one who is under no need to sell, a willing seller, and bought by one who is under no need to buy, a willing buyer. Federal Communications Commission, shall mean the federal agency established under the Communications Act of 1934, as amended, or any successor agency. 21 2 Gross revenues shall mean any and all revenues derived from the operation of a cable television system in the county, including but not limited to monthly or periodic charges for service, installation fees and reconnect fees, revenues derived from per-program or per-channel charges, studio and equipment rentals, and subscriber and advertising revenues. License shall mean the nonexclusive right granted hereunder to construct, install, maintain, and operate a cable television system or systems in any unincorporated area of the county. It does not include any other license or permit for the privilege of conducting a business in the county, as may be required by other county ordinances. License ordinance shall mean an ordinance adopted pursuant to section 5.5-4 of this chapter, formally granting a license to construct, install, maintain, or operate a cable television system in the county. License service area shall mean the geographical area within the unincorporated area of the county for which a nonexclusive right has been granted hereunder to construct, install, maintain, and operate a cable television system. Licensee shall mean a person granted a license hereunder. Normal Business Hours shall mean those hours during which most similar businesses in the community are open to serve customers. In all cases, normal business hours must include some evening hours at least one night per week and/or some weekend hours. Normal Operating Conditions shall mean those service conditions which are within the control of the cable operator. Those conditions which are not within the control of the cable operator include, but are not limited to, natural disasters, civil disturbances, power outages, telephone network outages, and severe or unusual weather conditions. Those conditions which are ordinarily within the control of the cable operator include, but are not limited to, special promotions, pay-per-view events, rate increases, regular peak or seasonal demand periods, and maintenance or upgrade of the cable television system. Person shall mean and include any individual, firm, partnership, cooperative, nonprofit membership corporation, joint venture, association, corporation, estate, trust, business trust, trustee in bankruptcy, receiver, auctioneer, syndicate, assignee, club, society, or any other group or combination acting as a unit. Public way shall mean any highway, street, road, alley, way, easement, right-of-way, place, or other right or interest in real property, belonging to any public body, including the county, the commonwealth, or any subdivision, agency, department, or authority of either. Service Interruption shall mean the loss of picture or sound on one or more cable channels. Subscriber shall mean any person who receives, or contracts with a licensee to receive, basic subscriber service, or one (1) or more of such other services as may be offered by the licensee's cable television system, or both. * * * 22 3 ARTICLE IV. CONSUMER PROTECTION AND SUBSCRIBER PRIVACY * * * Sec. 5.5-9. Maintenance; repairs. (a) The licensee shall establish maintenance service capability enabling the prompt location and correction of system malfunctions. The licensee shall maintain adequate records of all complaints and requests for repairs, and their resolution, which records shall be open for public inspection. (b) Under normal operating conditions, each of the following four standards will be met no less than ninety-five (95) percent of the time measured on a quarterly basis: (1) Standard installations will be performed within seven (7) business days after an order has been placed. Standard installations are those that are located up to 125 feet from the existing distribution system. (2) Excluding conditions beyond the control of the licensee, the licensee will begin working on service interruptions promptly and in no event later than 24 hours after the interruption becomes known. Licensee must begin actions to correct other service problems the next business day after notification of the service problem. (3) For all installations, service calls, and other installation activities, licensee shall provide its customer either a specific appointment time or, at maximum, a four-hour time block during business hours. Licensee may schedule service calls and other installation activities outside of normal business hours for the express convenience of the customer. (4) A licensee may not cancel an appointment with a customer after the close of business on the business day prior to the scheduled appointment. (c) If a representative of licensee is running late for an appointment with a customer and will not be able to keep the appointment as scheduled, the customer will be contacted. The appointment will be rescheduled, as necessary, at a time which is convenient for the customer. Sec. 5.5-10. Local office hours; telephone availability; complaints; notice of procedures. (a) The licensee shall maintain an office and bill payment location within the license service area, or in the Cities of Manassas or Manassas Park, which shall be open and accessible to the public during normal business hours. The licensee shall provide a local, toll-free or collect call telephone access line which will be available to its subscribers 24 hours a day, seven days a week for recording of subscriber complaints, including, but not limited to, billing errors, service disconnections, service interruptions, and equipment failure. Complaints other than those related to a system malfunction or service interruption addressed by section 5.5-9 shall be answered not later than the next business day after the complaint has been received, and corrective action shall be completed as soon as practical. Adequate records shall be made of all subscriber complaints, describing the nature of each complaint and showing when 23 4 and what corrective action was completed. Such records shall be available to the public or to representatives of the board, during normal business hours, and shall be retained in the licensee's files for not less than three (3) years. Annual summaries of complaints shall be filed with the office of consumer affairs, not later than June thirtieth of each year. (b) Unresolved complaints, if any, shall be reported to the office of consumer affairs, in writing, within thirty (30) days after the end of each calendar year quarter. The nature and number of any unresolved complaints shall be taken into account by the board in considering whether to renew or to revoke a license. (c) Each licensee shall, at any time of entering into an agreement to provide cable service of any kind, inform every subscriber of the provisions of this article. (d) Licensees serving more than one (1) license service area need provide a local office in only one (1) such area, or in either of the two (2) cities above. (e) Trained representatives of licensee will be available to respond to customer telephone inquiries during normal business hours. (f) After normal business hours, the telephone access line may be answered by a service or an automated response system, including an answering machine. Inquiries received after normal business hours must be responded to by a trained representative of licensee on the next business day. (g) Under normal operating conditions, telephone answer time by a representative of licensee, including wait time, shall not exceed thirty (30) second when the connection is made. If the call needs to be transferred, transfer time shall not exceed thirty (30) seconds. Under normal operating conditions, the customer will receive a busy signal less than three (3) percent of the time. These standards shall be met no less than ninety (90) percent of the time under normal operating conditions, measured on a quarterly basis. (h) The licensee will not be required to acquire equipment or perform surveys to measure compliance with the telephone answering standards of section 5.5-10(g) unless an historical record of complaints indicates a clear failure to comply. Sec. 5.5-11. Notification to subscribers; billing; refunds; and credits. (a) The licensee shall provide written information on each of the following areas at the time of installation of service, at least annually to all subscribers, and at any time upon request: (1) Products and services offered; (2) Prices and options for programming services and conditions of subscription to programming and other services; 24 5 (3) Installation and service maintenance policies; (4) Instructions on how to use the cable service; (5) Channel positions of programming carried on the system; and (6) Procedures which may be used to make complaints, requests for repairs and to contest alleged billing errors, including the address and telephone number of the county's cable office. (b) Customers will be notified of any changes in rates, programming services or channel positions as soon as possible through announcements on the cable system and in writing. Notice must be given to subscribers a minimum of thirty (30) days in advance of such changes if the change is within the control of the licensee. Increases made without such prior notice shall be void. In addition, the licensee shall notify subscribers thirty (30) days in advance of any significant changes in the other information required by Section 5.5-11(a). (c) Bills will be clear, concise and understandable. Bills must be fully itemized, with itemizations including, but not limited to, basic and premium service charges and equipment charges. Bills will also clearly delineate all activity during the billing period, including optional charges, rebates and credits. (d) In case of a billing dispute, the licensee must respond to a written complaint from a subscriber within thirty (30) days. (e) Refund checks will be issued promptly by licensee, but no later than either: (1) The customer's next billing cycle following resolution of the request or thirty (30) days, whichever is earlier; or (2) The return of the equipment supplied by the licensee if service is terminated. (f) Credits for service will be issued no later than the customer's next billing cycle following the determination that a credit is warranted. * * * EX-10.6.62 9 FRANCHISE QUANTICO, VA 1 EXHIBIT 10.6.62 NOTICE OF CLOSING DATE To: The Town of Quantico, Virginia You are hereby given notice that the closing of the sale of certain cable assets of Columbia Associates, L.P. ("Columbia") to Jones Communications of Virginia, Inc., formerly known as Jones Intercable of Alexandria, Inc. ("Jones") occurred and was effective as of November 29, 1995, and that the Agreement Relating to Television Transmission and Distribution System in Quantico Virginia dated May 13, 1980 (the "Agreement") between the Town of Quantico and Triangle Cable TV, Incorporated ("Triangle"), as previously assigned by Triangle to Columbia, was transferred to Jones as of November 29, 1995. JONES COMMUNICATIONS OF VIRGINIA, INC., f/k/a Jones Intercable of Alexandria, Inc., a Colorado corporation By: /s/ ELIZABETH M. STEELE ------------------------------------ Elizabeth M. Steele Vice President Dated: December 12, 1995 2 FRANCHISE AGREEMENT BETWEEN QUANTICO, VIRGINIA AND COLUMBIA ASSOCIATES, L.P. D/B/A COLUMBIA CABLE OF VIRGINIA 3 AGREEMENT RELATING TO TELEVISION TRANSMISSION AND DISTRIBUTION SYSTEM IN QUANTICO, VIRGINIA THIS AGREEMENT is entered into by and between the MAYOR AND COUNCIL OF THE TOWN OF QUANTICO, hereinafter referred to as the "Town" and Triangle Cable TV, Incorporated, its successors, assigns and designees, hereinafter referred to as the "Company", and the same WITNESSETH: In consideration of the mutual covenants and promises herein contained, it is agreed as follows: Section 1. Grant of Authority. The Company is hereby given the non-exclusive right to erect, maintain and operate television transmission and distribution facilities, and additions thereto, in, under, over, along, across and upon the public highways, streets, alleys, sidewalks, ways, and other public places within the Town limits of Quantico, Virginia, and subsequent additions thereto, for the purpose of the transmission and distribution of television and radio impulses and signals and television energy in accordance with the laws and regulations of the United States of America and the State of Virginia and the ordinances and regulations of the Town. This right shall continue for a period of twenty (20) years from the date of this Agreement. Section 2. "Television" defined. Whenever used in this contract, the word "television" shall mean a system for transmission of audio signals and/or visual images by means of electrical impulses. Section 3. Construction, Maintenance and Removal of Facilities. The poles and posts used for the Company's television distribution system shall be those erected by it or its successors or assigns and/or erected and maintained by such other persons, firms or corporations maintaining poles or posts within the Town limits, when and where practicable, under mutually satisfactory rental agreements with said persons, firms or corporations. Construction and maintenance of the transmission and distribution system shall be in accordance with the provisions of the National Electric Safety Code, prepared by the National Bureau of Standards, the National Electric Code of the National Board of Fire Underwriters, and such applicable ordinances and regulations of the Town affecting electrical installations, which may be in effect now or in the future. 4 -2- All installations shall be of permanent nature and installed in accordance with good engineering practices, and shall be of sufficient height to comply with all Town regulations, ordinances and state laws so as not to interfere in any manner with the right of the public or individual property owners, and shall not interfere with the travel and use of public places by the public, and during construction, repair or removal thereof, shall not obstruct or impede traffic. The Company's transmission and distribution system, poles, wires, and appurtenances shall be located, erected and maintained so as not to endanger the lives of persons, or cause damage to property, or to interfere with new improvements the Town may deem proper to make, or to unnecessarily hinder or obstruct the free use of the public highways, streets, alleys and other public ways, and removal of poles to avoid such interference will be at the Company's expense. In the maintenance and operation of the television transmission and distribution system in Quantico and in the course of construction or additions to its facilities, the Company shall proceed so as to cause the least possible inconvenience to the general public. Any opening or obstruction in the streets or other public places made by the Company in the course of its operations or the operations of its successors or assigns shall be guarded and protected at all times by the placement of adequate barriers, fencings, or boardings, the bounds of which during period of dusk and darkness shall be designated by warning lights of approved types. The Company agrees to remove the facilities erected under the terms of this Agreement in the event the Company ceases to operate hereunder. Section 4. Use of Company Facilities by Town. The Company shall grant to Quantico, free of expense, joint use of any and all poles owned by it for any proper Town purpose acceptable to the Company, insofar as that may be done without interfering with the free use and enjoyment of 5 -3- of the Company's own wires and facilities, and the Town shall hold the Company harmless from any and all actions, causes of action, or damages and expenses caused by the placing of the Town's wires or appurtenances upon the poles of the Company. Proper regard shall be given to all existing safety rules governing construction and maintenance in effect at the time of such construction. Section 5. Indemnification of Quantico by the Company. The Company shall indemnify, protect and save harmless Quantico from and against any losses and physical damage to property and bodily injuries or death to persons, including payments made under Workmen's Compensation Law, which may arise out of or be caused by the construction, maintenance or removal of the Company's facilities within the Town or by any act of the Company, its agents or employees. The Company shall procure and keep in force insurance to protect the parties hereto from and against all claims, demands, actions, judgments, costs, expenses and liabilities which may arise or result, directly or indirectly, from or by reason of any such loss, injury or damage. The amounts of such insurance against liability due to physical damage to property shall not be less than One Hundred Fifty Thousand Dollars ($150,000.00) as to any one accident and not less than Three Hundred Thousand Dollars ($300,000.00) aggregate in any single policy year. The amounts of such insurance against liability for bodily injury or death shall not be less than One Hundred Thousand Dollars ($100,000.00) as to any one person and not less than Three Hundred Thousand Dollars ($300,000.00) as to any one accident. Section 6. Commencement of Construction. In the event of the failure of the Company to commence construction of its transmission and distribution system, as contemplated provided for by this Agreement, within a period of one (1) year from the date necessary pole agreements are signed with the holders of public licenses (as set forth in Section 3, hereof), which 6 -4- agreements the Company will use due diligence to obtain and after being advised by the holders of public licenses that the poles are ready for occupancy by the Company, the Town shall have the right, on reasonable notice to the Company, to declare this Agreement, and the rights granted hereunder, terminated provided, however, the failure to comply with this stipulation by reason of causes beyond the reasonable control of the Company, which could not have been reasonably anticipated at the time of acceptance by the Company, shall not be sufficient grounds to declare a termination. Upon the termination of this Agreement for any reason, the Company shall remove its posts, poles, television transmission and distribution system and equipment, and other appurtenances, from the streets, lanes, sidewalks, highways, alleys, bridges and other public places of the Town and shall restore such streets, etc., to their original condition. Section 7. Payments to the Town. Beginning with the second year of operation, the Company shall pay to the Town, in annual payments, a sum equal to three percent (3%) of the gross receipts of the Company derived from the subscription of residents within the Town to the basic cable television services, and it shall be the duty of the Company to make the payments herein specified at the time of filing said statement. Section 8. Federal Communications Commission Requirements. Notwithstanding anything in this Agreement to the contrary, the Company's transmission and distribution system shall conform to the lawful regulations and lawful requirements of the Federal Communications Commission. Section 9. Grant to be Non-Exclusive. It is understood and agreed by the parties hereto that the rights herein granted to the Company for the use of public streets and places are non-exclusive, and the Town may hereafter, from time to time, grant similar rights to other persons, firms or corporations, upon whatever terms the Town deems advisable, so long as 7 -5- such grant of rights does not physically interfere with the facilities constructed and maintained hereafter by the Company. IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized representatives this 13 day of May, 1980. THE MAYOR AND COUNCIL OF THE TOWN OF QUANTICO By: /s/ T.A. GIANNOPOULOS -------------------------------- T.A. GIANNOPOULOS, MAYOR ATTEST: /s/ MICHAEL P. RAFTILIS - ------------------------------- Clerk TRIANGLE CABLE TV, INC. By: /s/ RONALD DICKERSON -------------------------------- June 22, 1980 ATTEST: /s/ DARLENE LIPTON - ------------------------------- Secretary EX-10.6.63 10 FRANCHISE US MARINE CORPS BASE, VA 1 EXHIBIT 10.6.63 NOVATION AGREEMENT COLUMBIA ASSOCIATES, L.P. ("Transferor"), a limited partnership duly organized and existing under the laws of Delaware with its principal office in Greenwich, Connecticut; JONES INTERCABLE OF ALEXANDRIA, INC. ("Transferee"), a corporation duly organized and existing under the laws of Colorado with its principal office in Englewood, Colorado; and the UNITED STATES OF AMERICA ("Government") enter into this Agreement as of 29 November 1995. (a) THE PARTIES AGREE TO THE FOLLOWING FACTS: (1) The Government, represented by the Commanding General of the Marine Corps Base, Marine Corps Combat Development Command at Quantico, Virginia (the "Quantico MCCDC"), has entered into a Franchise Agreement for Cable Television Service with Transferor dated June 1990 (The "Franchise Agreement"). Pursuant to administrative changes within the Marine Corps Combat Development Command since the Franchise Agreement was originally executed, the Commanding General of the Quantico Marine Corps Base has been delegated all responsibility for the protection of its rights and the performance of its obligations under this Agreement. The rights and obligations of both parties to this Agreement remain unaffected by this realignment of Marine Corps functions. From this day forward, authority to act on behalf of the Marine Corps with regard to its rights and/or obligations under this Agreement reside in the Commanding General of the Quantico Marine Corps Base, or his duly appointed representative. The term "the contracts," as used in this Agreement, means the above Franchise Agreement and all other contracts and purchase orders, including all modifications, made between the Government and the Transferor before the effective date of this Agreement (whether or not performance and payment have been completed and releases executed if the Government or the Transferor has any remaining rights, duties, or obligations under these contracts and purchase orders). Included in the term "the contracts" are also all modifications made under the terms and conditions of these contracts and purchase orders between the Government and the Transferee, on or after the effective date of this Agreement. (2) The Transferor has transferred to the Transferee all the assets of the Transferor which comprise the cable system serving the Quantico MCCDC by virtue of a Purchase and Sale Agreement dated as of 30 June, 1995, between the Transferor and the Transferee. (3) The Transferee has acquired all the assets of the Transferor which comprise the cable television system serving the Quantico MCCDC by virtue of the above transfer. (4) The Transferee has assumed all obligations and liabilities of the Transferor under the contracts by virtue of the above transfer. 1 2 (5) The Transferee is in a position to fully perform all obligations that may exist under the contracts. (6) It is consistent with the Government's interest to recognize the Transferee as the successor party to the contracts. (7) This Novation Agreement shall be effective upon filing of evidence of the consummation of the above transfer being filed with the Government. (b) IN CONSIDERATION OF THESE FACTS, THE PARTIES AGREE THAT BY THIS AGREEMENT -- (1) The Transferor confirms the transfer to the Transferee, and waives any claims and rights against the Government that it now has or may have in the future in connection with the contracts. (2) The Transferee agrees to be bound by and to perform each contract in accordance with the conditions contained in the contracts. The Transferee also assumes all obligations and liabilities of, and all claims against, the Transferor under the contracts as if the Transferee were the original party to the contracts. (3) The Transferee ratifies all previous actions taken by the Transferor with respect to the contracts, with the same force and effect as if the actions had been taken by the Transferee. (4) The Government recognizes the Transferee as the Transferor's successor in interest in and to the contracts. The Transferee by this Agreement becomes entitled to all rights, titles, and interests of the Transferor in and to the contracts as if the Transferee were the original party to the contracts. Following the effective date of this Agreement, the term "Contractor," as used in the contracts, shall refer to the Transferee. (5) Except as expressly provided in this Agreement, nothing in it shall be construed as a waiver of any rights of the Government against the Transferor. (6) All payments and reimbursements previously made by the Government to the Transferor, and all other previous actions taken by the Government under the contracts, shall be considered to have discharged those parts of the Government's obligations under the contracts. All payments and reimbursements made by the Government after the date of this Agreement in the name of or to the Transferor shall have the same force and effect as if made to the Transferee, and shall constitute a complete discharge of the Government's obligations under the contracts, to the extent of the amounts paid or reimbursed. 2 3 (7) The Transferor and the Transferee agree that the Government is not obligated to pay or reimburse either of them for, or otherwise give effect to, any costs, taxes, or other expenses, or any related increases, directly or indirectly arising out of or resulting from the transfer of this Agreement, other than those that the Government in the absence of this transfer or Agreement would have been obligated to pay or reimburse under the terms of the contracts. (8) The Transferor guarantees payment of all liabilities and the performance of all obligations that the Transferee (i) assumes under this Agreement or (ii) may undertake in the future should these contracts be modified under their terms and conditions. The Transferor waives notice of, and consents to, any such future modifications. (9) The contracts shall remain in full force and effect, except as modified by this Agreement. Each party has executed this Agreement as of the day and year first above written. UNITED STATES OF AMERICA By: Commanding General, Marine Corps Base, Quantico, VA --------------------------------------------------- /s/ E. C. KELLEY, JR. Name: E. C. KELLEY, JR. --------------------------------------------------- Title: Brigadier General, U.S. Marine Corps --------------------------------------------------- 3 4 JONES INTERCABLE OF ALEXANDRIA, INC. By: /s/ ELIZABETH STEELE ------------------------------------ Name: Elizabeth Steele ------------------------------------ Title: Vice President ------------------------------------ CERTIFICATE I, Katherine A. LeVoy, certify that I am an Assistant secretary of JONES INTERCABLE OF ALEXANDRIA, INC.; that Elizabeth Steele, who signed this Agreement for this corporation, was then Vice President of this corporation; and that this Agreement was duly signed for and on behalf of this corporation by authority of its governing body and within the scope of its corporate powers. Witness my hand and the seal of this corporation this 1st day of November 1995. By: /s/ KATHERINE A. LEVOY ------------------------------------ Name: Katherine A. LeVoy ------------------------------------ Title: Assistant Secretary ------------------------------------ (CORPORATE SEAL) 4 5 COLUMBIA ASSOCIATES, L.P. Columbia International, Inc., its managing general By: partner ------------------------------------ By: /s/ RICHARD H. ROSENCRANS ------------------------------------ Name: Richard H. Rosencrans ------------------------------------ Title: Vice-President ------------------------------------ CERTIFICATE I, Scott N. Ledbetter certify that I am the Secretary of COLUMBIA INTERNATIONAL, INC.; that this corporation is the sole managing general partner of COLUMBIA ASSOCIATES, L.P. (the "Transferor"); that Richard H. Rosencrans, who signed this Agreement for this corporation on behalf of the Transferor, was then the Vice-President of this corporation; and that this Agreement was duly signed for and on behalf of this corporation (on behalf of the Transferor) by authority of its governing body and within the scope of its corporate powers. Witness my hand and the seal of this corporation this 1st day of November 1995. By: /s/ SCOTT N. LEDBETTER ------------------------------------ Name: Scott N. Ledbetter ------------------------------------ Title: Vice-President ------------------------------------ (Corporate Seal) 5 6 FRANCHISE AGREEMENT between MARINE CORPS BASE MCCDC QUANTICO, VIRGINIA and COLUMBIA ASSOCIATES, L.P. d/b/a COLUMBIA CABLE OF VIRGINIA 7 [COLUMBIA INTERNATIONAL, INC. LETTERHEAD] December 5, 1990 Mr. Ralph E. Anderson Head, Training and Audio Visual Support Center Branch TAVSC Operations Division MCCDC Quantico, VA 22134-5000 Re: Cable Television Franchise Dear Ralph: Enclosed is the fully executed franchise agreement signed by both the Commanding General and the president of Columbia Associates, LP. This document includes the newly worded version of Section 35, clarifying franchise fees. I would like to reiterate that we find some language contained in this agreement to be inconsistent with the Cable Communications Policy Act of 1984 with regard to rate regulation. Specifically sections 22, 29d. and 41. The ultimate authority vested with the Commanding General to terminate this franchise should he or she feel that a proposed rate increase is "unreasonable" appears to contradict the rate regulation provisions of the 1984 Cable Act. It is Columbia's intention to work closely with you and base authorities over the coming years and we would not expect this issue of rate regulation to arise. However, I did want to make you aware of our concerns at this time. Beyond the issues mentioned above, we feel that this franchise agreement is an excellent one for both parties and we look forward to a long and successful relationship between Columbia Cable of Virginia and the United States Marine Corps. Thanks again for all your assistance in making this refranchising process work. Best regards, [ILLEGIBLE] cc: Troy L. Fitzhugh - Columbia Cable of Virginia Enclosure 8 CABLE TELEVISION FRANCHISE FRANCHISE AGREEMENT FOR CABLE TELEVISION SERVICE AT MARINE CORPS BASE MARINE CORPS COMBAT DEVELOPMENT COMMAND QUANTICO, VIRGINIA 22134 Franchisee Columbia Associates L.P. d/b/a Columbia Cable of Virginia Parent Company Columbia International, Inc. Address 9 Greenwich Office Park P.O. Box 4624 Greenwich, Connecticut 06830 Phone (203) 661-1509 Award date: Expiration date: June 2006 9 CABLE TELEVISION FRANCHISE AGREEMENT Table of Contents Section 1 General Requirements 1. Scope of Agreement 2. Definitions 3. Government Furnished Property or Support 4. Required Insurance 5. Safety Requirements 6. Permits 7. Hold Harmless Agreement 8. Conflict of Law 9. Passes and Badges 10. Activity Regulations 11. Franchisee Maps or Plans 12. Approval of Construction Operations 13. Construction and Operation Deadline 14. Subscriber Locations; Service Area 15. Line Extension Policy 16. Connections and Disconnects 17. Repair Service 18. Continuity of Service 19. Government Use Channels 20. Emergency Override 21. Program Guide and Channel Card 22. Franchise Holder's Rates 23. Technical Requirements 24. Reporting Requirements 25. Performance Evaluation/Compliance 26. Term of CATV Franchise 27. Franchise Renewal 28. Nontransferability of Franchise 29. Termination 30. Government Liability 31. Deactivation of the Base 32. Removal of Facilities 33. Disputes 34. Modifications of Government Regulations 35. Franchise and Analogous Fees 36. Utilities Services 37. Contractor Vehicle Authorization 38. Security Requirements 39. FAR Provisions Incorporated by Reference 40. Compliance with Section 634 of CCPA 41. Deregulation of Franchise Holders Fees 42. Compliance with Drug Free Work Place Act 43. Disclaimer of Official Sanction 44. Nondiscriminatory Availability 45. Compliance with Laws and Regulations 46. Protection of Subscriber Information 47. Signatures 10 Section 2 Facilities Services Exhibit 1: MCCDC Base Map Exhibit 2: Future Service Extension Map Exhibit 3: Technical Requirements Schedule A: Annual Management Report Schedule B: Technical Description and Performance Specifications
11 CABLE TELEVISION (CATV) FRANCHISE AGREEMENT 1. Scope of Agreement. This CATV Franchise Agreement ("Agreement") constitutes an agreement setting forth the terms and conditions under which Columbia International Inc., the Franchisee, is hereby granted a nonexclusive right to enter the Marine Corps Base, Marine Corps Combat Development Command, hereinafter referred to as Base, to construct, install and maintain facilities and equipment; to utilize specific Government property; and to solicit subscribers (including appropriated fund activities, nonappropriated fund activities, and individual subscribers) for the sole purpose of providing the services of a CATV system. This agreement in no way obligates the Government or Base at any time to reimburse the Franchisee for any costs, fixed or otherwise, required to put a CATV system into operation on the Base; for the provision of CATV services to any category of subscribers; or for loss, damage or destruction to the cable television system. The Government is responsible for any damage to the CATV system caused by the negligence of its agents to the extent permissible under the Federal Tort Claims Act; provided, however, that subscribers are not deemed agents of the Government. The Federal Tort Claims Act is the exclusive remedy for any such negligence. Liability for user and connection fees for the provisions of CATV services to on-base subscribers shall be established by separate agreements between the CATV Franchisee and the subscribers in the case of nonappropriated fund activities or individual subscribers; and by delivery orders on a contract issued by the Marine Corps Base Purchasing and Contracting Officer in the case of appropriated fund activities. No fees shall be charged for the use of Marine Corps real property granted by the Government in this Agreement, the Franchisee shall provide service at no cost to various designated locations. Other considerations include a 5% fee on all gross receipts payable to the Morale, Welfare and Recreation Division (MWR), equipment as specified in Paragraph 19 for programming the Command Information Channels, or other cable-related items or services as determined by the Base to benefit the Command. Upon the agreement of both the Franchise Holder and the Government, the Government may choose to contribute funds to aid in the cost of construction to those areas of the base that do not fulfill the density requirements as described in Paragraph 15 of this agreement. 2. Definitions. a. "Base" refers to the geographic area within the boundaries of the Marine Corps Base, Marine Corps Combat Development Command, Quantico, Virginia and the U.S. Naval Medical Clinic. b. "Basic Service" means the Cable TV programming and services exclusive of premium services to be provided by the Franchise Holder to base subscribers for the periodic user rates. 12 c. "Cable Act" is the Cable Communications Policy Act of 1984, Public Law 98-549, 47 USC 521-559 and all subsequent revisions to this law. d. "Cable Officer" is the individual appointed by the Commanding General who will act independently, but in cooperation with the cable operator and the Commanding General, as the technical and administrative liaison or representative of the Base subscribers in matters dealing with adequacy of type broadcasts, access to channels, reception problems, etc. The Head, Training and Audiovisual Support Center (TAVSC) is designated as the MCCDC "Cable Officer". e. "Cable Television System", also referred to as a "CATV system", means any reception, distribution and amplification equipment including but not limited to a headend antenna complex and related equipment; a system of microwave retransmitters, coaxial cables (including trunk, distribution and drop cables), or other electrical conductors; signal amplifiers; program origination (or cable-casting) facilities; and other equipment utilized by a private operator to receive, to transmit or to retransmit television satellite or radio signals to subscribers who shall receive such signals in a fashion other than off-the-air. f. "Commanding General" means the Commanding General of the Marine Corps Combat Development Command, or his duly authorized representative. The Commanding General holds signature authority for the cable Franchise Agreement which is delegated to the Contracting Officer, Head, Services Branch, Morale, Welfare and Recreation (MWR) Division. g. "Connection Fee" means that charge, if any, imposed on a subscriber by Franchise Holder for initial hookup, reconnection or relocation of equipment necessary to transmit the CATV signal from the distribution cable to a subscriber's receiver. h. "Contracting Officer" means the Head, Services Branch, MWR, Marine Corps Base, Marine Corps Combat Development Command, Quantico, Virginia. i. "Franchisee", "Franchise Holder", or "Cable Operator" means that person or entity awarded a CATV franchise under this Agreement. j. "Franchise Agreement", "Agreement" includes this Agreement and attached Schedules A and B; the Proposal, including Exhibits 1 through 3; all documentation required by the above items; and all subsequent amendments. k. "Franchise" means the right or privilege with expressed permission or competent authority to provide cable television services to subscribers on the Base. l. "Franchise Renewal Agreement", "Agreement" means the 13 document, including all attachments and reference, which specifies the terms and conditions of this Franchise. m. "Government", means the United States of America. n. "Installation", "Connection Fee" means the charge, if any, imposed on a subscriber by the CATV Franchisee for initial hookup, reconnecting, or relocation of equipment necessary to transmit the CATV signal from the distribution cable to a subscriber's receiver. o. "Rate", "User Fee" means the periodic service charge paid by a subscriber to the Franchise Holder for CATV services. p. "Subscriber" means any on-base person, group, organization, or nonappropriated or appropriated fund activity that procures CATV services that have been made available pursuant to the terms of this CATV Franchise Agreement. 3. Government Furnished Property or Support. The Government has no obligation to provide any property or support for the Franchisee's CATV system other than that specified in this Agreement. Rights to non-Government property, such as easements over private lands, required to install and to operate the system, shall be acquired at the expense and solely through the efforts of the Franchisee or its agents. No warranties are expressed or implied as to the suitability of either the Government facilities or any existing CATV equipment. 4. Required Insurance. a. Twenty days after Notice of Award the Franchisee shall procure and maintain during the entire period of this performance under this contract the following minimum insurance.
TYPE OF INSURANCE PER PERSON PER ACCIDENT PROPERTY ------------------------------------------------------ ---------- ------------ -------- 1. Comprehensive General Liability $300,000 $300,000 $100,000 2. Automobile Liability $300,000 $300,000 $100,000 3. Workmen's Compensation As required by Virginia state law 4. Other As required by Virginia state law
b. Prior to commencement of work, the Franchisee shall furnish to the Contracting Officer a certificate or written statement of the above required insurance. The Contracting Officer shall be noted on the certificate and shall receive revised copies as available as well as 30-day minimum notice from the insurance carrier regarding any intent to cancel or materially change coverage. c. The Franchise Holder shall indemnify and hold harmless the Government and its employees from all liability under the Federal Tort Claims Act (28 U.S.C. 1346, 2671-2680) or otherwise, 14 for death or injury to all persons, or loss or damage to the property of all persons resulting from or arising out of the negligent installation, operation or maintenance of cable television facilities on Government property. 5. Safety Requirements. The Franchisee agrees to conduct all of its construction, installation or maintenance activities in accordance with all applicable federal, state and local statutes and regulations, including Marine Corps orders, in the conduct and performance of service activities aboard the base, and, to adhere at all times to the security regulations governing Marine Corps Combat Development Command regulations pertaining to Base admission, identification, security and personnel conduct. The applicable regulations shall be made available for review in the office of the Cable Officer. 6. Permits. The Franchisee shall be responsible for obtaining any necessary licenses, registrations, and/or permits, and for complying with applicable laws, ordinances, and base regulations. The Franchisee hereby agrees to indemnify the Government against any expenses, taxes, liabilities, and charges of whatever kind or nature, including fees for copyright licenses or infringement fines, that may arise as a result of the activities of the Franchisee, whether said liability be tortious, contractual or other. 7. Responsibility for Government Property. The Franchisee agrees that it will, at its expense, repair or replace at the Government's option, any Government property that it may damage or destroy. If the franchisee fails or refuses to repair damaged Government property within 60 days, the Contracting Officer shall be entitled to effect repairs through other means and to impose the costs of the repairs on the Franchisee. 8. Conflict of Law. This Agreement is governed by federal law, and by the laws of the state of Virginia, where not in conflict with federal law. 9. Passes and Badges. All Franchise Holder employees will carry an identification card, with photograph and physical statistics, which positively identifies them as working for the Franchise Holder. All employees will carry this card in plain view whenever on Government property. Upon release of any employee, the Franchise Holder will ensure that any Government issued passes and the required Franchise Holder identification card are returned to the issuing office. The Cable Officer will assist in obtaining and returning such documents. 10. Activity Regulations. The Franchise Holder and all employees will obey all Government regulations while on Government property. The Government will supply, upon written request, a copy of applicable regulations. The Government will enforce regulations, regardless of whether or not the Franchise Holder has requested copies. The Commanding General reserves the right 15 to expel and exclude from base access, employees of the Franchise Holder or its subcontractors for violations of law or regulations. Such expulsion or exclusion shall not give rise to any action at law or equity on the part of the Franchise Holder, its employees, a subcontractor's employees or any other person for interference with business relationships or for any similar suit whether grounded in contract or tort. 11. Franchisee Maps or Plans. The Franchisee agrees to provide the Cable Officer, at construction completion or upon the latter's request, with three copies of maps, plans or equivalent documents describing the location of all CATV equipment, facilities and material that the Franchisee will place or has placed on the Base including antenna or microwave dish mounting details. Exhibit 1; Y & D drawing No. 963, 997 shows the total area of Government property at the Marine Corps Combat Development Command, Quantico, Virginia. Exhibit 2 provides future CATV service planned for the Base. 12. Approval of Franchisee's Construction Operation a. The construction or placement of any equipment or facilities on the Base by the Franchisee (including temporary buildings, if needed), as well as any alterations or additions to existing Government property, must be approved in advance by the Cable Officer and the Director of Facilities Division. All pedestals and equipment enclosures of the CATV system owned and maintained by the Franchisee shall be clearly marked to encompass any equipments and/or equipment enclosures and other mutually agreed-to marking requirements. b. Approval of the placement or location of CATV equipment or facilities may be denied, withdrawn or modified at any time if essential to avoid or minimize interference with Base operations or activities. The Franchisee shall not be entitled to reimbursement for any expenses associated with relocation of any equipment or facilities required by the withdrawal or modification of approval. Furthermore, the Cable Officer shall have the right to require the Franchisee to restore a site to its condition existing prior to the placement of CATV equipment or facilities. 13. Construction and Operations Deadline. The Franchisee shall extend energized trunk cable to 75% of the franchise area six months after receiving award of the franchise and shall extend trunk cable to the remaining 25% of its franchise area within four months of said date. Compliance with this construction schedule shall be determined by demonstrations of performance in accordance with Paragraph 23a herein. The Franchise Holder may offer an alternate construction schedule as part of its proposal if deemed necessary and demonstrated. The Government will identify and mark all locations of buried water, power, and telephone lines, etc. within 10 days of receipt of the Cable Officer's work request. Any delays on the part of the Government 16 will not be assessed against the Government. 14. Subscriber Locations; Service Area and Base Expansion. The Base shall determine whether any buildings constructed in the future shall be included in the Service Area. The Cable Officer will coordinate with the Franchisee regarding the subject of installation of cable in planned buildings. Expanded cable service will be negotiated in consideration of the geographical location of a facility, the number of potential subscribers, and other economic factors. 15. Line Extension Policy to Existing Service Area. If the Base increases the service area, including residential housing or barracks, the Franchise Holder will extend cable service to the new locations within 180 days of a written request from the Cable Officer, at no additional cost to the Government. The density of population is defined as 35 subscribers/outlets per linear mile. 16. Connections and Disconnects. a. The Franchisee shall have 5 calendar days to respond to a subscriber's request to initiate service and 5 calendar days to respond to a subscriber's direction to discontinue service. Widespread or repeated failures on the part of the Franchisee to meet these deadlines shall be grounds for termination of this Agreement under the clause entitled "Termination". A subscriber ordering a discontinuance of service shall be entitled to a reduction in monthly user fees in the amount of one day's user fee for each full day remaining following the subscriber's discontinuance order. b. The Franchisee shall provide each subscriber, at the time of initial subscription to the system and upon request, notice as to the procedures to be used for reporting and resolving complaints regarding the quality of service, defective equipment and similar matters; a complete listing of cable related rates and fees, and a copy of the billing policies and programming guides. 17. Repair Service. a. Unreasonable, frequent or widespread delays in making repairs shall be grounds for termination of this Agreement under the clause entitled "Termination". Agents of the Franchisee responsible for making repairs may be contacted at 670-3500 and shall be available during the following hours: 8:00 a.m. - 5:00 p.m., Monday through Saturday. Failure to make timely repairs at a subscriber's location shall constitute grounds for termination under paragraph 29 of this Agreement. b. Repairs due to major outages will be made on evenings and weekends as necessary. Agents of the Franchisee responsible for evening and weekend repairs must be available at a local telephone number. 17 c. Proper identification shall be provided to all employees of the Franchisee per Section 9. Employees are responsible for proper installation and cleanup procedures on the subscriber's premises. d. The Franchisee shall maintain an office within the license service area, or in the area of Quantico/Dumfries, which shall be open and accessible to the public during normal business hours and which shall provide twenty-four hour recording of subscriber complaints, including, but not limited to, billing errors, service disconnections, service loss, and equipment failure. Complaints other than those related to system malfunction addressed by section 17 shall be answered not later than the next business day after the complaint has been received, and corrective action shall be completed as soon as practical. Adequate records shall be made of all subscriber complaints, including description of each complaint. 18. Continuity of Service. a. The Franchisee hereby agrees to make every effort to ensure that CATV signals meeting the performance requirements of this Agreement are available on an uninterrupted basis at every subscriber's outlet on the Base. The Franchisee must respond telephonically and document within one business day in writing the intent to resume service. Failure to meet this requirement shall be grounds for termination of this Agreement under the clause entitled "Termination". The only exceptions are for conditions which result from an act of God or nature or from illegal subscriber action. b. In the event that signal interruption or diminution of one or more channels, whatever its cause, lasts for a period of 24 hours or more, the Franchisee shall credit to the subscribers a rebate consistent with fines levied similar to those at Fort Belvoir and Prince William County. The reduction in charges must be credited against monthly user fees for the monthly billings immediately subsequent to the interruption in service upon the individual subscriber's request. The only exceptions are for interruptions due exclusively to base power outages, acts of God or nature, or illegal subscriber actions which will not entitle users to a fee reduction. c. The Franchisee shall establish maintenance service capability enabling the prompt location and correction of system malfunctions, and shall make repairs within twenty-four (24) hours of receipt of notification during the work week, Monday through Saturday. The Franchisee shall provide a twenty-four hour day complaint answering service, and shall maintain adequate records of all complaints and requests for repairs, and their resolution, which records shall be open for public inspection. 18 19. Government Use Channels. a. The Franchise Holder will provide and maintain, for exclusive Base use, at no cost to the Government through the life of the agreement, at least five channels, or as prescribed in the Cable TV Act of 1984 if additional channels are added. All subscribers will receive four Government use channels with one narrow cast channel being reserved for official Marine Corps training and education, or information programs. The Franchise Holder may not use the assigned Government channels for distribution to other than base subscribers. b. Origination equipment for Base programming will Headend (originate) at the MCCDC TAVSC. The Government will provide video recording equipment, video editing equipment, video cameras, video switching equipment, video graphic equipment, and film transfer equipment so as to provide a broadcast quality signal for cable distribution on the five designated Government use channels. The Franchisee will provide audio/video modulators, carrier cable, and amplification equipment to carry the Government generated video signal from the TAVSC headend to the Franchisee's distribution facility. The Franchisee will provide maintenance of all equipment/cable from the modulators to the Franchisee's distribution facility. The Government will be responsible for maintenance of the program origination equipment. The Franchisee will provide one narrow cast channel for broadcast of official Marine Corps training and education, or information programs or designated facilities. The other four channels will be distributed to all MCCDC subscribers. 20. Emergency Override. The Franchisee shall provide an "emergency override" system for use by the Commanding General. This emergency alert system will allow live voice communications to interrupt on all system channels on the base. The equipment shall be accessible to the Commanding General 24 hours/7 days/week through an exclusive code which can be used from a touch-tone telephone. The Franchisee shall provide and maintain the equipment, services and personnel for the emergency alert system as part to this Agreement at no cost to the Government. The Government is responsible for monthly testing and notifying the Franchisee of any malfunctions. 21. Program Guide and Channel Card. The Franchisee will give each subscriber a card indicating the channel lineup for cable service, for each outlet of service. This card shall be provided free of charge at the time of installation. The Franchisee shall furnish one new card free to each subscriber whenever there is a change in the channel assignments. The Franchisee shall provide a printed program guide for basic service channels, or if feasible, an electronic program guide. The Franchisee will also provide a premium program guide to subscribers of such service. A charge for program guides may be applied for providing a more in-depth guide at subscriber's request. 19 22. Franchise Holder's Rates. The Franchisee agrees that user and connection fees shall be uniform as to all on-base subscribers within the categories set forth in Schedule A. a. Rates for cable service shall be comparable to those in the general area of the base, i.e., contiguous counties offering comparable services in accordance with the most advanced industry service. b. The Franchisee shall notify the Cable Officer and subscribers in writing of any proposed change in rates no less than 30 days or more than 90 days prior to the change. c. If the Cable Officer determines that the proposed rate change is unreasonable, i.e., that it is disproportionate to the number and quality of programming options, the quality of signals and services, channel capacity or the overall economics of the system, such determination shall be made in writing to the Franchisee. Such determination may be appealed to the Commanding General under paragraph 33 of this Agreement. In the event the parties are unable to reach an agreement on a reasonable amount for a rate change, either the Franchisee or the Government may elect to terminate this Agreement under paragraph 29 d. d. Where the Franchisee operates a CATV system in a nearby community, the Franchisee agrees to make available to the Cable Officer, at any time upon the latter's demand, a schedule of its off-base fees. e. Official services purchased by the Government will not be subject to a converter deposit; however, the Government agrees to report and pay for missing or stolen converters utilized for official services. 23. Technical Requirements. The Franchisee agrees to provide a minimum system channel capacity of 54 channels as shown in Schedule B which will meet all technical requirements set forth in Exhibit 3. The performance criteria for the composite system shall be as specified in Subpart K, Technical Standards, 47 CFR 76.601-619. The Cable Operator shall maintain the cable system so as to meet or exceed the technical and design specifications described in Exhibit 3, Technical System Description and Performance Specifications. The Franchisee is strongly encouraged to design, construct and maintain a system that will exceed FCC requirements. Standards and Practices as advanced by the National Cable Television Association are suggested as minimal operating standards to ensure acceptable quality service to all subscribers. a. Demonstrations of Performance. The Franchisee agrees to conduct demonstrations of the performance and signal quality of its system utilizing Franchisee-provided test equipment, at the following times: within the deadline specified in the clause of this agreement entitled "Construction and Operation Deadline", at 20 least once each calendar year (at intervals of not less than six months and not to exceed fourteen months); and when ordered to do so by the Cable Officer to determine whether the system meets the performance requirements set forth in Exhibit 3 and/or whether the construction schedule of paragraph 18 herein is met. A copy of each performance demonstration, verifying compliance with technical requirements, shall be forwarded to the Cable Officer. b. Inspection Rights. Following written notice to the Franchisee, the Commanding General shall have a right of access to the Franchisee's facilities and equipment for purpose of inspection to ensure compliance with the terms and conditions of this Agreement. 24. Reporting Requirements. In addition to any other reports or documents required in this Franchise Agreement, the Franchise Holder shall maintain and provide the following reports to the Cable Officer within 60 calendar days of the close of each calendar year unless otherwise stated. a. During the construction, installation, upgrade or rebuild phases, the Franchisee shall submit a monthly Progress Report (due on the 10th day of each calendar month until a phase is completed) which describes the contractor's progress during the previous month. At a minimum the report shall indicate: 1) Dates of actions and milestones achieved; 2) Schedule extensions requested/received; 3) Problems encountered and their resolutions. b. Upon establishing cable service availability, the Franchise Holder shall complete and submit on an annual basis attached Schedules A and B and their required documentation. Schedule A, the Annual Management Report, describes operational status which will afford a clear understanding of the Franchise Holder's current position; Schedule B summarizes technical performance. c. The Franchise Holder shall maintain a daily complaint log which identifies all such calls and correspondence and their resolutions. At a minimum the log shall identify the subscriber's name, address and telephone number; nature of complaint; and the date, time and resolution of the problem. The log shall be available for periodic inspection by the Cable Officer and during any performance evaluation or franchise renewal proceedings. A summary of this log shall be included in Schedule A. d. In the event the Franchise Holder publishes reports to shareholders, the base's Cable Officer shall receive copies when distributed. Any audited financial statements prepared for the Franchise Holder by a CPA shall also be provided promptly to the Commanding General and the Contracting Officer. 21 25. Performance Evaluation/Franchise Compliance. The Cable Officer shall maintain a record of the Franchisee's performance for the purposes of franchise administration and renewal as outlined in Section 546-c-1 of the Cable Act. Performance and compliance will be determined in part based on the information provided in Schedules A-B attached. a. The Cable Officer shall hold performance evaluation sessions starting within 30 days of the even numbered anniversaries of the Franchisee's award or renewal. Special evaluation sessions may be held at any time at the request of the Cable Officer or Franchise Holder. b. Topics which may be discussed include, but are not limited to, system performance; services provided; programming offered; customer complaints; amendments to the franchise; line extension policies; franchise fee; free or discounted service. c. The Cable Officer may organize a subscriber committee which will inform the Contracting Officer of problems encountered with franchise service so that the latter might work with the Franchisee to determine the extent of the problem and best means of resolution. The Cable Officer shall conduct, at least once during each 12-month period during the term of this Agreement, a meeting of the subscriber committee and/or of individual subscribers in order to determine subscriber opinion of overall quality and acceptability of Franchisee performance. The Franchisee will be afforded the opportunity to participate in such a meeting. 26. Term of CATV Franchise. Unless terminated beforehand pursuant to the terms of Section 30 of this Agreement entitled "Termination", this Agreement shall take effect upon execution by the Government via the Commanding General for a term of fifteen years thereafter. 27. Franchise Renewal a. The renewal procedure shall follow the guidelines specified by Section 546 of the Cable Act, including but not limited to: 1) Ascertainment by the Cable Officer, or designated representative, of the Base's cable related needs and best interests. 2) Review of the Franchisee's performance during the franchise term. 3) Submissions of a renewal proposal by the Franchisee addressing the Base's cable related needs and best interests. b. Determination of renewal will be base on: 22 1) Franchisee's compliance with the franchise and applicable law. 2) Quality of service, including signal quality, customer complaints and billing practices. 3) Ability of incumbent to provide satisfactory services, facilities and equipment offered in the renewal proposal. 4) Reasonableness of the renewal proposal in meeting the Base's cable related interests. c. The Cable Officer shall forward a recommendation to the Contracting Officer and the Commanding General regarding the appropriateness of renewal of the franchise in the light of the renewal process, documentation and other available information. The Commanding General shall have signature authority for initial and renewal franchises. d. Denial of proposal for renewal shall be based on any of the factors described in Section 29a(1) through (14). 28. Nontransferability of Franchise Rights. The rights accruing to the Franchisee under this Agreement are nontransferable without the written consent of the Contracting Officer. Assignments or other transfer of the Franchisee's rights under this Agreement without the written consent of the Contracting Officer shall be grounds for default under the clause of this Agreement entitled "Termination." This clause shall not apply to assignments of accounts receivable or to mortgages, deeds of trust, or similar financing instruments, unless operational or organizational control of the Franchisee is altered by such instruments. a. The Franchisee shall notify the Contracting Officer promptly of any proposed change in, transfer of, or acquisition by any other person of control of the Grantee or any parent company. For purposes of this Agreement, a change of control of the parent company will be deemed to have taken place upon the transfer of 50% or more of the common stock of such parent company to an unaffiliated entity. Every such change shall make the Franchisee subject to immediate termination unless and until the Contracting Officer has granted consent. b. As a condition of the Contracting Officer's consent, the proposed transferee must agree to comply with all provisions of the Agreement, and must show the financial, legal, technical and character qualifications to do so. The Franchisee will bear the cost of independent evaluation of these qualifications. 23 29. Termination. a. Provided that the Contracting Officer first serves the Franchisees with written notice of a default under this Agreement, and gives the Franchisee the opportunity to cure such default within 30 days after receipt of such notice, the Government reserves the right to terminate this Agreement for default by the Franchisee at any time in the event of any material breach of the franchise, including but not limited to the following: 1) Violation of any provision of this Agreement or the Cable Act, or any rule, order, regulation or determination pursuant to the agreement or the Act; 2) Attempt to evade any material provision of the Agreement or the practicing of any fraud or deceit upon its subscribers or the Government; 3) Misrepresentation of fact in the application for or negotiation of the franchise agreement or renewal agreement; 4) Failure to meet the installation and operation deadlines established pursuant to the clauses of this Agreement unless such failure is due to factors beyond the control of the Franchise Holder, acts of God included; 5) Insolvency, bankruptcy, inability or unwillingness to pay its debts, including subscriber refunds, where owed. 6) Breach of the clause of this Agreement entitled "Transferability of Franchise Rights"; 7) Loss of or failure to obtain or renew any FCC certificate, registration or other Government authorization that may be required. 8) Failure to obtain and maintain any public utility easements, road crossings, or the like required to provide service. 9) Frequent or unjustified delays in providing repair services. 10) Failure to provide the types of services promised, assuming the Franchisee has unsuccessfully pursued whatever recourse is available under Section 545 of the Cable Act. 11) Refusal or otherwise unreasonable failure to meet any of its obligations under this Franchise Agreement and failure to correct the deficiency within 10 days. 12) Breach of any of the following clauses of this Agreement: "Connections and Disconnects;" "Repairs;" "Continuity 24 of Service;" or "Nontransferability of Franchise Rights". 13) A broadcast without permission on the Government use channels. 14) Placement on the list of debarred, ineligible or suspended firms maintained by the Department of Defense. b. The foregoing shall not constitute a material breach if the violation is not the fault of the Franchisee or results from circumstances beyond its control. The Franchisee shall not be excused by mere economic hardship nor by malfeasance of its shareholders, directors, officers, employees, or agents. c. Any decision by the Contracting Officer to terminate this Agreement under paragraph 29 a. above is subject to review in accordance with paragraph 33 "Disputes." d. This provision may be invoked by either the Government or the Franchisee. However, the provision concerning rate changes may be invoked only after the Government and Franchisee are unable to reach agreement on what constitutes a reasonable rate change, and a final determination has been issued under Paragraph 33 advising the Franchisee that his proposed rate change is unreasonable. Within 60 days of the issuance of such determination, either the Franchisee or the Contracting Officer may initiate a written Notice of Termination of Cable Agreement for Convenience of the Parties. e. In the event of termination, the Franchisee shall continue to provide service until the effective date of the termination. 30. Government Liability Upon Expiration or Termination. The Government assumes no liability whatsoever to the Franchisee for recovery of fixed costs required to install the CATV system and to put it into operation or for any other expenses incurred by the Franchisee as a result of expiration of this Agreement under the clause entitled "Term of CATV Franchise Agreement" or of its termination under the clause entitled "Termination." Where, however, negotiations for the award of a new CATV Franchise Agreement are made necessary by the expiration of the term of this Agreement or by the termination of this Agreement under the conditions of the clause entitled "Termination", the Contracting Officer shall, where feasible and where the equipment of the CATV system has continued utility to the Base, permit the incumbent Franchisee to offer its installed facilities for sale to those who desire to submit proposals for the new CATV Franchise Agreement. However, nothing contained herein shall in any way obligate the Government to purchase or effectuate a sale of the benefit to the Franchisee. In lieu of the above, the Franchisee shall remove this equipment from the Base as required in Section 33 entitled "Removal of Facilities". 25 31. Deactivation of the Base. The Government assumes no liability whatsoever to the Franchisee for recovery of costs relating to the installation, construction and hookup of the CATV system, or for any other costs, should the Base covered by this Agreement be deactivated in whole or in part. In the event that all or part of the base is deactivated and put to civilian uses that create a demand for the Franchisee's services, this Agreement shall be conveyed only at the discretion of the new franchise authority. The Agreement shall, upon the Franchisee's request, be terminated as to the deactivated areas. 32. Removal of Facilities. The Government reserves the right to require the Franchisee to remove from the Base at the Franchisee's expense, all equipment, facilities and materials of the CATV System, and to restore affected areas to their former condition, within 90 calendar days after expiration or termination of this Agreement. In the event the Franchisee shall fail to remove the aforesaid, it shall be deemed to have been abandoned by the Franchisee. The Franchisee shall reimburse the Government for the cost, if any, incurred by the Government, in effecting removal or otherwise restoring its property to its former condition. Abandoned materials become the property of the Government. 33. Disputes. The Cable Officer shall decide all disputes concerning questions of fact that may arise between the Franchise Holder and subscribers. The Contracting Officer shall decide disputes between the Cable Officer and the Franchisee; appeals may be made to the Commanding General. The Commanding General shall put his decision in writing and mail a copy to the Franchisee within 30 days of reaching such decision. The decision of the Commanding General shall be final, conclusive and not subject to further review by administrative or judicial tribunals. a. If a dispute arises concerning interpretation of terms and conditions in this Agreement, the Franchisee and Contracting Officer shall meet and attempt to reach a mutually agreeable resolution. If such effort fails, the Contracting Officer shall issue, in writing, a final decision which may be appealed to the U.S. Claims Court within 12 months of the date of issuance of the Contracting Officer's final decision. The Government reserves the right to require certification as to entitlement and accuracy of sums claimed by the Franchisee as a condition precedent to payment of such claims. b. The Franchisee shall, in all good faith, proceed diligently with performance of all aspects of this contract, pending final resolution of any request for relief, claim, appeal or action related to the contract. 34. Modifications of Government Regulations. The parties reserve the right to reopen and renegotiate the terms of this Agreement in the event that statutory or regulatory changes of a material, 26 substantive nature are made with respect to regulation and implementation of the cable television industry and franchisees therefor. 35. Franchise and Analogous Fees. The Franchise Holder shall remit to the Government a franchise fee which shall be equal to 5% of the gross receipts received from all base subscribers for "all cable service". "All cable service" shall be defined as basic and premium programming and all other subscriber income resources. Installation fees, and one time service fees are not subject to franchise fees. Franchise fees from "Pay for View" programming will only be charged against the amount of the total "Pay for View" fee that is retained by the Franchise Holder. The first monthly Franchise fee payment will be due 75 days after the contract's effective date (e.g., 15 August 1991 if contract effective on 1 June 1991). Franchise fee payments will be paid monthly thereafter with payments due by the 15th of each calendar month. In lieu of submitting utility pole fees to the Government, the Franchisee shall provide cable service at no charge to the Government for up to forty (40) common areas identified in writing by the Government's Cable Officer and effective annually on 1 January. 36. Utilities Services. The Franchise Holder shall pay the Commanding General for the use authorized herein for utilities services on a metered basis, with the metering being installed at the Franchisee Holder's expense, for the entire system. The rate for such use shall be the same rate charged to other private party users. 37. Contractor Vehicle Authorization. All privately owned vehicles must be properly registered and identified in accordance with Base regulations. All drivers must have valid motor vehicle operator's licenses. All vehicles must conform to federal and state safety standards and be properly and currently licensed, inspected, and insured. Any accidents must be immediately reported to the Cable Officer and Base Security Officer. 38. Security Requirements. The Franchise Holder shall furnish the Cable Officer a roster of personnel assigned, will keep the roster current, and will report in writing immediately any termination of personnel assigned. All employees of the Franchise Holder employed in the performance of work under this Agreement shall be employees of or contractors working on behalf of the Franchise Holder at all times and not employees of the Government. 27 39. FAR Provisions Incorporated by Reference. The following FAR provisions are hereby incorporated by reference in this CATV Franchise Agreement.
FAR CLAUSE TITLE --------------------------------- -------------------------------- FAR 52.229-3 Federal, State and Local Taxes FAR 52.203-1 Officials Not to Benefit FAR 52.203-5 Convent Against Contingent Fees FAR 52.203-3 Gratuities FAR 52.222-3 Convict Labor FAR 52.232-17 Interest
40. Compliance with Section 554 of CCPA. The Franchise Holder shall comply with Section 554 of the Cable Communications Policy Act of 1984 with respect to Equal Opportunity. 41. The Franchise Holders fees shall be deregulated, as provided for under the CCPA and FCC rules. In no event shall the rates charged to subscribers on the Base be higher than the rates for equivalent cable television service provided by the Franchise Holder in the geographic area proximate to the Base. The Franchise Holder shall give all existing customers and the Commanding General no less than 30 days notice and no more than 90 days notice before the effective date of any fee increase. 42. Compliance with Drug Free Work Place Act. The Franchise Holder shall comply with the Drug Free Work Place Act of 1988. 43. Disclaimer of Official Sanction. In soliciting subscribers following execution of this Agreement, the Franchise Holder shall under no circumstances purport to offer its services as an officially sanctioned or recommended benefit or in any other way convey the impression that subscription is anything other than totally voluntary on behalf of subscribers. 44. Nondiscriminatory Availability. The Franchise Holder shall not, as to rates, charges, service, service facilities, or in any other respect grant undue preference to any subscriber or subject any subscriber to prejudice or disadvantage. 45. Compliance with Laws and Regulations. The Franchise Holder shall comply with all laws, ordinances, statutes and regulations pertaining to the provisions of this Franchise Renewal Agreement, including those Marine Corps Combat Development Command regulations pertaining to Base admission, identification, security and personnel conduct. 28 46. Protection of Subscriber Information. a. At the time of entering into an agreement to provide any cable service or other service to a subscriber, and at least once a year thereafter, the Franchisee shall provide notice in the form of a separate, written statement to such subscriber which clearly and conspicuously informs the subscriber of: (1) The nature of personally identifiable information collected or to be collected with respect to the subscriber and the nature of the use of such information; (2) The nature, frequency, and purpose of any disclosure which may be made of such information, including an identification of the types of persons to whom the disclosure may be made; (3) The period during which such information will be maintained by the Franchisee; (4) The times and places at which the subscriber may have access to such information in accordance with paragraph 16b; (5) The limitations provided by this section with respect to the collection and disclosure of information by a Franchisee and the right of the subscriber. In the case of subscribers who have entered into such an agreement before the effective date of this paragraph, such notice shall be provided within one hundred eighty (180) days of such date, and at least once a year thereafter. b. For purposes of this section, the term "personally identifiable information" does not include any record of aggregate data which does not identify particular persons. 29 47. Signatures. IN WITNESS WHEREOF, the Government and the Franchisee have caused this Agreement to be executed as of the day and year first below written. THE UNITED STATES OF AMERICA by /s/ [ILLEGIBLE] --------------------------------------- Commanding General DATE Marine Corps Base Marine Corps Combat Development Command Quantico, Virginia 22134 Telephone: (703) 640-5902 FRANCHISEE by /s/ ROBERT ROSENCRANS Dec. 5, 1990 --------------------------------------- (Name) Robert Rosencrans DATE Title President --------------------------------- Company Columbia Associates, L.P. ------------------------------- Address 9 Greenwich Office Park ------------------------------- City/State Greenwich, CT 06330 ---------------------------- Telephone: (203) 661-1509 ---------------------------- I, Scott N. Ledbetter certifiy that I am the Secretary of the Corporation named herein; and that the foregoing instrument was duly signed for and on behalf of said corporation by authority of its governing body and is within the scope of its incorporated power. 30 EXHIBIT 3 Technical Requirements 1. SCOPE 1.1 This exhibit sets forth the minimum technical engineering, performance, installation, and construction requirements which shall be met by the Franchisee in fulfilling his obligations under the Franchise Agreement. Summaries of the Cable Operator's design and technical specifications appear in Schedule B and are included in this exhibit by reference. 1.2 The Franchisee may request a waiver of any requirement of this Exhibit where local conditions render a waiver essential. Such requests shall be directed to the Contracting Officer who, in consultation with the Cable Officer, shall determine whether such requests should be considered. Waivers shall be granted only where technically acceptable to and in the best interests of the United States Marine Corps. Any such waivers must be signed by both parties and incorporated as Amendments to this Agreement. 2. APPLICABLE DOCUMENTS 2.1 Military Specifications or Standards. There are no military specifications applicable to this exhibit. 2.2 Other. Federal: Federal Communications Commission (FCC) Rules and Regulations ("R&R") Parts 73, 76 and 78. Industry: Electronic Industry Association (EIA) RS-170; National Cable Television Association (NCTA) Standards; National Electrical Code; National Electrical Safety Code. 3. REQUIREMENTS 3.1 Engineering. The system furnished in accordance with this exhibit shall distribute NTSC-TV signals with standard 6 Mhz channel bandwidths, as designated by FCC R&R, Part 73, Sections 73.6703 and 73.682 and/or as specified in supporting documentation. 3.2 General. All cabling shall be of a size and construction that will assure that the system functions as specified herein. All cable and components installed shall be wholly suitable for the conditions to which they may be exposed. (Note: Where not required for initial operation, unused cable ends shall be sealed and protected from moisture and other possible damage. In addition, all unused cable outputs shall be electrically terminated by 75 ohm resistors.) 1 31 3.3 Antennas. Antennas shall comply with all the United States Marine Corps and/or FAA safety requirements concerning lighting, marking and analogous features. Each antenna shall be of sufficient gain and directivity to provide adequate reserve signal to noise ratio and suppression of adjacent channel interference. 3.4 Electricity. The Franchisee shall meet all National Electrical Safety Code standards with regard to lightning, power surges and proper grounding. 3.5 Subscriber Installation Material. Cable fittings, ground blocks, etc., shall be of a quality that will provide secure and safe construction. Where grounding wire, rod, clamps, etc. are used, they shall be selected to conform to pertinent National Electric Code and local electrical safety specifications. 3.6 Best Engineering Effort. The Franchisee shall employ a best engineering effort in antenna design, limited only by restrictions imposed by the state of the art and zoning limitations, to avoid or to minimize co-channel interference, electrical noise interference, multipath signal or excessive fading. 3.7 Performance Standards. The Franchisee shall ensure that the CATV system meets or exceeds the performance standards specified in Schedule B of the Proposal, and meets at a minimum the following technical specifications. a. Hum modulation in any amplifier shall be kept to a minimum and shall in no event be greater than 5%. b. Carrier to noise ratio at any television receiver, including the receiver in the system that is located electrically the farthest away from the headend, shall be at least 42 dB. c. Composite triple beat at any television receiver, including that receiver in the system that is located electrically the farthest away from the headend, shall be at least 52 dB below the carrier level. d. In addition, all relevant FCC and Franchisee-proposed technical performance rules shall be complied with. In any event meeting the specifications set forth herein shall not relieve the Franchisee from providing clear quality video and aural signals, including any color information that may be present. 3.8 Radiation Leakage. Incidental radiation from any part of the system or service outlets shall conform with Part 15 of FCC Rules 2 32 and Cumulative Leakage Index requirements, or such modifications thereof as may be adopted subsequently. 3.9 Overhead. The installation shall conform to the requirements applicable to urban districts in the National Electrical Safety Code and shall apply to all streets, alleys, roads, and drives. All aerial coaxial cables shall be laced with lashing wire to messenger cables by means of a suitable lashing machine. Lashing wire shall be 0.045-inch stainless steel of the type used to lash aerial telephone cables. The pitch of lashing wire may be from 10 to 15 inches but shall be consistent throughout the system. At a minimum the system shall be grounded at every first, tenth and last pole in a span. 3.10 Ground Clearance. The installation of all CATV cabling shall not conflict with or cause any other cabling (i.e., communications, power, etc.) to violate established ground clearance criteria (existing and/or future). 3.11 Underground. Cables shall be unreeled and placed at the bottom of the trench. Cables normally shall not be unreeled and pulled into the trench from one end. Cable shall be in one piece without splices between connections except where the distance exceeds the length in which the cable is manufactured. 3.12 Conduit. Under paved areas and roadways, the cables shall be installed in adequately sized conduit in accordance with NEC and NESC standards. Conduit shall be extended not less than two feet beyond pavements and roadways, when such roadway is utilized for vehicular traffic. 3.13 Trenches. Trenches in which direct burial cables are placed shall have a minimum depth of 18 inches below grade, and shall generally be in straight lines between cable connections, except as otherwise necessary. Bends in trenches shall have a radius of not less than 36 inches. 3.14 Rock. Armored cable or conduit shall be used where rock is encountered. Rock, where encountered, shall be removed to a depth of not less than three inches below the cable depth and the space filled with sand or clean earth, free from particles that would be retained in a one quarter inch sieve. 3 33 SCHEDULE A ANNUAL MANAGEMENT REPORT This form is to be filed with the Franchise Administrator within 60 days of the close of each calendar. A. Construction/Service -------------------- 1. Current Plant Miles ------------------------- 2. Remaining Construction ------------------------- 3. No. Channels Activated ------------------------- 4. Rates Increased During year? ------------------------- 5. Previous basic rate/# channels ------------------------- 6. Prev. exp. basic rate/# channels ------------------------- 7. Prev. Premium rate(s) ------------------------- 8. Please attach a current channel lineup and rate card. 9. Program additions and/or deletions. - ------------------------------------------------------------------------------------------ B. Subscriptions ------------- 1. Potential outlets in area ------------------------- 2. Number of outlets passed ------------------------- 3. Beginning Subscribers ------------------------- a. New connects ------------------------- b. Reconnects ------------------------- c. Other ------------------------- 4. Total Disconnects ------------------------- a. Moved ------------------------- b. Bad Debt ------------------------- c. Other ------------------------- d. Change: Increase (Decrease) ------------------------- 5. Additions/deletions of consideration drops (Schedule D) - ------------------------------------------------------------------------------------------ C. Customer Service Standards Service Repairs -------------------------- ------- ------- 1. Customer Service Phone Number ------------------ ------------------ 2. Hours/days of CSR availability ------------------ ------------------ 3. Answering Service Hours ------------------ ------------------ 4. Number of phone lines ------------------ ------------------ 5. Avg. # CSR's available at one time ------------------ ------------------ 6. Maximum time before CSR pick-up ------------------ ------------------ 7. Hours/days repairs will be made ---------------------------------------- 8. Max. time before repair visit ---------------------------------------- 9. Appt. available for install repairs Yes No 10. On-base payment location ---------------------------------------- 11. Payment due days after receipt of bill 12. Written notification before disconnection Yes No
1 of 2 34 SCHEDULE A Annual Management Report D. Service/Repair Visits 1. Installation 2. Disconnects ---------- ---------- 3. Reconnect 4. Up/downgrade ---------- ---------- 5. VCR hookup 6. Illegal hookup ---------- ---------- 7. Installation Error 8. TV set problem ---------- ---------- 9. Converter problem 10. Drop problem ---------- ---------- 11. Line problem 12. No trouble found ---------- ---------- 13. Not home 14. Other ---------- ---------- 15. Total service visits 16. Telephone Report ---------- ----------
E. Outages Date Length #Calls #Units affected Reason for outage ----------------------------------------------------------------------------- a. ----------------------------------------------------------------------------- b. ----------------------------------------------------------------------------- c. ----------------------------------------------------------------------------- F. Comments, plans, problems, issues (indicate any changes in policies, management, address, telephone number etc.) 2 of 2 35 SCHEDULE B Technical Description and Performance Specifications A. Physical Plant -------------- 1. Miles of plant: Aerial ------------ Underground ------------ Construction complete? Yes No ---- ---- 2. Channel capacity: channels, passband - MHz. ---- ----- ----- 3. Activated channels: Downstream to MHz. ---- ------- ----- Upstream to MHz. ---- ------- ----- 4. Features (check if available): Audio ------- Stereo Audio ------- Pay-per-view ------- Cable-ready basic ------- 5. Channels unusable for video due to interference or other reasons: - -------------------------------------------------------------------------------- 6. Maximum cascade from headend: Trunk amplifiers ------- Bridger(s) ------- Line Extender(s) ------- 7. Equipment added or replaced during previous year: - -------------------------------------------------------------------------------- B. Signal Quality -------------- 1. Date of last demonstration of technical performance: ------------------------- 2. Results of demonstration (measured levels) at worst case test points: a. Carrier to noise dB ----------- b. Carrier to low frequency dB ----------- c. Carrier to second order dB ----------- d. Carrier to cross modulation dB ----------- e. Carrier to composite beat dB ----------- 3. Frequency vs. gain response of the passband shall not exceed N / 10 + __________dB, where N = number of amplifiers in cascade. 1 of 2 36 SCHEDULE B Technical Description and Performance Specifications 4. Frequency vs. gain response of a signal channel as measured across any 6 MHz spectrum shall not exceed +/- dB. 5. The system shall meet or exceed all FCC technical standards contained in Part 76, Subpart K of FCC Rules and Regulations. C. Comments 2 of 2 37 Addendum #1 to Franchise Agreement entered into on 6 December 1990 at Marine Corps Base, Marine Corps Combat Development Command, Quantico, Virginia, 22134 by and between the United States of America, and Columbia Associates (L.P. d/b/a Columbia Cable of Virginia) which parent company is Columbia International, Inc., 9 Greenwich Office Park, P.O. Box 4624, Greenwich, Connecticut, 06830. For the mutual benefit of all parties, this Addendum, the terms of which are set forth, is made and entered into on 7 June 1991, by and between the United States of America, hereinafter called USA, and Columbia Associates, hereinafter called the Franchisee. 1. That the five percent (5%) franchise fee shall apply to basic service only. That the franchise fee is not allowable as a separate increase to the bill with a direct pass through expense to customers. 2. That a 50% discount coupon off the price of the non-promotional installation fees for basic service shall be made available by the Franchisee to all military patrons at Marine Corps Combat Development Command. 3. That the computation of the franchise fee payable shall commence on 1 July 1991. 4. That the current five percent (5%) rate increase published by the Franchisee shall be rescinded. No rate increase shall occur prior to 1 January 1992. 5. That the format of the current customer fee schedule shall remain as currently printed until 1 July 1992 when a "breakout" of the franchise amount as a separate line item will become effective. A customer fee increase will not be effected at this time. The basic cable rate amount shown will be reduced by the five percent (5%) franchise fee "breakout" shown. 6. That this Addendum will commence and become effective on 7 June 1991. 7. Except as rendered inconsistent by provisions of the Addendum, all provisions of the basic agreement will be part of this Addendum. THE UNITED STATES OF AMERICA by /s/ Ed Cook Jr. 10 June 91 --------------------------------- Commanding General DATE Marine Corps Base Marine Corps Combat Development Command Quantico, Virginia 22134 Telephone: (703) 640-5902 1 of 2 38 FRANCHISEE by /s/ Richard H. Rosencrans 6/7/91 ---------------------------------------------------- (Name) DATE Title Vice President -- Columbia International, Inc. ---------------------------------------------- 9 Greenwich Office Park P.O. Box 4624 Greenwich, Connecticut 06830 Telephone: (203) 661-1509 2 of 2 EX-10.6.64 11 FRANCHISE TOWN OF HAYMARKET, VA 1 EXHIBIT 10.6.64 RESOLUTION NO. RESOLUTION APPROVING THE TRANSFER OF THE CABLE TELEVISION FRANCHISE FOR THE TOWN OF HAYMARKET, VIRGINIA HELD BY BENCHMARK/MANASSAS CABLE FUND LIMITED PARTNERSHIP WHEREAS, by Ordinance adopted on January 20, 1986 (the "Ordinance"), the Town Council of the Town of Haymarket, Virginia (the "Town") granted to Telesat Communications, Inc. ("Telesat") a franchise (the "Franchise") to construct, own, operate and maintain a cable television system within the Town (the "System"); and WHEREAS, by Consent to and Approval of Merger and Consent to and Approval of Assignment dated July 22, 1987, the Town approved the assignment of the Franchise from Telesat to Benchmark/Manassas Cable Fund Limited Partnership (d/b/a Cablevision of Manassas, Ltd.) ("Cablevision"), and the Franchise was subsequently so assigned, such that Cablevision is now the duly authorized holder of the Franchise; and WHEREAS, Cablevision has agreed to sell the System to Jones Intercable, Inc. ("Jones") and Jones has agreed to purchase the System from Cablevision; and WHEREAS, Cablevision has requested pursuant to Section 9 of the Ordinance that the Town Council of the Town of Haymarket, Virginia approve (i) the transfer of the Franchise to Jones Intercable, Inc., a Colorado corporation ("Jones") or any affiliate of Jones, including any limited partnership of which Jones or any affiliate of Jones is a general partner, or any joint venture or general partnership of which Jones, any affiliate of Jones or any such limited partnership or partnerships is a general partner (any such entity being hereinafter referred to as an "Affiliate of Jones"); (ii) the subsequent transfer of the Franchise to any Affiliate of Jones; and (iii) the granting from time to time by Jones or any Affiliate of Jones then holding the Franchise of a security interest in its assets, including the Franchise and the System, to an institutional lender or lenders as security for its obligations to such lender or lenders; and WHEREAS, Jones or any Affiliate then holding the Franchise has agreed to be bound by the terms, provisions and conditions of the Franchise. NOW, THEREFORE, BE IT HEREBY RESOLVED by the Council of the Town of Haymarket, Virginia that: 1. The Town does hereby consent to the transfer of the System and the Franchise from Cablevision to Jones or any Affiliate of Jones and to any subsequent transfers to any Affiliate of Jones. 2. The Town does hereby consent to the grant from time to time by Jones or any Affiliate of Jones then holding the Franchise of a security interest in the System 2 and in all of its rights, powers and privileges under the Franchise and all of its other assets to such lending institution or institutions as may be designated from time to time by Jones or such Affiliate, which lending institution or institutions shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code. 3. The foregoing consent to the transfer and assignment of the Franchise shall be effective upon the closing of the sale of the System by Cablevision to Jones or an Affiliate of Jones. Notice of such closing date shall be given to the Town. Any subsequent transfer of the Franchise from Jones to any Affiliate of Jones or between Affiliates of Jones shall be effective upon written notice being given to the Town by the entity then holding the Franchise. 4. The Town hereby confirms that, to its knowledge, (a) the Franchise is currently in full force and effect; (b) Cablevision is currently the valid holder and authorized grantee of the Franchise; (c) Cablevision is in compliance in all material respects with the Franchise; and (d) no event has occurred or exists which would permit the Town to revoke or terminate the Franchise. Subject to compliance with the terms of this Resolution, all action necessary to approve the transfer of the Franchise and the System to Jones or any Affiliate of Jones or to any subsequent transfers to any Affiliate of Jones has been duly and validly taken. Adopted by the Town Council of the Town of Haymarket, Virginia on this day of August 7, 1995. TOWN OF HAYMARKET, VIRGINIA [ILLEGIBLE] ------------------------------------ Title: Mayor ATTEST: [ILLEGIBLE] - ------------------------------ Town Clerk 3 CONSENT TO AND APPROVAL OF MERGER, AND CONSENT TO AND APPROVAL OF ASSIGNMENT This Consent to and Approval of Merger, and Consent to and Approval of Assignment is hereby made this 22nd day of July, 1987 by and among the Town of Haymarket, Virginia (the "Franchise Authority"), Telesat Communications, Inc. ("Telesat"), and Cablevision of Manassas Ltd., which plans to change its name to Benchmark/Manassas Cable Fund Limited Partnership (the "Partnership"). RECITALS A. Telesat currently owns and operates a cable television system serving Haymarket, Virginia (the "System"). B. Telesat has entered into an Agreement and Plan of Merger ("Merger Agreement"), dated June 19, 1987, with ABS/Benchmark Acquiring Corp., a Virginia corporation ("Acquiring Corp."). Pursuant to the Merger Agreement, among other things, Acquiring Corp. will be merged into Telesat (the "Merger") and Telesat will be the surviving corporation (the "Survivor"). The former holders of Common Stock and Series A Preferred Stock of Telesat will receive cash in exchange for their stock in the Merger and the stockholders of Acquiring Corp. will become the sole stockholders of Survivor. C. Acquiring Corp. represents that after the Merger, the Survivor will transfer all of its assets and 4 -2- liabilities to the Partnership in exchange for a limited partnership interest in the Partnership. D. The Franchise Authority granted to Telesat a cable television franchise on January 20, 1986 (the "Franchise"), which Franchise will expire on January 20, 2001. E. As a condition to the Closing of the Merger between Telesat and Acquiring Corp., Telesat must obtain the consent of and approval of the Franchise Authority to the Merger. F. Pursuant to the terms of the Franchise, the Survivor must obtain the consent of and approval of the Franchise Authority to the assignment and transfer of the Franchise by Survivor to the Partnership. NOW THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the sufficiency of which is hereby acknowledged, the Franchise Authority hereby consents to the following: 1. The Franchise Authority hereby consents to and approves the Merger of the Acquiring Corp. with and into Telesat pursuant to the Merger Agreement and, accordingly, acknowledges that the Franchise shall not be rescinded, negated or otherwise affected in any manner by the Merger or the transactions contemplated thereby. 5 -3- 2. The Franchise Authority hereby consents to and approves the assignment and transfer of the Franchise by Survivor to the Partnership, such assignment to be effective upon the date of closing for the transfer of assets and liabilities by Survivor to the Partnership (the "Closing");* 3. It is understood by all the parties hereto that no assignment or other transfer of any rights currently held by Telesat pursuant to the Franchise shall be effective, and the consents and the approvals requested hereby shall not take effect, unless and until a certificate of merger in connection with the Merger is issued by the State Corporation Commission of Virginia. 4. The Franchise Authority acknowledges that Telesat is in full compliance with the terms of the Franchise. IN WITNESS WHEREOF, this Agreement is made on the date first written above. TELESAT COMMUNICATIONS, INC. By: /s/ DAVID K. VITALIS -------------------------------- David K. Vitalis, Chairman President and Chief Executive Officer (SIGNATURES CONTINUED ON NEXT PAGE] provided that prior to the effective date of such transfer, the partnership, as the ultimate assignee has filed in the office to the Town Clerk an instrument, duly executed, reciting the fact of such assignment, accepting the terms of Franchise, and agreeing to perform all the conditions thereof. 6 -4- CABLEVISION OF MANASSAS LTD. BY: /s/ R. CALVIN SUTLIFF -------------------------------- R. Calvin Sutliff, General Partner TOWN OF HAYMARKET, VIRGINIA BY: /s/ GERTRUDE BEAN -------------------------------- Name: Title: Mayor State of Virginia Town of Haymarket, County of Prince William, to-wit: I hereby certify that before me, the subscriber, a notary public in and for the State and County aforesaid, personally appeared Gertrude Bean, Mayor of the above referenced Franchise Authority, known to me or satisfactorily proven to be the person whose name is subscribed to the foregoing instrument and acknowledged that he executed same for the purposes therein contained. /s/ THOMAS MACAULAY ------------------------------------ Notary Public [Notarial Seal] My commission Expires: ------------- MY COMMISSION EXPIRES APRIL 4, 1990 7 [BENCHMARK COMMUNICATIONS LETTERHEAD] TOWN OF HAYMARKET FRANCHISE AGREEMENT July 30, 1987 Gertrude Bean Mayor Town of Haymarket Haymarket, VA Dear Mayor Bean: In connection with the transfer from Telesat Communications, Inc. to Benchmark/Manassas Cable Fund Limited Partnership, the Franchise (known as the "Cable Television Ordnance") for providing cable television services in the Town of Haymarket, Virginia, we hereby accept the terms of that Franchise dated 20 January, 1986 and as amended by Town ordnance on 20 July, 1987 and agree to perform all the conditions thereof. Sincerely, BENCHMARK/MANASSAS CABLE FUND LIMITED PARTNERSHIP By: /s/ R. CALVIN SUTLIFF, JR. -------------------------------- R. Calvin Sutliff, Jr. General Partner 8 AN ORDINANCE TO AMEND THE ORDINANCE GRANTING TO TELESAT COMMUNICATIONS, INC. A FRANCHISE TO OPERATE A COMMUNITY ANTENNA TELEVISION SYSTEM SERVICE IN THE TOWN OF HAYMARKET, VIRGINIA WHEREAS, an Ordinance was adopted by the Council of the Town of Haymarket, Virginia, on the 20th day of January, 1986, granting a Franchise to Telesat Communications, Inc., known as the "Cable Television Ordinance"; and WHEREAS, Telesat Communications, Inc., has requested approval by the Town Council to assign and transfer, through merger with ABS/Benchmark Acquiring Corporation, a Virginia corporation, which corporation will sell its assets to a partnership known as Benchmark/Manassas Cable Fund Limited Partnership; and WHEREAS, Telesat Communications, Inc., has also requested the Town to amend SECTION 27 of the said Franchise Ordinance to reduce the bonding requirement therein from Fifty Thousand Dollars ($50,000.00) to Five Thousand Dollars ($5,000.00); and WHEREAS, the Town has agreed to reduce the said bonding requirements to Fifteen Thousand Dollars ($15,000.00) rather than the Five Thousand Dollars ($5,000.00) requested; and WHEREAS, pursuant to the requirements of Section 15.1-314 of the 1950 Code of Virginia, as amended, in order to amend the Franchise Ordinance, a public hearing was held on the 20th day of July, 1987, pursuant to notice published in The Journal Messenger on the 9th day of July, 1987, to reduce the requirements as set forth in Section 27 upon the said Franchisee. -1- 9 NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE TOWN OF HAYMARKET meeting in regular session this 20th day of July, 1987, that the Cable Franchise Ordinance entered into with Telesat Communications, Inc., be and it is hereby amended to grant approval of the assignment and transfer by Telesat Communications, Inc., to Benchmark/Manassas Cable Fund Limited Partnership, conditioned upon its filing with the Town Clerk the necessary acceptance of the terms of the Franchise and the Agreement to perform all the conditions thereof pursuant to the requirements of SECTION 9 of the Franchise; and BE IT FURTHER ORDAINED that "SECTION 27. Bonding Requirements" be amended and reenacted to read as follows: SECTION 27. Bonding Requirements. (1) Performance Bond. From and after the effective date of this Amendment, Company, and any successors or assigns thereof, shall keep on deposit in an escrow account in the name of the Town of Haymarket a cash deposit, corporate surety bond or irrevocable letter of credit in the amount of Fifteen Thousand Dollars ($15,000.00). The cash bond or letter of credit shall be used to insure the faithful performance by Company, its successors or assigns, of all provisions of this franchise ordinance; and its compliance with all orders, permits and directions of any agency, commission, board, department, division or office of the Town having jurisdiction over its acts or default under this franchise and the payment by the Company, or its successors or assigns, of any liquidated damages, claims, liens and taxes due the Town which arise by reason of the construction, operation or maintenance of the system. This ordinance shall be effective upon its passage. BY ORDER OF THE COUNCIL Endorsed: [ILLEGIBLE] Mayor -------------------------- Attest: /s/ DOROTHY KELLER ---------------------------- Town Clerk -2- 10 TO: BANK OF VIRGINIA: We, the undersigned, hereby notify you that pursuant to an Ordinance of the Town of Haymarket, Virginia, dated January 20, 1986, the Town of Haymarket granted a cable system franchise to Telesat Communications, Inc.; that an Escrow Agreement depositing $50,000.000 with the Bank of Virginia was entered into the 17th day of November, 1986, pursuant to the franchise requirement with the Bank of Virginia as Escrow Agent and with the provisions of escrow; that said ordinance was amended the 20th day of July, 1987, approving the assignment and transfer of the franchise from Telesat Communications, Inc., to Benchmark/Manassas Cable Fund Limited Partnership, a General Partnership, of which R. Calvin Sutliff, Jr., is General Partner; that the amendment to the said Franchise Ordinance further amended Section 27 of the original Franchise Ordinance to reduce from $50,000.00 to $15,000.00 the bonding requirement thereof, thereby amending the said Agreement dated November 17, 1986, between Telesat Communications, Inc., and the Town of Haymarket. You are further notified that all other directions, requirements and instructions in the said Escrow Agreement dated November 17, 1986, are hereby ratified and remain in force. You are hereby requested to forward to the Town of Haymarket a copy of the deposit slip or other verification of the receipt of the escrow of $15,000.00, thereby releasing the initial investment savings account certificate deposit receipt showing deposit of $50,000.00 in the name of the Town of Haymarket dated November 18, 1986, made at the Westgate Branch of the Bank of Virginia. TELESAT COMMUNICATIONS, INC. By: /s/ DAVID K. VITALIS --------------------------------- David K. Vitalis, President CABLEVISION OF MANASSAS LTD. (Benchmark/Manassas Cable Fund Limited Partnership) By: /s/ R. CALVIN SUTLIFF, JR. --------------------------------- R. Calvin Sutliff, Jr. General Partner TOWN OF HAYMARKET By: /s/ GERTRUDE BEAN --------------------------------- Gertrude Bean, Mayor 11 AN ORDINANCE TO ADVERTISE CABLE TELEVISION FRANCHISE ORDINANCE WHEREAS, the Town of Haymarket, Virginia, desires to seek qualified applicants to provide cable television service to the citizens of Haymarket, Virginia; and WHEREAS, the Town of Haymarket sets forth herein the proposed Cable Television Franchise Ordinance to be granted and the Request for Proposals respecting the same containing information and instructions relating to the preparation and filing of proposals as well as conditions and provisions regarding installation, operation and maintenance of a cable television system; and WHEREAS, such ordinance and proposals are on file at the Town Hall in Haymarket. NOW, THEREFORE, BE IT ORDAINED by the Council of the Town of Haymarket, Virginia, in Regular session this 20th day of January, 1986: I. That there shall be granted in the mode prescribed by the laws of the Commonwealth of Virginia for franchise grants (Title 15.1, Chapter 9, Article 2, Section 15.1-307, et seq., and Title 15.1, Chapter 1, Article 2, Section 15.1-23.1 of The 1950 Code of Virginia, as amended, and in accordance with The Cable Communications Policy Act of 1984, identified as "Title VI -- Cable Communications," an amendment to the Communications Act of 1934) upon the conditions hereinafter specified, the rights and privileges embodied in the foregoing draft of ordinance together with Request for Proposals for the provision of cable television services to the citizens of the Town of Haymarket, such ordinance being entitled: 12 AN ORDINANCE GRANTING UNTO TELESAT, ITS SUCCESSORS AND ASSIGNS, A FRANCHISE, RIGHT OF CONVENIENCE OR PRIVILEGE TO ERECT, OPERATE AND MAINTAIN POLES, CABLES, AND ALL OTHER ELECTRICAL EQUIPMENT, STRUCTURES, OR FIXTURES NECESSARY AND INCIDENTAL TO THE OPERATING OF A COMMUNITY ANTENNA TELEVISION SYSTEM SERVICE AND CLOSED CIRCUIT TELEVISION TRANSMISSION SERVICE, SUBJECT TO THE LIMITATIONS AND RESTRICTIONS HEREIN SET FORTH, UNDER, OVER, UPON AND ACROSS THE STREETS, ALLEYS, SIDEWALKS, AND PUBLIC PLACES OF THE TOWN OF HAYMARKET, VIRGINIA, FOR THE PURPOSE OF ERECTING, OPERATING, AND MAINTAINING A COMMUNITY ANTENNA TELEVISION SYSTEM AND CLOSED CIRCUIT TELEVISION TRANSMISSION SERVICE FOR THE USE OF THE RESIDENTS AND CITIZENS OF SAID TOWN, AND FOR THE PERSONS FIRMS AND CORPORATIONS DOING BUSINESS THEREIN, AND TO USE THE PROPERTY OF OTHER COMPANIES UPON SUCH ARRANGEMENTS AND CONDITIONS AS THE COMPANIES MAY AGREE. BE IT ORDAINED, by the Town of Haymarket, State of Virginia. SECTION 1. Short Title. This Ordinance shall be known and may be cited as the "Cable Television Ordinance". SECTION 2. Definitions. For the purpose of this Ordinance, the following terms, phrases, words, and their derivations shall have the meaning given herein. When not inconsistent with the context, words used in the present tense include the future, words in the plural number include the singular number and words in the singular number include the plural number. The word "shall" is always mandatory and not merely directory. (1) "Town" is the Town of Haymarket, Virginia. (2) "County" is the County of Prince William, Virginia. (3) "Company" is the grantee of rights under this Ordinance. 13 (4) "Council" is the Town Council of the Town of Haymarket, Virginia. (5) "Person" is any individual, partnership, association, corporation, joint stock company, trust, or governmental entity of any kind. (6) Whenever used in the ordinance, the words "audio", "video", "television" and "frequency modulation" shall mean a system for transmission of audio signals and visual images, or the separate transmission of either of them, by means of electrical impulses. The system shall have the emergency alert audio and video interruption feature to all channels. (7) "Subscriber System" means that portion of the cable television system that is designed to serve all residences, businesses, and institutions in the Town. (8) "Cable System Activation" means the date on which fifteen (15) percent of the trunk and feeder cable for the subscriber system has been installed, or the date on which the trunk or feeder cable of the subscriber system passes within one hundred fifty (150) feet of the property lines of fifteen (15) per cent of all residences in the Primary Service Area (PSA). (9) "Primary Service Area" (PSA) as used in this section means the total area of the town limits of Haymarket. (10) "Operator's Gross Revenues" shall include all revenues derived from supplying regular subscriber service, that is, the installation fees, disconnect and reconnect fees, and fees for regular cable benefits including the transmission of broadcast signals and access and origination channels, if any. -2- 14 It also includes revenues derived from per-program and per-channel charges, leased channel revenues, and advertising revenues. (11) "Cable Office" shall mean the business office of the franchise which shall be conveniently accessible to the public. (12) "Homes Per Mile" shall mean the total number of residential units located on the property directly adjacent to two consecutive miles of street, as measured along established streets. The total residential units thus obtained shall be divided by two to obtain the "homes per mile." Example: 8 apartments in one building count as 8 homes. SECTION 3. Authority and Terms (a) Grant of Authority. The town is hereby authorized to grant a non-exclusive right and privilege to construct, erect, operate and maintain, in, upon, along, across, above, over and under the streets, alleys, public ways and public places now laid out or dedicated, and all extensions thereof, and additions thereto, in the Town, poles, wires, cables, underground conduits, manholes and other television conductors and fixtures necessary for the maintenance and operation in the town of a community television system for the interception, sale and distribution of television signals. (b) Term of Franchise. This grant shall be for a period of fifteen (15) years from the effective date of this Ordinance, subject to a review of satisfactory performance commencing not later than the thirty-sixth (36) month prior to the expiration -3- 15 of the franchise to determine grant of a five (5) year extension thereof. SECTION 4. Compliance with Applicable Laws and Ordinances. The Company shall, at all times during the life of a Franchise, be subject to all lawful exercise of the police power of the Town, and to reasonable regulation as the Town shall hereafter, by resolution or Ordinance, provide. SECTION 5. Liability -- Indemnification -- Insurance. The Company shall maintain and by its acceptance of a franchise, specifically agrees that it will maintain throughout the term of its franchise, liability insuring the Town and the Company in the minimum amount of: (1) Workmen's Compensation: As required by all applicable Federal, State, Maritime or other laws. (2) Company's Liability: Each occurrence one million dollars ($1,000,000). (3) Comprehensive General Liability: Bodily injury, each occurrence one million dollars ($1,000,000); property damage, each occurrence one million dollars ($1,000,000) and aggregate one million dollars ($1,000,000). (4) Comprehensive, Automobile Liability: including non-ownership and hired car coverages as well as owned vehicles with minimum limits as follows: bodily injury for each occurrence three hundred thousand -4- 16 dollars ($300,000); property damage for each occurrence one hundred thousand dollars ($100,000). (5) The Insurance Policy obtained by the Company in compliance with this section must be approved by the Town Attorney and such policies along with written evidence of payment of premiums shall be filed and maintained with the Office of the Town Clerk during the term of this franchise and may be changed from time to time to reflect changing liability limits. The Company shall immediately advise the Town Attorney of any litigation that may develop that would affect the insurance. (6) Liability Limits: Neither the provisions of this section nor any damages recovered by the Town hereunder shall be construed to or limit the liability of the Company under this franchise or for damages. (7) Insurance Cancellation: The insurance policy maintained pursuant to this franchise shall contain the following endorsement: It is hereby understood that this insurance policy may not be canceled by the surety nor the intention not to renew be stated by the surety thirty (30) days after receipt by the Town by registered mail of written notice of such intention to cancel or not renew. SECTION 6. Poles and Conduits. The poles and underground conduit facilities used for the Grantee's distribution system shall be those erected and maintained by the locally franchised Telephone Company and/or the locally franchised Power Company, when and where practicable, -5- 17 providing mutually satisfactory rental agreements can be entered into with said Companies. Where the use of poles and underground conduit facilities owned by the locally franchised Telephone Company and/or the locally franchised Power Company is not practicable, or mutually satisfactory rental agreements cannot be entered into with said Companies, the Grantee shall have the right to erect and maintain its own poles and underground conduit facilities as may be necessary for the proper construction and maintenance of the television distribution system, with the approval of locating poles and underground conduit facilities to be first given by the Town Council. SECTION 7. Construction Approval. The Company shall furnish the Town true and accurate maps or plans of all existing installations, and the Town hereby reserves the right at all times to reject any proposed installation whose manner or place of construction it deems contrary to public interest, and may order and direct the Company, at its own expense, to move the location or alter the construction of any existing installation wherever the Town deems the public interest to require such removal or alteration, having due regard to the equities of the parties concerned and the purpose of this Ordinance. SECTION 8. Conditions on Street Occupancy. (1) Use. All transmission and distribution structures, lines and equipment erected by the Company within the Town shall -6- 18 be so located as to cause minimum interference with the proper use of streets, alleys, and other public ways and places, and to cause minimum interference with the rights or reasonable convenience of property owners who adjoin any of the said streets, alleys, or other public ways and places. (2) Restoration. In case of any damage of any property during installation, construction, operation, or removal, the Company shall, at its own cost and expense justly compensate the owner of said property for all damages incurred by the property owner. (3) Relocation. In the event that at any time during the period of this Franchise the Town shall lawfully elect to alter, or change the grade of, any street, alley, or other public way, the Company, upon reasonable notice by the Town, shall remove, relay, and relocate its poles, wires, cables, underground conduits, manholes and other fixtures at its own expense. (4) Placement of Fixtures. The Company shall not place poles or other fixtures where the same will interfere with any gas, electric, or telephone fixture, water hydrant or main, and all such poles or other fixtures placed in any street shall be placed at the outer edge of the sidewalk and inside the curb line, and those placed in alleys shall be placed close to the line of the lot abutting on said alley, and then in such a manner as not to interfere with the usual travel on said streets, alleys, and public ways. (5) Temporary Removal of Wire for Building Moving. The Company shall, on the request of any person holding a building -7- 19 moving permit issued by the Town, temporarily remove, raise, or lower its wires to permit the moving of buildings. The expense of such temporary removal, raising, or lowering of wires, shall be paid by the person requesting the same, and the Company shall have the authority to require such payment in advance. The Company shall be given not less than forty-eight (48) hours advance notice to arrange for such temporary wire changes. (6) Tree Trimming. The Company shall have the authority to trim trees upon and overhanging streets, alleys, sidewalks and public places of the Town so as to prevent the branches of such trees from coming in contact with the wires and cables of the Company, all trimming to be done under the supervision and direction of the Town and at the expense of the Company. (7) Existing Structures. Existing poles, posts, and other such structures of telephone and power companies for leasing or licensing at reasonable terms shall be used as practicable in order to minimize interference with travel. SECTION 9. Approval of Transfer. The Company shall not sell or transfer effective control of its plant or system to another, nor transfer any rights under the Franchise to another without Council approval. Provided, that no sale or transfer shall be effective until the Vendee, assignee or lessee has filed in the office of the Town Clerk an instrument, duly executed, reciting the fact of such sale, assignment or lease, accepting the terms of the Franchise, and agreeing to perform all the conditions thereof. -8- 20 SECTION 10. Franchisor Rights in Franchise. (1) Franchisor Rules. The right is hereby reserved to the Franchisor to adopt, in addition to the provisions herein contained and existing, applicable ordinances, such additional regulations as it shall find necessary in the exercise of the police power, provided that such regulations, by ordinances or otherwise, shall be reasonable, and not in conflict with the rights herein granted, and shall not be in conflict with the laws of the State of Virginia and the Cable Communications Policy Act of 1984. (2) Supervision and Inspection. The Town shall have the right to supervise all construction or installation work performed subject to the provisions of this Ordinance and to make such inspections as it shall find necessary to insure compliance with governing ordinances. (3) Town rights. All rights, rights of way, and easements acquired hereinabove designated shall remain the property of the Town. Until such time as said poles or other equipment are actually installed, and in the event of future removal of said equipment, said rights shall immediately revert to the Town. Should said rights not sooner revert to the Town, then this grant shall terminate and expire fifteen (15) years from the effective date hereof. It being understood that the Company shall have the right at any time during the effective term of this grant to surrender and relinquish all of its rights hereunder and thereupon be released from its duties as herein required. Surrender, by the Company, of this grant, shall be -9- 21 preceded by written notice of its intention to do so at least six (6) months before the surrender date. On the surrender date specified in such notice, all of the rights and privileges and all of the obligations, duties and liabilities of the Company under this Ordinance, except as to the extent previously accrued hereunder, shall terminate. SECTION 11. Franchise Fee. The Company shall pay to the Town five (5) percent of its gross revenues during the preceding year as a franchise fee in order to compensate the Town for the time and expense it incurs in regulating cable television said fee to be paid on or before 30 June of each year during the term hereof. SECTION 12. Interference. The Company shall at all times operate and maintain its community antenna television system in such a manner as not to interfere with existing television reception, including interference by radiation, and the town shall enforce the provisions of this section. SECTION 13. Records and Reports. The Town shall have access at all reasonable hours to all of the Company's engineering data, accounting, financial, and customer service records relating to the property and the operation of the Company and to all other records required to be kept by other governmental authorities and hereunder. (1) Company Rules and Regulations. Copies of such rules, regulations, terms and conditions adopted by the Company for the conduct of its business. -10- 22 (2) Gross Revenue. An annual summary report showing gross revenues received by the Company from its operation within the Town during the preceding year and such other information as the Town shall request with respect to properties and expenses of the Company's service within the Town. Said report shall be due on 31 May of each year during the term hereof. SECTION 14. Reimbursement of Costs. In addition to paying a franchise fee, the Company agrees to reimburse the Town for all direct and reasonable charges actually incurred by the Town in connection with the award of the franchise. SECTION 15. Channel Capacity. The Company shall establish a minimum channel capacity of thirty five (35) channels in the forward direction and expansion capability to four (4) in the reverse. SECTION 16. Subdivision Policy. The Town shall have the power to require the Company to install cable and fixtures in a proposed subdivision of such quality and service capability as is commensurate with the requirements of this ordinance and the Company's service elsewhere in the Town. The Company shall be reimbursed for all costs attendant + 10% with such reinstallation. -11- 23 SECTION 17. Service Review. The Town shall have the power to require periodic quality of service reviews for the purpose of regulation and franchise renewal. SECTION 18. Technical Standards. The Town shall have the right to establish minimum technical standards which the Company shall comply with. Until such standards are adopted, the following minimum system standards apply to all one-way and two-way channels, regardless of program content: (a) Subscriber Terminal 1. Minimum signal level 0 dBmV (+4 plus or minus 4 dBmV) 2. Adjacent visual carrier level maximum variation plus or minus 3 dB 3. Associated aural signals between 13 and 17 dB below visual signal level 4. FM signals and test signals carried at same signal level as aural signals 5. Amplitude characteristics within plus or minus 2 dB from .75 MHz below to 5.0 MHz above the video carrier frequency as measured from input to subscriber terminal 6. Signal-to-noise ratio 40 dB of visual signal level to 4.3 MHz noise 7. Frequency stability of total system conversion any input to any output plus or minus 50 kHz 8. Intermodulation products 46 dB below visual signal level 9. Cross modulation products fully loaded synchronous modulation 48 dB below visual level 10. Peak-to-Peak hum less than 5% of visual signal level -12- 24 11. Minimum terminal isolation 26 dB (b) Radiation The Town has the right to deactivate any and all channels immediately if there is a documented violation of radiation levels above the following:
LIMIT MICROVOLT/ FREQUENCY METER DISTANCE - -------------- ---------- -------- Up to 54 MHz 15 100" 54 to 216 MHz 20 10" Over 216 MHz 15 100"
SECTION 19. Reliability. The Town shall have the right to establish minimum reliability standards for the system. SECTION 20. System Testing. The cable television system shall be maintained in an appropriate manner as to provide state-of-the-art quality and signal transmission reliability. Properly calibrated state-of-the-art test equipment and tools shall be used in maintaining the system. System testing to monitor technical performance shall comply with generally accepted industry procedures as specified from time to time by the Town. As of the Agreement date, the Company shall utilize "NCTA Recommended Practices for Measurements on Cable Television Systems," published by the National Cable Television Association -- ISBN 0-940272-09-1, 1983(C). If there is a dispute concerning the source of visual impairment on video channels, the Company shall compare the subscriber's television with a portable television set on an A/B substitution basis. -13- 25 SECTION 21. Subscriber Connections. Only full time employees of the Company shall be used to install cable drops and connect subscriber facilities on the subscriber's property. All installation personnel shall be bonded. Cable drops shall be installed in compliance with the National Electric Code, Article 820 or its successor. Whenever technically possible, the Company shall meet each subscriber's desire regarding the point at which the cable drops enter the subscriber's residence or other structure, and the points at which the drops terminate inside the structure. All cable within buildings shall be located so as to make it as unobtrusive as possible. SECTION 22. Rates. The Company shall clearly define its rate structure and rates. The Town shall have the right from time to time to regulate the rates charged to subscribers in conformance with the Cable Communications Policy Act of 1984 and as further defined by the Federal Communications Commission. SECTION 23. Rights of Individuals Protected. (1) Sales of Subscriber Lists Prohibited. The Company shall not sell or allow the use of subscriber lists for any purpose not connected with the operation of the cable television system. -14- 26 (2) Monitoring. No monitoring of any terminal connected to the system shall take place without specific written authorization by the user of the terminal in question on each occasion. (3) Cable Tapping. The provisions of Section 18.2-187.1 of the Code of Virginia of 1950 and Section 633 of the Cable Communications Policy Act of 1984, as the same may from time to time be amended, is hereby incorporated by reference. (4) Discriminatory or Preferential Practices Prohibited. The Company shall not, in its rates or charges, or in making available the service or facilities of its system, or in its rules and regulations, or in any other respect, make or grant preferences or advantages to any subscriber or potential subscriber to the system, or to any user or potential user of the system, and shall not subject any such persons to any prejudice or disadvantage. This provision shall not be deemed to prohibit promotional campaigns to stimulate subscriptions to the system or other legitimate uses thereof; nor shall it be deemed to prohibit the establishment of a graduated scale of charges, and classified rate schedules to which any customer coming within classification shall be entitled. (5) Open Access. The entire system of the Company shall be operated in a manner consistent with the principle of fairness and equal accessibility of its facilities, equipment, channels, studios, and other services to all citizens, businesses, public agencies, or other entities having legitimate use of the system, and no one shall be arbitrarily excluded from its use; allocation of use of said facilities shall be made -15- 27 according to the rules and decisions of regulatory agencies affecting the same, and where such rules or decisions are not effective to resolve a dispute between conflicting users, or potential users, the matter shall be submitted for resolution to the Town. SECTION 24. Miscellaneous Provisions. (1) Severability. If any section, sentence, clause or phrase of the Ordinance is held invalid or unconstitutional, such invalidity or unconstitutionality shall not affect the validity of any remaining provision of this Ordinance. Provided, however, that in the event a court of competent jurisdiction declares any section invalid, then such section or sections will be renegotiated by the Town and the Company. (2) Captions. The captions to sections are inserted, solely for information and shall not affect the meaning or interpretation of the Ordinance. (3) No Recourse Against the Town. The Company shall have no recourse whatsoever against the Town or its officers, boards, commissions, agents, or employees for any loss, cost, expense or damage arising out of any provision or requirement of the franchise or because of its enforcement. (4) Non-Enforcement. The Company shall not be relieved of its obligation to comply promptly with any of the provisions of the franchise by any failure of the Town to enforce prompt compliance. -16- 28 (5) Employee Indoctrination. The Company shall have an ongoing indoctrination program such that each new employee shall be made fully aware of all the provisions of this ordinance, with special regard to the service provisions, subscriber complaint procedures and reports to be filed with the Town. (6) Other Business Activities. The Company shall not engage in the business of selling, repairing or installing television receivers, radio receivers, or accessories for such receivers within the town during the term of this franchise. SECTION 25. Franchise Application. Proposal. Proposals and applications for franchise shall be submitted in the form prescribed by the Town. SECTION 26. Incorporation by Reference Provision. Bid Incorporation by Reference. The Company upon its acceptance of their franchise shall be bound by the provisions of this Ordinance and all written and documentary responses, statements, promises of performance and information contained in its bid. SECTION 27. Bonding Requirements. (1) Performance Bond. Within thirty (30) days after the award of this franchise, Company shall deposit with the Town a cash security bond or irrevocable letter of credit in the amount of fifty thousand dollars ($50,000.00). The cash bond or letter of credit shall be used to insure the faithful performance by -17- 29 Company of all provisions of this ordinance franchise; and compliance with all orders, permits and directions of any agency, commission, board, department, division or office of the Town having jurisdiction over its acts or default under this franchise and the payment by the Company of any liquidated damages, claims, liens and taxes due the Town which arise by reason of the construction, operation or maintenance of the system. (2) Bonding Term. The cash bond or letter of credit shall be maintained at fifty thousand dollars ($50,000.00) during the entire term of this franchise, even if amounts have to be withdrawn pursuant to subdivision 1. or 3. of this section. (3) Town's Remedies Under Bond. If Company fails to pay to the Town any compensation within the time fixed herein; or, fails, after ten (10) days notice to pay to the Town any taxes due and unpaid; or fails to repay the Town within ten (10) days, any damages, costs or expenses which the Town is compelled to pay by reason of any act or default of the Company in connection with a franchise; or, fails, after three (3) days notice by the Town of such failure to comply with any provision of this franchise which the Town reasonably determines can be remedied by demand on the cash bond or letter of credit the Town may immediately require payment of the amount thereof, with interest and any liquidated damages, from the cash bond or letter of credit. -18- 30 (4) Town's Limitations. The rights reserved to the Town with respect to the cash bond or letter of credit are in addition to all other rights of the Town, whether reserved by a franchise or authorized by law, and no action, proceeding or exercise of a right with respect to such cash bond or letter of credit shall affect any other right the Town may have. SECTION 28. Construction Bond. Within thirty (30) days after the award of this franchise, Company shall obtain and maintain at its cost and expense, and file with the Town Clerk, a Corporate surety bond in a company authorized to do business in the State of Virginia, and found acceptable by the Town Attorney or an irrevocable letter of credit comparable to cash deposit and without condition in the amount of three hundred thousand dollars ($300,000) to guarantee the timely construction and full activation of the system and the safeguarding of damage to private property and restoration of damages incurred with utilities. The bond shall provide, but not be limited to, the following condition: There shall be recoverable by the Town, jointly and severally from the principal and surety, any and all damages, loss or costs suffered by the Town resulting from the failure of Company to satisfactorily complete and fully activate the system throughout the franchise area pursuant to the terms and conditions of this ordinance franchise agreement. Any extension to the prescribed construction time limit must be authorized by the Town Council. Such extension shall be -19- 31 authorized only when the Council finds that such extension is necessary and appropriate due to causes beyond the control of Company. The construction bond shall be terminated or the letter of credit canceled only after the Council finds that Company has satisfactorily completed initial construction and activation of the system pursuant to the terms and conditions of this ordinance franchise agreement. The rights reserved to the Town with respect to the construction bond are in addition to all other rights of the Town, whether reserved by this ordinance or authorized by law, and no action, proceeding or exercise of a right with respect to such bond shall affect any other rights the Town may have. The construction bond shall contain the following endorsement: It is hereby understood and agreed that this bond may not be canceled by the surety nor the intention not to renew be stated by the surety until sixty (60) days after receipt by the Town, by registered mail, of written notice of such intent to cancel or not to renew. SECTION 29. Revocation of Franchise for Cause. (1) The Town may terminate the franchise agreement entered into pursuant to this Ordinance upon its determination, after at least thirty (30) days written notice to the Chief Executive Officer of the Company in question and after public bearing, advertised for two (2) weeks in a newspaper having general circulation in the Town, that the Company has failed to cure any one or more of the following problems: (1) Breach, -20- 32 whether by act or omission, of any terms or conditions of this Ordinance or of the franchise agreement; or (2) Material misrepresentation of fact; or (3) Insolvency of the Company, or inability or unwillingness to meet its debts as they arise or mature, or the filing of a voluntary or involuntary petition in bankruptcy for the benefit of the creditors of the Company; or (4) For any other good cause shown. (2) Upon termination of a franchise for cause, the Town may acquire the cable system of the cable system operator whose franchise has been terminated at an equitable price based on the ongoing business value of the system. In the event that the Company and the Town cannot agree upon any such equitable price, then the matter of determining an equitable price shall be submitted to binding arbitration. (3) Any franchise revocation proceeding shall be appealable to the Circuit Court which has jurisdiction in the Town within sixty (60) days of the date of the order of the Town Council by Motion of Declaratory Judgment. This ordinance shall be in force from its passage. TOWN OF HAYMARKET By: /s/ GERTRUDE BEAN ------------------------------------ Gertrude Bean, Mayor ATTEST: /s/ DOROTHY KELLER ----------------------- Town Clerk ADOPTED this 20th day January, 1986. -21- EX-10.6.65 12 FRANCHISE MANASSAS, VA 1 EXHIBIT 10.6.65 RESOLUTION NO. R-96-50 RESOLUTION APPROVING THE TRANSFER OF THE CABLE TELEVISION FRANCHISE FOR THE CITY OF MANASSAS, VIRGINIA HELD BY BENCHMARK/MANASSAS CABLE FUND LIMITED PARTNERSHIP WHEREAS, by Ordinance enacted on October 30, 1985 (the "Ordinance"), the Council of the City of Manassas, Virginia (the "City") granted to Benchmark/Manassas Cable Fund limited Partnership (d/b/a Cablevision of Manassas, Ltd.) ("Cablevision") a franchise (the "Franchise") to construct, own, operate and maintain a cable television system within the City (the "System"); and WHEREAS, Cablevision has agreed to sell the System to Jones Intercable, Inc. ("Jones") and Jones has agreed to purchase the System from Cablevision; and WHEREAS, Cablevision has requested pursuant to Section 7 of the Ordinance that the Council of the City of Manassas, Virginia approve (i) the transfer of the Franchise to Jones Intercable Inc., a Colorado corporation (Jones) or any affiliate of Jones, including any limited partnership of which Jones or any affiliate of Jones is a general partner, or any joint venture or general partnership of which Jones, any affiliate of Jones or any such limited partnership or partnerships is a general partner (any such entity being hereinafter referred to as an "Affiliate of Jones"); (ii) the subsequent transfer of the Franchise to any Affiliate of Jones; and (iii) the granting from time to time by Jones or any Affiliate of Jones then holding the Franchise of a security interest in its assets, including the franchise and the System, to an institutional lender or lenders as security for its obligations to such lender or lenders; and WHEREAS, Jones or any Affiliate then holding the Franchise has agreed to be bound by the terms, provisions and conditions of the Franchise; and WHEREAS, pursuant to the existing interim "Cost of Service" Rules of the FCC, the City reserves the right in future rate determinations to exclude acquisition costs and goodwill as reasonable costs to be included in the rate base for any request for rate increases; and WHEREAS, City, after considering professional advice, finds that portion of the purchase price reflecting acquisition costs (as defined in sec. 89-97 of the Cost of Service Order) and goodwill to be excessive. NOW, THEREFORE, BE IT HEREBY RESOLVED by the Council of the City of Manassas, Virginia that: 1. The City does hereby consent to the transfer of the System and the Franchise from Cablevision to Jones Intercable of Alexandria, Inc. which shall be 2 bound by the terms of this Resolution and the Franchise. Any subsequent transfer of the Franchise from Jones Intercable of Alexandria, Inc. requires the written approval of the City. The City shall review and act upon a request to transfer the Franchise within 30 days of such request if accompanied by adequate documentation to permit the City to evaluate the financial and technical ability of the Affiliate or other entity. If the transfer is approved, the transferee shall be bound by the terms of this Resolution and of the Franchise. 2. The City does hereby consent to the grant from time to time by Jones or Jones Intercable of Alexandria, Inc. of a security interest in the System and in all of its rights, powers and privileges under the Franchise and all of its other assets to such lending institution or institutions as may be designated from time to time by Jones or Jones Intercable of Alexandria, Inc. which lending institution or institutions shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code. The existing basic tier service rates shall remain in effect through December 31, 1995. In consideration of the City foregoing its first right of refusal to purchase the cable communications system at the price offered to a bonafide purchaser in accordance with Section 7(f) of the Ordinance, from January 1, 1996, for so long as required by FCC rules and Regulations, Jones Intercable of Alexandria, Inc. shall maintain the existing basic tier service rates except for adjustments for inflation or to reflect any change in its external costs, as defined by the Federal Communications Commission and subject to any other changes in such rates permitted by any subsequent changes in the applicable laws or rules and Regulations of the FCC. Consent herein granted for the transfer to Jones Intercable of Alexandria, Inc. is conditional upon the acknowledgment by Jones and Jones Intercable of Alexandria, Inc. that the existing interim "Cost-of-Service" Rule of the FCC establish a presumption that the inclusion of the acquisition costs and goodwill shall not be considered as reasonable costs to be included in the rate base for any request for rate increase. The consent herein granted for the transfer to Jones Intercable of Alexandria, Inc. is also conditioned upon Jones' and Jones' Intercable of Alexandria, Inc. assumption of all rights, responsibilities and obligations of the Franchise. 3. the foregoing consent to the transfer and assignment of the Franchise shall be effective upon the closing of the sale of the System by Cablevision to Jones Intercable of Alexandria, Inc. Notice of such closing date shall be given to the City. 4. The City hereby confirms that, to its knowledge; (a) the Franchise is currently in full force and effect; and (b) Cablevision is currently the valid holder 3 and authorized grantee of the Franchise; (c) Cablevision is in compliance in all material respects with the Franchise; and (d) no event has occurred or exists which would permit the City to revoke or terminate the Franchise. Subject to compliance with the terms of this Resolution, all action necessary to approve the transfer of the Franchise and the System to Jones Intercable of Alexandria, Inc. has been duly and validly taken. Adopted by the Council of the City of Manassas, Virginia on this 23rd day of October, 1995. CITY OF MANASSAS /s/ ROBERT L. BROWN ------------------------------ TITLE: Mayor ATTEST: /s/ LINDA HAWLEY - ------------------------------ Linda Hawley, City Clerk 4 Second Reading: October 30, 1985 Enacted: October 30, 1985 Effective: October 30, 1985 "An Ordinance granting a franchise to Cablevision of Manassas, Ltd., its successors and assigns, to install, construct, operate and maintain in the City of Manassas a cable television system." BE IT ORDAINED by The Council of the City of Manassas, Virginia, meeting in regular session this 16th day of October, 1985, that: A. Name: This Ordinance shall be known as the CATV Ordinance. B. There be and there is hereby granted to Cablevision of Manassas, Ltd., its successors and assigns, hereinafter called the Grantee, a nonexclusive franchise, right and authority, subject to the conditions and restrictions hereinafter set forth, and in accordance with the Bid offering of Cablevision of Manassas, Ltd., incorporated herein and made a part hereof, and such as may be imposed by the laws and ordinances of the Commonwealth of Virginia, the U.S. Federal Authorities, and City of Manassas, to use the streets, alleys and public places of the City of Manassas and to that end the City adopts this Franchise Ordinance: 1. To regulate the erection, construction, reconstruction, installation, operation, maintenance, dismantling, testing, repair and use of a cable communications system in, upon, along, across, above, over or under or in any manner connected with the streets, public ways or public places within the jurisdiction of the City of Manassas as now or in the future may exist. 2. To provide for the payment of certain franchise fees and other valuable considerations to the City which, among other purposes, may be used to regulate the construction and operation, use and development of such a system within the City; and 5 3. To provide conditions under which such franchised system will serve present and future needs of government, public institutions, commercial enterprises, public and private organizations, and the citizens and general public of the City; and 4. To provide remedies and prescribe liquidated damages for any violation of this Ordinance. SECTION 1. DEFINITIONS For the purpose of this Ordinance, the following terms, phrases, words and their derivations shall have the meaning given herein. When not inconsistent with the context, words used in the present tense include the future, words in the plural number include the singular number, and words in the singular number include the plural number, and the use of any gender shall be applicable to all genders whenever the sense requires. The words "shall" and "will" are mandatory and the word "may" is permissive. Words not defined shall be given their common and ordinary meaning. a. "Access channel" shall mean a single channel dedicated in whole or in part for local programming which is not originated by the Company. b. "Basic Service" shall mean any or all of the different combinations of basic program services as described in a Company's proposal including the delivery of broadcast signals, satellite signals, local origination and access signals, covered by the regular monthly charges paid by subscribers, excluding the optional premium services for which separate charges are made. 2 6 c. "Cablecasting" is programming carried on the cable system, exclusive of broadcast signals, whether originated by the cable operator or any other party. d. "Cable Communications System," "Cable Television System" or "CATV System," shall mean a system of antennas, cables, wires, lines, towers, waveguides, or other conductors, converters, equipment or facilities, designed and constructed for the purpose of producing, receiving, transmitting, amplifying and distributing, audio, video and other forms of electronic or electrical signals, located in the City. Said definition shall not include any such facility that serves or will serve only subscribers in one or more multiple unit dwellings under common ownership, control or management, and does not use City rights-of-way. e. "City" is the City of Manassas in its present incorporated form or as it may be changed by annexation or interjurisdictional agreement or otherwise. f. "Construction." The terms "completion of construction," "complete system construction," "satisfactorily complete and fully activate" shall mean that strand has been put up and all necessary cable (including trunk and feeder cable) has been lashed -- or, for underground construction, that all cable has been laid and trenches refilled and, except as prevented by weather conditions or delayed because of seasons, landscaping restored; that all amplifier housings and modules have been installed (including modules for return path signals); that power supplies have been installed and all bonding and grounding has been completed; that all necessary connectors, splitters and taps have been installed; that construction of the headends or 3 7 hubs have been completed and all necessary processing equipment has been installed; and that any and all other construction necessary for the system to be ready to deliver cable service to subscribers has been completed. Proof of performance tests shall have been conducted on each otherwise completed segment of the cable system before direct marketing of that segment begins. It is expected that segments of less than the entire system will be activated and proofed when completed. Construction of any segment or of the entire system will not be considered complete until proof of performance tests have been conducted on such segment (or in the case of the entire system, on all segments of the cable system) and any problems found during testing have been corrected. The term "completion of construction" does not include marketing and installation of subscriber service. g. "Council" shall mean the governing body of the City of Manassas. h. "Dedicate" shall mean to make available channel space or equipment for exclusive use of the designated user, subject to the authority of the City Council to authorize reassignment of channels. i. "Grantee" or "company" is the party or parties to which a franchise under this ordinance is granted by the Council, and its or their lawful successors and assigns. j. "Gross Revenues" shall mean all cash, credits, property of any kind or nature, or other consideration received directly or indirectly by the grantee, its affiliates, subsidiaries, parent and any person in which grantee has a financial interest, or from any source whatsoever, arising from or attributable to the sale or exchange of cable communications services by grantee within the City or in any way 4 8 derived from the operation of its system, including, but not limited to, basic service, monthly fees, optional service or pay cable fees, installation and reconnection fees, leased channel fees, converter rentals or sales, studio rental, and advertising revenues. These gross revenues shall not be reduced for any purposes other than provided herein, and shall be the basis for computing the fee imposed pursuant to Section 9. These gross revenues shall not include any taxes on services furnished by Grantee imposed upon any subscriber or user by the State, City or other governmental unit and collected by grantee on behalf of said governmental unit, converter deposits or refunds to subscribers by the grantee. k. "Initial activation of service," or "initially providing cable communication service" shall mean with respect to a particular segment, group of segments or the entire cable system, as the case may be, that, all proposed services and system capabilities as stated in the Proposal are available and/or in place, construction has been completed (see definition of construction) and the completed segment or segments in question or the entire cable system, as the case may be, has been activated. 1. "Local Origination Programming" shall mean programming locally produced by the Grantee. m. "Proposal" or "Application" refers to a formal response by the cable applicant to a specific invitation by the City asking for proposals in accordance with City specifications to provide cable communications services to residents, businesses, industries, and institutions in the City of Manassas. n. "Subscriber" is a recipient of cable communications service. 5 9 o. "Two-way communications" means the transmission of telecommunications signals from subscriber locations or other points throughout the system back to the system's control center, as well as transmission of signals from the control center to subscriber locations. p. "User" means a party utilizing a cable communications system channel for purposes of production or transmission of material to subscribers, as contrasted with receipt in a subscriber capacity. q. The terms "will be available," "will be equipped," "will use," "will be designed," "will perform," "will be utilized," "will permit," "will allow," "will be activated," "will be initially connected," "will be capable," "will provide," "will include," "will employ," "will be established," "will be able," "will be implemented," "will be delivered," "will utilize," and other similar uses of terms in a company's Proposal denoting the activation of cable service or the delivery of equipment, facilities, or services, shall be interpreted to mean delivery or accomplishment at a date no later than the initial activation of service (see definition) unless otherwise expressly and clearly stated or qualified in the company's Proposal to mean a more specific or different time. SECTION 2. GRANT OF AUTHORITY Grantee is hereby granted the right and privilege to construct, erect, operate and maintain, in, upon, along, across, above, over and under the streets, alleys, public ways and public places now laid out or dedicated and all extensions thereof, and additions thereto, in the City poles, wires, cables, underground conduits, manholes, and other 6 10 cable conductors and fixtures necessary for the maintenance and operation in the City of Manassas of a cable communications system, to be used for the sale and distribution of cable services to the residents of the City. SECTION 3. DURATION OF FRANCHISE The duration of the rights, privileges and authorizations granted in a franchise agreement shall be fifteen (15) years from the date hereof unless sooner terminated as set forth herein. SECTION 4. SERVICE AVAILABILITY AND RECORDS The Grantee shall provide cable communication services throughout the entire franchise area pursuant to the provisions of this ordinance and shall keep a current file of all requests for service received by the Grantee for at least the three (3) most recent years. This record shall be maintained during the entire life of the franchise and be available for public inspection at the local office of the Grantee during regular office hours. SECTION 5. CATV SYSTEM CONSTRUCTION Construction MAP and Schedule (a) Map and Plan Grantee has submitted a construction plan for approval of the Public Works Department of the City which shall be incorporated by 7 11 reference and made a part of this franchise agreement. The plan consists of a map of the entire franchise area clearly delineating the following: (1) The areas within the franchise area where the cable television system will be initially available to subscribers including a schedule of construction for each year of construction. (2) Areas within the franchise area where extension of the cable communication system cannot reasonably be done due to lack of present or planned development or other similar reasons, with the areas and the reasons for not serving them clearly identified on the map. (b) Early Construction and Extension Nothing in this section shall prevent the Grantee from construction the system earlier than planned. However, any delay in the system construction beyond the times specified in the plan report timetable shall require application to and consent by the Council. (c) Delay in Construction Timetable Any delay beyond the terms of construction timetable, unless approved by the Council, will be considered a violation of this ordinance for which the provisions of either Sections 20 or 21 shall apply, as determined by the Council. (d) Commencement of Construction Construction in accordance with the plan submitted by Grantee shall commence as soon after the grant and acceptance of a franchise as is reasonably possible. Failure to proceed expeditiously shall be grounds for revocation of this franchise. Failure to proceed expeditiously shall be presumed i the event construction is not 8 12 commenced within twelve (12) months of the grant and acceptance of a franchise. (e) Underground and Overhead Construction In all sections of the City where all cables, wires, or other like facilities of public utilities served by the City of Manassas are placed underground the Cable television cable shall be placed underground; where the cables, wires, or other like facilities of public utilities served by the City of Manassas are placed overhead the Cable television cable shall be placed overhead. In all stations of the City where all cable, wires, or other like facilities of public utilities served by other utility companies are placed underground, the Cable television cable must be placed underground. If at any time the City determines that existing wire, cable or other like facilities of public utilities anywhere in the City shall be changed from an overhead to an underground installation, the Grantee shall also, at Grantee's sole expense, convert its system to an underground installation. In areas of the City where the municipal electric system is installed on poles above ground, the Grantee shall have the option of installing the system in like manner above or underground. (f) The entire City shall be served by CATV and no additional cost shall be assessed by the Grantee to any citizen receiving CATV service. In cases of new construction or property development where utilities are to be placed underground, unless the requirement is waived by City, Grantee shall use the same trenching as the City or public utility. City shall give Grantee five (5) days notice of such construction or development, and of the particular date on which open 9 13 trenching will be available for Grantee's installation of conduit, and/or cable. Grantee shall also provide specifications as needed for trenching. Trenches shall be closed within 24 hours upon completion of placement of utility lines, conduit and/or cable. Costs of trenching and easements required to bring service to the development shall be borne equally by the developer/property, and those sharing the trench, except that if Grantee fails to install its conduit, and/or cable within the specified time limitation indicated above, then the cost of new trenching is to be borne by Grantee (except for the notice of the particular date on which trenching will be available to Grantee). (3) Special Agreements Nothing herein shall be construed to prevent Grantee from serving areas not covered under this section upon agreement with developers, property owners or residents. SECTION 6. CONSTRUCTION AND TECHNICAL STANDARDS a. Compliance with Construction and Technical Standards Grantee shall construct, install, operate and maintain its system in a manner consistent with all laws, ordinances, construction standards, governmental requirements, FCC technical standards, and detailed standards submitted by Grantee as part of its application, which standards are incorporated by reference in the franchise agreement. In addition, Grantee shall provide the City, upon request, with a written report of the results of Grantee's annual proof of performance tests conducted pursuant to FCC standards and 10 14 requirements. Grantee shall pay the costs incurred by the City for any technical assistance deemed necessary by the City for obtaining independent verification of technical compliance with all standards. b. Additional Specifications Construction, installation and maintenance of the cable communications system shall be performed in an orderly and workmanlike manner. All cables and wires shall be installed, where possible, parallel with and in the same manner as electric and telephone lines. Multiple cable configurations shall be arranged in parallel and bundled with due respect for engineering considerations. Installations shall be in conformance with applicable codes. The Grantee shall maintain equipment capable of providing standby power for headend, transportation and trunk amplifiers for a minimum of four (4) hours. Grantee shall at all times comply with: (1) National Electrical Safety Code (National Bureau of Standards); (2) National Electrical Code (National Fire Protection Association); (3) Bell System Code of Pole Line Construction; (4) Applicable FCC or other federal, state and local ordinances and regulations; and (5) Requirements of Manassas Public Works Department. In any event, the system shall not endanger or interfere with the safety of persons or property in the franchise area or other areas where the Grantee may have equipment located. 11 15 SECTION 7. TRANSFERS AND ASSIGNMENTS a. This franchise shall not be assigned or transferred, either in whole or in part, or leased, sublet, or mortgaged in any manner, nor shall title thereto, in part, or leased, sublet, or mortgaged in any manner, nor shall title thereto, either legal or equitable or any right, interest or property therein, pass to or vest in any person without the prior written consent of the City. The proposed assignee must show technical ability, financial capability, legal qualifications and general character qualifications as determined by the City and must agree to comply with all provisions of this franchise. b. The Grantee shall promptly notify the City of any actual or proposed change in, or transfer of, or acquisition by any other party of, control of the Grantee. The word "control" as used herein is not limited to major stockholders but includes actual working control in whatever manner exercised. Every change, transfer, or acquisition of control of the Grantee shall make the franchise subject to cancellation unless and until the City shall have consented thereto, which consent will not be unreasonably withheld. For the purpose of determining whether it shall consent to such change, transfer or acquisition of control, the City may inquire into the qualifications of the prospective controlling party and the Grantee shall assist the City in any such inquiry. c. A rebuttable presumption that a transfer of control has occurred shall arise upon the acquisition or accumulation by any person or group of persons of 10 percent of the voting interest of the Grantee. 12 16 d. The consent or approval of the City Council to any transfer of the franchise shall not constitute a waiver or release of the right of the City in and to the streets, and any transfer shall by its terms, be expressly subordinate to the terms and conditions of this franchise. e. In any absence of extraordinary circumstances, the City will not approve any transfer or assignment of a franchise prior to substantial completion of construction of proposed system. f. The City Council reserves the first right of refusal to purchase a cable communications system at the price offered to any bonafide purchaser if and when it is placed on the market for sale. g. The City Council reserves the right to review the purchase price of any transfer or assignment of a cable system. Any assignee to a franchise expressly agrees that any negotiated sale value which the Council (acting upon professional advice) deems unreasonable will not be considered in the rate base for any subsequent request for rate increases subject to City regulation. h. In no event shall a transfer of ownership or control be approved without successor in interest becoming a signatory to the franchise agreement. SECTION 8. SUBSCRIBER SERVICE RATES The City may regulate rates to the extent, if any, permitted by applicable law at any time and from time to time during the term of this franchise in accordance with procedures established by the City. Any rate for service not regulated by the City may be increased by 13 17 Grantee only following at least thirty (30) days prior notice to the City and all affected subscribers. SECTION 9. PAYMENT OF FRANCHISE FEE a. For the reason that the streets to be used by the Grantee in the operation of its system within the boundaries of the City are valuable public properties acquired and maintained by the City at great expense to its taxpayers, and that the grant to the Grantee to the said streets is a valuable property right without which the Grantee would be required to invest substantial capital in right-of-way costs and acquisitions, and because the City will incur costs in regulating and administering the franchise, and at the option of the Council, the City may make available a portion of the franchise fee to further the development of public and community uses of cable TV, the Grantee shall pay to the City an amount equal to five percent (5%) of Grantee's gross annual revenue from all sources attributable to the operations of the Grantee within the confines of the City of Manassas. b. The franchise fee and any other cost or liquidated damages assessed shall be payable quarterly to the Office of the City Treasurer. The Grantee shall file a complete and accurate verified statement of all collected gross revenue within the City during the period for which said quarterly payment is made, and said payment shall be made to the City not later than sixty (60) days after the expiration of quarter for which payment is due. c. The City shall have the right to inspect the Grantee's income records and the right to annually audit at Grantee expense and to 14 18 recompute any amounts determined to be payable under this ordinance; provided, however, that such audit shall take place within thirty-six (36) months following the close of each of the Grantee's fiscal years. Any additional amount due to the City as a result of the audit shall be paid within thirty (30) days following written notice to the Grantee by the City which notice shall include a copy of the audit report. d. In the event that any franchise payment or recomputed amount, cost or penalty, is not made on or before the applicable dates heretofore specified, interest shall be charged daily from such date at the annual rate equivalent to the then existing prime rate of local banking institutions in Manassas, Virginia. SECTION 10. USE OF STREETS a. All transmission and distribution structures, lines, and equipment erected by the Grantee within the City shall be so located as to cause minimum interference with the rights and reasonable convenience of property owners who adjoin any of the said streets. b. In the case of disturbance of any street easement or paved area or other property the Grantee shall, at its own cost and expense and in a manner approved by the City, replace and restore such street easement or paved area or other property in as good a condition as before the work involving such disturbance was done. c. If at any time during the period of a franchise the City shall lawfully elect to alter or change the grade of other aspects of any street, the Grantee, upon reasonable notice by the City, shall 15 19 remove, relay, and relocate its poles, wires, cables, underground conduits, manholes, and other fixtures at its own expense. Any poles or other fixtures placed in or adjacent to any street by the Grantee shall be placed in such manner as to comply with all requirements of the City. The Grantee shall, at the request of any person holding a moving permit issued by the City, temporarily raise or lower its wires to permit the moving of buildings. The expense of such temporary removal or raising or lowering of wires shall be paid by the person requesting the same, and the Grantee shall have the authority to require such payment in advance. The Grantee shall be given not less than forty-eight (48) hours notice to arrange for such temporary wire changes. The Grantee shall have the authority to trim trees upon and overhanging streets of the City so as to prevent the branches of such trees from coming in contact with the wires and cables of the Grantee, except that at the option of the City, such trimming may be done by it or under its supervision and direction at the expense of the Grantee. At the expiration of the term of this franchise, or upon its termination and cancellation, as provided for herein, the City shall have the right to require the Grantee to remove at its own expense all portions of the cable television system from all streets within the City. 16 20 SECTION 11. INDEMNIFICATION AND INSURANCE a. Grantee hereby expressly covenants and agrees to hold the City and its agents and employees harmless from and against all claims, damages, losses, and expenses, including attorney's fees sustained by the City on account of any suit, judgment, execution, claim or demand whatsoever arising out of but not limited to copyright infringements and all other damages arising out of the installation, operation or maintenance of its cable system whether or not any act or omission complained of is authorized, allowed or prohibited by this ordinance. b. The Grantee shall maintain and by its acceptance of this franchise specifically agrees that it will maintain throughout the term of its franchise, liability insurance insuring the City and the Grantee in the minimum amount of: (1) Workmen's Compensation: as required by all applicable Federal, State, Maritime or other laws. (2) Grantee's Liability: each occurrence $1,000,000 (3) Comprehensive General Liability: Bodily injury, each occurrence $1,000,000; Property damage, each accident $1,000,000 and aggregate $1,000,000. (4) Comprehensive Automobile Liability: including nonownership and hired car coverage as well as owned vehicles with minimum limits as follows: Bodily injury for each occurrence $1,000,000; Property damage for each occurrence $1,000,000. c. The insurance policy obtained by the Grantee in compliance with this section must be approved by the City Attorney and such insurance policy, along with written evidence of payment of required premiums, shall be filed and maintained with the Office of the City Clerk during the term of this franchise and may be changed from time to time to reflect changing liability limits. Grantee shall immediately 17 21 advise the City Attorney of any litigation that may develop that would affect the insurance. d. Neither the provisions of this section nor any damages recovered by the City hereunder, shall be construed to or limit the liability of Grantee under this franchise or for damages. e. All insurance policies maintained pursuant to this franchise shall contain the following endorsement: It is hereby understood and agreed that this insurance policy may not be cancelled by the surety nor the intention not to renew be stated by the surety until thirty (30) days after receipt by the City, by registered mail, of written notice of such intention to cancel or not to renew. SECTION 12. MAINTENANCE BOND a. Within thirty (30) days after the award of this franchise, Grantee shall deposit with the City a cash security bond in the amount of $50,000. The cash bond shall be used to insure the faithful performance by Grantee of all provisions of this ordinance franchise; and compliance with all orders, permits and directions of any agency, commission, board, department, division or office of the City having jurisdiction over its acts or defaults under this franchise and the payment by the Grantee of any liquidated damages, claims, liens and taxes due the City which arise by reason of the construction, operation or maintenance of the system. b. The cash bond shall be maintained at $50,000 during the entire term of this franchise, even if amounts have to be withdrawn pursuant to subdivision a. or c. of this section. 18 22 c. If Grantee fails to pay to the City any compensation within the time fixed herein; or, fails, after ten (10) days notice to pay to the City any taxes due and unpaid; or fails to repay the City within ten (10) days, any damages costs or expenses which the City is compelled to pay by reason of any act or default of the Grantee in connection with a franchise, or, fails, after three (3) days notice by the City of such failure to comply with any provision of this franchise which the City reasonably determines can be remedied by demand on the cash bond the City may immediately require payment of the amount thereof, with interest and any liquidated damages, from the cash bond. d. The rights reserved to the City with respect to the cash bond are in addition to all other rights of the City, whether reserved by a franchise or authorized by law, and no action, proceeding or exercise of a right with respect to such cash bond shall affect any other right the City may have. SECTION 13. CONSTRUCTION BOND a. Within thirty (30) days after the award of this franchise, Grantee shall obtain and maintain at its cost and expense, and file with the City Clerk, a corporate surety bond in a company authorized to do business in the State of Virginia, and found acceptable by the City Attorney, in the amount of Five Hundred Thousand Dollars ($500,000) to guarantee the timely construction and full activation of the CATV system and the safeguarding of damage to private and/or public property and restoration of damages incurred. 19 23 The bond shall provide, but not be limited to, the following condition: There shall be recoverable by the City, jointly and severally from the principal and surety, any and all damages, loss or costs suffered by the City resulting from the failure of Grantee to satisfactorily complete and fully activate the CATV system throughout the franchise area pursuant to the terms and conditions of this ordinance franchise agreement. b. Any extension to the prescribed construction time limit must be authorized by the Council. Such extension shall be authorized only when the Council finds that such extension is necessary and appropriate due to causes beyond the control of Grantee. c. The construction bond shall be terminated only after the Council finds that Grantee has satisfactorily completed initial construction and activation of the CATV system pursuant to the terms and conditions of this ordinance franchise agreement. d. The rights reserved to the City with respect to the construction bond are in addition to all other rights of the City, whether reserved by this ordinance or authorized by law, and no action, proceeding or exercise of a right with respect to such bond shall affect any other rights the City may have. e. The construction bond shall contain the following endorsement: It is hereby understood and agreed that this bond may not be cancelled by the surety nor the intention not to renew be stated by the surety until sixty (60) days after receipt by the City, by registered mail, of written notice of such intent to cancel or not to renew. 20 24 SECTION 14. SERVICE STANDARDS a. Grantee shall put, keep, and maintain all parts of the system in good condition throughout the entire franchise period. b. Upon termination of service to any subscriber, Grantee shall promptly remove all its facilities and equipment from the premises of such subscriber upon subscriber's request. c. Grantee shall render efficient service, make repairs promptly, and interrupt service only for good cause and for the shortest time possible. Such interruptions, insofar as possible, shall be preceded by notice and shall occur during periods of minimum system use. d. Grantee shall not allow its cable or other operations to interfere with television reception of persons not served by Grantee, nor shall the system interfere with, obstruct or hinder in any manner, the operation of the various utilities serving the residents of the City. e. Grantee shall continue, through the term of this franchise, to maintain the technical, operational, and maintenance standards and quality of service set forth in this ordinance. Should the City find, by resolution, that Grantee has failed to maintain these standards and quality of service, and should it, by resolution specifically enumerate improvements to be made, Grantee shall make such improvements. Failure to make such improvements within three (3) months of such resolution will constitute a breach of condition for which the remedy of Section 21 is applicable. 21 25 SECTION 15. CONTINUITY OF SERVICE MANDATORY a. it shall be the right of all subscribers to continue receiving service insofar as their financial and other obligations to Grantee are honored. In the event that Grantee elects to overbuild, rebuild, modify, or sell the system, or the City gives notice of intent to terminate or fails to renew franchise, the Grantee shall act so as to ensure that all subscribers receive continuous, uninterrupted service regardless of the circumstances. In the event of a change of Grantee, or in the event a new operator acquires the system, Grantee shall cooperate with the City, new Grantee or operator in maintaining continuity of service to all subscribers. During such period, Grantee shall be entitled to the revenues for any period during which it operates the system. b. In the event Grantee fails to operate the system for four (4) consecutive days without prior approval of the City or without just cause, the City may, at its option, operate the system or designate an operator until such time as Grantee restores service under conditions acceptable to the City or a permanent operator is selected. If the City is required to fulfill this obligation for Grantee, the Grantee shall reimburse the City for all reasonable costs or damages. SECTION 16. COMPLAINT PROCEDURE APPLICATIONS a. Grantee shall maintain a central office within the City, which shall be open during all usual business hours, have a publicly-listed telephone and be so operated that complaints and 22 26 request for repairs or adjustments may be received on a twenty-four (24) hour basis. b. Grantee shall maintain a repair and maintenance crew capable of responding to subscriber complaints or requests for service within twenty-four (24) hours after receipt of the complaint or request. No charge shall be made to the subscriber for this service unless such maintenance or repair is required as a result of damage caused by subscriber. Grantee may charge for service calls to the subscribers' home that are not the result of cable failure upon approval of a rate and equitable procedure by the City. c. Grantee shall establish procedures for receiving, acting upon, and resolving subscriber complaints to the satisfaction of the City Manager's Office. Grantee shall furnish a notice of such procedures to each subscriber at the time of initial subscription to the system. d. Grantee shall keep a maintenance service log which will indicate the nature of each service complaint, the date and time it was received, the disposition of said complaint and the time and date thereof. This log shall be made available for periodic inspection by representatives of the City Manager's Office. All service complaint entries shall be retained on file for a period consisting of the most recent three (3) years. e. When there have been similar complaints made or when there exists other evidence, which, in the judgment of the City Manager casts doubt on the reliability or quality of cable service, the City Manager shall have the right and authority to compel Grantee to test, analyze, and report on the performance of the system. Such report shall be 23 27 delivered to the City Manager no later than fourteen (14) days after the City Manager formally notifies the Grantee and shall include the following information: the nature of the complaints which precipitated the special tests; what system component was tested, the equipment used, and procedures employed in said testing; the results of such tests; and the method in which said complaints were resolved. f. The City Manager may require that tests and analyses shall be supervised by a professional engineer not on the permanent staff of Grantee. The aforesaid engineer should sign all records of the special tests and forward to the City Manager such records with a report interpreting the results of the tests and recommending actions to be taken by Grantee and the City. g. The City's right under this section, shall be limited to requiring tests, analyses, and reports covering specific subjects and characteristics based on said complaints or other evidence when and under such circumstances as the City has reasonable grounds to believe that the complaints or other evidence requires that tests be performed to protect the public against substandard cable service. SECTION 17. AVAILABILITY OF BOOKS AND RECORDS Grantee shall fully cooperate in making available at reasonable times, and the City Manager or his designee shall have the right to inspect the books, records, maps, plans and other like materials of the Grantee applicable to the CATV system, at any time during normal business hours; provided where volume and convenience necessitate, Grantee may require inspection to take place on Grantee's premises. 24 28 SECTION 18. OTHER PETITIONS AND APPLICATIONS Copies of all petitions, applications, communications and reports submitted by Grantee to the Federal Communications Commission, Securities and Exchange Commission, or any other federal or state regulatory commission or agency having jurisdiction in respect to any matters affecting cable television operations authorized pursuant to this franchise, shall be provided simultaneously to the City. SECTION 19. FISCAL REPORTS The Grantee shall file annually with the office of the City Clerk, no later than one hundred twenty (120) days after the end of the Grantee's fiscal year, a copy of an audited financial report applicable to the CATV system serving the City of Manassas, including an income statement applicable to its operations during the preceding twelve (12) month period, a balance sheet and a statement of its properties devoted to CATV system operations, by categories, giving its investment in such properties on the basis of original cost, less applicable depreciation. These reports shall be certified as correct by an authorized officer of Grantee and there shall be submitted along with them such other reasonable information as the Council shall request. 25 29 SECTION 20. FORFEITURE AND TERMINATION a. In addition to all other rights and powers retained by the City under this ordinance or otherwise, the City reserves the right to forfeit and terminate this franchise and all rights and privileges of Grantee in the event of a material breach of its terms and conditions. A material breach by Grantee shall include, but shall not be limited to the following: (1) Violation of any material provision of this franchise or any material rule, order, regulation or determination of the City made pursuant to this franchise; (2) Attempt to dispose of any of the facilities or property of its CATV system to prevent the City from purchasing it, as provided for herein; (3) Attempt to evade any material provision of this franchise or practices any fraud or deceit upon the City or its subscribers or customers; (4) Failure to begin or complete system construction or system extension as provided under this franchise; (5) Failure to provide the broad categories of video programming or other services proposed; (6) Failure to restore service after ninety-six (96) consecutive hours of interrupted service, except when approval of such interruption is obtained from the City; (7) Material misrepresentation of fact in the application for or negotiation of this franchise; or (8) Bankruptcy or assignment for the benefit of creditors; receivership, or other insolvency of Grantee. b. Grantee shall not be excused by mere economic hardship nor by misfeasance or malfeasance of its shareholders, directors, officers, or employees. c. The City may make a written demand that Grantee comply with any such provision, rule, order, or determination under or pursuant to this ordinance. If the violation by the Grantee continues for a period of thirty (30) days following such written demand without written proof that the corrective action has been taken or is being actively and 26 30 expeditiously pursued, the City may place the issue of termination of this franchise before the City Council. The City shall cause to be served upon Grantee, at least twenty (20) days prior to the date of such a Council meeting, a written notice of intent to request such termination and the time and place of the meeting. Public notice shall be given of the meeting and issue which the Council is to consider. d. The City Council shall hear and consider the issue and shall hear any person interested therein, and shall determine in its discretion, whether or not any violation by the Grantee has occurred. e. If the City Council shall determine that a material breach exist, the Council may, by resolution, declare that the franchise of the Grantee shall be forfeited and terminated unless there is compliance within such period as the City Council may fix, such period not to be less than sixty (60) days, provided no opportunity for compliance need be granted for fraud or misrepresentation. f. The issue of forfeiture and termination shall automatically be placed upon the Council agenda at the expiration of the time set by it for compliance. The Council then may terminate this franchise forthwith upon finding that Grantee has failed to achieve compliance or may further extend the period, in its discretion. SECTION 21. LIQUIDATED DAMAGES By acceptance of this franchise granted by the City, Grantee understands and agrees that failure to comply with any time and performance requirements as stipulated in this ordinance will result in damage to the City, and that it is and will be impracticable to 27 31 determine the actual amount of such damage in the event of delay or nonperformance; and Grantee therefore shall agree that, in addition to any other damage suffered by the City, the Grantee will pay to the City the following amounts which will be chargeable to the security fund: a. For failure to complete system construction in accordance with Section 5, unless the Council specifically approves the delay by motion or resolution, due to the occurrence of conditions beyond Grantee's control, Grantee shall pay One Thousand Dollars ($1,000.00) per day for each day, or part thereof, the deficiency continues. b. For failure to provide upon written request, data, documents, reports, information or to cooperate with City during an application process or CATV system review, Grantee shall pay Fifty Dollars ($50.00) per day, or part thereof, each violation occurs or continues. c. For failure to test, analyze and report on the performance of the system following a written request pursuant to this ordinance, Grantee shall pay to City Two Hundred Dollars ($200.00) per day for each day, or part thereof, that such noncompliance continues. d. For failure to provide in a continuing manner the broad categories of video programming or other services proposed in the accepted application incorporated herein by reference, unless the Council specifically approves Grantee a delay or change, Grantee shall pay to the City One Thousand Dollars ($1,000.00) per day for each day, or part thereof, that each noncompliance continues. e. Forty-five (45) days following adoption of a resolution by the City Council in accordance with Section 14e determining a failure of Grantee to comply with operational, maintenance or technical standards, Grantee shall pay to the City One Thousand Dollars 28 32 ($1,000.00) for each day, or part thereof, that such noncompliance continues. SECTION 22. RIGHTS OF INDIVIDUALS a. Grantee shall not deny service, deny access, or otherwise discriminate against subscribers, channel users, or general citizens on the basis of race, color, religion, national origin, or sex. Grantee shall comply at all times with all other applicable federal, state and local laws and regulations, and all executive and administrative orders relating to nondiscrimination which are hereby incorporated and made part of this ordinance by reference. b. Grantee shall strictly adhere to the equal employment opportunity requirements of federal, state and local regulations, and as amended from time to time. c. No signals shall be transmitted from a subscriber terminal for purposes of monitoring individual viewing patterns or practices without the express written permission of the subscriber. The request for such permission shall be contained in a separate document with a prominent statement that the subscriber is authorizing the permission in full knowledge of its provision. The authorization shall be revocable at any time by the subscriber without penalty of any kind whatsoever. Such authorization is required for each type or classification of two-way cable communications activity planned, provided, however, that Grantee shall be entitled to conduct systemwide or individually addressed "sweeps" for the purpose of 29 33 verifying system integrity, controlling return-path transmission, or billing for pay services. d. Grantee, or any of its agents or employees, shall not, without the specific written authorization of the subscriber involved, sell, or otherwise make available to any party: (1) lists of the names and addresses of such subscribers, or (2) any list which identifies the individual viewing habits of subscribers. SECTION 23. PURCHASE OF CATV SYSTEM BY CITY a. Rights to Purchase In the event Grantee forfeits or City terminates this franchise pursuant to provisions of this ordinance, or at the normal expiration of the franchise term, City shall have the right to purchase the CATV system. b. Franchise Valuation (1) In the event Grantee forfeits or City terminates this Franchise, the City may purchase the system at an equitable price. (2) Upon expiration of this Franchise, the City may purchase the system at fair market value determined on the basis of the cable system valued as a going concern but with no value allocated to the Franchise itself. c. Date of Valuation The date of valuation shall be no earlier than the day following the date of expiration or termination and no later than the date City makes a fair and reasonable offer for the system or the date of transfer of ownership, whichever occurs first. 30 34 d. Transfer to City Upon exercise of this option and the payment of the above sum by the City and its service of official notice of such action upon Grantee, the Grantee shall immediately transfer to the City possession and title to all facilities and property, real and personal, of the CATV system, free from any and all liens and encumbrances not agreed to be assumed by the City in lieu of some portion of the purchase price set forth above; and the Grantee shall execute such warranty deeds or other instruments of conveyance to City as shall be necessary for this purpose. SECTION 24. PERFORMANCE EVALUATION SESSIONS a. The City and Grantee shall hold scheduled performance evaluation sessions within thirty (30) days of the first, second, third, sixth, ninth, and twelfth anniversary dates of Grantee's award of the franchise and as may be required by federal and state law. b. Special evaluation sessions may be held at any time during the term of this franchise at the request of the City or the Grantee. c. All evaluation sessions shall be open to the public and announced in a newspaper of general circulation in accordance with legal notice. Grantee shall notify its subscribers of all evaluation sessions by announcement on at least two (2) channels of its system between the hours of 7:00 p.m. and 9:00 p.m., for five (5) consecutive days preceding each session. d. Topics which may be discussed at any scheduled or special evaluation session may include, but not be limited to, service rate 31 35 structures; franchise fee; liquidated damages; free or discounted services; application of new technologies; system performance; services provided; programming offered; customer complaints; privacy; amendments to this ordinance; judicial and FCC rulings; line extension policies; and Grantee or City rules. SECTION 25. NEW DEVELOPMENTS a. The City Council shall have the authority to order a public hearing from time to time on the provision of additional channel capacity by Grantee or on the inclusion in the Grantee's CATV system of "State-of-the-Art" technology or upgraded facilities. b. If after such a hearing, the City Council determines (1) that there exists a reasonable need and demand for additional channel capacity and/or State-of-the-Art technology or upgraded facilities, and (2) that provision has been made or will be made for adequate rates which will allow Grantee a fair rate of return on its investment (including the investment required to provide the additional channels and/or the State-of-the-Art technology or upgraded facilities), and will not result in economic waste for the Grantee, the City Council may order Grantee to provide a specified number of additional channels and/or specified State-of-the-Art technology or upgraded facilities. Without implying any limitations as to other provisions of this ordinance, this Section is deemed a material provision within the meaning of Section 20 of this ordinance. c. If any access channel(s), in the opinion of the Council, have become fully utilized, Grantee shall within six (6) months from receipt 32 36 of written notice make a new channel available for the same purpose(s); provided, however, that nothing in this paragraph shall require Grantee to add additional channel capacity to the CATV System. Such requirement may be met by making available, on a part-time basis, one or more other underutilized access channels, or on a full or part-time basis one or more other unused access channels until such time as such underutilized or unused channels are needed for the uses to which they have been dedicated. d. Whenever, in the opinion of the City Council, any access channel is underutilized, the City may order or permit different or additional uses for said channel. SECTION 26. AREAWIDE INTERCONNECTION OF CATV SYSTEMS a. Interconnection Required Grantee shall interconnect access channels of the cable system with any or all other CATV systems in adjacent areas, upon the directive of the City. Interconnection of systems may be done by direct cable connection, microwave link, satellite, or other appropriate method. b. Interconnection Procedure Upon receiving the directive of the City to interconnect, Grantee shall immediately initiate negotiations with the other affected system or systems in order that all costs may be shared equally among cable companies for both construction and operation of the interconnection link. c. Relief 33 37 Grantee may be granted reasonable extensions of time to interconnect or the City may rescind its order to interconnect upon petition by the Grantee to the City. The City shall grant said request if it finds that Grantee has negotiated in good faith and has failed to obtain an approval from the system or systems of the proposed interconnection, or that the cost of the interconnection would cause an unreasonable or unacceptable increase in subscriber rates. d. Cooperation Required Grantee shall cooperate with any interconnection corporation, regional interconnection authority or city, county, state and federal regulatory agency which may be hereafter established for the purpose of regulating, financing, or otherwise providing for the interconnection of cable systems beyond the boundaries of the City. SECTION 27. TIME IS OF THE ESSENCE Whenever this franchise shall set forth any time for an act to be performed by or on behalf of the Grantee, such time shall be deemed of the essence and any failure of the Grantee to perform within time allotted shall always be sufficient ground for the City to invoke liquidated damages or revocation of this franchise. SECTION 28. FAILURE OF CITY TO ENFORCE FRANCHISE, NO WAIVER OF THE TERMS THEREOF Grantee shall not be excused from complying with any of the terms and conditions of this franchise ordinance by any failure of the City 34 38 upon any one or more occasions to insist upon or to seek compliance with any such terms or conditions. SECTION 29. SEVERABILITY If any section, sentence, clause or phrase of this ordinance is held unconstitutional or otherwise invalid, such infirmity shall not affect the validity of the ordinance, and any portions in conflict are hereby repealed. Provided, however, that in the event that the state or federal government laws or regulations renders any section invalid, then such section or sections may be renegotiated by the City and Grantee. This Ordinance shall be in force from its passage. City of Manassas By /s/ EDGAR E. ROHR -------------------------------- Edgar E. Rohr, Mayor ATTEST: /s/ R. H. MOORE ------------------------- R. H. Moore, Clerk 35 EX-10.6.66 13 FRANCHISE CITY OF MANASSAS PARK, VA 1 EXHIBIT 10.6.66 CABLE TELEVISION FRANCHISE TRANSFER AGREEMENT AMONG CABLEVISION OF MANASSAS PARK, INC., JONES COMMUNICATIONS OF VIRGINIA, INC., JONES CABLE HOLDINGS, INC. AND THE CITY OF MANASSAS PARK, VIRGINIA 2 CABLE TELEVISION FRANCHISE TRANSFER AGREEMENT This Cable Television Franchise Transfer Agreement ("Agreement") is made this 19th day of December, 1995 among CABLEVISION OF MANASSAS PARK, INC. ("Transferor"), a Virginia corporation, JONES COMMUNICATIONS OF VIRGINIA, INC., a Colorado corporation, registered to do business in Virginia, ("Transferee"), and JONES CABLE HOLDINGS, INC., a Colorado corporation registered to do business in Virginia ("Guarantor"), and THE CITY OF MANASSAS PARK, VIRGINIA, a Virginia municipal corporation, (the "City"). The Transferor and Transferee are sometimes collectively referred to herein as "the Companies". W I T N E S S E T H : WHEREAS, the City granted a non-exclusive franchise (the "Franchise"), for a term of fifteen (15) years beginning on May 16, 1983 (the "Franchise Term"), to the Transferor to construct, operate, maintain and use a cable television system in the City pursuant to: Chapter 7.5 of the Code of the City of Manassas Park, Virginia (the "Cable Television Regulations"); City of Manassas Park, Virginia Ordinance No. 83-1700-219, adopted on May 3, 1983 (the "Franchise Ordinance"); a Franchise Agreement between Cablevision of Manassas Park, Inc. and the City of Manassas Park, Virginia dated may 16, 1983, together with amendments thereto between such parties dated June 1986 and November 1, 1994 (jointly the "Franchise Agreement"); and An Application For Cable Television System Franchise Rights For the City of Manassas Park, Virginia, submitted to the City by Cablevision of Manassas Park, Inc., dated September 27, 1982, with exhibits (the "Proposal"). The Cable Television Regulations, Franchise Ordinance, Franchise Agreement, and the Proposal are jointly referred to as the "Franchise Documents"; and WHEREAS, pursuant to the Franchise Documents, since May 16, 1983, the Transferor has held a cable television franchise to serve subscribers in the City and in surrounding jurisdictions through the Transferor's cable television system (the "System"); and WHEREAS, the Transferor desires to transfer the Franchise and sell the System to the Transferee (the "Transfer") in accordance with a certain Asset Purchase Agreement Between Cablevision of Manassas Park, Inc. and Jones Intercable, Inc., 3 dated May 31, 1995 (the "Purchase Agreement"), which Purchase Agreement was thereafter assigned to, and assumed by, the Transferee by Assignment and Assumption Agreement between Jones Intercable, Inc. and the Transferee dated September 1, 1995 (the "Assignment and Assumption Agreement"); and WHEREAS, the Transferee desires to pledge, mortgage, hypothecate or otherwise transfer an interest in the System exceeding seventy five percent (75%) of the fair market value of the property of the System; and WHEREAS, the Franchise is scheduled to expire on May 15, 1998 and the City is expected, in the near future, to begin considering whether to renew the Franchise; and WHEREAS, the Franchise Documents provide that the Franchise shall neither be assigned nor transferred without the consent of the Governing Body of the City of Manassas Park, Virginia (the "Governing Body"); and WHEREAS, the Cable Television Regulations further provide that the Franchisee shall not pledge, mortgage, hypothecate or otherwise transfer an interest in the System, exceeding seventy five percent (75%) of the fair market value of the property of the System without the consent of the Governing Body; and WHEREAS, on September 25, 1995, the Companies (the Transferee by its former name, Jones Intercable of Alexandria, Inc.) jointly submitted to the City an application on Federal Communications Commission ("FCC") Form No. 394, dated September 22, 1995 (the "Transfer Application"), requesting that the City acknowledge notice of, and approve, the Transfer; and WHEREAS, the City has reviewed the Transfer Application and has examined the financial responsibility, technical expertise, legal and other qualifications of the Transferee in accordance with applicable laws and as permitted by the Franchise Documents; and WHEREAS, under Section 617 of the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992), the City is authorized to determine whether to approve the request for the Transfer; and WHEREAS, based on such review and examination, the Governing Body, after having considered this matter and after having held a public hearing thereon, is willing to grant its consent to the requested Transfer of the Franchise from the Transferor to the 2 4 Transferee for the remainder of the Franchise term, subject to the agreement of the Companies to perform various terms and conditions required by the Franchise Documents and necessary to protect the public interest; and WHEREAS, the Governing Body is further willing to grant its consent for the Transferee to pledge, mortgage, hypothecate or otherwise transfer an interest in the System, exceeding seventy five percent (75%) of the fair market value of the Property of the System, subject to certain conditions; and WHEREAS, the Companies are willing to agree to, and be bound by, the terms and conditions provided in this Agreement; and WHEREAS, the Governing Body, after due advertisement and after a full public hearing, has enacted an ordinance (the "Transfer Ordinance") granting approval of the proposed transfer and consenting to the proposed pledge, mortgage or hypothecation of a portion of the Property of the System, which approval and consent are subject to various conditions, including the condition that the Companies enter into this Agreement; NOW, THEREFORE, in consideration of the sum of ten dollars ($10.00), the consent to transfer the Franchise, the mutual covenants set forth herein, and other valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: Section 1. Acceptance of Franchise Obligations. 1.1 Acceptance. The Transferee hereby accepts, acknowledges and agrees to perform all of the commitments, duties and obligations, present, continuing and future, of the Franchisee and the Grantee as defined in the Franchise Documents. 1.2 Compliance with Franchise. The Transferee agrees to comply fully with all of the provisions, terms, and conditions set forth in the Franchise Documents, the Transfer Ordinance, this Agreement, and all applicable federal, state and local laws, including all amendments thereto. The Transferee agrees to take all necessary steps to ensure such compliance, notwithstanding conflicting provisions in any other agreements to which the Transferee is or may be a party. 1.3 Filing of Documents. The Companies agree to file with the City Manager, within thirty (30) days of the 3 5 transfer or assignment, executed copies of all bills of sale or similar documents as required by Section 7.5-8 of the Cable Television Regulations. 1.4 Assumption of Obligations. The Transferee agrees that all acts and omissions of Transferor occurring before the effective date of the Governing Body's consent to the Transfer and relating to the obligations of the Transferor under the Franchise Documents shall be deemed to be the acts and omissions of the Transferee. The Transferee hereby assumes liability for all such acts and omissions, known and unknown, and for all of the Transferor's previously accrued, but unfulfilled, obligations to the City under the Franchise Documents. The Companies acknowledge that each of them received a copy of the letter from Mr. Frank McDonough, the City Manager, to Mr. R. Calvin Sutliff, Jr., President of Cablevision of Manassas Park, Inc., and to Mr. Samuel Eddy, General Manager of Cablevision of Manassas Park, Inc., dated November 7, 1995 (the "Notice Letter"). A copy of the Notice Letter is attached and incorporated as Attachment A. The items described in the Notice Letter have been resolved to the satisfaction of the City or have been addressed in paragraph 3.5 of this Agreement. 1.5 City's Reliance Upon Companies' Representations. The Companies acknowledge and agree that the City consents to the Transfer of the System and consents to the pledge, mortgage, hypothecation or transfer of an interest in the System, in reliance upon the representations made in the Transfer Application, in this Agreement, and in the information provided by the Companies set forth in a list of documents, which list is attached and incorporated as Attachment B. The Companies' representations contained in the documents listed in Attachment B are material to the Franchise and constitute a material inducement to the City for the City's consent to the Transfer. The Companies hereby covenant that the Companies' representations in the documents listed in Attachment B are complete, true, and accurate. Any material misrepresentations, fraud or deceit by the Companies upon the City contained in Attachment B may result in the revocation of the Franchise. Section 2. No Waiver. 4 6 2.1 Investigation of Transferee's Qualifications. The approval and consent given by the Governing Body in this Agreement and in the Transfer Ordinance are made without prejudice to, or waiver of, the City's right to fully investigate and consider the Transferee's financial, technical and legal qualifications and any other relevant considerations during any franchise renewal process. The Transferee acknowledges that it acquires no right to, or expectancy of, renewal of the Franchise solely by virtue of this Agreement. 2.2 Transferor's Defaults. At no time after the Governing Body's approval and consent to the Transfer, particularly during any franchise renewal process, will the Companies contend, directly or indirectly, that the City is barred, by reason of the Transfer, from considering or raising claims based upon Transferor's defaults, its failure to provide reasonable service in light of the community's needs, or its failure to comply with the terms and conditions of the Franchise Documents or with applicable law, provided, however, that the City shall reasonably consider the extent to which the Transferee has corrected or improved upon any such defaults, deficiencies, or failures of performance in determining whether any default has been cured. 2.3 Transferee's Compliance. By entering into this Agreement, the City does not waive any of its rights with respect to the Transferee's compliance with the terms, conditions, requirements and obligations set forth in the Franchise Documents and in the applicable law. Section 3. Fees, Insurance, Bonds, and obligations. 3.1 Application and Acceptance Fees. The Transferor and the Transferee have agreed that, upon execution of this Agreement, the Transferor shall pay to the City on behalf of the Transferee the application and acceptance fees required by Section 7.5-46 of the Cable Television Regulations. 3.2 Performance and Bond. Upon execution of this Agreement, the Transferee shall obtain, and shall maintain throughout the remainder of the Franchise term, the liability and copyright infringement insurance required by, and in strict accordance with, Section 7.5-47 of the Cable Television Regulations. 5 7 The policy or policies and certificates therefor shall be filed by the Transferee with the City Manager within thirty (30) days after the execution of this Agreement. 3.3 Security Fund. The security fund required by Section 7.5-48 of the Cable Television Regulations, which has been deposited by the Transferor, will remain on deposit with the City Treasurer for the term of the Franchise. So long as such amount remains on deposit, the Transferee will be deemed to have fulfilled its obligations under Section 7.5-48 of the Cable Television Regulations to deposit such security fund with the City Treasurer. 3.4 Obligation to Obtain Rights to Locate or Install Facilities. Transferee agrees to enter into all necessary agreements in forms acceptable to the City, not later than March 1, 1996, permitting the Transferee, its successors and assigns, to construct, install, operate, maintain, and remove cable television facilities in the designated easement in the areas and at the locations described in Section 3 of Attachment A. 3.5. Transferee's Obligations. A. The Transferee shall meet the provisions of Section 7.5-40 of the Cable Television Regulations and all other provisions of the Franchise Documents regarding service requirements. In addition, the Transferee hereby agrees that the operation of the System shall meet or exceed the FCC standards contained in 47 CFR Part 76.309, entitled Customer Service Obligations, and the requirements of the Franchise Documents. Nothing in this paragraph shall relieve the Transferee from meeting its obligations under the Franchise Documents. B. By January 1, 1997, the Transferee shall inspect all subscriber drops in the City for compliance with the NEC and other applicable laws and regulations. For all drops which do not meet such Code, laws and regulations, the Transferee shall repair the drops, as needed, and provide to the City Manager quarterly written reports beginning on March 1, 1996, documenting such inspections and repairs. 6 8 C. The Transferee shall use employees of the Transferee, and not independent contractors, to perform all System installation and all System maintenance, which is a Franchise requirement. Without waiving this requirement, upon a showing of business need and with prior written approval of the City Manager, the Transferee shall be permitted to use independent contractors on a limited basis, provided that all individuals performing installation and maintenance work on the System, whether employees of the Transferee or independent contractors, shall be properly supervised by the Transferee and shall have been certified, upon successful completion of the Transferee's Qualified Installer Program. D. Upon receipt of a customer complaint or a request for service from any person or entity indicating that any of the Transferee's cables on such customer's, person's or entity's property are buried at depths of less than 18 inches, the Transferee shall, weather permitting and subject to the completion of customary locating procedures, begin to bury the cable to a depth of at least 18 inches as soon as practicable but in any event no later than (i) within twenty four (24) hours after receipt of such notice if the affected cable presents a safety risk or (ii) otherwise within ten (10) business days after receipt of such notice, and shall complete the rebury promptly. E. The Transferee shall incorporate the customers of the System into its centralized computer billing system, which billing system is currently acceptable to the City. The City's acceptance of this billing system does not constitute a waiver by the City of any Franchise requirement. F. The Transferee shall submit to the City Engineer as-installed plans for System extensions within thirty (30) days after completion of each such extension. G. When the City approves plans for the construction of new public streets or facilities or for the installation of new grades and alignments of existing public streets or facilities, then the 7 9 City will provide a copy of the approved plans to Transferee as soon as possible, but in no event more than ten (10) working days from the date of plan approval. At such time, the City shall also provide the Transferee with a schedule for completion of the relocation or placement of its facilities, which schedule shall provide a minimum of ten (10) working days for commencement by the Transferee of the relocation or placement of its facilities. The Transferee shall commence work on the relocation or placement of its facilities within ten (10) business days of receipt of the schedule or, if greater, within the number of days specified in the schedule, and shall complete construction promptly. H. The Transferee shall keep accurate records and, upon request, shall make available to the City for inspection, such records describing complaints received by the Transferee from subscribers and verifying the fact that each such complaint was investigated and acted upon by the Transferee as soon as possible, but no later than one business day after receipt, as required by Section 7.5-44(b) of the Cable Television Regulations. I. For all facilities and cables which are located outside of the boundaries of easements or in other locations where the Transferee has not obtained the legal right to locate such facilities and cable, the Transferee shall either obtain from the property owner or owners the legal right to locate such facilities and cable on such property, and promptly provide evidence of such legal right to the City Engineer, or relocate the facilities to property within which the Transferee has obtained the legal right to install such facilities and cable and provide evidence of such relocation to the City Engineer. J. The Transferee acknowledges that the Franchise Documents obligate the Franchisee to provide the following features or services. The City does not waive these or any other Franchise requirements and Transferee expressly binds itself to provide the following franchise obligations at any time, upon demand by the City, and during the period of time specified by the City: 8 10 1. A System installed with full two-way operation, as described in the Franchise Documents; 2. A System with two-way capability to allow the City School system to originate programming from any of the schools or administrative buildings, and a System with two outbound channels dedicated to school system use and two additional channels available for outbound use on a shared basis; 3. A System with harmonically-related channelization ("HRC") using Scientific Atlanta equipment; and 4. A System with 15 channels individually processed FM service using Catel equipment. The City does not presently intend to enforce the foregoing Franchise requirements during the remaining term of the Franchise. The City intends to consider the desirability of these and other requirements during the Franchise renewal process. Notwithstanding the provisions of subsection 2.2, above, the City will not treat as Franchise defaults any claim that the Transferor failed to comply with these requirements before the effective date of the transfer, nor will the City treat as Franchise defaults any claim that the Transferee failed to comply with these requirements after the effective date of the transfer for purposes of renewal determination unless the City requests that the Transferee satisfy such requirements during the remaining term of the Franchise and the Transferee fails to comply with such request within a reasonable time. 3.6 Franchise Fees through the Effective Date of Transfer. The Transferor has paid to the City certain amounts in satisfaction of the Transferor's obligation under the Franchise Documents to pay franchise fees. The City and the Companies agree that no audit has been conducted of the franchise fees paid by the Transferor to the City and that, if such an audit were conducted, it may result in either: A. a refund by the City to the Transferor of overpaid franchise fees; B. a payment by the Transferor to the City of underpaid 9 11 franchise fees; or C. neither a refund by the City nor a payment by the Transferor. In order to avoid any dispute about payment of these franchise fees through the effective date of the transfer, and in consideration of the covenants in this Agreement, the City and the Companies agree that they shall each forego the conducting of audits of the franchise fee payments through the effective date of the transfer, which audits are otherwise permitted by the Franchise Documents. Section 4. Costs, No Adverse Effect on Rates. 4.1 Payment of Transfer Costs. Notwithstanding anything to the contrary contained in the Franchise Documents, this Agreement or any previous Agreement, upon execution of this Agreement, Transferor agrees to pay to the City an amount not to exceed $65,000 inclusive of all application and acceptance fees required by sec. 7.5-46 of the Cable Television Regulations, which sum shall in addition defray all Transfer Costs incurred by the City, as those Transfer Costs are defined in a letter dated September 19, 1995 ("Letter Agreement"), from General Manager of Transferor to City Manager, a copy of which Letter Agreement is attached and incorporated as Attachment C. To the extent this provision is inconsistent with the Letter Agreement, this provision controls. In calculating the Transfer Costs to be paid by the Transferor to City, the City shall credit payments previously received from Transferor. 4.2 None of the expenses incurred or amounts expended by the Companies to comply with this Agreement shall be passed through by the Companies to system subscribers in any form, or itemized on any subscriber bills, except as allowed under applicable federal law and regulations. 4.3 No Adverse Effect on Rates. A. The Transferee hereby covenants and agrees that the Transfer of the System shall not cause, justify or require any increase in the rate base for the System allocable to basic service and/or equipment, other than as permitted under Federal law. The Transferee acknowledges that it is the 10 12 intent of both Transferee and the City that all costs associated with the requirements of this Transfer do not provide any basis for increasing the amounts paid by subscribers through cost pass-throughs, as so called "external costs," or as new franchise requirements. Neither the consent process, nor any related Governing Body actions, nor the provisions of this Agreement provide any basis for increasing the rates or amounts paid by subscribers in any other manner. B. The Transferee agrees that the existing basic service rates shall remain in effect through June 1, 1996. In consideration of the covenants provided in this Agreement, the Transferee shall not raise its basic service rates for the System until such time as the Transferee is permitted (whether pursuant to the relevant franchise documents, federal, state or local law, or otherwise) to raise such rates and does in fact raise those rates, in the cable television system it owns serving the City of Manassas, Virginia (and any such increase in the basic service rates for the System shall not be any higher percentage than the percentage increase to the basic service rates for subscribers in the City of Manassas, which is simultaneously being implemented), except for adjustments for inflation or to reflect any change in the Transferee's external costs as defined by the FCC, and subject to any subsequent changes in the applicable laws or rules and regulations of the FCC. C. Consent herein granted for the Transfer is conditioned upon the acknowledgment by the Transferee, as indicated by its execution of this Agreement, that the existing interim "Cost-of-Service" Rules of the FCC establish a presumption that the inclusion of the acquisition costs and good will shall not be considered as reasonable costs to be included in the rate base for any request for rate increases. D. The Transferee shall maintain, and shall make available for inspection by the City in Transferee's offices, upon the City's request, all appraisals, studies, reports, and records regarding the allocation of the purchase price of 11 13 the Transferor's System assets. Such appraisals, studies, reports and records shall be maintained by the Transferee in such a manner so that the City can determine the value of the Transferor's System assets with, and without, the allocation of the purchase price above net book value (allocation of the excess acquisition cost to the book value of the assets being acquired). Such appraisals, studies, reports and records shall be maintained so as to enable the City, at its sole discretion, to determine that no recovery of the excess purchase price is being sought in any cost of service showing. Section 5. Representations and Warranties. 5.1 Representations and Warranties of the Transferor. The Transferor hereby represents and warrants that: A. the execution and delivery of this Agreement do not contravene, result in a breach of, or constitute a default under, any contract or agreement to which Transferor is a party or by which Transferor may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both), and do not violate or contravene any law, order, decree, rule, regulation or restriction to which the Transferor is subject; B. the Transferor is a duly organized corporation, legally existing under the laws of Commonwealth of Virginia and is a corporation, in good standing, duly qualified to do business in the Commonwealth of Virginia; C. this Agreement, the Purchase Agreement and the Franchise Documents constitute legal, valid and binding obligations of the Transferor, enforceable in accordance with their terms; and D. the execution and delivery of, and performance under, this Agreement, the Purchase Agreement, and the Franchise Documents are within Transferor's power and authority without the joinder or consent of any other party, and have been duly authorized by all requisite action and are not in contravention of Transferor's charter, bylaws or other corporate organizational documents or of any indenture, agreement, or undertaking to which Transferor is a party or by which it is bound. The Transferor hereby indemnities and holds harmless the City, its elected and appointed officers, officials, employees, agents, contractors, and consultants against any loss, claim, damage, liability or expense (including, without 12 14 limitation, reasonable attorneys' fees) incurred as a result of: A. any representation or warranty made by Transferor in this Agreement which proves to be untrue or inaccurate in any material respect; B. the transfer of the Franchise from the Transferor to the Transferee, except for fees and costs associated with this Agreement; or C. any challenge to the validity of this Agreement by the Transferor. 5.2 Representations and Warranties of the Transferee. The Transferee hereby represents and warrants that: A. the execution and delivery of this Agreement do not contravene, result in a breach of, or constitute a default under, any contract or agreement to which Transferee is a party or by which Transferee may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both), and do not violate or contravene any law, order, decree, rule, regulation or restriction to which the Transferee is subject; B. the Transferee is a duly organized corporation, and legally existing under the laws of the State of Colorado and is a corporation, in good standing, duly qualified to do business in the Commonwealth of Virginia; C. this Agreement, the Purchase Agreement, and the Franchise Documents constitute legal, valid and binding obligations of Transferee enforceable in accordance with their terms; and D. the execution and delivery of, and performance under, this Agreement, the Purchase Agreement, and the Franchise Documents are within Transferee's power and authority without the joinder or consent of any other party, and have been duly authorized by all requisite action and are not in contravention of Transferee's charter, bylaws or other corporate organizational documents or of any indenture, agreement, or undertaking to which Transferee is a party or by which it is bound. The Transferee hereby indemnifies and holds harmless the City, its elected and appointed officers, officials, employees, agents, contractors, and consultants against any loss, claim, damage, liability or expense (including, without limitation, reasonable attorneys' fees) incurred as a result of: A. any representation or warranty made by Transferee in this Agreement which proves to be untrue or inaccurate in any material respect, or B. the transfer of the Franchise from the Transferor to the Transferee (except for fees and costs associated with this Agreement; C. Transferee's performance and 13 15 implementation of the terms and conditions of this Agreement, except for fees and costs associated with this Agreement; or D. any challenge to the validity of this Agreement by the Transferee. Section 6. Covenants of Transferee. 6.1 Acceptance of Franchise. The Transferee covenants that it has carefully read the terms and conditions of the Franchise Documents, this Agreement and the Transfer Ordinance, and accepts all of such terms and conditions imposed by such Documents, Agreement and Ordinance and agrees to abide by the same. The Transferee further accepts the Franchise, agrees to fully comply with the Franchise Documents, this Agreement, and the Transfer Ordinance, agrees to assume the obligations and liabilities of the Franchise, and agrees to exercise the rights and privileges granted in the Franchise, upon and subject to the terms, provisions, conditions and limitations set forth in the documents described in this Subsection 6.1. 6.2 Future Transfers. All future transfers or assignments of the Franchise and the System shall be subject to the review and approval of the Governing Body in accordance with federal, state and local law, and the Franchise Documents. 6.3 Encumbrances. Notwithstanding any language to the contrary contained in the Purchase Agreement, Assignment and Assumption Agreement, and any other agreements to which any of the signatories to this Agreement are parties, the Transferee shall not further pledge, mortgage, hypothecate or otherwise encumber the Franchise, the System or any assets used in connection therewith without the prior written consent of the Governing Body, to the extent that such is required under, without limitation, Section 7.5-8 of the Cable Television Regulations. 6.4 The City's approval of the Transferee's pledging, mortgaging, hypothecating or otherwise transferring an interest in an amount exceeding seventy five percent (75%) of the fair market value of the property of the System, is subject to the conditions that (A) the lender comply with the Franchise Documents, including but not limited to the lender's compliance with Section 7.5-8(c) of the Cable Television Regulations; and (B) 14 16 the Transferee submit to the City Manager, for the City's prior approval, evidence satisfactory to the City that the lender has agreed to comply with the Franchise Documents, this Agreement and the Transfer Ordinance. The City's approval described in this section is further conditioned upon the Transferee obtaining, and delivering to the City Manager prior to the effective date of the Transfer, the written agreement of any lender, under Section 7.5-8(c) of the Cable Television Regulations, that it shall comply with the Franchise Documents if the lender were to foreclose on, or otherwise take control of, the System assets in the future. The failure of the Transferee to submit such documents to the City, or the failure of the lender to so agree, shall render null and void the City's consent to the Transferee's request to pledge, mortgage or hypothecate property of the System. 6.5 The Companies agree that any mortgage, pledge, hypothecation, or lease of the System, or any portion thereof shall be subject and subordinate to the rights of the City under the Franchise Documents and other applicable law and that all documents regarding such mortgage, pledge, hypothecation, or lease of the System shall so state. Copies of such documents shall be delivered by the Transferee to the City upon the City's request. Section 7. Acceptance of this Agreement. By accepting this Agreement A. the Transferee accepts, and agrees to comply with each provision of this Agreement and of the Franchise Documents; B. the Companies acknowledge, accept and will not challenge the City's right to consent to the Transfer pursuant to the Franchise Documents, and to enter into this Agreement; and C. the Companies agree that consent to the Transfer has been or will be granted pursuant to processes and procedures consistent with the applicable law, and that the Companies will not raise, and hereby expressly waive, insofar as such waiver is consistent with applicable law, all claims to the contrary and will indemnify and hold harmless the City, its officials, employees, agents and contractors, against all costs, claims, liability, judgments and expenses arising out of such claims raised by persons or entities not a party to this Agreement. 15 17 Section 8. Effect of Failure to Satisfy This Agreement. If either the Companies at any time fail to satisfy any of the conditions in this Agreement, or if either of the Companies violate any provision of this Agreement, then the City may, after giving the Companies fifteen (15) days written notice, declare the Governing Body's consent to the Transfer to be null and void and of no force and effect. If after the transfer, the Transferee fails to satisfy the conditions set forth in Subsections 3.4 and 3.5 of this Agreement, then the City may, without further cause and in its sole discretion, initiate the procedure to revoke the Franchise. Section 9. Miscellaneous Provisions. 9.1 Binding Agreement. This Agreement shall bind and benefit the parties hereto and their respective heirs, beneficiaries, administrators, executors, receivers, trustees, successors and assigns, and the promises and obligations herein shall survive the effective date hereof. 9.2 Guarantee of Transferee's Performance. As of the effective date of this Agreement and throughout its term, the Guarantor guarantees to the City the full and complete performance of the Transferee under the terms and conditions of this Agreement and the Franchise Documents. In consideration of the City consenting to the Transfer and consenting to the pledge, mortgage, hypothecation or lease of the System, the Guarantor agrees: A. To assure the prompt, satisfactory and continuous performance of the Franchise by the Transferee in accordance with all the terms and conditions of this Agreement and the Franchise Documents; and B. To pay to the City all damages, costs and expenses, including attorney's fees, that the City is entitled to recover from the Transferee under or in connection with the Franchise and the Franchise Documents by reason of Transferee's failure to perform adequately its obligations under this Agreement or as a result of any wrongful act; and C. To maintain the aforementioned guarantee for the full duration of the remainder of the Franchise Term under this Agreement, or until all claims by 16 18 the City against the Transferee have been finally settled or resolved, whichever is later; and D. To make the Guarantor's obligations hereunder binding regardless of any modification, renewal, extension, waiver, or other change of any kind which may hereafter be made in the Franchise or in the Franchise Documents. Such guarantee shall not be affected by the City's failure to give timely notice of a default or modification under the Franchise to the Transferee or Guarantor. 9.3 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia and all applicable federal and local laws. 9.4 Severability and Enforceability. A determination in any judicial or administrative proceeding that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision. Upon any such determination, the parties shall enter into good faith negotiations with the intent of reaching an agreement that would place the City, the Companies and the subscribers substantially in the same position as if this Agreement were fully enforceable. 9.5 Time of the Essence. In determining whether a party has complied with this Agreement, the parties agree that time is of the essence. If the Transfer of the Franchise and the System, as contemplated by this Agreement, have not been completed by March 1, 1996, and written notice thereof provided to the City by March 11, 1996, then this Agreement, and the consent to transfer the Franchise and the System shall be null and void and of no force and effect, except that the Transferee's and Guarantor's indemnification of the City shall remain in force and effect and shall survive the term of this Agreement. 9.6 Counterparts. This document may be executed in multiple counterparts, and by the parties hereto on separate counterparts, and each counterpart, when executed and delivered, shall constitute an original agreement enforceable against all who signed it without production of, or accounting for, any other 17 19 counterpart, and all separate counterparts shall constitute the same agreement. 9.7 Captions. The captions and headings of this Agreement are for convenience and reference purposes only, and shall not affect in any way the meaning and interpretations of any provisions of this Agreement. 9.8 Recitals. The recitals are hereby incorporated into this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. TRANSFEROR: CABLEVISION OF MANASSAS PARK, INC. By: /s/ R. CALVIN SUTLIFF ------------------------------------ Name: R. Calvin Sutliff ---------------------------------- Title: President --------------------------------- Date: 12-19-95 ---------------------------------- TRANSFEREE: JONES COMMUNICATIONS OF VIRGINIA, INC. By: /s/ ELIZABETH STEELE ------------------------------------ Name: Elizabeth Steele ---------------------------------- Title: Vice President --------------------------------- Date: 12/18/95 ---------------------------------- GUARANTOR: JONES CABLE HOLDINGS, INC.. By: /s/ ELIZABETH STEELE ------------------------------------ Name: Elizabeth Steele ---------------------------------- Title: Vice President --------------------------------- Date: 12/18/95 ---------------------------------- 18 20 CITY OF MANASSAS PARK, VIRGINIA By: /s/ ERNEST L. EVANS -------------------------------- Name: Ernest L. Evans ------------------------------ Title: Mayor ----------------------------- Date: December 19, 1995 ------------------------------ ATTEST: /s/ LANA A. CONNER - ----------------------------- City Clerk 19 21 COMMONWEALTH OF VIRGINIA CITY OF PRINCE WILLIAM CO., TO WIT: I, a Notary Public in and for the aforesaid jurisdiction hereby certify that R. Calvin Sutliff, Jr. appeared before me in my jurisdiction and acknowledged same this 19th day of December, 1995 on behalf of the Cablevision of Manassas Park. /s/ ANN MICHELLE REYNOLDS -------------------------- Notary Public My Commission Expires: . COMMONWEALTH OF VIRGINIA CITY OF MANASSAS PARK, TO WIT: I, a Notary Public in and for the aforesaid jurisdiction hereby certify that Ernest L. Evans appeared before me in my jurisdiction and acknowledged same this 19th day of December, 1995 on behalf of the City of Manassas Park. /s/ LANA A. CONNER -------------------------- Notary Public My Commission Expires: 6/30/96 . STATE OF COLORADO COUNTY OF ARAPAHOE, TO WIT: I, a Notary Public in and for the aforesaid jurisdiction hereby certify that Elizabeth Steele, Vice President appeared before me in my jurisdiction and acknowledged same this 18th day of December, 1995 on behalf of Jones Communiations of Virginia, Inc. /s/ DOLORES M. GILLESPIE -------------------------- Notary Public My Commission Expires: 2/17/97 . 20 22 STATE OF COLORADO COUNTY OF ARAPAHOE, TO WIT: I, a Notary Public in and for the aforesaid jurisdiction hereby certify that Elizabeth Steele, Vice President appeared before me in my jurisdiction and acknowledged same this 18th day of December, 1995 on behalf of Jones Cable Holdings, Inc. /s/ DOLORES M. GILLESPIE ------------------------- Notary Public My Commission Expires: 2/17/97 . Dolores M. Gillespie 21 23 ATTACHMENT A [CITY OF MANASSAS PARK LETTERHEAD] November 7, 1995 CERTIFIED MAIL RETURN RECEIPT REQUESTED Mr. R. Calvin Sutliff, Jr. Benchmark Communications 21545 Ridgetop Circle Sterling, Virginia 20166 BY HAND Mr. Samuel Eddy General Manager Cablevision of Manassas Park, Inc. 9540 Center Street Manassas Park, Virginia 22110 Re: Notification of Non-Compliance With the Cable Television Franchise (the "Franchise") Granted by the City of Manassas Park, Virginia (the "City") to Cablevision of Manassas Park, Inc. ("CMP") Dear Messrs. Sutliff and Eddy: In reviewing CMP's request to transfer the Franchise under Chapter 7.5 of the City Code, the City has determined that CMP is not in compliance with various requirements of the Franchise. The particulars of these Franchise violations include: 1. Sections 7.5-29 and 7.5-34(a) of the Code of the City of Manassas Park (the "City Code"): Failure to bury underground cable to proper depth at various locations, including the main feed cable at the intersection of Manassas Drive and Park Center Court; Belmont Station Subdivision behind lots 69-72; and behind the lots on the north side of East Carondelet Drive. 2. Sections 7.5-33(a) and 7.5-34(a) of the City Code: Failure to construct, install and maintain the cable television system in compliance with the National Electric Code. An outside Plant Inspection Log listing the specific locations and corresponding descriptions of deficiencies is attached to this letter designated as Attachment A. 24 November 3, 1995 Page 2 3. Section 7.5-55 of the City Code, Section 6 of the Franchise Agreement between CMP and the City dated May 16, 1983, including amendments thereto dated July 24, 1986 and November 1994 (the "Franchise Agreement") and the Franchise Ordinance: Failure to obtain permission of the City to install cable television lines in Brandy Station, Stoneridge, Outlook, Mosby Ridge and Blooms Crossing subdivisions and in other locations in the City, resulting in unreasonable interference with the public's use thereof. Such other locations include, but are not limited to: Buried cable along Park Center Court, buried cable along Manassas Drive between the Cablevision office and the railroad, lots 95 & 96 of Blooms Crossing Subdivision is in the center of the driveway, and rear of lots on East Carondelet Drive in Bloom's Crossing Subdivision. 4. Section 7.5-36 of the City Code: Failure to move existing facilities, in a timely manner as reasonably directed by the City, resulting in the delay of public improvements at the following locations: Parking lot improvements at Manassas Elementary School, Widening of Manassas Drive between the railroad and Signal View Drive (formerly Blooms Road) and widening of Euclid Avenue at Manassas Drive. 5. Section 7 of the Franchise Agreement: Failure to furnish to the City Manager, or to obtain a suspension of such requirement, copies of various contracts within fifteen (15) days of execution thereof. 6. Section 10 of the Franchise Agreement: Failure to file with the City Manager, or to obtain a suspension of such requirement, certain FCC statements and documents within twenty (20) working days of such filings. 7. Section 4(b)(3) of the Franchise Agreement: Failure to operate a computerized billing system at the studio facilities located in the City. 8. Section 7 of the Franchise Agreement and Exhibit C-1 of the Franchise Application of CMP to the City dated September 27, 1982 (the "Proposal"): Failure to provide a cable television system with two-way capacity/capability. 25 November 3, 1995 Page 3 9. Section 7 of the Franchise Agreement and Exhibit C-2 of the Proposal: Failure to provide a cable television system with harmonically-related channelization ("HRC") using Scientific Atlanta equipment. 10. Section 7 of the Franchise Agreement and Exhibit C-2 of the Proposal: Failure to provide a cable television system with 15-channel, individually processed FM service using Catel equipment. 11. Section 7 of the Franchise Agreement and Exhibit C-4 of the Proposal: Failure to have system installation and maintenance performed exclusively by CMP personnel. 12. Section 7 of the Franchise Agreement and Exhibit C-4 of the Proposal: Failure to use answering service to answer service complaints during non-office hours. 13. Section 7 of the Franchise Agreement and Exhibit C-5 of the Proposal: Failure to provide set-top terminals (converters) capable of handling up to 120 channels. 14. Section 7 of the Franchise Agreement and Exhibit P-3 of the Proposal: Failure to provide a cable television system to permit the school system to originate programming from any of the schools or administrative building. 15. Section 7 of the Franchise Agreement and Exhibit P-3 of the Proposal: Failure to dedicate two out-bound channels to the school system use and two additional channels for out-bound use on a shared basis. 16. Section 7 of the Franchise Agreement and Exhibits P-4 and P-7 of the Proposal: Failure to provide a system with full 2-way operation to permit remote origination of programs from any point in the community served by the system. At a meeting on October 20, Sam Eddy and the City Attorney discussed all these and other issues of noncompliance. This meeting helped resolve a number of areas of concern and highlighted the changes and upgrades accomplished by CMP over the 26 November 3, 1995 Page 4 course of the present franchise term. As a result of these changes, we may find it desirable to amend the Franchise Documents to address some of the areas cited as technical noncompliance. The City desires to continue working with CMP to reach a satisfactory resolution of these violations at the earliest possible time. The City anticipates that CMP will fully and diligently cooperate in a prompt and complete correction or resolution of these issues. In the interest of maintaining public safety and providing quality cable television service to City residents, some of these items of noncompliance should be corrected immediately, while others may be better addressed in the franchise transfer process. Very truly yours, Frank McDonough BAK/red 27 November 3, 1995 Page 5 cc: Certified Mail-Return Receipt Requested Ms. Katherine A. LeVoy Assistant Secretary/Counsel Jones Intercable of Alexandria, Inc. 9697 East Mineral Avenue Englewood, Colorado 80112 Certified Mail-Return Receipt Requested Ms. Elizabeth M. Steele Vice President/General Counsel Jones Intercable, Inc. 9697 East Mineral Avenue Englewood, Colorado 80112 Mayor and City Council 28 ATTACHMENT B List of Documents 1. FCC Form No. 394, dated September 22, 1995, Cablevision of Manassas Park, Inc., Transferor/Assignor, Jones Communications of Virginia, Inc., Transferee/Assignee with exhibits. 2. Letter from Samuel Eddy, General Manager of Cablevision of Manassas Park, Inc. to Frank McDonough, City Manager, dated August 28, 1995 with Attachment A (including attachments and containing exhibits thereto), containing responses to Items 1 through 16 listed in a letter dated August 16, 1995 from Frank McDonough to Samuel Eddy and Katherine A. LeVoy. 3. Letter from Ruth E. Warren, Group Vice President/Operations of Jones Intercable to Frank McDonough, dated August 25, 1995, (including exhibits), containing responses to Questions 17 through 41 listed in a letter dated August 16, 1995 from Frank McDonough to Samuel Eddy and Katherine A. LeVoy. 4. Letter from Samuel Eddy, General Manager of Cablevision of Manassas Park, Inc. to Frank McDonough, City Manager, dated September 14, 1995 (including attachments and exhibits), containing responses to Questions 13, 64, 66, 71, 74 through 77 and 81 to questions listed in a letter dated September 6, 1995 from Frank McDonough to Samuel Eddy and Katherine A. Levoy. 5. Letter from Katherine A. LeVoy, counsel, Jones Intercable to Frank McDonough, City Manager, dated September 18, 1995 enclosing responses of Jones Intercable, Inc. and Jones Communications of Virginia, Inc., (including attachments and exhibits), containing responses to Questions 42 through 81 to questions listed in a letter dated September 6, 1995 from Frank McDonough to Samuel Eddy and Katherine A. Levoy. 6. Letter from Katherine A. LeVoy, counsel, Jones Intercable, Inc., and Jones Intercable of Alexandria, Inc., to the City of Manassas Park dated November 7, 1995 enclosing responses of Jones Intercable, Inc. and Jones Intercable of Alexandria, Inc. (including exhibits), to questions 81 through 94 listed in letters from David J. Effron to Katherine A. LeVoy dated October 6 and October 19, 1995. 7. Letter from Katherine A. LeVoy, counsel, Jones Intercable, to James A. Hoffman, dated November 30, 1995. 8. Letter from Katherine A. LeVoy, counsel, Jones Intercable, to James A. Hoffman, dated December 12, 1995. 29 ATTACHMENT C September 19, 1995 [LOGO] Mr. Frank McDonough City Manager One Park Center Court Manassas Park, VA 22111 Dear Mr. McDonough: This letter offers to assist the City of Manassas Park ("City") in its review of the proposed transfer of the City's cable television franchise. This offer consists of an unqualified contribution from Cablevision of Manassas Park ("CMP") to the City in the amount of $25,000.00, to defray the City's cost of consultants (experts, attorneys, engineers, etc.) and related administrative expenses directly relative to CMP's application for consent to transfer the CATV franchise ("Transfer Costs"). With consideration to City Code Section 7.5-34 (b), CMP agrees to pay the City one-half of the "salary and cost" of any such consultants hired by the City. We understand that the City estimates such Transfer Costs will not exceed $50,000.00. Should the Transfer Costs exceed the estimated amount, CMP asks and expects that the City shall provide reasonable explanation to CMP for the increase. Moreover, CMP would like the opportunity to revisit with the City the need for additional funds deemed necessary to the reasonable and prudent evaluation of the CMP application for transfer consent. CMP recognizes that, under City Code Section 7.5-8, the existing franchise held by CMP cannot be transferred without the prior consent of the City Council. In considering its consent, the City Council may evaluate the potential transferee's ability to perform all of its obligations under the franchise, including among other things its financial responsibility, its intent and ability to correct all deficiencies in the franchise, and its technical and legal qualifications. CMP recognizes that the City retains these consultants at some expense and will incur some financial risk, given that CMP and the transferee may determine not to proceed with the transfer, even after the City has expended time, effort and expense in reviewing the transfer requests. In order to allay the City's concerns and to assist the City in conducting its review in a timely and expeditious fashion, CMP makes the following offer. CMP offers to create a fund to defray the City's Transfer Costs and such other fees, costs and expenses directly related to the transfer request. CMP will deposit with the City Treasure, no later than September 22, 1995, the sum of $25,000.00 in cash. We request that this sum be placed by the City in an interest-bearing account from which the City will pay its Transfer Costs. If the Transfer Costs do not exceed $50,000.00 at the conclusion of the proposed transfer, then the City will return to CMP any excess which remains in the account, plus accrued interest. Should it appear that the Transfer Costs may exceed the 30 Mr. Frank McDonough September 8, 1995 Page 2 initial estimate, the City agrees to provide CMP reasonable explanation for the costs which exceed the original estimate, at which time the City and CMP agree to discuss the continuation of the transfer process and the need for additional funds. We look forward to working with the City to complete the proposed transfer by the date (8 December 1995) proposed in Mr. McDonough's letter dated 6 September 1995. This offer is unconditional and irrevocable. We make this offer with the understanding that it does not obligate the City to approve the transfer request. This offer reflects CMP's willingness to assist the City in the franchise transfer review process. Sincerely yours, Cablevision of Manassas Park, Inc. /s/ SAMUEL EDDY Samuel Eddy General Manager ACCEPTED: THE CITY OF MANASSAS PARK, VIRGINIA BY: ------------------------------- Ernest L. Evans Mayor 31 SECOND AMENDMENT TO FRANCHISE AGREEMENT THIS SECOND AMENDMENT TO FRANCHISE AGREEMENT ("Second Amendment") is made this first day of November, 1994, by and between CABLEVISION OF MANASSAS PARK, INC. ("CMP"), and the CITY OF MANASSAS PARK ("City"). R E C I T A L S: R-1. On May 3, 1983, the City Council for the City of Manassas Park adopted an ordinance codifying Chapter 7.5 of the city code of the City of Manassas Park, Virginia ("Ordinance"), which awarded a non-exclusive franchise to CMP for the operation of a cable television system within the corporate limits of the City; and R-2. On May 16, 1983, CMP and the City entered into a Franchise Agreement by which the parties agreed to the terms, provisions, conditions and limitations by which CMP would operate the cable television franchise in the City; and R-3. By Amendment to Franchise Agreement, dated June 1986, the City agreed to permit CMP to relocate its local origination studio facilities for the cable television system from within the corporate limits of the City to a new location in the City of Manassas, Virginia and, in exchange, CMP agreed to other changes to the Franchise Agreement, including CMP's agreement "to impose and collect reasonable rates, fees and charges" for the use of the facilities located within the City; and R-4. A dispute arose between CMP and the City about CMP's authority to collect rates, fees and charges from subscribers outside the City for facilities located within the City; and 32 R-5. CMP now desires to eliminate the requirement for CMP to impose and collect fees and charges from subscribers outside the City for the use of facilities located within the City; and R-6. Both parties agree to accept the revisions of the franchise agreement as described in this Second Amendment. NOW THEREFORE, in consideration of the mutual promises and obligations contained in this Second Amendment and conditioned upon full payment of the amounts set forth in paragraph 5, below, the parties agree to the following revisions to the Franchise Agreement: 1. Amend paragraph 4(b), by deleting the language "to a location at 9324 N. Main Street in the City of Manassas, Virginia for a period of three (3) years from the date hereof, which time may be extended upon written request from CMP and approval by the Council." 2. Delete paragraph 4(b)(7). 3. Amend paragraph 11 by deleting the following sentence: "In the event that CMP uses facilities located within the City to serve subscribers outside the City, CMP agrees to impose and collect reasonable rates, fees and charges for the use of such facilities." 4. Amend the portion of paragraph 20 providing for the address for notices to CMP to read as follows: To CMP: R. Calvin Sutliff, Jr. Benchmark Communications 21545 Ridgetop Circle Sterling, Virginia 20166 2 33 5. In exchange for these revisions to the Franchise Agreement, CMP agrees to pay the City $200,000.00. CMP will pay $100,000.00 to the City upon execution and delivery of this Second Amendment and will pay an additional $100,000.00 to the City no later than May 1, 1995. CMP agrees that this provision shall be binding on its successors and assigns. 6. All of the provisions of the Franchise Agreement not expressly amended by this Second Amendment shall remain in full force and effect. WITNESS the following signatures and seals. CABLEVISION OF MANASSAS PARK, INC. By: /s/ R. CALVIN SUTLIFF, JR. ------------------------------- R. Calvin Sutliff, Jr. President STATE OF VIRGINIA ) COUNTY OF FAIRFAX ) to-wit: R. Calvin Sutliff, Jr. personally appeared before me, the undersigned Notary Public this 15th day of November, 1994, to sign this Second Amendment to Franchise Agreement. /s/ KIM A. BROWN ------------------------------- Notary Public My Commission Expires: November 30, 1995 3 34 ATTEST: CITY OF MANASSAS PARK /s/ LANA A. CONNER By: /s/ ERNEST L. EVANS - ------------------------------- ------------------------ Lana A. Conner Ernest L. Evans, City Clerk Mayor 4 35 AMENDMENT TO FRANCHISE AGREEMENT THIS AMENDMENT TO FRANCHISE AGREEMENT, made this 24th day of July 1986, by and between CABLEVISION OF MANASSAS PARK, INC., a corporation organized under the laws of the Commonwealth of Virginia (hereinafter referred to as "CMP"), and the CITY OF MANASSAS PARK, a municipal corporation organized under the laws of the Commonwealth of Virginia (hereinafter referred to as the "City"). RECITALS: R-1. On May 3, 1983, the Council for the City, of Manassas Park (hereinafter referred to as "the Council") adopted an ordinance to the City Code, known as Chapter 7.5 (hereinafter the "ordinance") which awarded a non-exclusive franchise to CMP for the operation of a cable television system within the corporate limits of the City; and R-2. On May 16, 1983, CMP and the City entered into a FRANCHISE AGREEMENT whereby the parties agreed to the terms, provisions, conditions and limitations by which CMP would operate the franchise; and R-3. CMP now desires to relocate its local origination studio facilities for the cable television system from within the corporate limits of the City to a new location in the City of Manassas, Virginia; and R-4. On May 20, 1986 the Council adopted certain revisions to the terms of the cable television ordinance; and R-5. The City now desires to amend the franchise fee paid by CMP to the City for the operation of the franchise; and R-6. Both parties agree hereby to accept the revisions of the Franchise Agreement as described hereinafter. 36 NOW, THEREFORE, in consideration of the mutual promises and obligations contained hereinafter, the parties do agree to the following revisions to the Franchise Agreement: 1. Amend paragraph 4 to read as follows: 4. Non-exclusive right to use streets, alleys and other public places: (a) The City covenants and agrees that CMP has the non-exclusive franchise and rights to use the streets, alleys and other public places of the City and to acquire, erect, maintain and use, and if now erected or installed, to maintain and use, posts, poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances, appurtenances and all other necessary apparatus in, under, over and along the streets, alleys and public places of the City for the purpose of providing a cable television service and system to the residents of the City as the same now exists or may be hereafter extended or altered, under the terms and conditions specified herein. CMP accepts such franchise and rights and agrees and covenants that it shall exercise such franchise and rights only in strict accordance with, and upon the conditions contained in, the terms of this Agreement and the laws, ordinances and regulations of the United States, the Commonwealth of Virginia, and the City which are now in existence or which may be adopted hereafter, including but not limited to Chapter 7.5 of the City Code. (b) The City and CMP agree that CMP may relocate its local origination studio facilities for the cable television system from its location in the City to a location at 9324 N. Main Street in the City of Manassas, Virginia for a period of three (3) years from the date hereof, which time may be extended upon written request by CMP and approval by the Council. The City and CMP agree that CMP may combine the local origination -2- 37 studio facilities that service the residents of the City with the studio facilities that service residents of Manassas provided as agreed upon by CMP that: (1) CMP will provide an additional studio facility and an extra channel for local origination for the cable system serving the City should, in the sole decision of the Council, the time demand for use of the studio or its facilities by residents of the City exceed the time made available to meet demands of residents of the City. (2) CMP agrees that if an additional studio is needed to meet the demands of the City, said studio facilities will be provided at the original location in the City within one year. (3) CMP agrees to install approximately ONE HUNDRED THOUSAND DOLLARS ($100,000) worth of electronic equipment and a computer billing system capable of handling CMP's billing. Said computerized billing system shall be operated out of CMP's current studio facilities located within the corporate limits of the City. (4) CMP agrees to continue to garage all of its business vehicles in the City. (5) CMP agrees to apportion in its report made to the City the operational costs of the new, relocated studio facilities on a pro rata basis between the subscribers to be served in Manassas or in other areas outside the City and those in the City, as follows: (a) For the first year after relocation, the costs shall be apportioned on a pro rata basis based on the number of homes passed in the City and those outside of the City. (b) For the succeeding years, the costs shall be apportioned on a pro rata basis based on the number of -3- 38 subscribers within the City and those outside of the City at the end of the preceding fiscal year. (6) CMP agrees to apportion in its reports to the City the financing costs for the system in the City versus the system outside of the City, on a reasonable basis, that takes into account the financing required for the construction of each, the parties hereby agreeing that of the total loan outstanding as of December 31, 1985, one million dollars ($1,000,000.00) was allocable to the City system. (7) CMP agrees to add eleven (11) additional channels to its current service and four (4) additional optional services. (8) CMP agrees to make available to the City, on a first-call basis, a minimum of ten (10) hours per week of local origination time in the studio to the located in the City of Manassas. 3. Amend paragraph 9 to read as follows: 9. Franchise fee: CMP covenants and agrees to pay as further consideration for the use of the said streets, alley and public places, the franchise fee described in Section 7.5-45 of the City Code, as amended. Payments of the franchise fee shall not be considered in the nature of a tax or assessment, but shall be in addition to any and all taxes and assessments which are now or hereafter required to be paid by law to any taxing body, and nothing in this Agreement shall be construed to limit CMP's liability for all applicable federal, state and local taxes. 4. Amend paragraph 11 to read as follows; 11. Franchise area: CMP covenants and agrees to serve the entire area of the City, as described in Section 7.5-19 of the City Code, subject to the limitations contained therein. -4- 39 The office and headend for the cable television system shall be located on 1.6919 acres of land in the City on Manassas Drive in the Conner Center. (Phase I). In the event that CMP uses facilities located within the City to serve subscribers outside the City, CMP agrees to impose and collect reasonable rates, fees and charges for the use of such facilities. CMP shall maintain ail office at its present location in the City. 5. Amend the portion of paragraph 20 providing for the address for notices to CMP to read as follows: TO CMP: R. Calvin Sutliff, Jr. Benchmark Communications 2164 Wisconsin Ave., N.W. Washington, D.C. 20007 6. The parties acknowledge that Chapter 7.5 of the City Code was amended on May 20, 1986 and that such amendments are hereby incorporated as part of the Franchise Documents. All other provisions of the Franchise Agreement not expressly amended herein shall remain in full force and effect. WITNESS the following signatures and seals: CABLEVISION OF MANASSAS PARK, INC. By: R. CALVIN SUTLIFF, JR. (SEAL) ------------------------------ R. Calvin Sutliff, Jr. President ATTEST: THE CITY OF MANASSAS PARK LANA A. CONNER By: G. ROBERT MAITLAND (SEAL) - ----------------------------- ------------------------------ Lana A. Conner G. Robert Maitland, Mayor Clerk of the City -5- 40 District of Columbia , to-wit: The foregoing instrument was acknowledged before me this 24th day of July 1986 by R. Calvin Sutliff, Jr., of Cablevision of Manassas Park, Inc., a Virginia corporation, on behalf of the corporation. /s/ BARBARA J. STRAUB ------------------------------------ Notary Public My Commission expires: 1-31-91 STATE OF VIRGINIA COUNTY OF, PRINCE WILLIAM to-wit: The foregoing instrument was acknowledged before me this 26th day of August 1986 by G. Robert Maitland, Mayor of the City of Manassas Park, a municipal corporation, on behalf of the City. /s/ FRANCIS T. EMBROY ------------------------------------ Notary Public My Commission expires: January 15, 1990 -6- 41 FRANCHISE AGREEMENT THIS FRANCHISE AGREEMENT, made this 16th day of May, 1983, by and between CABLEVISION OF MANASSAS PARK, INC., a corporation organized under law of the Commonwealth of Virginia, (hereinafter referred to as "CMP"), party of the first part, and the CITY OF MANASSAS PARK, a municipal corporation organized under the law of the Commonwealth of Virginia (hereinafter referred to as the "City"), party of the second part. W I T N E S S E T H: WHEREAS, on May 3, the Council of the City of Manassas Park (hereinafter referred to as the Council) adopted an ordinance awarding a non-exclusive franchise to CMP for the construction, operation, maintenance and use of a cable television service and system within the corporate limits of the City; and WHEREAS, the award of a non-exclusive franchise is subject to certain terms, provisions, conditions and limitations, which are described hereinafter; and WHEREAS, CMP wishes hereby to accept, and by this Agreement does hereby accept, the award of this franchise subject to the terms, provisions, conditions and limitations described hereinafter. NOW, THEREFORE, in consideration of the mutual promises and obligations contained hereinafter, the parties do agree as follows: 1. Definitions: (a) The Franchise Application shall mean CMP's "Application For Cable Television System Franchise Rights For the City of Manassas Park," dated September 27, 1982, consisting of 42 thirty-five pages and all attachments and exhibits thereto, as submitted to the Council by CMP as its application for the cable television system franchise for the City. (b) The Franchising Ordinance shall mean the ordinance adopted by the Council on May 3, 1983 announcing the grant of a non-exclusive franchise for constructing and maintaining a cable television system to CMP. (c) Franchise Documents shall mean Chapter 7.5 of the City Code, the Franchising Ordinance, the Franchise Application, and this Agreement. (d) Unless the context of this Agreement clearly indicates that a different meaning is intended herein, all terms used herein shall have the same meanings given in the City Code. 2. Term of franchise: The initial term of this franchise shall be for a period of fifteen (15) years beginning on the date of this Agreement as set forth on page 1 hereof; provided, however, that the City reserves the right to revoke this franchise at any time pursuant to Section 7.5-4 of the City Code in the event that CMP violates any of the material provisions of the Franchise Documents or is found to have practiced any fraud or deceit upon the City or the public. Any extension of the initial franchise term which shall be granted by the Council shall be accomplished in accordance with Chapter 7.5 of the City Code. 3. Documents incorporated herein: The City and CMP agree that the following documents are hereby incorporated herein by reference and made a part hereof. a. Chapter 7.5 of the City Code, which is attached hereto as Exhibit "A". b. The Franchising Ordinance, which is attached hereto as Exhibit "B". -2- 43 c. The Franchise Application, which is attached hereto as Exhibit "C". In the event that any of the provisions contained in any of the documents listed above and this Agreement are conflicting, the documents shall take precedence in the order listed above, and this Agreement shall be last in order of precedence. 4. Non-exclusive right to use streets, alleys and other public places: The City covenants and agrees that CMP has the non-exclusive franchise and rights to use the streets, alleys and other public places of the City and to acquire, erect, maintain and use, and if now erected or installed, to maintain and use, posts, poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances, appurtenances and all other necessary apparatus in, under, over and along the streets, alleys and public places of the City for the purpose of providing a cable television service and system within the corporate limits of the City as the same now exist or may be hereafter extended or altered, under the terms and conditions specified herein. CMP accepts such franchise and rights and agrees and covenants that it shall exercise such franchise and rights only in strict accordance with, and upon the conditions contained in, the terms of this Agreement and the laws, ordinances and regulations of the United States, the Commonwealth of Virginia, and the City which are now in existence or which may be adopted hereafter, including but not limited to Chapter 7.5 of the City Code. 5. Funding: CMP covenants that within one hundred twenty (120) days of the execution of this Agreement it will obtain, and have available for use at its demand if necessary, the sum of Eight Hundred Thousand Dollars ($800,000) in a combination of equity and debt financing of which not less than -3- 44 $250,000 shall be unrestricted equity capital and the balance shall be debt financing available on short notice to CMP. CMP shall present evidence satisfactory to City of its compliance with the requirement on or before the expiration of said one hundred twenty (120) day period. 6. Non-interferences with public use: CMP covenants and agrees that it shall not exercise the rights granted hereby in such a way as to unreasonably interfere with the City's or the public's use of the said streets, alleys and public places of the city. 7. Performance by CMP and security therefor: CMP covenants and agrees to furnish all necessary material, labor, and equipment necessary for the cable television system and to construct and install the cable television system, as more particularly defined in the Franchise Application as in existence as of this date or as may be amended or supplemented as provided herein, all at its own risk and expense, within twenty-four months of the date of this Agreement. CMP shall furnish the City a copy of its contracts (and amendments thereto) for the furnishing of material, labor and program and services support necessary for the construction, installation, and maintenance of the cable television system, other than a personal service contract, within fifteen (15) days of the execution of such contract or amendment. The City Manager may suspend the requirement to file copies of the aforesaid contracts and contract amendments. CMP will make no charge or claim to the City or the Council for hindrance or delay of the construction or installation of the cable television system. The City shall assist CMP in obtaining all necessary permits for such construction or installation from the City and its agencies. CMP shall furnish the Council with monthly progress reports indicating whether or not it is complying with the construction schedule and specifying the reasons for any -4- 45 delay. CMP agrees to maintain a performance corporate surety bond in the penal sum of $100,000 as described in Section 7.5-47 of the City Code. This fully executed faithful performance corporate surety bond from CMP is attached hereto and incorporated herein as Exhibit "D." 8. Additional franchises: Nothing in this Agreement shall preclude the City from issuing further non-exclusive franchises in accordance with Section 7.5-4 of the City Code or VA. CODE sec. 15.1-23.1, as the same now exists or may hereafter be amended, nor from enacting or amending any ordinance regulating cable television within the City. 9. Franchise fee: CMP covenants and agrees to pay as further consideration for the use of the said streets, alley and public places, the franchise fee described on Section 7.5-45 of the City Code. In the event that the franchise fee is in excess of three percent (3%) of CMP's gross revenues from all cable services in the City, CMP covenants and agrees to apply to the Federal Communications Commission (hereinafter the FCC) for a waiver of the fee limitation as provided in 47 C.F.R. sec. 76.31. The City shall cooperate with CMP in applying for such waiver. CMP and the City agree that a franchise fee of five percent (5%) of CMP's gross revenues will not interfere with the effectuation of federal regulatory goals in the field of cable television and is appropriate in light of the planned local regulatory program. Payments of the franchise fee shall not be considered in the nature of a tax or assessment, but shall be in addition to any and all taxes and assessments which are now or hereafter required to be paid by law to any taxing body, and nothing in this Agreement shall be construed to limit CMP's liability for all applicable federal, state and local taxes. 10. FCC filings: CMP covenants and agrees to file a registration statement and any other required document with the -5- 46 FCC in accordance with the rules and regulations promulgated by the FCC as such rules and regulations may be amended from time to time. CMP further covenants and agrees to file with the City a copy of any document it files with the FCC or any other regulatory agency pertaining to cable television systems within twenty (20) working days of such filing. To the extent that such documents contain, to the satisfaction of the City Manager, the information specified by other reports required to be filed with the City pursuant to the Franchise Documents, the City Manager may suspend the requirement to file such copies of documents filed with the FCC or of other reports with the City so as to avoid duplication and the administrative costs attendant thereto. 11. Franchise area: CMP covenants and agrees to serve the entire area of the City, as described in Chapter 7.5 of the City Code, subject to the limitations contained therein. The office and headend for the cable television system shall be located on 1.6919 acres of land now owned by the City on Manassas Drive in the Conner Center (Phase I). CMP has agreed by separate written contract to purchase said land from the City for $22,500 in cash paid at settlement. In the event that CMP extends cable television service to residents outside the franchise territory, the monthly rate for basic service and special service to customers outside the franchise territory shall contain a $1.00 surcharge per individual viewing customer or subscriber which surcharge CMP shall pass directly through to the City as a direct reimbursement for costs of the City's administration and regulation as provided in Section 7.5-59 of the City Code; provided, however, that the City Council may reduce this surcharge for customers served outside the franchise territory through other cable television systems in which CMP or its stockholders have no direct or indirect interest and where the Council is satisfied no direct service by CMP is practical and -6- 47 further provided that no such surcharge shall be collected or payable to the City for customers served for which service a franchise fee is payable to another county, city or town under the authority contained in sec. 15.1-23.1 of the Virginia Code. The revenue raised by CMP from such service outside the franchise territory shall not be considered as a portion of "gross revenue" in determining the franchise fee required in Paragraph 9 above. 12. Complaints: CMP covenants and agrees to employ an operator or maintain a telephone answering device twenty-four (24) hours per day, every day, to receive subscriber complaints, and to maintain a repair service capable of acting upon service requests within twenty-four (24) hours of receipt thereof. 13. Indemnification: This Agreement shall not be deemed to give any rights to any parties other than the City and CMP, and neither the City, the Council, nor the agents, employees and representatives thereof shall be liable because of this Agreement for any injury or damage to any person or property arising from the granting of the franchise or construction, use or maintenance of the cable television system. CMP covenants and agrees to indemnify and hold harmless the City, the Council and the agents, employees and representatives thereof from any and all damages and penalties contained in Section 7.5-47 of the City Code. CMP further covenants and agrees to maintain the liability insurance in the minimum limits as described in Section 7.5-47 of the City Code during the term of this Agreement. The certificate for such liability insurance policy is attached hereto and incorporated herein as Exhibit "E." 14. Copyright: Nothing herein shall be construed to render the City or the Council liable for the failure of CMP or any user of the public access facilities to secure and protect whatever right CMP or the user of the public access facilities -7- 48 may have in intellectual property, including, but not limited to, securing copyright protection. CMP agrees to maintain, during the term of this Agreement, copyright infringement insurance with a minimum liability of $1,000,000 as described in Section 7.5-47 of the City Code. The certificate of such policy is attached hereto and incorporated herein as Exhibit "F." 15. City's Cost: As further consideration for the nonexclusive right of CMP to use the streets, alleys and public places of the City, CMP covenants and agrees to pay to the City, upon the execution of this Agreement, the sum of Ten Thousand Dollars ($10,000.00) to offset the City's direct costs of the investigation of the franchise application process as provided in Section 7.5-46 of the City Code. 16. Performance Escrow: CMP has deposited and does hereby covenant and agree to maintain on deposit, as specified in Section 7.5-48 of the City Code, during the lifetime of this franchise, Five Thousand Dollars ($5,000) in an escrow account with the City Treasurer to provide security for the faithful performance by CMP any of CMP's obligations under the Franchise Documents. A receipt of the initial deposit of said Five Thousand Dollars ($5,000.00) in escrow is attached hereto and incorporated herein as Exhibit "G." In the event that the City should have to expend funds for the costs of investigation or for resolution by litigation or otherwise of alleged franchise or ordinance violations, or for rate adjustment determinations, such costs are assessable upon notice to CMP in addition to fees paid under Paragraph 9 of this Agreement, and may be withdrawn by the City from the performance escrow. Costs assessable under this paragraph may include, but are not limited. to, legal fees, engineering fees and economic consultant's fees. Interest, if any on the escrowed account, shall inure to the benefit of CMP -8- 49 but the City shall have no obligation to keep such funds in an interest bearing account. 17. Emergency removal of property of franchisee: If, at any time, in case of fire, disaster, or emergency in the franchise area it shall become necessary in the judgment of the City, the Council, or the agents and employees thereof, to cut or move any of the wires, cables, amplifiers, appliances, or appurtenances thereto of CMP, none of the Council, the City, or the agents or employees thereof shall be liable for such cutting or moving. 18. No limitation on liability: None of the provisions in this Agreement, nor any insurance policy required by this Agreement or Chapter 7.5 of the City Code nor any penalties assessed by Section 7.5-49 of Chapter 7.5 of the City Code, nor any damages recovered by the City thereunder, shall be construed to excuse the faithful performance by or limit the liability of CMP under Chapter 7.5 of the City Code or this Agreement, or the liability for damages to the limits of such policies or otherwise. 19. No abrogation of police powers: Nothing in this Agreement shall be construed as an abrogation or limitation by the City, or the Council, of any of its police powers. 20. Service of notice: All notices required to be given to the City shall be deemed served when delivered in writing by hand or mailed postage prepaid to the City Manager at the address specified below. All notices required to be given to CMP shall be deemed served when delivered in writing by hand or when mailed, postage prepaid, to CMP at the last known principal office of CMP in the City. Until establishment of said office in the City, notices to CMP shall be addressed as specified below. -9- 50 To the City: City of Manassas Park 103 Manassas Drive Manassas Park, Virginia 22111, or such other address or person of which CMP may be notified in writing by the City. To CMP: R. Calvin Sutliff, Jr. 2367 49th Street, N. W. Washington, D. C. 20007 or such other address or person of which the City may be notified in writing by CMP. 21. Change in personnel: CMP covenants and agrees to give the City thirty (30) days prior written notice of any change in the principals, or their successors, listed on Page 18 of the Franchise Application, namely, R. Calvin Sutliff, Jr., Jeffrey Waggoner, and Stephen P. Robin. 22. Cable Television Advisory Committee: The Council may appoint up to five (5) persons to serve as a Cable Television Advisory Committee, which Committee shall assist the City Manager, as he shall request and prescribe, in the performance of his authority and responsibilities under Section 7.5-51 of the City Code. CMP hereby covenants and agrees to assist and cooperate with the Cable Television Advisory Committee as a representative of the Council and the City Manager if and when such Committee shall be so appointed. 23. Equipment for public access station: CMP covenants and agrees to provide, as a part of its public use studio facilities, the equipment listed in Exhibit P-9 of the Franchise Application or equipment substantially equivalent in use or performance, with total minimum acquisition expenses of $50,000, within ninety (90) days from the date that CMP commences its cable television service in the City. -10- 51 24. Remedies: (a) All rights and remedies belonging to the City are cumulative and shall be in addition to and not in derogation of any other rights or remedies which the City may have. (b) Specific mention of the materiality of any of the provisions in the Franchise Documents is not intended to be exclusive of any other for the purpose of determining whether any failure of compliance thereunder is material. 25. Successors: CMP covenants and agrees that this Agreement shall be binding on its successors and assigns. 26. Severability: CMP and the City covenant and agree that if any part or section of this Agreement is held invalid or unconstitutional by any court of competent jurisdiction, such decision shall not affect the validity of the remaining part or section hereof. 27. Time of the essence: Time is of the essence in this Agreement. 28. Status of CMP and governing law: CMP represents and warrants that it is a Virginia corporation in good standing; that it has the authority to enter into this Agreement; and that the execution of this Agreement has been authorized by a resolution of CMP's Board of Directors or other appropriate corporate action. This Agreement shall be governed by the laws of the Commonwealth of Virginia and the Ordinances and Resolutions of the City now in effect or as may be hereafter amended. 29. Whole agreement: The parties covenant and agree that this Agreement and the documents incorporated by reference herein constitute the entire agreement between the parties, and each party further covenants and agrees that there are no other understandings or conditions, written or oral, relating to this franchise. -11- 52 30. Acceptance: CMP hereby accepts the award of this franchise and hereby expressly covenants and agrees that it has carefully read the terms of the Franchise Documents, that it fully understands the meaning of each of the Franchise Documents, and that it shall faithfully comply in all respects with every provision, obligation and requirement of the Franchise Documents as in effect now or as may be hereafter amended or supplemented. Nothing in this Agreement shall preclude the City or the Council from enacting its legislative powers to enact, amend, or supplement any law regulating cable television within the franchise area, provided, however, that no change shall be made in any of the Franchise Documents which shall materially affect the obligations of CMP to operate and maintain a cable television system in the franchise area, and that CMP shall make no changes in the Franchise Application or the obligations, commitments or representations made therein without the City's prior written approval. The City may delegate its right to make such written approvals to its City Manager. WITNESS the following signatures and seals. Approved by: CABLEVISION OF MANASSAS PARK, INC. By: /s/ R. CALVIN SUTLIFF, JR. (SEAL) ------------------------------------ R. Calvin Sutliff Jr., President THE CITY OF MANASSAS PARK ATTEST: /s/ LANA A. CONNER By: /s/ WENDALL R. HITE, II (SEAL) -------------------------- ------------------------------------ Clerk Wendall R. Hite, II, Mayor -12- 53 STATE OF VIRGINIA COUNTY OF FAIRFAX The foregoing instrument was acknowledged before me this 17 day of May, 1983, by R. Calvin Sutliff, Jr., of Cablevision of Manassas Park, Inc., a Virginia corporation, on behalf of the corporation. JUDY A. AXEL -------------------------- Notary Public My Commission Expires: 2/13/87 STATE OF VIRGINIA COUNTY OF PRINCE WILLIAM The foregoing instrument was acknowledged before me this 16th day of August, 1983, by Wendall R. Hite, II, Mayor of The City of Manassas Park, a municipal corporation, on behalf of the corporation. KAREN L. BARTON -------------------------- Notary Public My Commission Expires: March 18, 1987 -13- 54 Exhibit B to Franchise Agreement dated May 16, 1993 between Cablevision of Manassas Park, Inc. and the City of CITY OF MANASSAS PARK, VIRGINIA Manassas Park PRESENTED May 3, 1993 -------------------- ORDINANCE NO. 83-1700-219 ADOPTED May 3, 1993 ---------------- ---------------------- AN ORDINANCE: GRANTING TO CABLEVISION OF MANASSAS PARK, INC., ITS SUCCESSORS AND ASSIGNS, THE NON-EXCLUSIVE FRANCHISE, RIGHT AND PRIVILEGE, UPON CERTAIN CONDITIONS, TO USE THE STREETS, ALLEYS AND OTHER PUBLIC PLACES OF THE CITY OF MANASSAS PARK, VIRGINIA, WITHIN ITS CORPORATE LIMITS, AS THE SAME NOW EXIST OR MAY BE HEREAFTER EXTENDED OR ALTERED, FOR THE PURPOSE OF PROVIDING A CABLE TELEVISION SERVICE AND SYSTEM WITHIN SAID CORPORATE LIMITS. ORDAINED by the Council of the City of Manassas Park, Virginia, as follows: SECTION I. The non-exclusive right is hereby granted to Cablevision of Manassas Park, Inc., hereinafter referred to as "Grantee," its successors and assigns, for the term and subject to the terms, provisions, conditions and limitations hereinafter stated, to use the streets, alleys and other public places of the City of Manassas Park, Virginia, hereinafter referred to as "City," and to acquire, erect, maintain and use, and if now erected or installed, to maintain and use posts, poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances, appurtenances and all other necessary apparatus in,, under, over and along the streets, alleys and public places of the City for the purpose of providing a cable television service and system within the corporate limits of the City as the same now exist or may be hereafter extended or altered. SECTION II. The Grantee shall have the non-exclusive right to use, maintain and operate, subject to the provisions, terms, conditions and limitations prescribed in this franchise 55 and subject to all the terms and provisions of the Cable Television Rules and Regulations, Chapter 7.5 of the City Code, and subject to the lawful exercise of the police power of the City, the posts, poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances, appurtenances and all other necessary apparatus erected, maintained and used in, under, over and along the streets, alleys and other public places of the City on the day this franchise becomes in force and effect for the purpose of so providing a cable television service and system. SECTION III. The Grantee shall have the non-exclusive right to erect, maintain and use such posts. poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances, appurtenances and all other necessary apparatus in, under, over and along the streets, alleys and other public places of the City at such locations as are reasonably suitable and convenient for the purpose of the Grantee and the City subject to the terms, provisions, conditions and limitations hereinafter stated and the lawful exercise of the police power of the City. SECTION IV. The City reserves and shall have the right to require the Grantee to obtain the specific permission of the City to locate, construct or erect any micro-wave tower, radio corelay installation, television relay installation and all other apparatus and appliances appurtenant thereto in, on, under, over, above and along the streets, alleys and other public places of the City and the City further reserves and shall have the right to attach reasonable conditions to the granting of any such 56 specific permission. The City reserves and hall have the right to require the Grantee to obtain the specific permission of the City to locate, construct or erect any of its property, including but not limited to posts, poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances and appurtenances that exceed in height or size that which are now in common use throughout the City in, on, under, over, above and along the streets, alleys and other public places of the City and the City further reserves and shall have the right to attach reasonable conditions to the granting of any such specific permission. SECTION V. Nothing contained in this franchise shall be construed to exempt the Grantee from any tax, levy or assessment which is now or which may be hereafter authorized by law. SECTION VI. The Grantee will maintain its property, including but not limited to posts, poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances and appurtenances, in good order and operating condition throughout the term of this franchise, and the Grantee by accepting this franchise agrees that the City or its successors has jurisdiction, to the full extent and in the manner now or hereafter provided by law, during the term of this franchise to require the Grantee to render efficient cable television service at reasonable rates, and that the Circuit Court of Prince William County or its successor has jurisdiction to enforce compliance with all of the terms, provisions, conditions and limitations of this franchise to the full extent 57 and in the manner now or hereafter provided by law during the term of this franchise. SECTION VII. The Grantee agrees and binds itself to indemnify, keep and hold the City and its officers, employees and agents free and harmless from liability on account of injury or damage to persons, firms or corporations or property growing out of the erection, installation, maintenance, repair, operation and use of any of the Grantee's property, including but not limited to posts, poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances and appurtenances on the streets, alleys and other public places of the City, and to maintain throughout the term of its franchise, liability insurance in companies acceptable to the City sufficient to cover such indemnification, all in accordance with the provisions of Sec. 7.5-47 of the City Code. SECTION VIII. The rights granted to the Grantee by this franchise may be exercised by any successor or successors, assignee or assignees of the Grantee with the consent of the City Council but such successor or successors, assignee or assignees shall be subject to and bound by all of the provisions, terms, conditions and limitations prescribed in Chapter 7.5 of the City Code and this franchise. SECTION IX. The rights and privileges granted by this franchise shall continue for a term of fifteen (15) years from the date of franchise agreement unless sooner voluntarily surrendered by the Grantee, with the consent of the City Council, or forfeited, or extended as provided by law. Upon the expiration of the term of this franchise or surrender or 58 forfeiture of the rights and privileges granted by this franchise, the Grantee, if required by the City Council, shall remove all of its property, including but not limited to posts, poles, wires, manholes, ducts, cables, conduits, electrical conductors, fixtures, appliances and appurtenances from the streets, alleys and other public places of the City, and shall repair, restore or replace any street, alley or other public place and any sewer or water, electric, fire alarm, civil defense system, police communication or traffic control facility or tree, or any part thereof, which may be damaged, disturbed or destroyed by or as a direct or indirect result of the removal of such property. SECTION X. This franchise and the rights and privileges granted thereby are not exclusive and nothing in this ordinance shall be construed to prevent a grant by the City of a similar franchise and rights and privileges to other persons or corporations. SECTION XI. This ordinance shall become effective when the Grantee (a) accepts this franchise and agrees to exercise the rights and privileges granted by this franchise and upon and subject to the terms, provisions, conditions and limitations set forth in this franchise, which acceptance and agreement shall be in writing and in accordance with the terms of Section 7.5-64 and (b) at the same time files with the City the performance bond and security deposit required by Sec. 7.5-47 and Sec. 7.5-48 of the City Code. Such written acceptance and bond shall be filed as provided in this section before the 3rd day of June, 1983. 59 EXHIBIT D, PAGE 1 [UNITED STATES FIDELITY GUARANTY COMPANY LOGO] PERFORMANCE BOND Approved by the American Institute of Architects A.I.A. Document No. A-311 (February 1970 Edition) BOND NUMBER -------------------------- KNOW ALL MEN BY THESE PRESENTS: That Cablevision of Manassas Park, Inc. ------------------------------------------------------------------------ as Principal, - ------------------------------------------------------------------ hereinafter called Contractor, and UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation organized and existing under the laws of the State of Maryland, Baltimore, Maryland, as Surety, hereinafter called Surety, are held and firmly bound unto City of Manassas Park, Va. --------------------------------------------------------------------- as Obligee, hereinafter called Owner, in the amount of One hundred thousand ---------------------- & 00/100------------------------------------Dollars ($ 100,000.00--), for - -------------------------------------------- -------------------- the payment whereof Contractor and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. WHEREAS, Contractor has by written agreement dated 4/15/83 19 , --------------- ---- entered into a contract with Owner for construction and operation of cable television system in accordance with drawings and specifications prepared by - -----------------------------------------------, which contract is by reference (Here insert full name, title and address) made a part hereof, and is hereinafter referred to as the Contract. NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION is such that, if Contractor shall promptly and faithfully perform said Contract, then this obligation shall be null and void; otherwise it shall remain in full force and effect. The Surety hereby waives notice of any alteration or extension of time made by the Owner. Whenever Contractor shall be, and declared by Owner to be in default under the Contract, the Owner having performed Owner's obligations thereunder, the Surety may promptly remedy the default, or shall promptly (1) Complete the Contract in accordance with its terms and conditions, or (2) Obtain a bid or bids for completing the Contract in accordance with its terms and conditions, and upon determination by Surety of the lowest responsible bidder, or, if the Owner elects, upon determination by the Owner and the Surety jointly of the lowest responsible bidder, arrange for a contract between such bidder and Owner, and make available as Work progresses (even though there should be a default or a succession of defaults under the contract or contracts of completion arranged under this paragraph) sufficient funds to pay the cost of completion less the balance of the contract price; but not exceeding, including other costs and damages for which the Surety may be liable hereunder, the amount set forth in the first paragraph hereof. The term "balance of the contract price," as used in this paragraph, shall mean the total amount payable by Owner to Contractor under the Contract and any amendments thereto, less the amount properly paid by Owner to Contractor. Any suit under this bond must be instituted before the expiration of two (2) years from the date on which final payment under the Contract falls due. No right of action shall accrue on this bond to or for the use of any person or corporation other than the Owner named herein or the heirs, executors, administrators or successors of the Owner. Signed and sealed this 15 day of April , 1983 --------------- ------------------------ ---- CABLEVISION OF MANASSAS PARK, INC. ---------------------------------- In the presence of: /s/ DANIEL E. SMITH By /s/ R. CALVIN SUTLIFF (Seal) - -------------------------------------------- ------------------------------- (Witness) Principal UNITED STATES FIDELITY AND GUARANTY COMPANY /s/ LENO E. KINGTON By /s/ YANCEY E. LOVELACE (Seal) - -------------------------------------------- ------------------------------- (Witness) YANCEY E. LOVELACE 60 EXHIBIT D, Page 2 CERTIFIED COPY GENERAL POWER OF ATTORNEY No. 90191 KNOW ALL MEN BY THESE PRESENTS That UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation organized and existing under the laws of the State of Maryland, and having its principal office at the City of Baltimore, in the State of Maryland, does hereby constitute and appoint Yancey Lovelace of the City of Brewton, State of Alabama, its true and lawful attorney in and for the State of Alabama for the following purposes, to wit: To sign its name as surety to, and to execute, seal and acknowledge any and all bonds, and to respectively do and perform any and all acts and things set forth in the resolution of the Board of Directors of the said UNITED STATES FIDELITY AND GUARANTY COMPANY, a certified copy of which is hereto annexed and made a part of this Power of Attorney; and the said UNITED STATES FIDELITY AND GUARANTY COMPANY, through us, its Board of Directors, hereby ratifies and confirms all and whatsoever the said Yancey Lovelace may lawfully do in the premises by virtue of these presents. In Witness Whereof, the said UNITED STATES FIDELITY AND GUARANTY COMPANY has caused this instrument to be sealed with its corporate seal, duly attested by the signatures of its Vice-President and Assistant Secretary, this 4th day of January, A.D. 1980 UNITED STATES FIDELITY AND GUARANTY COMPANY (Signed) By /s/ JOHN HAMILTON --------------------------------- Vice-President. (SEAL) (Signed) By /s/ WILLIAM J. PHELAN --------------------------------- Assistant Secretary. STATE OF MARYLAND, ss: BALTIMORE CITY, On this 4th day of January, A.D. 1980, before me personally came JOHN HAMILTON, Vice-President of the UNITED STATES FIDELITY AND GUARANTY COMPANY and WILLIAM J. PHELAN, Assistant Secretary of said Company, with both of whom I am personally acquainted, who being by me severally duly sworn, said that they, the said JOHN HAMILTON and WILLIAM J. PHELAN were respectively the Vice-President and the Assistant Secretary of the said UNITED STATES FIDELITY AND GUARANTY COMPANY, the corporation described in and which executed the foregoing Power of Attorney; that they each knew the seal of said corporation; that the seal affixed to said Power of Attorney was such corporate seal, that it was so fixed by order of the Board of Directors of said corporation, and that they signed their names thereto by like order as Vice-President and Assistant Secretary, respectively, of the Company. My commission expires the first day in July, A.D. 1982 (SEAL) (Signed) /s/ MARGARET M. HURST ---------------------------------- Notary Public. STATE OF MARYLAND, ss: BALTIMORE CITY, I, WILLIAM ALLEN, Clerk of the Superior Court of Baltimore City, which Court is a Court of Record, and has a seal, do hereby certify that MARGARET M. HURST, Esquire, before whom the annexed affidavits were made, and who has thereto subscribed his name, was at the time of so doing a Notary Public of the State of Maryland, in and for the City of Baltimore, duly commissioned and sworn and authorized by law to administer oaths and take acknowledgments, or proof of deeds to be recorede therein. I further certify that I am acquainted with the handwriting of the said Notary, and verily believe the signature to be his genuine signature. In Testimony Whereof, I hereto set my hand and affix the seal of the Superior Court of Baltimore City, the same being a Court of Record, this 4th day of January, A.D. 1980 (SEAL) (Signed) /s/ WILLIAM ALLEN ------------------------------------ Clerk of the Superior Court of Baltimore City. 61 INSURANCE BINDER THIS BINDER IS A TEMPORARY INSURANCE CONTRACT, SUBJECT TO THE CONDITIONS SHOWN ON THE REVERSE SIDE OF THIS FORM
- ----------------------------------------------------------------------------------------------------------------------------------- NAME AND ADDRESS OF AGENCY COMPANY Employers Reinsurance Escambia Insurance Agency, Inc. ----------------------------------------------------------------------- P.O. Box 366 Effective 12:01 a m 5-3 , 1983 Brewton, AL 36427 *Expires [X] 12:01 am [ ] Noon 5-3 , 1984 ----------------------------------------------------------------------- [ ] This binder is issued to extend coverage in the above named company per expiring policy # (except as noted below) - ----------------------------------------------------------------------------------------------------------------------------------- NAME AND MAILING ADDRESS OF INSURED Description of Operation/Vehicles/Property Cablevision of Manassas Park, Inc. etal *until repalced by issued policy 2367 49th St., N.W. Washington, D.C. 20007 ===================================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------- Type and Location of Property Coverage/Perils/Forms Amt of Insurance Ded. Coins. % - ---------------------------------------------------------------------------------------------------------------------------------- P R O P E R T Y - ---------------------------------------------------------------------------------------------------------------------------------- Type of Insurance Coverage/Forms Limits of Liability ------------------------------------------------- Each Occurrence Aggregate L ----------------------------------------------------------------------------------------------------------------------------- I A [ ] Scheduled Form [ ] Comprehensive Form Bodily Injury $ $ B [ ] Premises/Operations Property I [ ] Products/Completed Operations Damage $ $ L [ ] Contractual ------------------------------------------------- I [ ] Other (specify below) Bodily Injury & T [ ] Med. Pay. $ Per $ Per Property Damage Y [ ] Personal Injury Person Accident Combined $ $ ------------------------------------------------ [ ] A [ ] B [ ] C Personal Injury $ - --------------------------------------------------------------------------------------------------------------------------------- A Limits of Liability U ------------------------------------------------ T [ ] Liability [ ] Non-owned [ ] Hired Bodily Injury (Each Person) $ O [ ] Comprehensive-Deductible $ Bodily Injury (Each Accident) $ M [ ] Collision-Deductible $ ------------------------------------------------ O [ ] Medical Payments $ Property Damage $ B [ ] Uninsured Motorist $ ------------------------------------------------ I [ ] No Fault (specify): Bodily Injury & Property Damage L [ ] Other (specify): Combined $ E - ---------------------------------------------------------------------------------------------------------------------------------- [ ] WORKERS' COMPENSATION - Statutory Limits (specify states below) [ ] EMPLOYERS' LIABILITY - Limit $ - ---------------------------------------------------------------------------------------------------------------------------------- SPECIAL CONDITIONS/OTHER COVERAGES Libel & Allied Torts $1,000,000 Limit 1,000 Retention Annual Premium: $627 Minimum & Deposit ================================================================================================================================== NAME AND ADDRESS OF [ ] MORTGAGEE [ ] LOSS PAYEE [ ] ADD'L INSURED CRC INSURANCE WHOLESALERS P. O. BOX 7673A ------------------------ Birmingham, AL 35253 LOAN NUMBER /s/ [ILLEGIBLE] 5/3/83 -------------------------------------- ------ Signature of Authorized Representative Date - ------------------------------------------------------------------------
62 CERTIFICATE OF INSURANCE THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES LISTED BELOW. - ------------------------------------------------------------------------------- NAME AND ADDRESS OF AGENCY COMPANIES AFFORDING COVERAGES ------------------------------------------- Escambia Insurance Agency COMPANY P. O. Box 366 LETTER A Bituminous Casualty Corp. Newton, Al. 36427 ------------------------------------------- COMPANY LETTER B Employers Reinsurance - ------------------------------------------------------------------------------- NAME AND ADDRESS OF INSURED COMPANY LETTER C Cablevision of Manassas Park ------------------------------------------- c/o R. Calvin Sutliff COMPANY 2367 49th St. NW LETTER D Washington, D. C. 20007 ------------------------------------------- COMPANY LETTER E - ------------------------------------------------------------------------------- This is to certify that policies of insurance listed below have been issued to the insured named above and are in force at this time. Notwithstanding any requirement, term or condition of any contract or other document with respect to which this certificate may be issued or may pertain, the insurance afforded by the policies described herein is subject to all the terms, exclusions and conditions of such policies. - -------------------------------------------------------------------------------
LIMITS OF LIABILITY IN THOUSANDS (000) ----------------------------------------- COMPANY POLICY EACH LETTER TYPE OF INSURANCE POLICY NUMBER EXPIRATION DATE OCCURRENCE AGGREGATE - -------------------------------------------------------------------------------------------------------------------- GENERAL LIABILITY BODILY INJURY $ $ A [X] COMPREHENSIVE FORM Being Issued 4/15/84 [X] PREMISES-OPERATIONS PROPERTY DAMAGE $ $ [ ] EXPLOSION AND COLLAPSE HAZARD ----------------------------------------- [X] UNDERGROUND HAZARD BODILY INJURY AND [X] PRODUCTS/COMPLETED PROPERTY DAMAGE $ 500 $ 500 OPERATIONS HAZARD COMBINED [X] CONTRACTUAL INSURANCE ----------------------------------------- [X] BROAD FORM PROPERTY PERSONAL INJURY $ 500 DAMAGE [X] INDEPENDENT CONTRACTORS [X] PERSONAL INJURY - -------------------------------------------------------------------------------------------------------------------- AUTOMOBILE LIABILITY BODILY INJURY $ (EACH PERSON) A [ ] COMPREHENSIVE FORM Being Issued 4/15/84 [ ] OWNED BODILY INJURY $ [ ] HIRED (EACH ACCIDENT) [X] NON-OWNED ----------------------------------------- PROPERTY DAMAGE $ ----------------------------------------- BODILY INJURY AND PROPERTY DAMAGE $ 500 COMBINED - -------------------------------------------------------------------------------------------------------------------- EXCESS LIABILITY BODILY INJURY AND A [X] UMBRELLA FORM Being Issued 4/15/84 PROPERTY DAMAGE $ 2,000 $ 2,000 [ ] OTHER THAN COMBINED UMBRELLA FORM - -------------------------------------------------------------------------------------------------------------------- WORKERS' COMPENSATION STATUTORY A AND Being Issued 4/15/84 EMPLOYERS' LIABILITY $100, (EACH ACCIDENT) - -------------------------------------------------------------------------------------------------------------------- OTHER B Copyright Infringement Being Issued 5/3/84 $ 1,000, ==================================================================================================================== DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES 30 Days Notice of Cancellation or Non-Renewal Additional Insured: City of Manassas Park, Va. - --------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- CANCELLATION: Should any of the above described policies be cancelled before the expiration date thereof, the issuing company will endeavor to mail 30 days written notice to the below named certificate holder, but failure to mail such notice shall impose no obligation or liability of any kind upon the company. - --------------------------------------- DATE ISSUED: 6/3/83 NAME AND ADDRESS OF CERTIFICATE HOLDER: ------------------------ ESCAMBIA INSURANCE AGENCY, INC. City of Manassas Park Manassas Park, Virginia /s/ YANCEY E. LOVELACE --------------------------------- AUTHORIZED REPRESENTATIVE Yancey E. Lovelace - --------------------------------------- 63 PASSED THIS 3 day of May, 1983. /s/ ERNEST L. EVANS ----------------------------------- Ernest L. Evans, Mayor City of Manassas Park ATTEST: /s/ LANA A. CONNER - -------------------------------- Clerk of Council True Certified Copy /s/ LANA A. CONNER - -------------------------------- Lana A. Conner City Clerk 64 COPY OF RESOLUTION ------------------------ THAT WHEREAS, it is necessary for the effectual transaction of business that this Company appoint agents and attorneys with power and authority to act for it and in its name in States other than Maryland, and in the Territories of the United States and in the Provinces of the Dominion of Canada and in the Colony of Newfoundland. THEREFORE, BE IT RESOLVED, that this Company do, and it hereby does, authorize and empower its President or either of its Vice-Presidents in conjunction with its Secretary or one of its Assistant Secretaries, under its corporate seal, to appoint any person or persons as attorney or attorneys-in-fact, or agent or agents of said Company, in its name and as its act, to execute and deliver any and all contracts guaranteeing the fidelity of persons holding positions of public or private trust, guaranteeing the performances of contracts other than insurance policies and executing or guaranteeing bonds and undertakings, required or permitted in all actions or proceedings, or by law allowed, and ALSO, in its name and as its attorney or attorneys-in-fact, or agent or agents to execute and guarantee the conditions of any and all bonds, recognizances, obligations, stipulations, undertakings or anything in the nature of either of the same, which are or may by law, municipal or otherwise, or by any Statute of the United States or of any State or Territory of the United States or of the Provinces of the Dominion of Canada or of the Colony of Newfoundland, or by the rules, regulations, orders, customs, practice or discretion of any board, body, organization, office or officer, local, municipal or otherwise, be allowed, required or permitted to be executed, made, taken, given, tendered, accepted, filed or recorded for the security or protection of, by or for any person or persons, corporation, body, office, interest, municipality or other association or organization whatsoever, in any and all capacities whatsoever, conditioned for the doing or not doing of anything or any conditions which may be provided for in any such bond, recognizance, obligation, stipulation, or undertaking, or anything in the nature of either of the same. I, T. Hartley Marshall, an Assistant Secretary of the UNITED STATES FIDELITY AND GUARANTY COMPANY, do hereby certify that the foregoing is a full, true and correct copy of the original power of attorney given by said Company to Yancey Lovelace of Brewton, Alabama, authorizing and empowering him to sign bonds as therein set forth, which power of attorney has never been revoked and is still in full force and effect. And I do further certify that said Power of Attorney was given in pursuance of a resolution adopted at a regular meeting of the Board of Directors of said Company, duly called and held at the office of the Company in the City of Baltimore, on the 11th day of July, 1910, at which meeting a quorum of the Board of Directors was present, and that the foregoing is a true and correct copy of said resolution, and the whole thereof as recorded in the minutes of said meeting. IN TESTIMONY WHEREOF, I have hereunto set my hand and the seal of the UNITED STATES FIDELITY AND GUARANTY COMPANY on 4/15/83. /s/ T. HARTLEY MARSHALL --------------------------------- Assistant Secretary. EX-10.6.67 14 FRANCHISE PRINCE WILLIAM COUNTY, VA 1 EXHIBIT 10.6.67 PRINCE WILLIAM CO. CABLEVISION OF MANASSAS MOTION: READING October 7, 1986 Regular Meeting SECOND: PFITZNER ORD No. 86-143 RE: GRANT OF CABLE TELEVISION LICENSE -- CABLEVISION OF MANASSAS, LTD WHEREAS, by Ordinance effective January 1, 1986, all persons constructing, installing, maintaining, expanding, enlarging, or otherwise increasing or operating a cable television system through, on, over, or under any public way in an incorporated area of the County, beyond that which may already have existed on the effective date of the cable television ordinance, must apply for, be granted and accepted a license to do so; and WHEREAS, Cablevision of Manassas, Ltd. has submitted an application for a cable television license subject to the terms, conditions and provisions of Chapter 5.5 of the Prince William County Code; and WHEREAS, Cablevision of Manasses, Ltd. will provide service in the area of the County described in its application attached hereto and incorporated herein by reference; and WHEREAS, the Board of County Supervisors has conducted extensive inquiry into the award of a license to more than one operator to provide cable television services in Prince William County, and public hearing has been conducted on this ordinance and the question whether multiple providers of such service enhances the public welfare, with consideration given to economic effects, the impact on private property rights, public convenience, public need and potential benefit; and WHEREAS, public hearing was held on October 7, 1986, on the grant of a license to Cablevision of Manassas, Ltd. following notice thereof published in a newspaper of general circulation in Prince William County on September 23, 1986, and September 30, 1986; and WHEREAS, the Board of County Supervisors is advised that the application is complete and proper in all respects, and that a cable television license should be granted; NOW, THEREFORE, BE IT ORDAINED that the Board of County Supervisors does hereby determine that the best interests of Prince William County are served and enhanced by licensing more than one cable television service provided; and it is FURTHER ORDAINED, that Cablevision of Manassas, Ltd. is hereby granted a cable television license subject to the terms, conditions and provisions of Chapter 5.5 of the Prince William County Code to serve the area described herein as such service may be extended or expanded, such license to be effective, unless otherwise revoked or terminated, for 15 years from the date upon which Cablevision of Manassas, Ltd. files a formal instrument of license acceptance with the County; and 2 October 7, 1986 Regular Meeting ORD No. 86-143 Page Two BE IT STILL FURTHER ORDAINED that such license shall be transferrable without prior approval of the County, provided that any transferree shall amend the transferor's license application to reflect such information as to ownership and other particulars required under Chapter 5.5 of the Prince William County Code, sufficient to determine the character, ownership and business responsibility of the transferee in accordance with Section 5.5-4(4) and (5) of the Code of Prince William County. ATTACHMENT VOTE: Ayes: Guiffre, Kidwell, King, Pfitzner, Reading, Seefeldt Nays: None Absent from Vote: Jenkins Absent from Meeting: None For information: County Attorney CERTIFIED COPY /s/ CATHERINE CLEMEN ROLLINS --------------------------------- Clerk to the Board 3 Mr. Doug Bourne Cable Television Administrator Office of Consumer Affairs 15960 Cardinal Drive Woodbridge, Virginia 22191 RE: CABLEVISION OF MANASSAS LTD. GRANT OF CABLE TELEVISION LICENSE Dear Mr. Bourne: Pursuant to the provisions of sec.5.5-1 et seq. of the Prince William County Code's cable television ordinance, the Board of County Supervisors of Prince William County adopted an ordinance granting a nonexclusive license to operate a cable television system to Cablevision of Manassas Ltd., on October 7, 1986. This letter, filed within thirty days after the grant of such license, is for the purpose of formally accepting the license as required by sec.5.5-6(a) of the Prince William County Code. The undersigned, as owner/agent of the company, and authorized to act on its behalf, has carefully read and clearly understands the terms and conditions of sec.5.5-1 et seq. of the Prince William County Code and of the license ordinance adopted by the Board, and agrees to strictly comply with both their terms. The undersigned further acknowledges and concedes the validity of the terms and conditions of the cable television ordinance and of the license ordinance in their entirety. Notwithstanding the terms of the license ordinance, the company hereby acknowledges and concedes that it is at all times subject to the lawful exercise of the County's police power, and acknowledges the Board of County Supervisors' right to adopt such other ordinances or amendments as it deems necessary to protect the public health, safety and welfare. The undersigned fully understands that failure to comply with any section of the cable television ordinance or of the license ordinance may be grounds for revocation of the license. 4 Doug Bourne Page Two A certified check payable to the order of Prince William County in the amount of $1,000.00 is enclosed herewith as a nonrefundable license acceptance fee. Sincerely, CABLEVISION OF MANASSAS LTD. By: /s/ R. Calvin Sutliff --------------------------------- Position: General Partner --------------------------- Date: 10-16-96 ------------------------------- 5 [COUNTY OF PRINCE WILLIAM LETTERHEAD] October 29, 1986 TO: CASHIERS OFFICE, FINANCE DEPARTMENT FROM: DOUGLAS N. BOURNE, CABLE TV COORDINATOR I am enclosing a cashiers check in the amount of $1,000. This is Cablevision of Manassas LTD.'s payment, in full, of the acceptance fee for a cable tv license. It should be recorded and deposited in the County's General Fund. This check should be coded 120030-0390. If you should have any questions regarding this check, please do not hesitate to contact me. Enclosure DNB/lcw [COPY OF CASHIER'S CHECK] 6 PRINCE WILLIAM COUNTY FRANCHISE RECEIVED JUN 10 1985 MOTION: GUIFFRE June 4, 1985 Regular Meeting SECOND: READING Ord. No. 85-62 SUBJECT: GRANT OF CABLE TELEVISION LICENSE -- CABLEVISION OF MANASSAS PARK, INC. WHEREAS, by Ordinance effective January 1, 1985, all persons constructing, installing, maintaining, expanding, enlarging, or otherwise increasing or operating a cable television system through, on, over, or under any public way in an incorporated area of the County, beyond that which may already have existed on the effective date of the cable television ordinance, must apply for, be granted and accept a license to do so; and WHEREAS, Cablevision of Manassas Park, Inc. operated a cable television system prior to the effective date of the cable television ordinance and intends to extend service beyond that which existed on January 1, 1985; and WHEREAS, Cablevision of Manassas Park, Inc. has submitted an application for a cable television license subject to the terms, conditions and provisions of Chapter 5.5 of the Prince William County Code; and WHEREAS, Cablevision of Manassas Park, Inc. will provide service in the area of the County described in the exhibit attached hereto and incorporated herein by reference; and WHEREAS, the Board of County Supervisors has conducted extensive inquiry into the award of a license to more than one operator to provide cable television services in Prince William County, and public hearing has been conducted on this ordinance and the question whether multiple providers of such service enhances the public welfare, with consideration given to economic effects, the impact on private property rights, public convenience, public need and potential benefit; and WHEREAS, public hearing was held on June 4, 1985 on the grant of a license to Cablevision of Manassas Park, Inc., following notice thereof published in a newspaper of general circulation in Prince William County on May 21, 1985 and May 28, 1985; and WHEREAS, the Board of County Supervisors is advised that the application is complete and proper in all respects, and that a cable television license should be granted; NOW, THEREFORE, BE IT ORDAINED that the Board of County Supervisors does hereby determine that the best interests of Prince William County are served and enhanced by licensing more than one cable television service provider; and it is 7 June 4, 1985 Ord. No. 85-62 Page Two FURTHER ORDAINED, that Cablevision of Manassas Park, Inc. is hereby granted a cable television license subject to the terms, conditions and provisions of Chapter 5.5 of the Prince William County Code to serve the area described herein as such service may be extended or expanded, such license to be effective, unless otherwise revoked or terminated, for 15 years from the date upon which Cablevision of Manassas Park, Inc. files a formal instrument of license acceptance with the County; and BE IT STILL FURTHER ORDAINED that such license shall be transferrable without prior approval of the County, provided that any transferee shall amend the transferor's license application to reflect such information as to ownership and other particulars required under Chapter 5.5 of the Prince William County Code, sufficient to determine the character, ownership and business responsibility for the transferee in accordance with sec.5.5-4(4) and (5) of the Code of Prince William County. ATTACHMENT VOTE: Ayes: Guiffre, Jenkins, Kidwell, King, Pfitzner, Reading, Seefeldt Nays: None Absent from Vote: None Absent from Meeting: None FI: County Attorney Consumer Affairs Director CERTIFIED COPY: [ILLEGIBLE COPY] ------------------------- Clerk to the Board 8 [COUNTY OF PRINCE WILLIAM LETTERHEAD] June 10, 1985 TO: Cashiers Office, Finance Department FROM: Douglas N. Bourne, Cable TV Coordinator RE: Cable TV License Acceptance Fee Cablevision of Manassas Park, Inc. I am enclosing herewith a cashiers check in the amount of $1,000.00. This is Cablevision of Manassas Park, Inc.'s payment, in full, of the acceptance fee for a cable tv license. It should be recorded and deposited in the County's General Fund. This check should be coded 120030-0390. If you should have any questions regarding this check, please do not hesitate to call me. Enclosure DNB/lcw [COPY OF CASHIER'S CHECK] 9 [Cablevision of Manassas Park, Inc. Letterhead] Mr. Doug Bourne Cable Television Administrator Office of Consumer Affairs 15960 Cardinal Drive Woodbridge, Virginia 22191 Re: CABLEVISION OF MANASSAS PARK, INC. GRANT OF CABLE TELEVISION LICENSE Dear Mr. Bourne: Pursuant to the provisions of sec.5.5-1 et seq. of the Prince William County Code's cable television ordinance, the Board of County Supervisors of Prince William County adopted an ordinance granting a nonexclusive license to operate a cable television system to Cablevision of Manassas Park, Inc., on June 4, 1985. This letter, filed within thirty days after the grant of such license, is for the purpose of formally accepting the license as required by sec.5.5-6(a) of the Prince William County Code. The undersigned, as owner/agent of the company, and authorized to act on its behalf, has carefully read and clearly understands the terms and conditions of sec.5.5-1 et seq. of the Prince William County Code and of the license ordinance adopted by the Board, and agrees to strictly comply with both their terms. The undersigned further acknowledges and concedes the validity of the terms and conditions of the cable television ordinance and of the license ordinance in their entirety. Notwithstanding the terms of the license ordinance, the company hereby acknowledges and concedes that it is at all times subject to the lawful exercise of the County's police power, and acknowledges the Board of County Supervisors' right to adopt such other ordinances or amendments as it deems necessary to protect the public health, safety and welfare. The undersigned fully understands that failure to comply with any section of the cable television ordinance or of the license ordinance may be grounds for revocation of the license. A certified check payable to the order of Prince William County in the amount of $1,000.00 is enclosed herewith as a nonrefundable license acceptance fee. Sincerely, CABLEVISION OF MANASSAS PARK, INC. BY: [ILLEGIBLE] --------------------------------- POSITION: President --------------------------- 10 [COUNTY OF PRINCE WILLIAM LETTERHEAD] November 23, 1993 VIA CERTIFIED MAIL #P 260-353-661 Sam Eddy, General Manager Cablevision of Manassas 9540 Center Street Manassas, Virginia 22110 RE: Notification of customer service amendments/Prince William County Dear Mr. Eddy: On November 16, 1993 the Board of County Supervisors, during a public hearing session, passed proposed customer service amendments to the Prince William County Cable TV Ordinance. These amendments essentially incorporated those sections of the Federal Communications Commission's (FCC) Report and Order, released on April 7, 1993, implementing Section 8 of the Cable Television Consumer Protection Act of 1992 that addressed federal customer service standards. Paragraph (C) of the Report and Order establishes federal customer service standards. Paragraph (a) of the new rule provides that a franchising authority may enforce the federal standards; but in order to do so, the franchising authority must provide affected cable operators 90 days' written notice of its intent to enforce the standards. This letter constitutes Prince William County's notice of its intent to enforce the federal standards 11 Page Two November 23, 1993 which were adopted by the Board of Supervisors on November 16, 1993 by way of the customer service amendments to Article IV of the Prince William County Cable TV Ordinance. Therefore, the effective enforcement date is February 22, 1994. A copy of these amendments is attached for your review. Sincerely, /s/ DOUGLAS N. BOURNE Douglas N. Bourne Cable TV Coordinator cc: Jim Mullen, County Executive Susan Matthews, Public Information Officer Rob Dickerson, Assistant County Attorney Enclosure(s): As Stated 12 PROPOSED AMENDMENTS TO CHAPTER 5.5 Chapter 5.5 CABLE TELEVISION *** ARTICLE I. IN GENERAL *** Sec. 5.5-2. Definitions. As used in this chapter, the following words and phrases shall have the meanings herein specified, except where the context is clearly to the contrary. Consistent with context, words used in the plural contemplate and include the singular, and words used in the singular contemplate and include the plural. Context notwithstanding, the word "shall" is mandatory, never directory. Basic subscriber service shall means the distribution to subscribers of signals over a cable television system on all channels except: (1) Those for which a per-program of per-channel is made; (2) Those intended for reception by equipment other than a television broadcast receiver; (3) Two-way services; (4) Services, the delivery of which are regulated or pre-empted by the Federal Communications Commission; and (5) Emergency services. Board shall mean the board of county supervisors of Prince William County, Virginia. Cable televisions system shall mean a cable television system as defined by section 15.1-23.1, Virginia Code Annotated. County shall mean Prince William County, Virginia. County Executive shall mean the chief executive officer of the county, appointed by the board, or his designee so indicated in writing. Fair market value shall mean the price that property will command when sold by one who is under no need to sell, a willing seller, and bought by one who is under no need to buy, a willing buyer. Federal Communications Commission, shall mean the federal agency established under the Communications Act of 1934, as amended, or any successor agency. 13 2 Gross revenues shall mean any and all revenues derived from the operation of a cable television system in the county, including but not limited to monthly or periodic charges for service, installation fees and reconnect fees, revenues derived from per-program or per-channel charges, studio and equipment rentals, and subscriber and advertising revenues. License shall mean the nonexclusive right granted hereunder to construct, install, maintain, and operate a cable television system or systems in any unincorporated area of the county. It does not include any other license or permit for the privilege of conducting a business in the county, as may be required by other county ordinances. License ordinance shall mean an ordinance adopted pursuant to section 5.5-4 of this chapter, formally granting a license to construct, install, maintain, or operate a cable television system in the county. License service area shall mean the geographical area within the unincorporated area of the county for which a nonexclusive right has been granted hereunder to construct, install, maintain, and operate a cable television system. License shall mean a person granted a license hereunder. Normal Business Hours shall mean those hours during which most similar businesses in the community are open to serve customers. In all cases, normal business hours must include some evening hours at least one night per week and/or some weekend hours. Normal Operating Conditions shall mean those service conditions which are within the control of the cable operator. Those conditions which are not within the control of the cable operator include, but are not limited to, natural disasters, civil disturbances, power outages, telephone network outages, and severe or unusual weather conditions. Those conditions which are ordinarily within the control of the cable operator include, but are not limited to, special promotions, pay-per-view events, rate increases, regular peak or seasonal demand periods, and maintenance or upgrade of the cable television system. Person shall mean and include any individual, firm, partnership, cooperative, nonprofit membership corporation, joint venture, association, corporation, estate, trust, business trust, trustee in bankruptcy, receiver, auctioneer, syndicate, assignee, club, society, or any other group or combination acting as a unit. Public way shall mean any highway, street, road, alley, way, easement, right-of-way, place, or other right or interest in real property, belonging to any public body, including the county, the commonwealth, or any subdivision, agency, department, or authority of either. Service Interruption shall mean the loss of picture or sound on one or more cable channels. Subscriber shall mean any person who receives, or contracts with a licensee to receive, basic subscriber service, or one (1) or more of such other services as may be offered by the licensee's cable television system, or both. * * * 14 3 ARTICLE IV. CONSUMER PROTECTION AND SUBSCRIBER PRIVACY * * * Sec. 5.5-9. Maintenance; repairs. (a) The licensee shall establish maintenance service capability enabling the prompt location and correction of system malfunctions. The licensee shall maintain adequate records of all complaints and requests for repairs, and their resolution, which records shall be open for public inspection. (b) Under normal operating conditions, each of the following four standards will be met no less than ninety-five (95) percent of the time measured on a quarterly basis: (1) Standard installations will be performed within seven (7) business days after an order has been placed. Standard installations are those that are located up to 125 feet from the existing distribution system. (2) Excluding conditions beyond the control of the licensee, the licensee will begin working on service interruptions promptly and in no event later than 24 hours after the interruption becomes known. Licensee must begin actions to correct other service problems the next business day after notification of the service problem. (3) For all installations, service calls, and other installation activities, licensee shall provide its customer either a specific appointment time or, at maximum, a four-hour time block during business hours. Licensee may schedule service calls and other installation activities outside of normal business hours for the express convenience of the customer. (4) A licensee may not cancel an appointment with a customer after the close of business on the business day prior to the scheduled appointment. (c) If a representative of licensee is running late for an appointment with a customer and will not be able to keep the appointment as scheduled, the customer will be contacted. The appointment will be rescheduled, as necessary, at a time which is convenient for the customer. Sec. 5.5-10. Local office hours; telephone availability; complaints; notice of procedures. (a) The licensee shall maintain an office and bill payment location within the license service area, or in the Cities of Manassas or Manassas Park, which shall be open and accessible to the public during normal business hours. The licensee shall provide a local, toll-free or collect call telephone access line which will be available to its subscribers 24 hours a day, seven days a week for recording of subscriber complaints, including, but not limited to, billing errors, service disconnections, service interruptions, and equipment failure. Complaints other than those related to a system malfunction or service interruption addressed by section 5.5-9 shall be answered not later than the next business day after the complaint has been received, and corrective action shall be completed as soon as practical. Adequate records shall be made of all subscriber complaints, describing the nature of each complaint and showing when 15 4 and what corrective action was completed. Such records shall be available to the public or to representatives of the board, during normal business hours, and shall be retained in the licensee's files for not less than three (3) years. Annual summaries of complaints shall be filed with the office of consumer affairs, not later than June thirtieth of each year. (b) Unresolved complaints, if any, shall be reported to the office of consumer affairs, in writing, within thirty (30) days after the end of each calendar year quarter. The nature and number of any unresolved complaints shall be taken into account by the board in considering whether to renew or to revoke a license. (c) Each licensee shall, at any time of entering into an agreement to provide cable service of any kind, inform every subscriber of the provisions of this article. (d) Licensees serving more than one (1) license service area need provide a local office in only one (1) such area, or in either of the two (2) cities above. (e) Trained representatives of licensee will be available to respond to customer telephone inquiries during normal business hours. (f) After normal business hours, the telephone access line may be answered by a service or an automated response system, including an answering machine. Inquiries received after normal business hours must be responded to by a trained representative of licensee on the next business day. (g) Under normal operating conditions, telephone answer time by a representative of licensee, including wait time, shall not exceed thirty (30) seconds when the connection is made. If the call needs to be transferred, transfer time shall not exceed thirty (30) seconds. Under normal operating conditions, the customer will receive a busy signal less than three (3) percent of the time. These standards shall be met no less than ninety (90) percent of the time under normal operating conditions, measured on a quarterly basis. (h) The licensee will not be required to acquire equipment or perform surveys to measure compliance with the telephone answering standards of section 5.5-10(g) unless an historical record of complaints indicates a clear failure to comply. Section 5.5-11. Notification to subscribers: billing; refunds; and credits. (a) The licensee shall provide written information on each of the following areas at the time of installation of service, at least annually to all subscribers, and at any time upon request: (1) Products and services offered; (2) Prices and options for programming services and conditions of subscription to programming and other services: 16 5 (3) Installation and service maintenance policies; (4) Instructions on how to use the cable service; (5) Channel positions of programming carried on the system; and (6) Procedures which may be used to make complaints, requests for repairs and to contest alleged billing errors, including the address and telephone number of the county's cable office. (b) Customers will be notified of any changes in rates, programming services or channel positions as soon as possible through announcements on the cable system and in writing. Notice must be given to subscribers a minimum of thirty (30) days in advance of such changes if the change is within the control of the licensee. Increases made without such prior notice shall be void. In addition, the licensee shall notify subscribers thirty (30) days in advance of any significant changes in the other information required by Section 5.5-11(a). (c) Bills will be clear, concise and understandable. Bills must be fully itemized, with itemizations including, but not limited to, basic and premium service charges and equipment charges. Bills will also clearly delineate all activity during the billing period, including optional charges, rebates and credits. (d) In case of a billing dispute, the licensee must respond to a written complaint from a subscriber within thirty (30) days. (e) Refund checks will be issued promptly by licensee, but no later than either: (1) The customer's next billing cycle following resolution of the request or thirty (30) days, whichever is earlier; or (2) The return of the equipment supplied by the licensee if service is terminated. (f) Credits for service will be issued no later than the customer's next billing cycle following the determination that a credit is warranted. *** 17 PRINCE WILLIAM COUNTY CODE CONSUMER AFFAIRS AND CABLE TV 18 Chapter 5.5 CABLE TELEVISION* ART. I. IN GENERAL, SECTIONS 5.5-1--5.5-3 ART. II APPLICATION FOR LICENSE, SECTION 5.5-4 ART. III. GRANT OF LICENSE, SECTIONS 5.5-5--5.5-7 ART. IV. CONSUMER PROTECTION AND SUBSCRIBER PRIVACY, SECTIONS 5.5-8--5.5-15 ART. V. LICENSE FEE, SECTION 5.5-16 ART. VI. ADMINISTRATION AND ENFORCEMENT, SECTIONS 5.5-17--5.5-21 ART. VII. RENEWAL AND REVOCATION OF LICENSES, SECTIONS 5.5-22--5.5-24 ART. VIII. CREATION OF LICENSE SERVICE AREA, SECTION 5.5-25 ART. IX. MISCELLANEOUS, SECTIONS 5.5-26--5.5-28 ARTICLE I. IN GENERAL SEC. 5.5-1. SHORT TITLE; PURPOSE; AUTHORITY. (a) This chapter shall be known and may be cited as the "Prince William County Cable Television Ordinance." (b) This chapter is intended to provide for the licensing and regulation of one (1) or more cable television systems, and to impose a fee on the privilege of operating such system or systems, in the unincorporated area of Prince William County, Virginia. (c) This chapter is enacted pursuant to sections 15.1-23.1 and 15.1-512.1, Virginia Code Annotated. (No. 84-829, 10-23-84) SEC. 5.5-2. DEFINITIONS. As used in this chapter, the following words and phrases shall have the meanings herein specified, except where the context is clearly to the contrary. Consistent with context, words used in the plural contemplate and include the singular, and words used in the singular contemplate and include the plural. Context notwithstanding, the word "shall" is mandatory, never directory. Basic subscriber service shall mean the distribution to subscribers of signals over a cable television system on all channels except: (1) Those for which a per-program or per-channel charge is made; (2) Those intended for reception by equipment other than a television broadcast receiver; - --------------- *EDITOR'S NOTE--Res. No. 84-829, enacted Oct. 23, 1984, amended the Code by adding thereto a new Ch. 5.1, sec.sec. 5.1-1--5.1-28. In order to provide for the future addition of chapters, Ch. 5.1 was redesignated by the editor as Ch. 5.5, and the sections were also redesignated accordingly; otherwise, the chapter is included herein substantially as enacted. CROSS REFERENCES--Consumer protection, Ch. 6; emergency services, Ch. 7; licenses generally, Ch. 11; taxation, Ch. 26; telephones, Ch. 28 267 19 sec. 5.5-2 PRINCE WILLIAM COUNTY CODE (3) Two-way services; (4) Services, the delivery of which are regulated or pre-empted by the Federal Communications Commission; and (5) Emergency services. Board shall mean the board of county supervisors of Prince William County, Virginia. Cable televisions system shall mean a cable television system as defined by section 15.1-23.1, Virginia Code Annotated. County shall mean Prince William County, Virginia. County executive shall mean the chief executive officer of the county, appointed by the board, or his designee so indicated in writing. Fair market value shall mean the price that property will command when sold by one who is under no need to sell, a willing seller, and bought by one who is under no need to buy, a willing buyer. Federal Communications Commission shall mean the federal agency established under the Communications Act of 1934, as amended, or any successor agency. Gross revenues shall mean any and all revenues derived from the operation of a cable television system in the county, including but not limited to monthly or periodic charges for service, installation fees and reconnect fees, revenues derived from per-program or per-channel charges, studio and equipment rentals, and subscriber and advertising revenues. License shall mean the nonexclusive right granted hereunder to construct, install, maintain, and operate a cable television system or systems in any unincorporated area of the county. It does not include any other license or permit for the privilege of conducting a business in the county, as may be required by other county ordinances. License ordinance shall mean an ordinance adopted pursuant to section 5.5-4 of this chapter, formally granting a license to construct, install, maintain, or operate a cable television system in the county. License service area shall mean the geographical area within the unincorporated area of the county for which a nonexclusive right has been granted hereunder to construct, install, maintain, and operate a cable television system. Licensee shall mean a person granted license hereunder. Person shall mean and include any individual, firm, partnership, cooperative, nonprofit membership corporation, joint venture, association, corporation, estate, trust, business trust, trustee in bankruptcy, receiver, auctioneer, syndicate, assignee, club, society, or any other group or combination acting as a unit. Public way shall man any highway, street, road, alley, way, easement, right-of-way, place, or other right or interest in real property, belonging to any public body, including the county, the commonwealth, or any subdivision, agency, department, or authority of either. 268 20 CABLE TELEVISION sec. 5.5-4 Subscriber shall mean any person who receives, or contracts with a licensee to receive, basic subscriber service, or one (1) or more of such other services as may be offered by the licensee's cable television system, or both. (No. 84-829, 10-23-84; No. 86-123, 8-5-86) SEC. 5.5-3. REQUIREMENT OF LICENSE; PROHIBITION ON EXPANSION. (a) No person shall construct, install, maintain, expand, enlarge, or otherwise increase, or operate a cable television system through, on, over, or under any public way in the unincorporated area of the county without first having applied for, been granted, and accepted a license under the provisions hereof; provided, however, that any person operating a cable television system in the county on the effective date of this chapter may continue operating such existing system as it is then constituted, without further extension of service to any additional subscriber if such extension of service requires the crossing or use of any public way. (b) Notwithstanding the permission granted hereby to continue operation of existing systems, board of supervisors Resolution No. 83-696, dated August 2, 1983, is expressly repealed upon the adoption of this chapter, and the permission granted thereby for the use of the public ways of the county for the purpose of providing cable television service is revoked, except as to those portions of existing systems grandfathered under the provisions of subsection (a) of this section. (No. 84-829, 10-23-84) ARTICLE II. APPLICATION FOR LICENSE SEC. 5.5-4. APPLICATION; FEE; CONTENTS. (a) The board shall, by resolution, establish procedures and forms governing the invitation for, and submission, review, and evaluation of, written applications for a license. Each person applying for a license shall pay, by certified check to the order of "Prince William County," a nonrefundable fee in the amount of five hundred dollars ($500.00) to defray expenses incurred by the county in processing applications. In addition to such other information as the board may deem necessary or appropriate to include in the aforesaid resolution, all applications shall include, at a minimum, unless otherwise determined by the board: (1) A map delineating all areas to which cable service must be provided in accordance with the service extensions required by section 5.5-14 hereof. (2) A detailed statement of services proposed to be offered, including public, civic, or community services. (3) A schedule of initial rates, fees, and other charges to be established by the applicant. (4) Information sufficient to determine the character and business responsibility of the applicant, its financial, technical and other qualifications. (5) Full and true disclosure of the actual ownership of the applicant, including the identity of all principals and ultimate beneficial owners, however designated, specifi- 269 21 SEC. 5.5-4 PRINCE WILLIAM COUNTY CODE cally including all stockholders of corporations (nominal and beneficial) owning more than one (1) percent of the issued and outstanding stock, and all partners of any general or limited partnership. (b) Submitted applications shall be amended only with the consent of the board. (c) Applications shall be signed by the applicant, or by a duly authorized representative of the applicant, evidence of whose authority shall be supplied with the application. (No. 84-829, 10-23-84) ARTICLE III. GRANT OF LICENSE SEC. 5.5-5. FORM; NONEXCLUSIVE TERM. (a) The board may, by individual ordinance adopted for the purpose, grant one (1) or more nonexclusive licenses, subject to the terms, conditions, and other provisions of this chapter. Such licenses shall be for a term of fifteen (15) years beginning with the date a written instrument accepting the license is filed with the county pursuant to this chapter. (b) Nothing in this chapter shall be deemed, construed, or applied to require the board to grant any license. Any decision or decisions of the board concerning the granting, or the refusal to grant, one or more licenses shall be final. (c) The license ordinance shall constitute the license, and shall include at a minimum a description of the area or areas to be served, the terms of any agreements which may be made between the county and licensee beyond the requirements of this chapter, and such other terms and conditions as shall be lawful and appropriate. (No. 84-829, 10-23-84) SEC. 5.5-6. ACCEPTANCE OF LICENSE; POLICE POWER; FEE. (a) A license granted pursuant to this chapter shall not become effective unless and until accepted by written instrument filed with the county within thirty (30) days after the license ordinance has been adopted. Such instrument shall state that the licensee has carefully read and clearly understands the terms and conditions of this chapter and of the license ordinance, and agrees to strict compliance with both. By accepting a license, the licensee acknowledges and concedes the validity of the terms and conditions of this chapter and of the license ordinance in their entireties, at the time of adoption of the license ordinance. (b) By accepting a license granted pursuant to this chapter, the licensee acknowledges and concedes that, notwithstanding the terms of the license, it is at all times subject to the lawful exercise of the county's police power. The board hereby expressly reserves the right to adopt, in addition to this chapter and to the license ordinance, such other ordinances as it deems necessary to protect the public health, safety, or welfare, provided that such other ordinances are consistent with state and federal law and authorized by said police power. The board may adopt amendments to this chapter, provided that such amendments shall not deprive any licensee of rights which have vested during the license period. 270 22 CABLE TELEVISION SEC. 5.5-10 (c) Upon accepting a license, the licensee shall pay to the county a fee in an amount set by resolution of the board, not to exceed one thousand dollars ($1,000.00). Such fee shall be nonrefundable, and shall be paid by a certified check to the order of "PRINCE WILLIAM COUNTY." (NO. 84-829, 10-23-84) SEC. 5.5-7. FILING WITH COUNTY. Unless otherwise expressly provided by resolution of the board, all materials herein required to be filed with the county shall be filed at and with the office of consumer affairs. (No. 84-829, 10-23-84) ARTICLE IV. CONSUMER PROTECTION AND SUBSCRIBER PRIVACY SEC. 5.5-8. CONTINUOUS, EFFICIENT SERVICE; PRO RATA REFUNDS OR CREDITS. (a) The licensee shall provide continuous, efficient service, on a nondiscriminatory basis, in return for payment of its rates, fees, and other charges for service. Interruptions of service shall be for good cause only and for the shortest time possible. Planned interruptions of thirty (30) minutes or more shall be preceded by at least twenty-four (24) hours' advance notice to all subscribers and, to the extent feasible, shall occur during periods of minimum use of the cable television system. (b) In the event service to one-fourth ( 1/4) or more of the subscribers of any licensee is interrupted for more than twenty-four (24) consecutive hours, whether pre-planned or not, the licensee shall provide each such subscriber subject to such interruption with a pro rata credit or refund for the entire period of such interruption. (No. 84-829, 10-23-84) SEC. 5.5-9. MAINTENANCE; COMPLAINT ANSWERING SERVICE; REPAIRS. The licensee shall establish maintenance service capability enabling the prompt location and correction of system malfunctions, and shall make repairs promptly within twenty-four (24) hours of receipt of notification of the need therefor. The licensee shall provide a twenty-four-hour complaint answering service, and shall maintain adequate records of all complaints and requests for repairs, and their resolution, which records shall be open for public inspection. (No. 84-829, 10-23-84) SEC. 5.5-10. LOCAL OFFICE; COMPLAINTS; NOTICE OF PROCEDURES. (a) The licensee shall maintain an office within the license service area, or in the Cities of Manassas or Manassas Park, which shall be open and accessible to the public during normal business hours and which shall provide twenty-four-hour recording of subscriber complaints, including, but not limited to, billing errors, service disconnections, service loss, and equipment failure. Complaints other than those related to system malfunction addressed by section 5.5-9 shall be answered not later than the next business day after the complaint has been received, and corrective action shall be completed as soon as practical. Adequate records shall be made of all subscriber complaints, describing the nature of each complaint and showing 271 23 sec. 5.5-10 PRINCE WILLIAM COUNTY CODE when and what corrective action was completed. Such records shall be available to the public or to representatives of the board, during normal business hours, and shall be retained in the licensee's files for not less than three (3) years. Annual summaries of complaints shall be filed with the office of consumer affairs, not later than June thirtieth of each year. (b) Unresolved complaints, if any, shall be reported to the office of consumer affairs, in writing, within thirty (30) days after the end of each calendar year quarter. The nature and number of any unresolved complaints shall be taken into account by the board in considering whether to renew or to revoke a license. (c) Each license shall, at the time of entering into an agreement to provide cable service of any kind, inform every subscriber of the provisions of this article, and of the procedures which may be used to make complaints, requests for repairs, and to contest alleged billing errors. (d) Licensees serving more than one (1) license service area need provide a local office in only one (1) such area, or in either of the two (2) cities above. (No. 84-829, 10-23-84) SEC. 5.5-11. NOTICE OF RATE CHANGES. Licensees shall give not less than thirty (30) nor more than ninety (90) days' prior written notice to each subscriber of any prospective increase in any rate, fee, or charge subject to local regulation. Increases made without such prior notice shall be void. (No. 84-829, 10-23-84) SEC. 5.5-12. PROTECTION OF SUBSCRIBER INFORMATION. (A) (1) At the time of entering into an agreement to provide any cable service or other service to a subscriber, and at least once a year thereafter, a cable operator shall provide notice in the form of a separate, written statement to such subscriber which clearly and conspicuously informs the subscriber of: (a) The nature of personally identifiable information collected or to be collected with respect to the subscriber and the nature of the use of such information; (b) The nature, frequency, and purpose of any disclosure which may be made of such information, including an identification of the types of persons to whom the disclosure may be made; (c) The period during which such information will be maintained by the licensee; (d) The times and place at which the subscriber may have access to such information in accordance with subsection (d); and (e) The limitations provided by this section with respect to the collection and disclosure of information by a licensee and the right of the subscriber under subsections (f) and (h) to enforce such limitations. In the case of subscribers who have entered into such an agreement before the effective date of this chapter, such notice shall be provided within one hundred eighty (180) days of such date, and at least once a year thereafter. (2) For purposes of this section, the term "personally identifiable information" does not include any record of aggregate data which does not identify particular persons. 272 24 CABLE TELEVISION sec. 5.5-12 (B) (1) Except as provided in paragraph (B)(2) of this subsection, no licensee shall use the cable system to collect personally identifiable information concerning any subscriber, without the prior written or electronic consent of the subscriber concerned. (2) A licensee may use the cable system to collect such information in order to: (a) Obtain information necessary to render a cable service or other service provided by the licensee to the subscriber; or (b) Detect unauthorized reception of cable communications. (C) (1) Except as provided in paragraph (C)(2), a licensee shall not disclose personally identifiable information concerning any subscriber without the prior written or electronic consent of the subscriber concerned. (2) A licensee may disclose such information if the disclosure is: (a) Necessary to render, or conduct, a legitimate business activity related to, cable service or other service provided by the licensee to the subscriber; (b) Subject to subsection (h), made pursuant to a court order authorizing such disclosure, if the subscriber is notified of such order by the person to whom the order is directed; or (c) A disclosure of the names and addresses of subscribers to any cable service or other service, if: 1. The licensee has provided the subscriber the opportunity to prohibit or limit such disclosure, and 2. The disclosure does not reveal, directly or indirectly, the: a. Extent of any viewing or other use by the subscriber of a cable service or other service provided by the licensee; or b. The nature of any transaction made by the subscriber over the cable system of the licensee. (D) A cable subscriber shall be provided access to all personally identifiable information regarding that subscriber which is collected and maintained by a licensee. Such information shall be made available to the subscriber at reasonable times and at a convenient place designated by such licensee. A cable subscriber shall be provided reasonable opportunity to correct any error in such information. (E) A licensee shall destroy personally identifiable information if the information is no longer necessary for the purpose for which it was collected and there are no pending requests or orders for access to such information under subsection (D) or pursuant to a court order. (F) Any person aggrieved by any act of a licensee in violation of this section may bring a civil action in accordance with the provisions of section 631 of the Cable Franchise Policy and Communications Act of 1984. (G) Nothing in this chapter shall be construed to prohibit the board from enacting or enforcing laws consistent with federal law for the protection of subscriber privacy. 273 25 sec. 5.5-12 PRINCE WILLIAM COUNTY CODE (H) A governmental entity may obtain personally identifiable information concerning a cable subscriber pursuant to a court order only if, in the court proceeding relevant to such court order: (1) The entity offers clear and convincing evidence that the subject of the information is reasonably suspected of engaging in criminal activity and that the information sought would be material evidence in the case; and (2) The subject of the information is afforded the opportunity to appear and contest such entity's claim. (No. 84-829, 10-23-84) SEC. 5.5-13. CONSUMER ACCESS TO CABLE SERVICE. (a) The owner of any multiple-unit residential or commercial building or manufactured home park may not prevent or interfere with the construction or installation of facilities necessary for a cable system, consistent with this section, if cable service has been requested by a lessee or owner (including a person legally entitled to occupy a unit in a cooperative project) of a unit in such building or park, provided that the owner of such property is justly compensated for any physical invasion of his property to provide such service, in accordance with this section. (b) The county executive is authorized to prescribe regulations to implement this section which provide: (1) That the safety, functioning, and appearance of premises and convenience and safety of other persons shall not be adversely affected by the installation or construction of the facilities necessary for extension of a licensee's cable system; (2) That the reasonable and just cost of the installation, construction, operation, or removal of such facilities be borne by the licensee or subscriber, or a combination of both; (3) That the owner be justly compensated by the licensee for any taking or damage caused by the installation, construction, operation or removal of such facilities by the licensee; and (4) That methods be developed for determining just compensation under this section. In the event that a property owner declines to accept just compensation as established in accordance with regulations promulgated hereunder, and the county executive determines that it is necessary to effect the provisions of this section by other means, he is hereby authorized to initiate condemnation proceedings for the purposes hereof, and to request the county attorney to assist, or to retain qualified counsel approved by the county attorney for the purpose of conducting such proceedings, and to compensate such counsel from the proceeds of any license fee required under this chapter. (c) Any owner of such a multiple-unit building or park may not demand or accept payment from any licensee in exchange for permitting construction or installation necessary for a cable system on or within the premises in excess of any amount which constitutes just compensation as determined in accordance with regulations promulgated hereunder. 274 26 CABLE TELEVISION sec. 5.5-14 (d) In prescribing methods under subsection (b) for determining just compensation, the county executive shall give consideration to: (1) The extent to which the cable system facilities actually occupy the premises; (2) The actual long-term damage which the cable system facilitates may cost to the premises; (3) The extent to which the cable system facilities would interfere with the normal use and enjoyment of the premises; and (4) The enhancement in value of the premises resulting from the availability of cable service. (e) This section shall not apply to units which are customarily leased to a person for a period of less than thirty (30) days, or to units in a hospital. (f) This section shall not apply to any owner of a multiple unit residential or commercial building or manufactured home park who, in the opinion of the county executive, makes available to residents a diversity of information sources and services equivalent to those offered by the cable system authorized to provide cable service in the area in which such dwelling is located in accordance with regulations prescribed by the county executive. (No. 84-829, 10-23-84) SEC. 5.5-14. SERVICE EXTENSIONS REQUIRED. (a) Except as may be otherwise authorized in the license ordinance, each licensee shall provide service to all continuous and contiguous areas where the number of occupied dwelling units meets or exceeds a density of fifty (50) dwelling units per mile of cable, such areas to be measured linearly from any point of existing service. Such service shall be extended as soon as practicable after the adoption of this chapter, and in any event upon request of any person residing within any area where the aforesaid density conditions exist. (b) In areas not meeting the aforementioned density of fifty (50) occupied dwellings per mile in which mandatory extension of service is provided, upon the request of fifty (50) percent of the owners of occupied dwelling units per mile along the shortest and most direct feasible route from the nearest termination point of licensee's existing service to the dwelling of the last person requesting such nonmandatory extension, and within two hundred fifty (250) feet on either side of such route, the licensee shall extend service to any such subscriber(s) upon their payment to the licensee of an amount equal to the proportional cost of such extension by such route, determined by multiplying the cost of such extension by a fraction with the denominator of fifty (50) per mile and a numerator equal to fifty (50) per mile less the density of occupied dwelling units along the route of such extension, and occupied dwellings within five hundred (500) feet of such route. (c) Nothing contained in this section shall be construed to require licensees to overbuild in any portion of a service area, and either mandatory or nonmandatory service extensions required hereby shall be provided by the licensee whose existing service terminates nearest to any occupied dwelling subject to either extension requirement. Nor shall this section be construed to preclude any person or group of persons from requesting nonmandatory connec- 275 27 sec. 5.5-14 PRINCE WILLIAM COUNTY CODE tion from any other licensee in the service area other than the nearest licensee, nor be construed to preclude voluntary overbuild in any area for which a license is held. (No. 84-829, 10-23-84; No. 85-81, 7-9-85) SEC. 5.5-15. SYSTEM DESIGN; CAPACITY. The licensee shall design, install, construct, operate and maintain the cable television system: (1) So as to provide high quality service, to meet or exceed the technical standards set forth in rules and regulations promulgated by the Federal Communications Commission regarding cable television, as such rules and regulations may from time to time be amended, or, in the absence of such rules and regulations, or federal pre-emption of the area, in full compliance with such technical standards as the board may, by ordinance, adopt, and the board hereby expressly reserves the right to adopt such standards; (2) So that signals are at all times within the limitations imposed by the technical standards established, and delivered to subscribers without material degradation in quality; and (3) For an audio override of all channels simultaneously, for use in case of public emergencies, or disasters. (No. 84-829, 10-23-84) ARTICLE V. LICENSE FEE SEC. 5.5-16. REQUIRED. (a) The licensee shall pay to the county for the duration of the license a license fee which shall be the sum of one dollar ($1.00) per year per basic subscriber to that licensee's system; provided, that in no event may such fee exceed five (5) percent of the annual gross revenues of the licensee. The number of subscribers upon which such fee shall be calculated shall be the number of basic subscribers to each system as of December 31st of each year. The fee shall be payable to the county in a single payment made not later than January 31st of each year. In the event that any license is granted to any cable operator after January 1, 1985, but before December 31, 1985, the licensee shall pay such license fee based on the number of basic subscribers to its system on December 31, 1984, and such fee shall be paid to the county within thirty (30) days of the grant of the license. (b) Notwithstanding subsection (a) of this section, the board reserves the right, at any time during which any license is in effect, to establish a different license fee in an amount then to be established by ordinance of the board, such license fee not to exceed five (5) percent of the licensee's gross revenues. The board may establish a lesser percentage without prejudice to its right to change the fee at any time, provided that the said fee does not exceed the foregoing five (5) percent limitation. Any such fee based on a percentage shall be paid quarterly within thirty (30) days after the expiration of the calendar year quarters ending 276 28 CABLE TELEVISION sec. 5.5-17 March 31, June 30, September 30, and December 31, at which time the licensee shall file with the county a financial statement clearly showing the gross revenues received by the licensee during the preceding quarter. In the event any quarterly payment of the license fee is not made within thirty (30) days specified herein, interest shall be charged from the thirty-first day at the interest rate permitted on judgments by general law. (c) Acceptance of any fee payment shall not constitute, and shall not be deemed, construed, or applied as, an admission or an agreement by the county that the amount paid is in fact correct, or as a waiver of its rights, hereby expressly reserved to audit the licensee's financial records at any time, and to recompute the amount of fee payable hereunder. Any additional amounts found to be due as a result of such audit shall be paid, upon demand, together with interest at the rate permitted on judgments by general law computed from the date upon which the correct fee was due. (d) In the event a license is revoked prior to its expiration date, and in the event that a percentage license fee has been imposed, the licensee shall, within thirty (30) days of the date of revocation: (1) File with the county a financial statement clearly showing the gross revenues received by the licensee since the expiration of the immediately preceding calendar year quarter; and (2) Pay the license fee accrued as of the date of revocation. (e) Nothing in this section shall be deemed construed, or applied to exempt the licensee from the payment of any taxes, fees, or charges lawfully imposed. (No. 84-829, 10-23-84) ARTICLE VI. ADMINISTRATION AND ENFORCEMENT SEC. 5.5-17. BOOKS AND RECORDS. (a) The licensee shall keep and maintain such books and records of its operations within the county as may be specified by the county executive, which he deems reasonably necessary to enable the county to properly determine the amount of any license fee due to it, and to otherwise enforce the provisions of this chapter. The licensee shall retain such books and records, in any reasonable form, for not less than five (5) years. The county shall have the right to extend the retention period through the term of any renewed license, and shall have the right to inspect, copy, or audit the licensee's books and records at any reasonable time, upon twenty-four (24) hours' written notice to the licensee. (b) At the request of the county executive, within one hundred twenty (120) days following the conclusion of its fiscal year, the licensee shall, at its sole cost and expense, file with the county its financial statements for that year, examined and reported on by an independent public accountant. The licensee shall advise the office of consumer affairs of the period of its fiscal year. 277 29 sec. 5.5-18 PRINCE WILLIAM COUNTY CODE SEC. 5.5-18. INSURANCE. (a) Not later than thirty (30) days after accepting a license, and at all times during the term of the license, the license shall obtain, pay all premiums for, and file with the county executive written evidence of payment of premiums for and executed duplicate copies of the following: (1) A general comprehensive public liability insurance policy indemnifying, defending, and holding harmless the county, its officers, boards, commissions, agents, or employees from any and all claims by any person whatsoever on account of injury to or death of a person or persons caused by the operations of the licensee under the license herein granted, or alleged to have been so caused, with a minimum liability of one million dollars ($1,000,000.00) for personal injury or death of all persons so injured or killed in any one (1) occurrence. (2) A property damage insurance policy indemnifying, defending, and holding harmless the county, its officers, boards, commissions, agents, or employees from any and all claims by any person whatsoever for property damage caused by the operations of the licensee under the license herein granted, or alleged to have been so caused, with a minimum liability of one million dollars ($1,000,000.00) for damage to such property in any one occurrence. (b) Each of the foregoing insurance policies shall be in a form acceptable to the county and each shall require thirty (30) calendar days' notice of any cancellations to both the county and the licensee. Within thirty (30) days following receipt by the county or licensee of any cancellation notice, the licensee shall obtain, pay all premiums for, and file with the county written evidence of payment of premiums for and executed duplicate copies of a replacement policy in the same minimum amount as the canceled policy. (No. 84-829, 10-23-84) SEC. 5.5-19. INDEMNITY. (a) The licensee shall, at its sole cost and expense, indemnify, defend, and hold harmless the county, its officials, boards, commissions, agents, and employees against any and all claims, suits, causes of action, proceedings, and judgments for damages or relief, of any kind, arising out of: (1) The grant of a license to the licensee of the licensee's acceptance thereof: (2) The operations of the licensee under such license, specifically including antitrust actions under state or federal law. Indemnified expenses shall include, but not be limited to, all out-of-pocket expenses, court costs, attorneys' fees, and the reasonable value of any services rendered by county employees. (b) The foregoing indemnity is conditioned upon the county's giving the licensee prompt notice of the making of any claim or the commencement of any suit, action, or other proceeding covered by this section. Nothing in this section shall be deemed, construed, or applied to prevent the county from cooperating with the licensee and participating in the defense of any litigation by its own counsel at its sole cost and expense. (No. 84-829, 10-23-84) 278 30 CABLE TELEVISION sec. 5.5-22 SEC. 5.5-20. FAILURE TO ENFORCE LICENSE. The licensee shall not be excused from complying with any of the terms and conditions of this chapter or of the license ordinance by any delay or failure of the county, upon any one (1) or more occasions, to insist upon the licensee's performance or to seek the licensee's compliance with any one (1) or more of such terms or conditions. (No. 84-829, 10-23-84) SEC. 5.5-21. ADMINISTRATION AND ENFORCEMENT RESPONSIBILITIES. (a) The administration and enforcement of this chapter and any license granted and accepted pursuant to this chapter shall be vested in the office of consumer affairs, under the supervision and control of the county executive. (b) The county executive is hereby authorized to promulgate such rules, regulations, and orders as he shall deem necessary and appropriate to enforce, administer, and interpret, this chapter; provided that he shall cause reasonable notice of the proposed adoption of any rules or regulations to be published in a newspaper or general circulation in the county, and shall conduct at least one (1) public hearing on the adoption thereof. The county executive may not delegate this responsibility. (c) The county executive may enforce this chapter, the terms and conditions of any license, and any rules, regulations, or orders issued in the interpretation and administration thereof, by any appropriate action at law or cause in chancery. The county attorney is authorized to file and prosecute such proceedings in the name of the board, upon the written request of the county executive. This authority may not be delegated by the county executive. (No. 84-829, 10-23-84) ARTICLE VII. RENEWAL AND REVOCATION OF LICENSES SEC. 5.5-22. RENEWAL OF LICENSES. (A) Licenses may be renewed in accordance with this section, and shall terminate unless so renewed. (B) During the six-month period which begins with the thirty-sixth month before license expiration, the board may, on its own initiative, and shall upon application of the licensee, commence proceedings for the purpose of: (1) Identifying the future cable-related community needs and interests of the county; and (2) Reviewing the performance of the licensee under the license during the then-current license term. (C) (1) Upon completion of a proceeding under subsection (B), above, a licensee seeking renewal of a license may, on its own initiative or at the request of the board, submit a proposal for renewal thereof. (2) Subject to the applicable provisions of federal law and regulation, any such proposal shall contain such material as the board may require, including proposals for an upgrade of the cable system. 279 31 sec. 5.5-22 PRINCE WILLIAM COUNTY CODE (3) The board may establish a date by which such proposals shall be submitted. (D)(1) Upon submittal by a licensee of a proposal for renewal of a license, the board shall provide prompt public notice of such proposal and, during the four-month period which begins on the completion of any proceedings under subsection (B), either renew the license or issue a preliminary assessment that the license should not be renewed, and at the request of the operator, or on its own initiative, commence an administrative proceeding, after providing prompt public notice of such proceeding in accordance with paragraph (D)(2) to consider whether: (a) The licensee has substantially complied with the material terms of the existing license and with the applicable law; (b) The quality of the licensee's service, including signal quality, response to consumer complaints, and billing practices, but without regard to the mix, quality, or level of cable services or other services provided over the system, has been reasonable in light of community needs; (c) The license has the financial, legal and technical ability to provide the services, facilities, and equipment as set forth in the licensee's proposal; and (d) The licensee's proposal is reasonable to meet the future cable-related community needs and interests, taking into account the costs of meeting such needs and interests. (2) In any proceeding under paragraph (D)(1), the licensee shall be afforded adequate notice, and both the licensee and the board, or its designee, shall be afforded fair opportunity for full participation therein, including the right to introduce evidence (including evidence related to issues raised in the proceedings under subsection (b)), to require the production of evidence, and to question witnesses. A transcript shall be made of any such proceeding. (3) At the completion of a proceeding under this subsection, the board shall issue a written decision granting or denying the proposal for renewal based upon the record of such proceeding, and transmit a copy of such decision to the licensee. Such decision shall state the reasons therefor. (E) Any denial of a proposal for renewal shall be based on one or more adverse findings made with respect to the factors described in subparagraphs (a) through (d) of subsection (D)(1), pursuant to and based upon the record of the proceeding under subsection (D). The board may not base a denial of renewal on a failure to substantially comply with the material terms of the license under subsection (D)(1)(a) or on events considered under subsection (D)(1)(b) in any case in which a violation of the license or the events considered under subsection (D)(1)(b) occur after the effective date of the Cable Franchise Policy and Communications Act of 1984, unless the board has provided the licensee with notice and the opportunity to cure, or in any case in which it is documented that the board has waived its right to object, or has effectively acquiesced. (F) Any licensee whose proposal for renewal has been denied by final decision of the board made pursuant to this section, or has been adversely affected by a failure of the board to act in accordance with the procedural requirements of this section, may appeal such final 280 32 CABLE TELEVISION sec. 5.5-23 decision or failure pursuant to the provisions of sections 626 and 636 of the Cable Franchise Policy and Communications Act of 1984. (G) Notwithstanding the provisions of subsections (A) through (F) of this section, a licensee may submit a proposal for renewal of a license at any time, and the board may grant or deny such proposal at any time (including after proceedings pursuant to this section have commenced). The provisions of subsections (A) through (F) shall not apply to a decision to grant or deny a proposal under this section. The denial of a renewal under this subsection shall not affect on a renewal proposal that is submitted in accordance with subsections (A) through (F). (No. 84-829, 10-23-94) SEC. 5.5-23. REVOCATION OF LICENSE. (a) In addition to other rights and powers provided by this chapter, or general law, the county hereby expressly reserves the right to revoke any license granted under this chapter on any one (1) or more of the following grounds: (1) The licensee's material misrepresentation of fact in an application submitted pursuant to this chapter. (2) The licensee's willful or negligent failure or refusal to construct, install, maintain, or operate its cable television system in compliance with any term or condition of this chapter or of the license ordinance. (3) The licensee's insolvency, or its seeking relief under the bankruptcy laws or having been adjudged bankrupt. (4) Foreclosure or other judicial sale of all or a substantial part of licensee's cable television system, or (5) The licensee's repeated or substantial violation of any provision of the Virginia Consumer Protection Act of 1977, as amended. (6) The licensee's repeated failure to provide efficient, continuous service, or to maintain the system in good repair, or to satisfactorily resolve bona fide subscriber complaints. (b) The board may revoke a license pursuant to this section, by ordinance, only after it has given the licensee notice of its intention to adopt such an ordinance and the grounds therefor, and has afforded the licensee a reasonable opportunity to prove in a hearing before the board that the proposed grounds for revocation never existed or do not warrant revocation. The board shall give at least the same notice of such hearing as required for the adoption of ordinances. (c) A license shall not be revoked pursuant to this section for any act or omission beyond the licensee's control; provided, however, that an act or omission shall not be deemed or construed to be beyond the licensee's control because of financial difficulties of any sort. (d) In the event that a license is revoked by the board, the county shall have the option to acquire the assets of the licensee's cable television at their then fair market value, or to select a successor licensee, consistent with the provisions of this chapter, and to permit such 281 33 sec. 5.5-23 PRINCE WILLIAM COUNTY CODE successor to acquire said assets at their then fair market value. Such option must be exercised within one (1) year of the date of revocation. (e) In the event that a license is revoked by the board, and until such time as the licensee transfer to the county or to a successor licensee possession and title to the assets of its cable television system, the licensee shall, as trustee for its successor in interest, continue to operate the cable television system under the terms and conditions of this chapter and of the license ordinance. During such interim period, the licensee shall not make any material administrative or operational change that would tend to: (1) Degrade the quality of service to subscribers; (2) Decrease income; or (3) Materially increase expenses without the express permission, in writing, of the county. For its management services during this period of trusteeship, the licensee shall be entitled to receive, as compensation, the net profit generated from the operation of its cable television system during such period. Such management services shall not be continued without the licensee's consent for more than twelve (12) months. (No. 84-829, 10-23-84) SEC. 5.5-24. REMOVAL OF MATERIALS UPON TERMINATION OF LICENSE. In the event a license is revoked, or otherwise terminated for any lawful reason, the licensee shall, if the system is not sold to a successor licensee, or acquired by the board within the period for exercise of its option to acquire or after said option shall have been declined, remove all supporting structures, poles, transmission and distribution systems, and other appurtenances, owned by it, from all public ways in, over, under, through, and along which installed, and restore such areas to their original condition. If not done within six (6) months from notice by the board to restore, such property shall be deemed abandoned. (No. 84-829, 10-23-84) ARTICLE VII. CREATION OF LICENSE SERVICE AREAS SEC. 5.5-25. LICENSE SERVICE AREAS. The board may, by ordinance, establish one or more license service areas within which it may grant licenses as provided in this chapter. Unless and until the board determines to create other license service areas, the entire geographical area of Prince William County shall constitute the license service area for purposes of this chapter. (No. 84-829, 10-23-84) ARTICLE IX. MISCELLANEOUS SEC. 5.5-26. TIME OF THE ESSENCE. Whenever this chapter or the license ordinance specified any time for any act to be performed by or on the behalf of a licensee, such time shall be deemed to be of the essence and 282 34 CABLE TELEVISION SEC. 5.5-28 the licensee's failure to perform within the time specified shall, in all cases, be sufficient grounds for the county to invoke the remedies available under the terms and conditions of this chapter and of the license ordinance. (No. 84-829, 10-23-84) SEC. 5.5-27. SEVERABILITY. If any provision of this chapter or of the license ordinance is held invalid or unconstitutional by any court or administrative agency of competent jurisdiction, such holding shall not affect the validity of the remaining provisions thereof. (No. 84-829, 10-23-84) SEC. 5.5-28. EFFECT OF STATE OR FEDERAL REGULATION OR LAW. The provisions of this chapter, any resolution adopted by the board hereunder, and any license ordinance or agreement entered into shall be deemed amended pro tanto to comply with any requirement of state or federal law or regulation which is applicable thereto, which has been, or shall be adopted, and which is inconsistent with provisions of this chapter, and this chapter shall be deemed to include mandatory and self-effectuating provisions of such law or regulation. Nothing shall preclude the board from adopting express amendments to this chapter, and any resolution, other ordinance, or agreement to conform local law, regulation, and agreements to such federal or state law or regulation. (No. 84-829, 10-23-84) 283 EX-21 15 LIST OF SUBSIDIARIES 1 EXHIBIT 21 JONES INTERCABLE, INC. LIST OF SUBSIDIARIES Evergreen Intercable, Inc. International Aviation, Ltd. Jones Cable Corporation Jones Cable Holdings, Inc. Jones Communications of Colorado, Inc. Jones Communications of Virginia, Inc. Jones Electronic Manufacturing Services, Inc. Jones Futurex, Inc. Jones Galactic Radio, Inc. Jones Galactic Radio Partners, Inc. The Jones Group, Ltd. Jones Intercable Funds, Inc. Jones Intercable of Ft. Myers, Inc. Jones Intercable of Hawaii, Inc. Jones Intercable of Leeds, Inc. Jones Intercable of San Diego, Inc. Jones Intercable of South Hertfordshire, Inc. Jones of Wisconsin, Inc. Jones Panorama Properties, Inc. Jones Programming Services, Inc. Jones Satellite Networks, Inc. Jones Satellite Programming, Inc. Jones Spacelink Acquisition Corporation Jones Spacelink Cable Corporation Jones Spacelink Management, Inc. Jones Spacelink Opportunities, Inc. Jones Spacelink Spanish Investments, Inc. Jones Telecommunications of Virginia, Inc. Jones Tri-City Intercable, Inc. Jones U.K. Holdings, Inc. Saturn Cable T.V., Inc. EX-23 16 CONSENT OF ARTHUR ANDERSEN 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report included in this Form 10-K into the Company's previously filed Registration Statements on Form S-3, File Nos. 33-62537 and 33-62539 and on Form S-8, File Nos. 33-3087, 33-25577, 33-54596 and 33-52813. ARTHUR ANDERSEN LLP Denver, Colorado, March 13, 1996 EX-27 17 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 12,084 0 19,332 1,056 0 0 475,436 (171,948) 860,499 0 492,714 0 0 313 292,482 860,499 0 188,838 0 174,109 (13,799) 0 49,552 (21,024) 0 (21,024) 0 (692) 0 (21,716) (.69) 0
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