-----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, F3ITXqBoAkxVy+s9du9pQSmZmeNS3/FlLcb9BD5ETFDqAYZSMmgn2yfBcJpNV1fZ n1T/CG9cXwXI59QwzOHDvg== 0000912057-01-530164.txt : 20010827 0000912057-01-530164.hdr.sgml : 20010827 ACCESSION NUMBER: 0000912057-01-530164 CONFORMED SUBMISSION TYPE: PRER14A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20010824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JONES PROGRAMMING PARTNERS 1-A LTD CENTRAL INDEX KEY: 0000873800 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 841088820 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRER14A SEC ACT: 1934 Act SEC FILE NUMBER: 033-21970-02 FILM NUMBER: 1722696 BUSINESS ADDRESS: STREET 1: 9697 E MINERAL AVE STREET 2: P O BOX 3309 CITY: ENGLEWOOD STATE: CO ZIP: 80155 BUSINESS PHONE: 3037923111 MAIL ADDRESS: STREET 1: C/O JONES INTERCABLE INC STREET 2: 9697 E MINERAL AVE PO BOX 3309 CITY: ENGLEWOOD STATE: CO ZIP: 80155-3309 PRER14A 1 a2057914zprer14a.txt PRER14A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 JONES PROGRAMMING PARTNERS 1-A, LTD. (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) - -------------------------------------------------------------------------------- Payment of Filing Fee (Check the appropriate box): [ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: LIMITED PARTNERSHIP INTERESTS ---------------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: 12,743 ---------------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ESTIMATED VALUE OF ASSETS TO BE SOLD IS BASED UPON THE DISCOUNTED PRESENT VALUE OF THE FILM RIGHTS OF $945,000. ---------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: $945,000 ---------------------------------------------------------------------- 5) Total fee paid: $189.00 ---------------------------------------------------------------------- [X] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: Page 1 REVISED PRELIMINARY COPY JONES PROGRAMMING PARTNERS 1-A, LTD. 9697 E. MINERAL AVENUE ENGLEWOOD, COLORADO 80112 (303) 792-3111 NOTICE OF SPECIAL MEETING OF THE LIMITED PARTNERS OF JONES PROGRAMMING PARTNERS 1-A, LTD. To the Limited Partners of Jones Programming Partners 1-A, Ltd.: As your general partner, Jones Entertainment Group, Ltd. (the "General Partner") believes that it is time to sell all the assets and to dissolve your partnership, Jones Programming Partners 1-A, Ltd. (the "Partnership"). Accordingly, a special meeting of the limited partners of your Partnership is to be held at the corporate offices of the General Partner, 9697 E. Mineral Avenue, Englewood, Colorado, on _________, ________, 2001, at 9:30 a.m., Mountain Time, for the purpose of obtaining limited partner approval for the sale to an unaffiliated and as yet unidentified, third party or parties, of the assets of the Partnership consisting of various rights to original programming entitled "The Story Lady," "The Little Kidnappers" and "Curacao" (collectively, the "Film Rights"), followed by the dissolution of the Partnership. If the limited partners approve the proposed sale of the Film Rights and if the Film Rights are sold, the net sale proceeds, if any, will be distributed by the Partnership to the partners, including the General Partner which has a one percent interest. Thereafter, your Partnership will be dissolved. No date for the sale of the Film Rights or the dissolution of the Partnership has been determined. The proposal covers the sale of the Film Rights and the dissolution of your Partnership (the "Proposal"), and a vote in favor of the Proposal will constitute a vote in favor of each of these matters. Only limited partners of record at the close of business on _______, 2001 will be entitled to notice of and to vote at the meeting. It is important that all limited partners participate. The Proposal will be adopted only if approved by the holders of a majority of the limited partnership interests. Each limited partnership interest entitles the holder thereof to one vote on the Proposal. Abstentions and non-votes will be treated as votes against the Proposal. A properly executed proxy card returned to the General Partner on which a limited partner does not mark a vote will be counted as a vote in favor of the Proposal. Because limited partners do not have dissenters' or appraisal rights in connection with the proposed sale of the Film Rights, if the holders of a majority of the limited partnership interests approve the Proposal, all partners, including the General Partner, will receive a distribution of the net sale proceeds, if any, in accordance with the Page 2 procedures proscribed by the limited partnership agreement regardless of how or whether they vote on the Proposal. Also included in this package is the most recent financial and other information prepared regarding your Partnership. Jones Entertainment Group, Ltd., as General Partner of your Partnership, urges you to sign and return the enclosed proxy card as promptly as possible in the enclosed envelope -- whether or not you plan to attend the meeting. If you do attend the meeting, you may withdraw your proxy at that time. JONES ENTERTAINMENT GROUP, LTD. General Partner ------------------------------------- Lorri Ellis Secretary __________, 2001 Page 3 REVISED PRELIMINARY COPY JONES PROGRAMMING PARTNERS 1-A, LTD. 9697 E. MINERAL AVENUE ENGLEWOOD, COLORADO 80112 (303) 792-3111 PROXY STATEMENT SPECIAL MEETING OF THE LIMITED PARTNERS OF JONES PROGRAMMING PARTNERS 1-A, LTD. This Proxy Statement and the accompanying Proxy are being furnished for use at the Special Meeting of the limited partners of Jones Programming Partners 1-A, Ltd., a Colorado limited partnership (the "Partnership"), by Jones Entertainment Group, Ltd., the General Partner of the Partnership (the "General Partner"), on behalf of the Partnership, for the purpose of obtaining limited partner approval of the sale of the Partnership's assets, consisting of various rights to original programming entitled "The Story Lady," "The Little Kidnappers" and "Curacao" (collectively, the "Film Rights"), followed by dissolution of the Partnership (collectively, the "Proposal"). THE GENERAL PARTNER HAS APPROVED THE TRANSACTIONS CONTEMPLATED BY THE PROPOSAL AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. The Special Meeting will be held on ____, _______, 2001, at 9:30 a.m., Mountain Time, at the corporate offices of the General Partner located at 9697 E. Mineral Avenue, Englewood, Colorado 80112. Proxies in the form enclosed, properly executed and duly returned, will be voted in accordance with the instructions thereon. Limited partners are urged to sign and return the enclosed proxy card as promptly as possible. Proxies cannot be revoked except by delivery of a proxy dated as of a later date, by voting in person at the Special Meeting, or by giving written or oral notice of revocation to the Secretary of the General Partner. Officers and other employees of the General Partner may, on behalf of the Partnership, solicit proxies by mail, by fax, by telephone or by personal interview. The General Partner may adjourn the Special Meeting, from time to time, and continue to solicit proxies if the holders of a majority of the limited partnership interests have not voted on the Proposal. If the General Partner adjourns the meeting, the limited partners will be informed by mail of the reason for the adjournment and when the meeting will be resumed. The cost of the proxy solicitation will be paid by the Partnership. See "Voting on the Proposal." The Partnership has only one class of limited partners and no limited partner has a right of priority over any other limited partner. The participation of the limited partners is divided into limited partnership interests and each limited partner owns one limited partnership interest Page 4 for each $500 of capital contributed to the Partnership. The General Partner and its affiliates do not own any limited partnership interests. THE PROPOSAL IS SUBJECT TO NUMEROUS RISK AND OTHER FACTORS. SEE "RISK FACTORS" FOR A MORE COMPLETE DISCUSSION OF RISK FACTORS THAT SHOULD BE CONSIDERED BY LIMITED PARTNERS REGARDING THE PROPOSAL. THE TRANSACTIONS DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR THE MERITS OF SUCH TRANSACTIONS NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. The approximate date on which this Proxy Statement and Form of Proxy are being sent to limited partners is _________, 2001. Page 5 TABLE OF CONTENTS SUMMARY......................................................................... 8 The Film Rights............................................................ 8 Potential Value of the Film Rights......................................... 9 Possible Methods of Sale................................................... 10 Dissolution of the Partnership if the Proposal is Approved................. 11 Effect of the Proposal..................................................... 11 Reasons for the Proposal................................................... 11 Consideration of Alternatives.............................................. 12 Federal Income Tax Consequences............................................ 12 The General Partner's Recommendation....................................... 12 Participation of the General Partner....................................... 12 RISK FACTORS.................................................................... 13 The Amount of Sales Proceeds and Distributions to the Limited Partners is Uncertain.................................................... 13 You Will Have No Opportunity to Approve the Specific Terms of Any Sales.... 13 The Status of Certain Film Rights May be Unclear........................... 13 You Might Receive Less Money if the Proposal is Approved................... 14 The Market for the Film Rights is Uncertain and the Sales Prices for the Partnership's Film Rights may be Low..................................... 14 You Will Have No Appraisal or Dissenter's Rights........................... 14 No Independent Representative Will be Retained for Limited Partners........ 14 Unfavorable Tax Consequences of Sale....................................... 15 THE PROPOSAL.................................................................... 15 General.................................................................... 15 Proxy Solicitation ........................................................ 15 Proposal to Sell the Partnership's Film Rights............................. 15 Retention of Sales Agent................................................... 16 Timing of Asset Sales if the Proposal is Approved.......................... 17 Consequences of the Partnership Not Approving the Proposal or if the Film Rights are Not Sold............................................. 17 Potential Prices for the Film Rights....................................... 17 Potential Value of the Film Rights......................................... 17 Reasons for the Proposal................................................... 19 Distribution Objectives Met........................................... 19 The Partnership is Over 11 Years Old and is Ready to Cease Operations and Dissolve...................................... 19 Avoiding Ongoing Operating Costs of Partnership....................... 19 Lack of Significant Current Revenue .................................. 19 Benefits of Selling a Film Library.................................... 20 Taxes................................................................. 20
Page 6 Consideration of Alternatives.............................................. 20 Steps to Implement the Proposal............................................ 21 Estimated Selling Costs.................................................... 21 THE PARTNERSHIP................................................................. 22 General.................................................................... 22 Principal Assets........................................................... 22 Amounts Invested and Cash Distributions.................................... 26 Cash Distributions......................................................... 26 Transactions Between the General Partner and the Partnership............... 26 No Trading Market.......................................................... 27 List of Limited Partners................................................... 27 Books and Records.......................................................... 27 Legal Proceedings.......................................................... 27 VOTING ON THE PROPOSAL.......................................................... 27 Vote Required; Principal Holders........................................... 27 Proxies; Revocation........................................................ 28 Solicitation............................................................... 28 No Appraisal or Dissenters' Rights Provided................................ 29 Recommendation of the General Partner...................................... 29 FEDERAL INCOME TAX CONSEQUENCES................................................. 29 General.................................................................... 29 Taxable Gain or Loss Upon Sale of Programming Assets....................... 30 Dissolution of the Partnership............................................. 30 Capital Gains Tax.......................................................... 31 Passive Loss Limitations................................................... 31 DOCUMENTS INCLUDED.............................................................. 32 FORWARD-LOOKING STATEMENTS...................................................... 32 OTHER MATTERS................................................................... 32 Incorporation by Reference................................................. 32 FORM OF PROXY................................................................... 33
Page 7 SUMMARY This summary highlights selected information from this proxy statement, but may not contain all of the information that is important to you. This proxy statement includes specific terms of the Proposal, information about the Partnership and its financial status. We encourage you to read this proxy statement, including the "Risk Factors" section, the attachments and the documents incorporated by reference before making a decision on how to vote on the Proposal. THE FILM RIGHTS The Partnership's Film Rights consist of various interests in the three films described below. The Partnership does not own all of the various rights in all of the three films. See "The Partnership, Principal Assets." o THE LITTLE KIDNAPPERS. In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement with Jones Maple Leaf Productions to produce a full-length feature film for television entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which included a production and overhead fee of $300,000 paid to the General Partner. From inception to June 30, 2001, the Partnership recognized approximately $3,036,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to finance the film's production. As of March 1999, the Partnership had amortized its net investment in this film. Revenues to the Partnership from The Little Kidnappers for the year 2000 and the six months ended June 30, 2001 were $469 and $33,587, respectively. o THE STORY LADY. In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC Productions, Inc. ("NBC") for the production of a full-length, made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for worldwide distribution rights to this film, excluding United States and Canadian broadcast television rights. The Partnership licensed back the foreign rights to NBC for an eight year term (which expired at the end of 1999 and was extended until July 12, 2001, when it terminated) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television and non theatrical. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. From inception to June 30, 2001, the Partnership recognized approximately $2,299,000 of revenue from this film. As of December 1995, the Partnership has amortized its net investment in this film. Revenues to the Partnership from The Story Lady for the year 2000 and the six months ended June 30, 2001 were $0. o CURACAO. In October 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") for the production of a full-length made-for-television film entitled "Curacao." The total production cost of the film incurred by the Partnership was approximately $4,410,000. In addition to the Page 8 costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime presale and supervising production of this picture. From inception through June 30, 2001, the Partnership recognized approximately $4,064,000 of revenue from this film, which includes the initial license fee, home video advances and certain talent costs from Showtime of $2,650,000, which was used to finance the film's production. In December 1999, after consideration of amortization and write-downs, the Partnership fully amortized its net investment in this film. Revenues to the Partnership from Curacao for the year 2000 and the six months ended June 30, 2001 were $26,807 and $1,162, respectively. POTENTIAL VALUE OF THE FILM RIGHTS To obtain assistance in determining the potential value of the Film Rights, the Partnership has retained the services of Tulip Media Ltd. ("Tulip"), Los Angeles, California, which conducted the valuation in consort with Marrinan Multimedia Group Inc. ("MMG"). As compensation for such valuation services, the Partnership has paid or is obligated to pay Tulip $5,500 plus reimbursement of certain expenses. The principals of Tulip and MMG have years of worldwide film and production experience. Except as described in this paragraph, neither Tulip nor MMG has any prior relationship with the Partnership, the General Partner or any of the Films. Todd P. Leavitt, the principal shareholder (through nominees) of Tulip, previously was employed at NBC Productions, Inc. at the time the Partnership entered into its agreement with NBC with respect to the film "The Story Lady" and was actively involved on behalf of NBC in negotiating the agreement. Tulip has also been retained as the Partnership's exclusive agent to sell the Film Rights. Tulip was selected based on a recommendation from the General Partner's outside counsel regarding film matters and after negotiation of the terms of the engagement of Tulip. In arriving at its estimate of the fair market value of the Film Rights, Tulip reviewed the potential sales opportunity for each Film on a worldwide, media-by-media, territory-by-territory basis. In each case, sales estimates for each media and each territory were made with "low," "mid-value" and "high" cases. Tulip has categorized each of the Films as "mid-value" (which refers to Tulip's general subjective expectation regarding the revenue generating capacity of the Films). Tulip prepared hypothetical sales results of the Film Rights over a ten-year period beginning July 2001. Sales were projected with an initial re-run value (assuming all Films have been previously licensed in all major territories) and a residual value for additional sales income during the balance of the ten-year period. In its estimated valuation, Tulip also made the following assumptions: o all sales results are subject to a hypothetical distribution fee of 35% of gross revenues and a hypothetical distribution/marketing expense recoupment of 5% of gross revenues. Such fees and expenses would be paid to third party distributors and vendors as part of the distribution processes in various media and reflect typical industry arrangements (and costs thereof) which potential buyers will likely take into account in determining whether there will be an adequate return on investment. o residual value after ten years was at 10% of all re-run values. o Union/guild residual payments are estimated to be 11% of sales revenue for all Films. Based on the above approach, Tulip concluded that the fair market value of the Film Rights, discounted at various interest rates to arrive at net present values rounded to the nearest thousand ("NPV"), is as follows: Page 9
Net Present Value of NPV of Little NPV of the Story NPV of Discount Interest Rate All Film Rights Kidnapper Rights Lady Rights Curacao Rights - ---------------------- -------------------- ---------------- ---------------- -------------- 8% $945,000 $243,000 $372,000 $330,000 10% $882,000 $230,000 $351,000 $302,000 12% $826,000 $217,000 $332,000 $277,000 15% $753,000 $201,000 $308,000 $245,000
Tulip's use of a range of discount rates reflects what Tulip believes the capital markets would use and what potential purchasers are likely to use in their own evaluations. As with any valuation exercise, the results suggested are hypothetical and are the reflection of reasonable reliance upon historical performance as well as current market-place factors, including whether the Film is in the English language, the age of the Film, the time periods for the distribution rights, and the trends in the various possible film markets. Such factors are subject to constant variation on a media-by-media and territory-by-territory basis. Further, factors unique to any specific Film, such as cast and genre, can result in significant variations in marketplace performance. Tulip considered, to the extent relevant, all of such factors in reaching its evaluation that the Partnership's Film Rights were all "mid value." There is no assurance that the Partnership will be able to sell the Film Rights for the values described above or at any specific prices. POSSIBLE METHODS OF SALE Currently there are no buyers for the Film Rights and the actual prices at which the Film Rights may be sold have not yet been determined. The Film Rights may be sold as one package, or separately in a number of transactions or may be sold in various combinations. Neither the General Partner nor its affiliates will bid on or purchase any of the Partnership's Film Rights. Buyers may be sought in the following ways: o NEGOTIATED SALES -- The Partnership has entered into an agreement with Tulip, an unaffiliated broker, to sell the Partnership's Film Rights on an exclusive basis through December 31, 2001. The brokerage fee is ten percent (10%) of the sale proceeds. Tulip will seek to sell the Film Rights through direct contact with unaffiliated potential purchasers and negotiating sales prices and terms with them. The owner of some of the rights associated with a film may be a potential purchaser. The General Partner is also the general partner of Jones Programming Partners 2-A, Ltd., a publicly held limited partnership which owns certain rights in two films. That partnership is also seeking to sell its film rights and to dissolve. The General Partner may combine the films of such partnership with those of the Partnership in an effort to attract buyers with a larger, more diversified offering. In such an instance, the sale proceeds would be divided either according to actual, separate sales prices (if determinable) or by appraisal, or by such method that the General Partner believes to be the most accurate method. The General Partner does not have a greater percentage interest in one or the other selling partnership. It would not receive any relatively greater amount from one or the other depending on which entity happens to receive more proceeds. o BID - A possible method of sale will be through a bid procedure. Bids may be solicited from unaffiliated third parties for the sale of the Films as one package, but bids may be considered for less than all of the Films or for a portion of the Rights associated with each Film. If a bid process is used, the General Partner will determine if a minimum bid price will be established; however, the highest bid price from an unaffiliated third party, if any, may not necessarily be accepted, if, in the judgement of the General Partner, the bid does not reflect the value of the Film Rights involved. The bid process will likely be used only in conjunction with the broker the Partnership has retained. Page 10 DISSOLUTION OF THE PARTNERSHIP IF THE PROPOSAL IS APPROVED If the limited partners approve the Proposal, the Partnership will seek to sell all of its assets, wind up its business and dissolve. The Partnership will receive only cash for the Film Rights, although some deferred payment arrangements could be made for some or all of the Film Rights, if that is in the best interests of the Partnership. Limited partners will receive cash distributions, if any, in amounts according to their respective percentage ownership interests in the Partnership. See "The Proposal--Effect of the Proposal." EFFECT OF THE PROPOSAL The event of future sales proceeds is not known in the absence of any actual buyers. After payment of (and reserves for) Partnership obligations, any remaining sales proceeds will be used to make distributions to the partners in the Partnership and the Partnership will be dissolved. Partnership obligations will include expenses of sale (including the 10% sales commission and legal expenses), amounts owed to the General Partner and to third parties, and potentially, the legal costs and expenses of resolving the disputes with NBC. The total amount of such obligations is not determinable in part because actual sales proceeds are not known, nor is the outcome of the NBC disputes. All of such obligations will be paid or reserved for prior to distributions being made to the limited partners. Any such distribution(s) will result in the acceleration of the distribution to limited partners of the remaining value of the Partnership's assets. However, the limited partners in any event are not expected to receive a return of the amount of their initial investments. Interests in the Partnership were offered at $500 per interest, with a minimum purchase of 10 interests. As of June 30, 2001, limited partners had received aggregate distributions of $335 per $500 interest. Because of uncertainties concerning the value of the Film Rights, no assurance is given that there will be any cash to be distributed to the limited partners from the sale of the Film Rights. REASONS FOR THE PROPOSAL The General Partner believes that the continuation of the Partnership's operations is no longer justified and that it is in the best interests of limited partners to dissolve the Partnership at this time because: o The original expected life of the Partnership (6 to 8 years) has been exceeded. The Partnership was formed in 1989. o Our distribution objectives have been met. The films have been through at least one distribution cycle already. The last phase of operations is to dispose of our library of film rights. o The Partnership has very little current cash flow. o Our fixed administrative costs continue while revenues have greatly decreased. o No capital is available to develop additional programming. Page 11 o "The Story Lady" revenue prospects are uncertain because NBC has not recovered its original investment plus imputed interest. The Partnership has disputed the claimed interest amount. NBC also has made claims regarding the proper allocation of revenues from this film which the Partnership is disputing, and in any event the Partnership does not have the funds to satisfy such claims. o Approving the sale of the Partnership's assets at this time will accelerate your receipt of any remaining net cash value of the Partnership's assets. o Upon the sale of the Film Rights, in addition to realizing long-term capital gain, there may be unrealized passive losses which the limited partners could claim in the year in which the Partnership completes the sale of all the Film Rights. Through December 31, 2000, the amount of such losses was approximately $108 per each interest. o The Partnership may have an opportunity to sell one or more Film Rights as part of a package where the same Film Rights would be more difficult to sell individually because of the lack of interest in that specific film (i.e., a popular film may be bundled with less popular ones as a way to sell the latter.) CONSIDERATION OF ALTERNATIVES The General Partner has given consideration to alternatives before submitting the Proposal to you for approval. The General Partner believes that the only real alternative to the sale of the Film Rights is the continued operation of the Partnership. See "The Proposal--Consideration of Alternatives." FEDERAL INCOME TAX CONSEQUENCES Limited partners that are subject to federal income tax are expected to realize and recognize taxable gain or loss, or a combination of both gain and loss, on the sale of Film Rights and the dissolution of the Partnership. For a more complete discussion of the federal income tax consequences of a sale of assets and partnership dissolution, see "Federal Income Tax Consequences." THE GENERAL PARTNER'S RECOMMENDATION Jones Entertainment Group, Ltd., in its capacity as General Partner of the Partnership, recommends that limited partners of the Partnership vote "FOR" the Proposal. The General Partner believes the terms of the Proposal are fair to limited partners. See "Risk Factors." PARTICIPATION OF THE GENERAL PARTNER The General Partner will share in any net proceeds of the sale of the Film Rights through the General Partner's one percent (1%) interest in the profits/losses and distributions of the Partnership. It will receive no compensation from the sale of the Film Rights. Page 12 RISK FACTORS In addition to the other information contained in this proxy statement, the following factors should be considered carefully in evaluating how to vote on the Proposal. THE AMOUNT OF SALES PROCEEDS AND DISTRIBUTIONS TO THE LIMITED PARTNERS IS UNCERTAIN The General Partner has not determined at what price or prices it expects to sell the Film Rights, nor is there a minimum price set for any of them. The General Partner has obtained an independent valuation of the Film Rights from Tulip. Appraisals are only estimates of value and there is no assurance that the Film Rights will be sold for the appraised price or at all. Tulip has experience in selling film rights, including films which have been through cycles of distribution and are not producing large revenue amounts. Two of the Films, "Little Kidnappers" and "Curacao" are not presently generating any significant revenues and it is uncertain at what prices they can be sold. The third Film, "The Story Lady" has been producing some revenue, but the Partnership owns only certain limited distribution rights regarding this Film (as opposed to the copyright and other rights in the work itself). In addition, there are outstanding disputes with NBC, which produced the film, regarding (i) the amount of fees owed NBC for the statement periods June 30, 1993 to December 31, 1994 for distribution of the film in ancillary markets (such as in airplanes) and (ii) whether NBC is entitled to first receive interest on its film production costs before the Partnership shares in certain past and future revenues. The Partnership's principal basis for disputing the NBC claims is the lack of required timeliness of NBC in claiming the amounts owed. NBC denies any lack of timeliness. These disputes will likely adversely affect the ability of the Partnership to either sell its rights regarding this Film or to realize as high a price as it would otherwise realize. The Partnership has had only limited discussions with NBC to resolve these disputes, which have not been fruitful. No assurance can be given that such disputes will be timely or favorably resolved. Litigation could result because of the disputes with NBC. In addition, no assurance can be given that the Partnership would be able to pay NBC if NBC's positions are upheld. There exists the possibility that the Partnership and NBC will negotiate a settlement of their disputes which will result in NBC acquiring some or all of the Partnership's rights in this Film. The terms of any such future settlement cannot be predicted. The Partnership will withhold proceeds from the sale of the Film Rights in order to provide for a resolution of its disputes with NBC, including amounts necessary to cover legal costs and expenses. This will reduce or even eliminate any amounts that otherwise would be distributed to the Limited Partners. The Partnership does not intend to distribute any amounts to limited partners that would be recoverable by NBC if litigation results over these disputes, nor will the limited partners be assessed for any amounts, or made to return any prior distributions. YOU WILL HAVE NO OPPORTUNITY TO APPROVE THE SPECIFIC TERMS OF ANY SALES Because the Film Rights will not be sold until limited partners approve the Proposal, no purchasers or purchase prices have yet been determined. In voting for the Proposal, limited partners do not have the opportunity to approve or reject the specific terms of any particular sale of any Film Rights to third parties, including the sales prices. THE STATUS OF CERTAIN FILM RIGHTS MAY BE UNCLEAR The Film Rights consist of a variety of rights granted or provided by a number of parties and which concern different media and territories. The General Partner believes that the Partnership possesses the necessary ownership of these rights to satisfy potential buyers of the Film Rights. However, there may be lack of certainty in some cases regarding such matters as termination rights, the provision of reports, renewal rights, division of proceeds, rights of first Page 13 negotiation, and other matters. In such instances, the Partnership may be required to obtain third party consents, waivers or other clarification, and may be required to provide compensation to such parties. There is no assurance that the Partnership will be successful in such efforts. In addition, the failure to fully document all of the Partnership's Film Rights could affect the timing of the sale and the price obtained for such rights. YOU MIGHT RECEIVE LESS MONEY IF THE PROPOSAL IS APPROVED Although you might receive the value of your interest in the Partnership sooner and in one lump sum payment if the Partnership's assets are sold now, you might receive a smaller amount upon dissolution than if the Partnership's operations continue and if cash distributions are made in the future. However, it is unlikely that the Partnership will make any future distributions from regular operations. THE MARKET FOR THE FILM RIGHTS IS UNCERTAIN AND THE SALES PRICES FOR THE PARTNERSHIP'S FILM RIGHTS MAY BE LOW The General Partner believes that there is no ready or established market for films like the ones represented by the Film Rights. Instead, sellers rely on contacts within the industry to assist in finding buyers and negotiating deals. The Partnership will therefor encounter some difficulty in finding potential buyers for the Film Rights. Because the Films are several years old and because they have been through at least one distribution cycle (i.e. licensing and re-licensing the Films in the various media and in various geographic areas), they are not expected to attract a large number of buyers. All those factors may result in low prices being offered by buyers, or no offers at all. YOU WILL HAVE NO APPRAISAL OR DISSENTER'S RIGHTS If the Proposal is approved, limited partners have no right to ask for appraisal or dissenters' rights relating to the sale and dissolution described herein. This may result in a lower amount received than if such rights were available, as they are for corporate shareholders. NO INDEPENDENT REPRESENTATIVE WILL BE RETAINED FOR LIMITED PARTNERS The General Partner will not retain an independent representative to act on behalf of the limited partners in the Partnership in structuring and negotiating the terms and conditions for implementation of the Proposal. No limited partners were empowered to negotiate the terms and conditions of the Proposal or to determine what procedures should be in place to safeguard the rights and interests of the limited partners. In addition, no investment banker, attorney, financial consultant or expert was engaged to represent the interests of the limited partners. On the contrary, the General Partner has been responsible for structuring all the terms and conditions of the Proposal. Page 14 UNFAVORABLE TAX CONSEQUENCES OF SALE For tax purposes, the costs of the Film Rights have been written off, with the exception of the estimated salvage value for each film. Thus, any amounts received on the sale of the Film Rights in excess of the salvage value will be a taxable gain. To the extent the gains do not exceed the original cost of the Film Rights, they will be taxed as ordinary income due to the depreciation recapture provisions of IRC Section 1245. It is anticipated that all gains or losses will be treated as ordinary. There may be unrecognized passive losses which the limited partners can deduct in the year in which the Partnership completes the sale of all the Film Rights. Such passive losses could be as high as approximately $108 per limited partner interest, if such losses have not been previously deducted. See "Federal Income Tax Consequences." THE PROPOSAL GENERAL This proxy statement is submitted on behalf of the Partnership by Jones Entertainment Group, Ltd. in its capacity as the General Partner of the Partnership to ask your approval of a proposal to sell to unaffiliated and as yet unidentified, third party or parties, all of the Partnership's film programming assets consisting of various rights to original films entitled "The Story Lady," "The Little Kidnappers" and "Curacao," followed by the dissolution of the Partnership. PROXY SOLICITATION This proxy statement is furnished in connection with the Special Meeting of the limited partners of the Partnership to be held at 9:30 a.m., Mountain Time, at the corporate offices of the General Partner, at 9697 E. Mineral Avenue, Englewood, Colorado 80112. Proxies in the form enclosed, properly executed and duly returned, will be voted in accordance with the instructions thereon. Limited partners are urged to sign and return the enclosed proxy card as promptly as possible. Proxies cannot be revoked except by delivery of a proxy dated as of a later date, by voting in person at the Special Meeting, or by giving written or oral notice of revocation to the Secretary of the General Partner. Officers and other employees of the General Partner may, on behalf of the Partnership, solicit proxies by mail, by fax, by telephone or by personal interview. The General Partner may adjourn the Special Meeting, from time to time, and continue to solicit proxies if the holders of a majority of the limited partnership interests have not voted on the Proposal. If the General Partner adjourns the meeting, the limited partners will be informed by mail of the reason for the adjournment and when the meeting will be resumed. The cost of the proxy solicitation will be paid by the Partnership. PROPOSAL TO SELL THE PARTNERSHIP'S FILM RIGHTS Currently there are no buyers for the Film Rights and the actual prices at which the Film Rights may be sold have not yet been determined. The Film Rights may be sold as one Page 15 package, or separately in a number of transactions or may be sold in various combinations. Neither the General Partner nor its affiliates will bid on or purchase any of the Partnership's Film Rights. Buyers may be sought in the following ways: o NEGOTIATED SALES -- The Partnership has entered into an agreement with Tulip, an unaffiliated broker, to sell the Partnership's Film Rights on an exclusive basis through December 31, 2001. The brokerage fee is ten percent (10%) of the sale proceeds. Tulip will seek to sell the Film Rights through direct contact with unaffiliated potential purchasers and negotiating sales prices and terms with them. The owner of some of the rights associated with a film may be a potential purchaser. The General Partner is also the general partner of Jones Programming Partners 2-A, Ltd., a publicly held limited partnership which owns certain rights in two films. That partnership is also seeking to sell its film rights and to dissolve. The General Partner may combine the films of such partnership with those of the Partnership in an effort to attract buyers with a larger, more diversified offering. In such an instance, the sale proceeds would be divided either according to actual, separate sales prices (if determinable) or by appraisal, or by such method that the General Partner believes to be the most accurate method. The General Partner does not have a greater interest in one or the other selling partnership and would not receive any significantly greater amount from one or the other depending on which entity happens to receive more proceeds. o BID - A possible method of sale will be through a bid procedure. Bids may be solicited from unaffiliated third parties for the sale of the Films as one package, but bids may be considered for less than all of the Films or for a portion of the Rights associated with each Film. If a bid process is used, the General Partner will determine if a minimum bid price will be established; however, the highest bid price from an unaffiliated third party, if any, may not necessarily be accepted, if, in the judgement of the General Partner, the bid does not reflect the value of the Film Rights involved. The bid process will likely be used only in conjunction with the broker the Partnership has retained. RETENTION OF SALES AGENT The Partnership has engaged Tulip as its exclusive agent to sell (and not to license or distribute) all rights in the Films, in all media and worldwide, for a period commencing February 16, 2001 and continuing through December 31, 2001 (the "Term"), which period may be extended by the parties. See "Potential Value of the Film Rights," regarding the prior Page 16 involvement of the principal of Tulip regarding the negotiation of the original agreement for "The Story Lady." Tulip has experience in selling film rights, including films which have been through cycles of distribution and are not producing large revenues. The General Partner has absolute approval over accepting any offers obtained by Tulip; provided that the General Partner must exercise its good faith in rejecting any offer. Tulip shall receive a sales agency fee equal to 10% ("Sales Agency Fee") of all proceeds from the sale of all the Film Rights (or any rights derived therefrom as approved by the General Partner). Proceeds consist of the cash consideration received and any accounts payable-type liabilities expressly assumed by the buyer(s). Tulip shall be entitled to its Sales Agency Fee for any sale of Film Rights consummated by or agreed to by the General Partner during the Term or for a period of up to six (6) months thereafter in the event all or some Film Rights are sold to any entity to whom Tulip contacted during the Term. TIMING OF ASSET SALES IF THE PROPOSAL IS APPROVED The General Partner anticipates that the sale of the Film Rights and the dissolution of the Partnership could be completed by December 31, 2001, although the precise length of the sales process is unknown, and the sale of the Film Rights could take longer. If any Film Rights are not sold, the General Partner will make the determination whether to continue the Partnership (including the requirement to provide income tax Forms K-1 to the limited partners). CONSEQUENCES OF THE PARTNERSHIP NOT APPROVING THE PROPOSAL OR IF THE FILM RIGHTS ARE NOT SOLD If the limited partners in the Partnership do not approve the Proposal, or if the Film Rights are not sold, the Partnership will continue to operate with no change in its investment objectives, policies or restrictions and in accordance with the terms of its limited partnership agreement. POTENTIAL PRICES FOR THE FILM RIGHTS Although the General Partner has not identified any prospective purchaser for any of the Partnership's Film Rights, nor does it know the prices at which these rights will actually be sold, given the likely range of possible prices being paid in the entertainment market for films which have been through at least one distribution cycle, the General Partner anticipates that the amounts, if any, distributed to limited partners upon sale of the Partnership's assets, together with cash distributions made to date, will not return to limited partners the amount they initially invested in the Partnership. As of June 30, 2001, limited partners had received aggregate distributions of approximately $335 per $500 interest. The disputes with NBC will also affect the Partnership's ability to make any distribution of sales proceeds. POTENTIAL VALUE OF THE FILM RIGHTS To obtain assistance in determining the potential value of the Film Rights, the Partnership has retained the services of Tulip, which conducted the valuation in consort with MMG. As compensation for such valuation services, the Partnership has paid or is obligated to Page 17 pay Tulip $5,500 plus reimbursement of certain expenses. The principals of Tulip and MMG have years of worldwide film and production experience. Except as described in this paragraph, neither Tulip nor MMG has any prior relationship with the Partnership, the General Partner or any of the Films. Todd P. Leavitt, the principal shareholder (through nominees) of Tulip, previously was employed at NBC Productions, Inc. at the time the Partnership entered into its agreement with NBC with respect to the film "The Story Lady" and was actively involved on behalf of NBC in negotiating the agreement. Tulip was selected based on a recommendation from the General Partner's outside counsel regarding film matters and after negotiation of the terms of the engagement of Tulip. In arriving at its estimate of the fair market value of the Film Rights, Tulip reviewed the potential sales opportunity for each Film on a worldwide, media-by-media, territory-by-territory basis. In each case, sales estimates for each media and each territory were made with "low," "mid-value" and "high" cases. Tulip has categorized each of the Films as "mid-value" (which refers to Tulip's general subjective expectation regarding the revenue generating capacity of the Films). Tulip prepared hypothetical sales results of the Film Rights over a ten-year period beginning July 2001. Sales were projected with an initial re-run value (assuming all Films have been previously licensed in all major territories) and a residual value for additional sales income during the balance of the ten-year period. In its estimated valuation, Tulip also made the following assumptions: o all sales results are subject to a hypothetical distribution fee of 35% of gross revenues and a hypothetical distribution/marketing expense recoupment of 5% of gross revenues. Such fees and expenses would be paid to third party distributors and vendors as part of the distribution processes in various media and reflect typical industry arrangements (and costs thereof) which potential buyers will likely take into account in determining whether there will be an adequate return on investment. o residual value after ten years was at 10% of all re-run values. o Union/guild residual payments are estimated to be 11% of sales revenue for all Films. Based on the above approach, Tulip concluded that the fair market value of the Film Rights, discounted at various interest rates to arrive at net present values rounded to the nearest thousand ("NPV"), is as follows:
Discount Interest Net Present Value NPV of Little NPV of the Story NPV of Rate of All Film Rights Kidnapper Rights Lady Rights Curacao Rights - ----------------- ------------------ ---------------- ---------------- -------------- 8% $945,000 $243,000 $372,000 $330,000 10% $882,000 $230,000 $351,000 $302,000 12% $826,000 $217,000 $332,000 $277,000 15% $753,000 $201,000 $308,000 $245,000
Tulip's use of a range of discount rates reflects what Tulip believes the capital markets would use and what potential purchasers are likely to use in their own evaluations. As with any valuation exercise, the results suggested are hypothetical and are the reflection of reasonable reliance upon historical performance as well as current market-place factors, including whether the Film is in the English language, the age of the Film, the time periods for the distribution rights, and the trends in the various possible film markets. Such factors are subject to constant variation on a media-by-media and territory-by-territory basis. Further, factors unique to any specific Film, such as cast and genre, can result in significant variations in marketplace performance. Tulip considered, to the extent relevant, all of such factors in reaching its evaluation that the Partnership's Film Rights were all "mid-value." There is no assurance that the Partnership will be able to sell the Film Rights for the values described above or at any specific prices. Copies of the Tulip report are available to Limited Partners, at no cost, by contacting Ms. Lorri Ellis, Jones Entertainment Group, Ltd., 9697 E. Mineral Avenue, Englewood, Colorado 80112, (303) 784-8486. Page 18 The principal of Tulip is Todd P. Leavitt and valuation and brokerage services are being performed by Tulip in consort with MMG and its principal, James P. Marrinan. Mr. Leavitt has been involved with the entertainment business since 1977, first as an attorney and for many years as an executive with a number of large production and distribution companies in this industry. He founded Tulip in 1998. Mr. Marrinan has been involved in this industry, in a variety of positions, since 1974. His experience includes marketing, sales, management and financial, and administration. He founded MMG in 1995. REASONS FOR THE PROPOSAL DISTRIBUTION OBJECTIVES MET. The distribution objectives of the Partnership have been met. The three films have already been through at least one distribution cycle. Individual rights to individual films will have to be negotiated and these rights may not provide any significant resources. Therefore, the General Partner believes that it is in the best interest of limited partners for the Partnership to sell its assets at this time, make a final distribution of proceeds, if any, to its limited partners and dissolve the Partnership. It is the General Partner's view that this is an appropriate time in which to seek to sell the Partnership's assets. The continued operation of the Partnership is no longer practical for a number of reasons, including those discussed below. THE PARTNERSHIP IS OVER 11 YEARS OLD AND IS READY TO CEASE OPERATIONS AND DISSOLVE. The prospectus for the Partnership said that the term of the Partnership would be for 25 years, but it is likely that sales of programming assets would begin in the range of 6-8, keyed to when the first round of film distribution was concluded. The Partnership is past that period for some or all of the films and actually has done re-licensing of some film rights and in some geographic areas. Generally, the films are producing very little revenue and, while expenses are also small (except film distribution expenses which are generally keyed to revenues), the General Partner believes that the Partnership may have realized substantially all it can from routine licensing transactions (as opposed to sale of all of its Film Rights). AVOIDING ONGOING OPERATING COSTS OF PARTNERSHIP. If the Film Rights can be sold within a reasonable period, even the generally low cost of operating the Partnership can be eliminated, possibly providing more funds for the limited partners, as well as eliminating the need for each limited partner to report the Partnership's K-1 tax information with the limited partners' tax returns. The Partnership has fixed administrative costs (such as tax returns, K-1s, annual audits, SEC filings), while revenues have steadily declined. This will ultimately deplete any funds available to distribute to limited partners. There is no capital available to develop additional programming. The Partnership's small asset base, coupled with decreasing revenues and cash flow no longer justify the continuation of Partnership operations. LACK OF SIGNIFICANT CURRENT REVENUE. For approximately the last 24 months, the Partnership's Film Rights have not generated significant revenues and, in the case of The Little Kidnappers and Curacao, the revenue stream is very small. For the three-year period January 1, 1998 through December 31, 2000 and the six month period ending June 30, 2001, total revenues recognized by the Partnership were $30,545 and $1,162 for Curacao, respectively, and $17,334 and $33,587 for The Little Kidnappers, respectively. The only Film Rights which have provided any material revenues recently are those related to The Story Lady. As is discussed under the "Risk Factors", there are disputes regarding the allocation of both past and future revenues with NBC, the owner of the principal remaining rights to this film. If such disputes are not resolved, it is uncertain whether the Partnership will realize anything from Page 19 its rights to The Story Lady, and there exists the possibility that the Partnership will owe NBC amounts ranging from approximately $176,000 to $368,000 (as of June 2001), which the Partnership does not have and cannot fund. This would directly affect the amount of funds available for distribution by the Partnership. BENEFITS OF SELLING A FILM LIBRARY. A possible advantage to the Partnership in attempting to group the sale of all of its Film Rights will be that the Partnership may have an opportunity to sell one or more film rights as part of a package where the same film rights would be more difficult to sell on an individual basis because of the lack of interest in that specific film right, i.e. one good film may be bundled with less popular ones as a way to sell the latter. The Film Rights of the Partnership may be conducive to this principally because all these films were made initially for television. However, the General Partner will attempt to get the best price it can for each of the Film Rights, whether that be by grouping the Film Rights or selling them individually. There is no assurance that the General Partner will be successful in these efforts. In the discretion of the General Partner, the Partnership's Film Rights could be grouped with those held by Jones Programming Partners 2-A, Ltd. in an effort to provide a potentially more attractive package to buyers. TAXES. For tax purposes, the costs of the Film Rights have been written off, with the exception of the estimated salvage value for each film. Thus, any amounts received on the sale of the Film Rights in excess of the salvage value will be a taxable gain. To the extent the gains do not exceed the original cost of the Film Rights, they will be taxed as ordinary income due to the depreciation recapture provisions of IRC Section 1245. It is anticipated that all gains or losses will be treated as ordinary. There may be unrecognized passive losses which the limited partners can deduct in the year in which the Partnership completes the sale of all the Film Rights. Such passive losses could be as high as approximately $108 per limited partner interest, if such losses have not been previously deducted. See "Federal Income Tax Consequences." CONSIDERATION OF ALTERNATIVES PARTNERSHIP CONTINUATION. The General Partner has given consideration to some alternatives for the Partnership before submitting the Proposal to you for approval. The only viable alternative would be the continued operation of the Partnership. BORROWING. The General Partner has not sought to borrow any funds for the development of any additional film projects, nor does the General Partner believe that any borrowed funds would be available, if sought. ASSESSING THE LIMITED PARTNERS. The Partnership has no funds with which to pursue other film projects, nor is borrowing for such purpose a realistic possibility. In addition, the limited partnership agreement does not provide for any form of voluntary or mandatory assessment for further capital contributions by limited partners in the Partnership. Given the purpose of the Partnership when it was formed, and the explicit partnership provisions and disclosures that no assessments would be made, the General Partner does not consider it appropriate to suggest amending the Partnership agreement to allow assessments. Because there is no ability to obtain financing, the only realistic options to the Partnership are to sell its assets or to continue operations. As set forth in the Proxy Statement, the General Partner favors the sale of the Partnership's assets, followed by the dissolution of the Partnership. Page 20 STEPS TO IMPLEMENT THE PROPOSAL Assuming the approval of the Proposal by the limited partners, of which there is no assurance, the General Partner intends to take the following steps to implement the Proposal: i. Sell all of the Partnership's programming assets through one or more of the methods discussed in this proxy statement, probably in multiple transactions; ii. Receive the sales proceeds for the programming assets and execute assignments and other instruments to accomplish such sale; iii. Pay or provide for payment of (and reserves for) the Partnership's liabilities and obligations to creditors, if any, using the Partnership's cash on hand and net sales proceeds; iv. Conduct a final accounting in accordance with the limited partnership agreement and make final cash distributions; v. Cause the Partnership's final tax returns to be prepared and filed with the Internal Revenue Service and appropriate state taxing authorities; vi. Distribute to the limited partners final Form K-1 tax information; and vii. File a Cancellation of Domestic Certificate of Limited Partnership on behalf of the Partnership with the Secretary of State of the State of Colorado. ESTIMATED SELLING COSTS The expenses associated with the sale of the Film Rights are expected to be approximately 15-25% of the sales proceeds of the Partnership's programming assets, primarily comprised of third party costs incurred, including the fees and costs of Tulip, legal counsel, auditors, printing and mailing costs and related out-of-pocket expenses. The general and administrative costs of the General Partner anticipated to be incurred in connection with the Proposal and related transactions will be met through the normal ongoing procedure set out in the limited partnership agreement. Such expenses are not anticipated to be material in relation to the proceeds from the sale of the Partnership's assets. These expenses would be prior in right to any distributions to the partners. Page 21 THE PARTNERSHIP GENERAL The Partnership was formed to acquire, develop and own rights to produce and license original programming. The primary objectives of the Partnership have been to own a group of programming assets and to license the rights to the programming on television and in other media throughout the world, and to generate a positive cash flow to permit cash returns in the form of distributions to the limited partners. It was contemplated from the outset of the Partnership's existence that after the programming had been initially exploited in all applicable markets, the General Partner would begin to liquidate its library of programming assets, which was expected to begin in approximately six to eight years. The decision when to dissolve the Partnership is to be made by the General Partner in its sole discretion. The General Partner believes that enough additional revenues have been generated to justify keeping the Partnership in existence until now. However, revenues have diminished significantly and the General Partner believes no material purpose would be served to continue the Partnership's existence. The Partnership was formed on April 27, 1989 when subscriptions for the minimum offering amount were received. Sales of interests closed in October 17, 1990 with proceeds of $6,371,500. PRINCIPAL ASSETS The Partnership's Film Rights are in the following three films: o THE LITTLE KIDNAPPERS. In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement to produce a full-length feature film for television entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000 in the film, which included a production and overhead fee of $300,000 to the General Partner. The Partnership made production advances to complete the film and received all distribution rights, excluding theatrical rights, in perpetuity in all markets except Canada. The rights in Canada have since reverted to the Partnership. Theatrical rights are held by the writer. Page 22 The Partnership has agreements with third parties to distribute the film in various markets. The following rights will not be available for a purchaser to exploit until expiration of the agreements. In November 1990, international home video rights were licensed to a third party for no earlier than 10 years following completion of delivery, said rights terminated in December 2000. Such party has licensed all international pay television and video rights in Brazil until June 2002. Another licensee has the international television and satellite rights to distribute the film in France, the UK, French Belgium, the Benelux countries, Iceland, Sweden, Norway, Denmark & Finland, Africa & the Middle East and Turkey until between March 2003 and February 2005. International television and satellite rights are held in Germany by another licensee until September 2010. North American home video rights are licensed to a third party. The Partnership also has the right to a home video royalty based on the net retail sales proceeds earned by the third party. Although these rights expire in June 2002, the Partnership has the option to terminate the agreement, by giving six months' written notice, if the licensee fails to sell a minimum number of video units of the film within the first three years of the term which concluded in June 2000. The licensee has failed to meet the minimum sales provision. The General Partner has exercised its option to terminate said agreement, effective November 1, 2001. A buyer of the Partnership's rights in The Little Kidnapper will be required to assume a variety of obligations related to the film, including writer and producer royalties which are based in part on gross receipts and actors' union royalties, also based on gross receipts. From inception to June 30, 2001, the Partnership recognized approximately $3,036,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to help finance the film's production. As of March 1999, the Partnership has amortized its net investment in this film. o THE STORY LADY. In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC for the production of a full-length, made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000, which included a production and overhead fee of $120,000 paid to the General Partner. In return, the Partnership received all distribution rights to this film, excluding all United States network distribution rights retained by NBC, after the required airings on the NBC television network. These airings have occurred. The Partnership in turn granted certain worldwide rights to NBC , including exclusive rights of theatrical distribution and all print publishing rights, merchandising rights and subsidiary rights with respect to the film. In 1991, the Partnership sub-licensed the exclusive worldwide distribution rights (excluding the United States, its territories and possessions) to NBC Enterprises, an affiliate of NBC, for a period of eight years. These rights expired in September 1999; however, the parties extended the agreement on a month-to-month basis, with a thirty-day right of termination. On June 12, 2001, the General Partner provided NBC with a written notice to terminate said agreement effective 30 days after receipt. NBC Enterprises has a first negotiation/first refusal right with respect to distributing the film in international markets beyond the end of such month-to-month period. NBC Enterprises has entered into distribution agreements with third Page 23 parties beyond the initial term provided in the sub-license agreement with the Partnership. These distribution rights will not be available for a purchaser to exploit until their expiration, including international video rights in Mexico and the Philippines. International pay television rights are not available in Argentina. International free television rights are not available in Argentina, Colombia, Czech Republic, France, Honduras, Mexico, Romania, Slovakia, South America, Ukraine, Venezuela, Turkey, Panama, Chile, Nicaragua, Cyprus, Sri Lanka and Africa. These agreements are set to expire between June 2001 and November 2003. All international distribution rights, other than set forth above, are available. The Partnership controls non-network television distribution (i.e., syndication, cable, pay cable) in the United States and domestic home video distribution. North American home video rights are licensed to a third party. The Partnership also has the right to a home video royalty based on the net retail sales proceeds earned by the third party. Although these rights expire in June 2002, the Partnership has the option to terminate the agreement, by giving six months' written notice, if the licensee fails to sell a minimum number of video units of the film within the first three years of the term which concluded in June 2000. The licensee has failed to meet the minimum sales provision. The General Partner has exercised its option to terminate said agreement, effective November 1, 2001. The Partnership also has an agreement granting rights to distribute "The Story Lady" in the domestic home video market, only through direct sales and telecommunications sales, or other means outside normal retail channels whereby consumers purchase copies for their own home viewing, not for resale or rental. This agreement expires in October 2001. The licensee has the option to extend the licensing term for up to four additional one year periods after the October 2001, in exchange for additional annual license fees. All domestic distribution rights, other than set forth above, are available for exploitation. A buyer of these film rights will be required to assume certain obligations. Under the agreement with NBC, once the Partnership has recouped its distribution advance plus interest, NBC is entitled to recoup its imputed deficit (as defined) out of remaining gross receipts. NBC's imputed deficit is defined as the difference between (a) the sum of the approved budgeted direct costs (costs incurred in connection with the development and production of The Story Lady and the rights for two network broadcasts) including 7 1/2% as an overhead allowance and a portion of the over budget direct costs; and (b) the sum of the imputed license fee deemed paid by NBC television company for two network broadcasts and the distribution advance paid to NBC by the Partnership. Since the Partnership has fully recouped the required amount, NBC is entitled to recoup its imputed deficit and interest therein, which totaled approximately $508,000, as claimed by NBC as of June 30, 2000. After NBC recoupment of its imputed deficit and its recoupment of certain third party participants and deferments, NBC is entitled to 5% of the remaining net profits. Third party participants and deferments include various percentages of revenues payable to writers, producers and actors. NBC is responsible for payment of the third party participation and deferred compensation; provided, however, that NBC is entitled to recoup such payments. Furthermore, NBC has agreed that the third party participation shall not exceed 35% of the adjusted gross (defined as gross receipts less distribution expenses, the Partnership's distribution advance including interest and NBC's imputed deficit) of "The Story Lady." The agreement with NBC allows the Partnership to assign the agreement in connection with a sale of all or substantially all of the Partnership's assets, provided the assignee assumes all of the Partnership's obligations under the agreement. Any other assignment requires NBC's prior written approval. In addition, NBC has the right to require the Partnership to sell to NBC all the executory rights granted to the Partnership for an amount when added to all proceeds theretofore received to result in an internal rate of return of 15% compounded annually on all monies paid by the Partnership to NBC. The effect of these various provisions may cause the Partnership to suffer delay in the sale of its rights to this film until NBC has exercised or waived its acquisition rights regarding the film. In September 1999, NBC first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $192,500. NBC mistakenly failed to take a 50% Page 24 subsidiary rights distribution fee on airline revenues reported on statements June 30, 1993 to December 31, 1994 for total revenue of $384,854. The agreement with NBC provides that any statement to which no objection has been made by the party receiving the statement within two years after submission will be deemed conclusive on all parties. Therefore, the General Partner does not believe that NBC is entitled to the additional distribution fees claimed. NBC also reported that it has not recouped approximately $508,000 of its original investment, including interest. NBC is entitled to recover its unrecouped amount under the agreement, which makes it unlikely that the Partnership will receive any income from this film in the near future, or if at all. The Partnership has also received approximately $175,600 from distributors, which has not been applied to NBC's unrecouped amount. As of March 31, 1999, the Partnership has reported this amount as an accrued liability, but believes a basis exists to deny some or all of such liability. Litigation could result because of these disputes with NBC. Such litigation would likely be costly and time consuming. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make such payments, nor is it likely that the Partnership could borrow the necessary funds. From inception to June 30, 2001, the Partnership received approximately $2,299,000 of revenue from this film. As of December 1995, the Partnership has amortized its net investment in this film. o CURACAO. In June 1992, the General Partner, on behalf of the Partnership, entered into an agreement with a third party for the production of the full-length film "Curacao". The Partnership provided financing for the film and received all worldwide distribution rights, except certain distribution rights granted to a third party which have now reverted back to the Partnership. Circling Curacao, N.V., which provided certain production services, holds distribution rights in the Netherland Antilles, Aruba and Surinam, in perpetuity. In November 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") to assist with financing the production of "Curacao". The total cost of the film was approximately $4,410,000. In addition to the costs of production, the Partnership paid $500,000 to the General Partner as a production and overhead fee. The Partnership received a licensing fee of $1,675,000 and $675,000 as a recoupable advance for home video rights. In addition, Showtime paid the Partnership for certain talent costs. The Partnership has received no additional revenues from Showtime. Showtime was granted certain rights, including an exclusive pay television license and exclusive home video rights in the United States and islands of the Caribbean. Showtime's pay television and certain other domestic rights may not expire for a number of years, unless Showtime waives certain commercial windows, of which there is no assurance. The home video rights expired in February 2001; however, such rights may be contractually suspended until expiration of Showtime's pay television rights. International theatrical, free television and home video rights are licensed to a third party until October 2003. International pay television rights in Australia are licensed until April 2002. All other international distribution rights are available. Page 25 A potential buyer of these film rights will be required to assume certain obligations, in addition to those set forth above. These are principally writer and union royalties and certain amounts that may be owed to musical talent. From inception to June 30, 2001, the Partnership received approximately $4,064,000 of revenue from this film, which includes the initial license fee and advances from Showtime of $2,650,000. In December 1999, after consideration of amortization and write-downs, the Partnership fully amortized its net investment in this film. AMOUNTS INVESTED AND CASH DISTRIBUTIONS Limited partners made contributions of $6,371,500 in the aggregate to the Partnership, the net proceeds of which have all been invested. The General Partner made a capital contribution with respect to its general partner interest of $1,000. From inception through June 30, 2001, the Partnership made cash distributions to its limited partners totaling $4,201,502. On a per interest basis, the limited partners had received, as of June 30, 2001, approximately $335 per $500 interest, or approximately 66% of their initial capital contributions. Details of the amounts of cash distributions made to partners over the three years ended December 31, 2000 are set out under "Cash Distributions" below. From inception through June 30, 2001, the General Partner has received cash distributions from the Partnership of $42,440 with respect to its general partner interest. CASH DISTRIBUTIONS During the three years ended December 31, 2000, total cash distributions and cash distributions per interest were:
Total Per $500 Interest ----- ----------------- 2000 $ 0 $ 0 1999 $ 0 $ 0 1998 $ 160,897 $ 12.50
TRANSACTIONS BETWEEN THE GENERAL PARTNER AND THE PARTNERSHIP The General Partner was reimbursed for all offering costs up to 3.75% of gross offering proceeds, which reimbursement was $238,931. Ten percent commission costs ($637,150) paid to an affiliate of the General Partner and reimbursements to the General Partner for costs for raising Partnership capital were charged to limited partners' capital. The following summarizes the transactions between the General Partner and the Partnership pursuant to which the General Partner has been paid or has had its expenses reimbursed on an ongoing basis: o The General Partner has received from inception through June 30, 2001 production and overhead fees of $920,000, all of which were received prior to 1997. o The General Partner is entitled to be reimbursed for general and administrative costs incurred on behalf of and allocable to the Partnership, including employee salaries and Page 26 office overhead. Administrative services to the Partnership consist primarily of accounting services, allocated to the Partnership at cost. Through June 30, 2001, the General Partner has received a total of $261,804 as general and administrative expense reimbursements from the Partnership, of which $15,442, $10,856, $9,680 and $10,552 was reimbursed for the years ended December 31, 1998, 1999 and 2000 and the six months ended June 30, 2001, respectively. NO TRADING MARKET There is no trading market for the limited partnership interests, and only very limited sales of such interests have occurred since inception. LIST OF LIMITED PARTNERS A limited partner of the Partnership is entitled to request copies of the names of the limited partners showing the names and addresses of all limited partners in the Partnership. The right to receive a limited partner list may be conditioned upon the requesting limited partner paying the cost of copying and a showing that the request is for a proper purpose. Reasonable requests would include requests for the limited partner list for the purpose of opposing the Proposal. Requests for limited partner lists may be addressed to ACS Securities Services, Inc., at 3988 N. Central Expressway, Building 5, 6th Floor, Dallas, TX 75204; Attention: Ms. Shari Eastwood. BOOKS AND RECORDS The Partnership's limited partnership agreement provides that its books and records are available for inspection by limited partners or their duly authorized representatives at all reasonable times at the Partnership's principal office in Englewood, Colorado. A written request must be received stating a proper purpose for inspection of such books and records, with the inspection to be conducted at the limited partner's expense. A limited partner may request in writing and receive without charge copies of the Partnership's limited partnership agreement, certificate of limited partnership and tax returns. LEGAL PROCEEDINGS The General Partner is not aware of any material pending legal proceedings to which the Partnership is a party or of which any of the Film Rights are the subject. There are, however, pending disputes with NBC regarding whether certain amounts are owed to NBC regarding "The Story Lady." See "Principal Assets--THE STORY LADY." VOTING ON THE PROPOSAL VOTE REQUIRED; PRINCIPAL HOLDERS Under the limited partnership agreement, the Proposal must be approved by the affirmative vote of the limited partners holding a majority of the limited partnership interests in the Partnership as of the record date. As of July 31, 2001, the number of interests Page 27 outstanding was 12,743 and the number of record holders was 834. Each limited partner appearing on the records of the Partnership as of ______, 2001, the "record date," is entitled to notice of, and to participate in, this vote of limited partners. It is very important that all limited partners participate in the voting. The ability of the Partnership to complete the transaction discussed in this proxy statement and the Partnership's ability to make a distribution to its limited partners of the net proceeds of the sale of the Partnership's assets are dependent upon the approval of the transaction by the holders of a majority of the Partnership's limited partnership interests. An abstention by a limited partner will have the same effect as a vote against the Proposal. The General Partner and its affiliates own no limited partnership interests. The General Partnership interest in the Partnership does not have a vote on the Proposal, but the General Partner has approved the Proposal and recommends that the limited partners vote in favor of it. To the General Partner's knowledge, there is no holder of interests of more than 5% of the interests, except for Mr. Herbert Borbe. Mr. Borbe owns 800 of the 12,743 interests outstanding as of December 31, 2000. Mr. Borbe's address is 1709 134th Avenue, S.E., Belleview, Washington 98005. Mr. Borbe is not a director, officer or employee of the General Partner or any of its affiliates. PROXIES; REVOCATION A sample of the form of proxy is attached to this proxy statement. The actual proxy to be used to register your vote on the Proposal is the separate sheet of paper included with this proxy statement. If you wish, you can fax your executed proxy to us at 214-887-7198, Attention: Shari Eastwood, of ACS Securities Services, Inc. Investors may also vote by toll-free telephone at 1-866-ACS-VOTE (1-866-227-8683). PLEASE USE THE ENCLOSED PROXY TO CAST YOUR VOTE ON THE PROPOSAL OR SEE THE ACCOMPANYING INSTRUCTION PAGE FOR MORE DETAILS ON VOTING BY TELEPHONE. If the proxy is properly signed and is not revoked by a limited partner, the interests it represents will be voted in accordance with the instructions of the limited partner. If no specific instructions are given, the interests will be counted as a vote "FOR" the Proposal and the grant of authority to extend the solicitation period. Proxies cannot be revoked except by delivery of a proxy dated as of a later date, by voting in person at the Special Meeting, or by giving written or oral notice of revocation to the Secretary of the General Partner. SOLICITATION The solicitation is being made by Jones Entertainment Group, Ltd. in its capacity as General Partner on behalf of the Partnership. The Partnership will bear the costs of the preparation of this proxy statement and of the solicitation of proxies, which is estimated at $15,000. Such costs will be allocated to the limited partners and to the General Partner according to their respective percentage interests pursuant to the limited partnership agreement. Solicitations will be made primarily by mail. However, a number of regular employees of the General Partner may, to ensure the presence of a quorum, solicit proxies in person or by telephone. The General Partner may contact brokers and representatives who originally sold the interests to limited partners and request their assistance in encouraging limited partners to return their proxies or to vote by telephone. These brokers or Page 28 representatives would not be compensated for this assistance nor would they be asked to make any recommendation as to how the limited partners should vote. Additionally, the General Partner may retain a proxy solicitor to assist in contacting brokers or limited partners to encourage the return of proxies, although it does not anticipate doing so. Should such a solicitor be retained, its costs would be part of the aforesaid estimated $15,000. NO APPRAISAL OR DISSENTERS' RIGHTS PROVIDED Limited partners are not entitled to any dissenters' or appraisal rights with respect to the Proposal, as would be available to shareholders in a corporation engaging in a corporate transaction. RECOMMENDATION OF THE GENERAL PARTNER The General Partner believes that it is in the best interests of the limited partners to sell the Film Rights and to dissolve the Partnership. The General Partner believes the terms of the Proposal are fair to the limited partners. Dissolution will allow the limited partners to receive any remaining value of the Partnership's programming assets currently, rather than receiving distributions, if any, over the remaining life of the Partnership. If operations continue, revenues will continue to decline while direct, operating, general and administrative expenses continue, reducing the likelihood of cash distributions. Continued operations also mean continuation of the additional costs incurred by the limited partners, including the costs associated with inclusion of information from the Schedule K-1 relating to the Partnership in their personal income tax returns. Dissolution of the Partnership will allow preparation of final tax returns. THE GENERAL PARTNER RECOMMENDS THAT LIMITED PARTNERS VOTE FOR THE PROPOSAL. FEDERAL INCOME TAX CONSEQUENCES GENERAL The following summarizes the material federal income tax consequences to the limited partners if the Proposal to sell the Partnership's assets and dissolve the Partnership is approved. This discussion is not based upon an opinion of counsel and it is possible that different results than those described may occur. Statements regarding tax consequences are based upon relevant provisions of the Internal Revenue Code of 1986, as amended, the "Code", Treasury Regulations in effect on the date hereof, reported judicial decisions, published positions of the IRS, further assumptions that the Partnership constitutes a partnership for federal tax purposes, and that the Partnership will be dissolved as described herein. The laws, regulations, administrative rulings and judicial decisions which form the basis for conclusions regarding the tax consequences described herein are complex, are subject to prospective or retroactive change at any time, and any change may adversely affect the limited partners. This summary does not describe all the tax aspects which may affect limited partners because the tax consequences may vary depending upon the individual circumstances of a limited Page 29 partner. It is directed to the limited partners that are the original purchasers of the interests and hold interests as "capital assets," generally, property held for investment. Each limited partner that is a corporation, trust, estate, tax-exempt entity or other partnership is strongly encouraged to consult its own tax advisor as to the rules which are specifically applicable to it. This summary does not address foreign, state or local tax consequences, and is inapplicable to nonresident aliens, foreign corporations, debtors under the jurisdiction of a court in a case under federal bankruptcy laws or in a receivership, foreclosure or similar proceeding, or an investment company, financial institution or insurance company. TAXABLE GAIN OR LOSS UPON SALE OF PROGRAMMING ASSETS A limited partner will realize and recognize gain or loss, or a combination of both, on the Partnership's sale of its programming assets prior to dissolution. The amount of gain realized with respect to each programming asset, or related asset, will be an amount equal to the excess of the amount realized by the Partnership and allocated to the limited partner, for example, cash or consideration received, over the limited partner's adjusted tax basis for such programming asset. Conversely, the amount of loss realized with respect to each programming asset or related asset will be an amount equal to the excess of the limited partner's tax basis over the amount realized by the Partnership for such programming asset and allocated to the limited partner. It is projected that net taxable gain will be realized upon the sale of Partnership programming assets and that such gain will be allocated among the limited partners in accordance with the limited partnership agreement. The limited partnership agreement includes an allocation provision that requires allocations pursuant to a dissolution be made among partners in a fashion that equalizes capital accounts of the partners so that the amount in each partner's capital account will reflect such partner's sharing ratio of income and loss. The extent to which capital accounts can be equalized, however, is limited by the amount of gain and loss available to be allocated. Realized gains and losses generally must be recognized and reported in the year the sale occurs. Accordingly, each limited partner will realize and recognize his or her allocable share of gains and losses in his tax year within which the Partnership programming assets are sold. Each limited partner's recognized allocable share of the net partnership Section 1231 gains or losses must be netted with that limited partner's individual Section 1231 gains and losses recognized during the year in order to determine the character of such net gains or net losses under Section 1231. Net gains will be treated as capital gains except to the extent recharacterized as ordinary income due to recapture and net losses will be treated as ordinary losses. IT IS ANTICIPATED THAT ALL GAINS ON THE SALE OF THE FILM RIGHTS WILL BE TREATED AS ORDINARY INCOME DUE TO THE DEPRECIATION RECAPTURE PROVISION OF SECTION 1245 OF THE CODE. DISSOLUTION OF THE PARTNERSHIP After the sale of its Film Rights, the Partnership's assets will consist solely of any net cash remaining after payment of the Partnership's obligations. Any such cash will be distributed to the partners in liquidation of his or her partnership interest. The Partnership will not realize gain or loss upon such distribution of cash to its partners. If the amount of cash distributed to a limited partner in liquidation of his or her partnership interest is less than such limited partner's adjusted tax basis in his or her interests, the limited partner will realize and recognize a capital loss to the extent of the excess. If the amount of cash distributed is greater than such limited partner's adjusted tax basis in his or her interests, the limited partner will recognize a capital gain to the extent of the excess. Page 30 CAPITAL GAINS TAX Net long-term capital gains of individuals, trusts and estates generally will be taxed at a maximum rate of 20%, while ordinarily income, including income from the recapture of depreciation, will be taxed at a maximum rate of 35.5% or 39.1%, depending on the taxpayer's taxable income. The amount of net capital losses that can be utilized to offset ordinary income will be limited to the sum of net capital gains from other sources recognized by the limited partner during the tax year, plus $3,000, or $1,500, in the case of a married individual filing a separate return. The excess amount of such net long-term capital loss may be carried forward and utilized in subsequent years subject to the same limitations. Corporations are taxed on net long-term capital gains at their ordinary Section 11 rates and are allowed to carry net capital losses back three years and forward five years. Section 1231 net losses can be fully utilized to offset ordinary income. PASSIVE LOSS LIMITATIONS Limited partners that are individuals, trusts, estates, or personal service corporations are subject to the passive activity loss limitations rules that were enacted as part of the Tax Reform Act of 1986. Generally, losses from a passive activity can only be deducted to the extent of income from other passive activities. A limited partner's allocable share of partnership income, gain, loss, and deduction is treated as derived from a passive activity, except to the extent of partnership portfolio income, which includes interest, dividends, royalty income and gains from the sale of property held for investment purposes. A limited partner's allocable share of any gain realized on sale of Partnership assets (other than gain from the sale of portfolio investments) will be characterized as passive activity income that may be offset by passive activity losses from other passive activity investments. Moreover, because the sale of all of the Partnership's assets will terminate the limited partner's interest in the passive activity, a limited partner's allocable share of any loss (i) previously realized as a limited partner in the Partnership and suspended because of its passive characterization, (ii) realized on the sale of partnership assets, or (iii) realized by the limited partner upon liquidation of his or her partnership interest, will not be characterized as losses from a passive activity. Through December 31, 2000, the passive activity losses from inception of the Partnership are approximately $108 per $500 limited partner interest. These losses can be deducted on disposition of the Film Rights if they have not previously been utilized by the limited partners. THE FOREGOING DISCUSSION IS INTENDED TO BE A SUMMARY OF THE MATERIAL INCOME TAX CONSIDERATIONS OF THE SALE OF PARTNERSHIP ASSETS AND DISSOLUTION. EACH LIMITED PARTNER SHOULD CONSULT ITS OWN TAX ADVISOR CONCERNING ITS PARTICULAR TAX CIRCUMSTANCES AND THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO IT OF THE SALE OF PARTNERSHIP ASSETS AND THE DISSOLUTION OF THE PARTNERSHIP. Page 31 DOCUMENTS INCLUDED Included with this proxy statement are the following documents: o The Partnership's Annual Report on Form 10-K for the year ended December 31, 2000. o The Partnership's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. o The Partnership's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. FORWARD-LOOKING STATEMENTS Some of the information included in this proxy statement, any attachments and the documents incorporated by reference contain forward-looking statements. Forward-looking statements use forward-looking terms such as "believe," "expect," "may," "intend," "will," "project," "should" or "anticipate" or other similar words. These statements discuss "forward-looking" information such as: o future net revenues from film distribution; o future cash distributions to investors in the Partnership; and o amounts or ranges of net proceeds from sales of the Partnership's assets. Other factors that could cause actual results to differ materially from those anticipated are discussed in the Partnership's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2000. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this proxy statement, any attachment and the documents incorporated by reference. The Partnership will not update these forward-looking statements unless the securities laws require an updating. OTHER MATTERS INCORPORATION BY REFERENCE The Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and the Partnership's Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2001 and June 30, 2001 are incorporated by reference in their entirety in this Proxy Statement. All subsequent documents filed by the Partnership prior to the vote pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934 are hereby incorporated by reference. JONES ENTERTAINMENT GROUP, LTD. as General Partner of the Partnership -------------------------------------- Lorri Ellis Secretary Page 32 FORM OF PROXY JONES PROGRAMMING PARTNERS 1-A, LTD. **VOTING OPTIONS** YOU MAY VOTE BY TELEPHONE (OR COMPLETE THE PROXY CARD BELOW AND RETURN IT BY MAIL IN THE ENCLOSED ENVELOPE) If voting by proxy, you may vote either by mail, fax or telephone. Your telephone vote authorizes the named proxies to vote your interests in the same manner as if you marked, signed and returned your proxy card by mail. To vote by telephone, please read the accompanying proxy statement and then follow these steps: TO VOTE BY PHONE: CALL TOLL FREE 1-866-227-8683 ANY TIME ON A TOUCH-TONE TELEPHONE. THERE IS NO CHARGE TO YOU FOR THE CALL. PLEASE HAVE THIS FORM AVAILABLE WHEN YOU CALL THE TOLL-FREE NUMBER. Enter the 10-digit pin number located below. To vote YES on the Proposal, as the General Partner recommends, PRESS 1. To vote AGAINST the Proposal PRESS 2. To ABSTAIN on the Proposal PRESS 3. If you vote by telephone, please DO NOT mail back the proxy. THANK YOU FOR VOTING! / / PIN NUMBER FOR TELEPHONIC VOTING FOLD AND DETACH HERE - -------------------------------------------------------------------------------- THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER FOR A SPECIAL MEETING OF THE LIMITED PARTNERS The undersigned hereby appoints Timothy J. Burke and Lorri Ellis as Proxies, each with the power to appoint his or her substitute, and hereby authorizes them to represent and to vote, as designed herein, all limited partnership interests of JONES PROGRAMMING PARTNERS 1-A, LTD. held of record by the undersigned on ________, 2001 for a special meeting of limited partners to be held at the corporate offices of the General Partner, 9697 E. Mineral Avenue, Englewood, Colorado, on ___________, ________, 2001, at 9:30 a.m., Mountain Time. THE GENERAL PARTNER RECOMMENDS A VOTE "FOR" THE FOLLOWING ITEM: 1) The adoption of a proposal for the sale of substantially all of the assets of the Partnership and the dissolution of the Partnership. (Note: The asset sale and dissolution of the Partnership comprise a single proposal, and a vote in favor of the proposal will constitute a vote in favor of each of these matters.) / / FOR / / AGAINST / / ABSTAIN THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE HEREON. IF NO SPECIFICATION IS MADE, IT WILL BE VOTED FOR THE PROPOSAL. (TO BE SIGNED ON OTHER SIDE.) Page 33 IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO ACT UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. ---------------------------------------- Date ---------------------------------------- Signature ---------------------------------------- (Signature if held jointly) Please sign exactly as your name appears at the left. When partnership interests are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or corporation, please sign in full corporate name by president or other authorized person. If a partnership, please sign in partnership name by authorized person. YOU MAY FAX YOUR SIGNED PROXY TO 214-887-7198. Page 34 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ______ to ______ Commission file number: 0-19075 JONES PROGRAMMING PARTNERS 1-A, LTD. ------------------------------------ (Exact name of registrant as specified in its charter) COLORADO 84-1088820 - -------------------------- --------------------------------- (State of Organization) (IRS Employer Identification No.) 9697 E. MINERAL AVENUE, ENGLEWOOD, COLORADO 80112 (303) 792-3111 - ------------------------------------------------- -------------- (Address of principal executive office and Zip Code) (Registrant's telephone no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 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 of the voting stock held by non-affiliates of the registrant: N/A Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ------- DOCUMENTS INCORPORATED BY REFERENCE: None Information contained in this Form 10-K Report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-K Report that address activities, events or developments that the General Partner or the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements are based upon certain assumptions and are subject to a number of risks and uncertainties. Actual results could differ materially from the results predicted by these forward-looking statements. PART I. ITEM 1. BUSINESS Jones Programming Partners 1-A, Ltd. (the "Partnership") is a Colorado limited partnership that was formed in April 1989 pursuant to the public offering of limited partnership interests in the Jones Programming Partners Limited Partnership Program. Jones Entertainment Group, Ltd. is the general partner of the Partnership (the "General Partner"). The Partnership was formed to acquire, develop and own rights to produce and license original programming. All the Partnership's films are subject to a variety of license agreements for various markets. Some of these agreements will last beyond the year 2001. The General Partner charges the Partnership for certain direct costs incurred on the Partnership's behalf. See further discussion of such costs charged to the Partnership by the General Partner in ITEM 8, FINANCIAL STATEMENTS, NOTE 4. As of December 31, 2000, the Partnership had three programming properties: "The Little Kidnappers," "The Story Lady" and "Curacao." It is not anticipated that the Partnership will invest in any additional programming, but instead will focus on the distribution and/or sale of its existing programming. Following is a description of the Partnership's programming. THE LITTLE KIDNAPPERS In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement with Jones Maple Leaf Productions to produce a full-length made-for-television film entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which included a production and overhead fee of $300,000 paid to the General Partner. In March 1999, the Partnership fully amortized its net investment in this film. From inception to December 31, 2000, the Partnership has recognized approximately $3,003,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to help finance the film's production. THE STORY LADY In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC Productions, Inc. ("NBCP") for the production of a full-length, made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for certain distribution rights to this film. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. In December 1995, the Partnership fully amortized its net investment in this film. From inception to December 31, 2000, the Partnership has recognized approximately $2,299,000 of revenue from this film. The Partnership has an agreement with NBCP to distribute "The Story Lady" in foreign markets. Under this agreement, the Partnership paid $1,000,000 for all the distribution rights to "The Story Lady" except for NBC network exhibition and certain other rights. The Partnership licensed back the foreign rights to NBCP for an eight year term (which expired at the end of 1999 and has been extended on a month to month basis) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television, and non-theatrical. The Partnership and NBCP revenues are pooled and are to be paid to the parties until each receives its original investment plus interest (the "unrecouped amount"). The Partnership is fully recouped. In September 1999, NBCP first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $200,000. The Partnership does not believe that NBCP is entitled to the distribution fees that it claims. 2 As of December 31, 2000, NBCP reported that it had not recouped approximately $469,000 of its original investment, plus interest. While the Partnership disputes whether NBCP is entitled to recover its entire claimed unrecouped amount under the agreement, an unfavorable outcome to the Partnership would make it unlikely that the Partnership will receive income from this film in the near future, or at all. Through December 31, 2000, the Partnership had received approximately $190,000 from distributors which was not applied to NBCP's unrecouped amount. As of December 31, 2000, the Partnership had reported this amount as an accrued liability. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make such payment, nor is it likely that the Partnership could borrow the necessary funds. Any proceeds from the sale of the Partnership's programming interests will likely have to be applied to some or all of the amounts claimed by NBCP. CURACAO In October 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") for the production of a full-length, made-for-television film entitled "Curacao." The total production cost of the film incurred by the Partnership was approximately $4,410,000. In addition to the costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime presale and supervising production of this picture. In December 1999, the Partnership fully amortized its net investment in this film. From inception to December 31, 2000, the Partnership has recognized approximately $4,062,000 of revenue from this film, which includes the initial license fee and home video advance from Showtime of $2,650,000, which was used to finance the film's production. GENERAL MATTERS The General Partner, on behalf of the Partnership, is pursuing the sale of the Partnership's interests in its programming. See further discussion of the Partnership's distribution efforts concerning these films in ITEM 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. None of the Partnership's films are presently generating any significant revenue. There is no assurance that the Partnership will be successful in obtaining a buyer or buyers for the assets of the Partnership or that the terms or conditions of any sale will be favorable to the Partnership. Many of the factors set forth below which affect the distribution of the films will also affect the saleability of the films themselves. If efforts to sell the Partnership's assets are not successful, the Partnership will continue to seek distribution for its films. The Partnership has obtained the services of a broker to assist in the sale of the Partnership's films. Pursuant to the services agreement, the broker will receive a 10% commission for arranging the sale, or sales, of the Partnership's films. The Partnership has encountered intense competition in connection with its attempts to distribute its programming. There is competition within the television programming industry for exhibition time on cable television networks, broadcast networks and independent television stations. Acceptance of the programming in certain distribution media may be limited and the programming will compete with other types of television programming in all domestic and international distribution media and markets. The age and technical specifications of the Partnership's programming may also limit distribution in certain international and domestic markets. The success of programming is also dependent in part on public taste, which is unpredictable and susceptible to change. In international markets, the Partnership has, in the past, and may again encounter additional risks, such as foreign currency rate fluctuations, compliance and regulatory requirements, differences in tax laws, and economic and political environments. The Partnership's films have been distributed in a number of markets. It is not known whether the Partnership can successfully exploit any of its films in these or other markets in the future. There can be no assurance that the distribution efforts made by the Partnership, the General Partner or unaffiliated parties on behalf of the Partnership for its programming will be successful. 3 ITEM 2. PROPERTIES SEE ITEM 1. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS While the Partnership is publicly held, there is no public market for the limited partnership interests and it is not expected that such a market will develop in the future. As of February 28, 2001, the number of equity security holders in the Partnership was 832. 4 ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------------------------------------------- 1996 1997 1998 1999 2000 -------------- -------------- ---------------------------- --------------- Gross revenues $ 211,669 $ 222,714 $ 195,717 $ 9,077 $ 27,273 Costs of filmed entertainment 107,418 93,983 11,546 6,027 - Distribution fees and expenses 58,229 98,471 196,695 119,104 15,463 Loss from write-down of film production cost 656,744 - - 58,946 - Operating, general and administrative expenses 62,499 94,162 115,247 61,810 43,239 Operating loss (673,221) (63,902) (127,771) (236,810) (31,429) Net loss (654,916) (54,372) (117,496) (237,119) (25,626) Net loss per limited partnership unit (50.88) (4.22) (9.13) (18.42) (1.99) Weighted average number of limited partnership units outstanding 12,743 12,743 12,743 12,743 12,743 General partner's deficit (49,284) (49,828) (52,612) (54,983) (55,239) Limited partners' capital (deficit) 517,422 463,594 187,985 (46,763) (72,133) Total assets 657,221 442,164 265,317 90,254 72,725 General partner advances 15,600 8,303 11,045 10,273 1,973
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the Partnership's financial condition and results of operations contains, in addition to historical information, forward-looking statements that are based upon certain assumptions and are subject to a number of risks and uncertainties. The Partnership's actual results may differ significantly from the results predicted in such forward-looking statements. RESULTS OF OPERATIONS 2000 COMPARED TO 1999 Revenues of the Partnership increased $18,196, from $9,077 in 1999 to $27,273 in 2000. This increase was primarily the result of revenue collection efforts made by the General Partner with respect to "Curacao". Revenue from "Curacao" was $3,703 in 1999 as compared to $26,807 in 2000. International and domestic sales of "The Little Kidnappers" and "The Story Lady" decreased, resulting in Partnership revenue of $4,455 and $919, respectively, in 1999 compared to $469 and $0, respectively, in 2000. "The Story Lady" was actively being distributed in 2000, however, due to the unrecouped position of NBCP, the Partnership was not entitled to any of the revenue generated by the film. Filmed entertainment costs decreased $6,027, from $6,027 in 1999 to $0 in 2000. This decrease was the result of the full amortization of the capitalized production costs relating to "The Little Kidnappers" in March 1999 and to "Curacao" in December 1999. Filmed entertainment costs are amortized over the life of the film in the ratio that current gross revenues bear to anticipated gross revenues. Distribution fees and expenses decreased $103,641, from $119,104 in 1999 to $15,463 in 2000. This decrease was due primarily to the Partnership recording $119,081 in royalties owed NBCP for the "Story Lady" in 1999 compared to $15,000 in 2000. These distribution fees and expenses relate to the compensation due and costs incurred by distributors in selling the Partnership's programming in the domestic and international markets. The timing and amount of distribution fees and expenses vary depending upon the individual market in which programming is distributed. The Partnership did not have a loss on write-down of film production in 2000. The loss from the write-down of film production of $58,946 in 1999, was the result of a full write-down of the Partnership's net investment in 5 "Curacao", as of December 31, 1999. As of December 31, 1999, the Partnership had expensed all costs related to the production of each of its three films. Operating, general and administrative expenses decreased $18,571, from $61,810 in 1999 to $43,239 in 2000. This decrease was due primarily to the Partnership writing off an outstanding receivable of $26,129 in 1999. A similar write off did not occur in 2000. This decrease was partially offset by an increase in legal expenses related to the potential sale of the Partnership's assets. Interest income increased $2,466, from $3,337 in 1999 to $5,803 in 2000. This increase in interest income was the result of higher interest rates and higher levels of invested cash balances during 2000 compared to 1999. Limited Partners' net loss per partnership unit decreased $16.43, from $(18.42) in 1999 to $(1.99) in 2000. This change was due to the results of operations as discussed above. 1999 COMPARED TO 1998 Revenues of the Partnership decreased $186,640, from $195,717 in 1998 to $9,077 in 1999. This decrease was due primarily to a decrease in domestic and international sales of "The Little Kidnappers" and "The Story Lady," which were $12,354 and $183,324, respectively, for 1998 as compared to $4,455 and $919, respectively, in 1999. International sales of "Curacao" increased $3,664, from $39 in 1998 to $3,703 in 1999. Filmed entertainment costs decreased $5,519, from $11,546 in 1998 to $6,027 in 1999. This decrease resulted primarily from the decrease in Partnership revenues and the full amortization in March 1999 of the "Little Kidnappers". Filmed entertainment costs are amortized over the life of the film in the ratio that current gross revenues bear to anticipated gross revenues. Distribution fees and expenses decreased $77,591, from $196,695 in 1998 to $119,104 in 1999. This decrease was due primarily to royalties that became due to artisan guilds in 1998 related to "Story Lady" and the decrease in revenues received from the three films. These distribution fees and expenses relate to the compensation due and costs incurred by distributors in selling the Partnership's programming in the domestic and international markets. The timing and amount of distribution fees and expenses vary depending upon the individual market in which programming is distributed. Loss on write-down of film production of $58,946 in 1999, was the result of a full write-down of the Partnership's net investment in "Curacao", as of December 31, 1999. No such write-down was taken in 1998. As of December 31, 1999, the Partnership had expensed all costs related to the production of films. Operating, general and administrative expenses decreased $53,437, from $115,247 in 1998 to $61,810 in 1999. This decrease was due primarily to an allowance of $80,300 made during 1998 related to the potential uncollectibility of an outstanding international income receivable. Interest income decreased $6,198, from $9,535 in 1998 to $3,337 in 1999. This decrease in interest income was the result of lower average levels of invested cash balances existing during 1999 as compared to 1998. Limited Partners' net income per partnership unit changed $(9.29), from $(9.13) in 1998 to $(18.42) in 1999. This change was due to the results of operations as discussed above. FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Partnership's principal sources of liquidity are cash on hand and amounts received from the domestic and international distribution of the Partnership's programming. The Partnership had approximately $73,000 in cash as of December 31, 2000. The Partnership will not invest in any additional programming projects, but instead will focus on the distribution and/or sale of its three existing films. 6 The General Partner, on behalf of the Partnership, is pursuing the sale of the Partnership's interests in its programming. The General Partner has no obligation to purchase any assets of the Partnership, nor is it anticipated that the General Partner will purchase any of such assets. The Partnership will retain a certain level of working capital, including any necessary reserves, to fund its operating activities. It is anticipated that any future distributions will only be made from proceeds received from the sale of the Partnership's assets. There is no assurance regarding the timing or amount of any future distributions. The General Partner has initiated sales efforts but cannot predict at this time when or at what price the Partnership's interests in its programming ultimately will be sold. The films may be sold as a group or on a one by one basis, in the judgement of the General Partner. Any direct costs incurred by the General Partner on behalf of the Partnership in soliciting and arranging for the sale, or sales, of the Partnership's programming projects will be charged to the Partnership. The Partnership does not have the funds necessary to pay NBCP its claimed unrecouped costs involved with "The Story Lady" and even if the Partnership is successful in finding a buyer or buyers for all of its property, the proceeds may not be sufficient to allow for any distributions to the Partners. It is probable that the distributions of the proceeds from the sales of the Partnership's programming projects, if any, together with all prior distributions paid to the limited partners, will return to the limited partners less than 75% of their initial capital contributions to the Partnership. The Partnership has obtained the services of a broker to assist in the sale of the Partnership's films. Pursuant to the services agreement, the broker will receive a 10% commission for arranging the sale, or sales, of the Partnership's films. The General Partner believes that the Partnership has, and will continue to have, sufficient liquidity to fund its ongoing operations and to meet its obligations so long as quarterly distributions are suspended and provided the Partnership is able to reach a satisfactory resolution with respect to the claims made by NBCP. However, there can be no assurance that such a resolution can be achieved. The General Partner does not anticipate cash flow from the films to increase significantly in the future. The lack of significant cash flow presently being generated by the Partnership's films may negatively effect the ultimate sales price of the films. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Partnership does not hold any financial instruments which present significant interest or market risk. 7 ITEM 8. FINANCIAL STATEMENTS JONES PROGRAMMING PARTNERS 1-A, LTD. FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 2000 INDEX
PAGE ----------- Report of Independent Public Accountants 9 Statements of Financial Position 10 Statements of Operations 11 Statements of Partners' Capital (Deficit) 12 Statements of Cash Flows 13 Notes to Financial Statements 14
8 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Jones Programming Partners 1-A, Ltd.: We have audited the accompanying statements of financial position of Jones Programming Partners 1-A, Ltd. (a Colorado limited partnership) as of December 31, 1999 and 2000, and the related statements of operations, partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the General Partner's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 Programming Partners 1-A, Ltd. as of December 31, 1999 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Denver, Colorado, March 2, 2001. 9 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, ------------------------------------- 1999 2000 ------------ ------------ ASSETS CASH AND CASH EQUIVALENTS (Note 2) $ 86,626 $ 72,725 RECEIVABLES: International income receivable 156 - Domestic income receivable 3,472 - INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION, net of accumulated amortization of $8,887,206 and $8,887,206 as of December 31, 1999 and 2000, respectively (Notes 2 and 5) - - ------------ ------------ Total assets $ 90,254 $ 72,725 =========== =========== LIABILITIES AND PARTNERS' DEFICIT LIABILITIES: Accounts payable to affiliates $ 10,273 $ 1,973 Accrued liabilities 181,727 198,124 ----------- ----------- Total liabilities 192,000 200,097 ----------- ----------- PARTNERS' CAPITAL (DEFICIT) (Note 3): General partner - Contributed capital 1,000 1,000 Distributions (42,440) (42,440) Accumulated deficit (13,543) (13,799) ------------ ----------- Total general partner's deficit (54,983) (55,239) ----------- ----------- Limited partners - Contributed capital (12,743 units outstanding as of December 31, 1999 and 2000) 5,459,327 5,459,327 Distributions (4,201,502) (4,201,502) Accumulated deficit (1,304,588) (1,329,958) ------------ ----------- Total limited partners' deficit (46,763) (72,133) ------------ ------------ Total partners' deficit (101,746) (127,372) ------------ ------------ Total liabilities and partners' deficit $ 90,254 $ 72,725 =========== ===========
The accompanying notes are an integral part of these financial statements. 10 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, ----------------------------------- 1998 1999 2000 --------- --------- --------- REVENUES (Notes 2 and 5) $ 195,717 $ 9,077 $ 27,273 COSTS AND EXPENSES: Costs of filmed entertainment (Notes 2 and 5) 11,546 6,027 -- Distribution fees and expenses (Note 2) 196,695 119,104 15,463 Loss from write-down of film production cost (Notes 2 and 5) -- 58,946 -- Operating, general and administrative expenses (Note 4) 115,247 61,810 43,239 --------- --------- --------- Total costs and expenses 323,488 245,887 58,702 --------- --------- --------- OPERATING LOSS (127,771) (236,810) (31,429) --------- --------- --------- OTHER INCOME (EXPENSE): Interest income 9,535 3,337 5,803 Other income (expense), net 740 (3,646) -- --------- --------- --------- Total other income (expense), net 10,275 (309) 5,803 --------- --------- --------- NET LOSS $(117,496) $(237,119) $ (25,626) ========= ========= ========= ALLOCATION OF NET LOSS: General partner $ (1,175) $ (2,371) $ (256) ========= ========= ========= Limited partners $(116,321) $(234,748) $ (25,370) ========= ========= ========= NET LOSS PER LIMITED PARTNERSHIP UNIT $ (9.13) $ (18.42) $ (1.99) ========= ========= ========= WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 12,743 12,743 12,743 ========= ========= =========
The accompanying notes are an integral part of these financial statements. 11 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1998 1999 2000 -------------- -------------- ------------- GENERAL PARTNER: Balance, beginning of year $ (49,828) $ (52,612) $ (54,983) Distributions (1,609) - - Net loss (1,175) (2,371) (256) ----------- ----------- ----------- Balance, end of year $ (52,612) $ (54,983) $ (55,239) =========== =========== =========== LIMITED PARTNERS: Balance, beginning of year $ 463,594 $ 187,985 $ (46,763) Distributions (159,288) - - Net loss (116,321) (234,748) (25,370) ----------- ----------- ----------- Balance, end of year $ 187,985 $ (46,763) $ (72,133) =========== =========== =========== TOTAL PARTNERS' CAPITAL (DEFICIT) $ 135,373 $ (101,746) $ (127,372) =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 12 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------- 1998 1999 2000 --------------- ------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (117,496) $ (237,119) $ (25,626) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Amortization of filmed entertainment costs 11,546 6,027 - Loss from write-down of film production cost - 58,946 - Decrease in international income receivable 97,253 25,119 156 Decrease (increase) in domestic income receivable (76,122) 77,650 3,472 Decrease in other assets - 3,275 - Net change in amounts due to/from affiliates 2,742 (772) (8,300) Increase in accrued liabilities 98,804 62,828 16,397 ---------- ------------ ----------- Net cash provided by (used in) operating activities 16,727 (4,046) (13,901) ---------- ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners (160,897) - - ---------- ------------ ----------- Net cash used in financing activities (160,897) - - ---------- ------------ ----------- DECREASE IN CASH AND CASH EQUIVALENTS (144,170) (4,046) (13,901) CASH AND CASH EQUIVALENTS, beginning of year 234,842 90,672 86,626 ---------- ------------ ----------- CASH AND CASH EQUIVALENTS, end of year $ 90,672 $ 86,626 $ 72,725 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 13 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (1) ORGANIZATION AND BUSINESS Organized in April 1989, Jones Programming Partners 1-A, Ltd. (the "Partnership") is a limited partnership formed pursuant to the laws of the State of Colorado to engage in the development, production, acquisition, licensing and distribution of original entertainment programming. Jones Entertainment Group, Ltd. is the "General Partner" of the Partnership. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS - The Partnership considers all highly-liquid investments with a maturity when purchased of three months or less to be cash equivalents. FILM REVENUE RECOGNITION - The Partnership recognizes revenue in accordance with the provisions of Statement of Financial Accounting Standards No. 139 ("SFAS No. 139") and AICPA Statement of Position No. 00-2 ("SOP 00-2"). Pursuant to SFAS No. 139 and SOP 00-2, revenues from domestic and international licensing agreements for programming are recognized when such amounts are known and the film is available for exhibition or telecast, and when certain other criteria set forth in SFAS No. 139 and SOP 00-2 are met. Advances received for licensing or other purposes prior to exhibition or telecast are deferred and recognized as revenue when the above conditions are met. The adoption of SFAS No. 139 and SOP 00-2 in 2000 did not materially effect the manner in which the Partnership recognizes revenue. INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION - Investment in and advances for film production consists of advances to production entities for story rights, production, and film completion costs, and is stated at the lower of cost or estimated net realizable value. In addition, film production and overhead fees payable to the General Partner have been capitalized and included as investment in film production. Film production costs are amortized based upon the individual-film-forecast method. Estimated losses, if any, will be provided for in full when determined by the General Partner (see Note 5.) DISTRIBUTION COSTS - Distribution fees and expenses incurred in connection with domestic and international film distribution are recorded at the time that the related licensing fees are recognized as revenue by the Partnership. Similarly, the Partnership expenses film advertising costs related to distribution when the advertising takes place. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. (3) PARTNERS' CAPITAL (DEFICIT) The capitalization of the Partnership is set forth in the accompanying Statements of Partners' Capital (Deficit). No limited partner is or will be obligated to make any additional contributions to the Partnership. The General Partner purchased its interest in the Partnership by contributing $1,000 to Partnership capital. Profits, losses and distributions of the Partnership are allocated 99 percent to the limited partners and 1 percent to the General Partner until the limited partners have received distributions equal to 100 percent of their capital contributions plus an annual return thereon of 12 percent, cumulative and non-compounded. Thereafter, profits/losses and distributions will generally be allocated 80 percent to the limited partners and 20 percent to the General Partner. Interest income earned prior to the start of the Partnership's first production was allocated 100 percent to the limited partners. It is probable that the 14 distributions of the proceeds from the sales of the Partnership's programming, if any, together with all prior distributions paid to the limited partners, will return to the limited partners less than 75% of their initial capital contributions to the Partnership. (4) TRANSACTIONS WITH AFFILIATES The General Partner is entitled to reimbursement from the Partnership for its direct and indirect expenses allocable to the operations of the Partnership, which shall include, but not be limited to, rent, supplies, telephone, travel, legal expenses, accounting expenses, preparation and distribution of reports to investors and salaries of any full or part-time employees. Because the indirect expenses incurred by the General Partner on behalf of the Partnership are immaterial, the General Partner generally does not charge indirect expenses to the Partnership. The General Partner charged $15,442, $10,856, and $9,680 to the Partnership for direct expenses for the years ended December 31, 1998, 1999, and 2000, respectively. (5) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION "THE LITTLE KIDNAPPERS" In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement with Jones Maple Leaf Productions to produce a full-length feature film for television entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which included a production and overhead fee of $300,000 paid to the General Partner. From inception to December 31, 2000, the Partnership has recognized approximately $3,003,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to finance the film's production. In March 1999, the Partnership fully amortized its net investment in this film. "THE STORY LADY" In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC Productions, Inc. ("NBCP") for the production of a full-length made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for worldwide distribution rights to this film, excluding United States and Canadian broadcast television rights. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. From inception to December 31, 2000, the Partnership has recognized approximately $2,299,000 of revenue from this film. In December 1999, the Partnership wrote off the outstanding receivable of $26,129. This write off is reflected in operating, general and administrative expenses in the accompanying statement of operations. In December 1995, the Partnership fully amortized its net investment in this film. The Partnership has an agreement with NBCP to distribute "The Story Lady" in foreign markets. Under this agreement, the Partnership paid $1,000,000 for all the distribution rights to "The Story Lady" except for NBC network exhibition and certain other rights. The Partnership licensed back the foreign rights to NBCP for an eight year term (which expired at the end of 1999 and has been extended on a month to month basis) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television, and non-theatrical. The Partnership and NBCP revenues are pooled and are to be paid to the parties until each receives its original investment plus interest (the "unrecouped amount"). The Partnership is fully recouped. In September 1999, NBCP first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $200,000. The Partnership does not believe that NBCP is entitled to the distribution fees that it claims. As of December 31, 2000, NBCP reported that it had not recouped approximately $469,000 of its original investment, plus interest. Through December 31, 2000, the Partnership had received approximately 15 $190,000 from distributors, which was not applied to NBCP's unrecouped amount. As of December 31, 2000, the Partnership had reported this amount as an accrued liability. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make such payments, nor is it likely that the Partnership could borrow the necessary funds. "CURACAO" In October 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") for the production of a full-length, made-for-television film entitled "Curacao." The total production cost of the film was approximately $4,410,000. In addition to the costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime pre-sale and supervising production of this picture. From inception to December 31, 2000, the Partnership has recognized approximately $4,062,000 of revenue from this film, which includes the initial license fee and home video advance from Showtime of $2,650,000 which was used to finance the film's production. During the fourth quarter 1999, the General Partner reassessed the anticipated gross revenue remaining from the distribution of "Curacao" based on revised estimated television sales projections and actual results of the film's distribution in comparison to the film's prior projections. A determination was made by the General Partner that the Partnership's net investment in "Curacao" exceeded the film's estimated net realizable value as of December 31, 1999, resulting in a write down of $58,946. These revenue projections were estimated by the General Partner based on the film's prior distribution history, the remaining international and domestic territories available to the film for future television distribution and the General Partner's previous distribution experience with other films. In December 1999, after consideration of amortization and write-downs, the Partnership fully amortized its net investment in this film. (6) INCOME TAXES Income tax provision (benefit) resulting from the Partnership's operations are not reflected in the accompanying financial statements as such amounts accrue directly to the partners. The Federal and state income tax returns of the Partnership are prepared and filed by the General Partner. The Partnership's tax returns, the qualification of the Partnership as a limited partnership for tax purposes, and the amount of distributable Partnership income or loss are subject to examination by Federal and state taxing authorities. If such examinations result in changes with respect to the Partnership's tax status or to the Partnership's recorded income or loss, the tax liability of the general and limited partners would be adjusted accordingly. The Partnership's only significant book-tax differences between the financial reporting and tax bases of the Partnership's assets and liabilities are associated with: 1) the difference between the amount of film production cost amortization and loss from write-down of film production cost recognized under generally accepted accounting principles and the amount of expense allowed for tax purposes; and 2) the allowance for doubtful accounts which is not yet deductible for tax purposes. Film production cost recognized under accounting principles generally accepted in the United States exceeded (was less than) the amount of expense recognized for tax purposes by approximately $91,300, ($472,400) and $0 for the years ended December 31, 1998, 1999 and 2000, respectively. 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership itself has no officers or directors. Certain information concerning directors and executive officers of the General Partner of the Registrant is set forth below. Each of the directors serves until the next annual meeting of the shareholders of the General Partner and until their successors shall be elected and qualified.
NAME AGE POSITIONS WITH THE GENERAL PARTNER Glenn R. Jones 71 Chairman of the Board, Chief Executive Officer and President Timothy J. Burke 50 Vice President and Director
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and Chief Executive Officer of the General Partner since its inception and he has served as President of the General Partner since April 1994. Mr. Jones is also the Chairman of the Board of Directors and Chief Executive Officer of the General Partner's principal shareholder, Jones 21st Century, Inc., a subsidiary of Jones International, Ltd. He is also an officer and director of a number of subsidiaries for Jones Media Networks, Ltd. (formerly known as Jones International Networks, Ltd.). For more than five years, until April 1999, Mr. Jones was Chairman of the Board of Directors and Chief Executive Officer of Jones Intercable, Inc., a multiple system cable television operator. In addition, Mr. Jones is a member of the Board and Education Council of the National Alliance of Business. In 1994, Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame. Mr. Jones received a B.S. in Economics from Allegheny College and a J.D. from the University of Colorado School of Law. Mr. Timothy J. Burke is Vice President and Director of the General Partner. Mr. Burke is a Group Vice President of Jones International, Ltd. and an officer and/or director of many other Jones International, Ltd. affiliated companies. He has over 24 years of financial experience, and has been employed with Jones for 18 years. Prior to the Jones companies, Mr. Burke was a Tax Manager with Arthur Andersen & Co. He received a B.A. in Accounting and a J.D from the University of Iowa. ITEM 11. EXECUTIVE COMPENSATION The Partnership has no employees; however, various personnel are required to operate its business. Such personnel are employed by the General Partner or an affiliate of the General Partner and, pursuant to the terms of the Partnership's limited partnership agreement, the cost of such employment can be charged by the General Partner to the Partnership as a reimbursement item. SEE ITEM 13. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of February 28, 2001, no person or entity owns more than 5 percent of the limited partnership interests in the Partnership, except for Herbert Borbe. Mr. Borbe owns 800 of the 12,743 partnership interests outstanding as of December 31, 2000. Mr. Borbe's address is 1709 134th Avenue S.E., Unit 21, Bellview, Washington 98005. Mr. Borbe is not a director, officer or employee of the General Partner or any of its affiliates. 17 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The General Partner and its affiliates engage in certain transactions with the Partnership as contemplated by the limited partnership agreement of the Partnership. The General Partner believes that the terms of such transactions are generally as favorable as could be obtained by the Partnership from unaffiliated parties. This determination has been made by the General Partner in good faith, but none of the terms were or will be negotiated at arm's-length and there can be no assurance that the terms of such transactions have been or will be as favorable as those that could have been obtained by the Partnership from unaffiliated parties. 18 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT: -------------------------------------------------------- 1. Financial statements 2. The following exhibits are filed herewith: 4.1 Limited Partnership Agreement. (1) (1) Incorporated by reference from the Partnership's Annual Report on Form 10-K for year ended December 31, 1989. (b) REPORTS ON FORM 8-K: ------------------- None. 19 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 PROGRAMMING PARTNERS 1-A, LTD., a Colorado limited partnership By Jones Entertainment Group, Ltd., its General Partner By: /s/ GLENN R. JONES ---------------------------------- Glenn R. Jones Chairman of the Board, Chief Executive Officer Dated: March 21, 2001 and President Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. By: /s/ GLENN R. JONES ---------------------------------- Glenn R. Jones Chairman of the Board, Chief Executive Officer and President Dated: March 21, 2001 (Principal Executive Officer) By: /s/ TIMOTHY J. BURKE ---------------------------------- Dated: March 21, 2001 Timothy J. Burke 20 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 0-19075 JONES PROGRAMMING PARTNERS 1-A, LTD. (Exact name of registrant as specified in charter) COLORADO 84-1088820 -------- ---------- (State of organization) (I.R.S. Employer Identification No.) 9697 E. MINERAL AVENUE, ENGLEWOOD, COLORADO 80112 (303) 792-3111 - -------------------------------------------------- -------------- (Address of principal executive office and Zip Code) (Registrant's telephone no, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 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 ___ JONES PROGRAMMING PARTNERS 1-A, LTD. INDEX
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Statements of Financial Position December 31, 2000 and March 31, 2001 3 Unaudited Statements of Operations Three Months Ended March 31, 2000 and 2001 4 Unaudited Statements of Cash Flows Three Months Ended March 31, 2000 and 2001 5 Notes to Unaudited Financial Statements March 31, 2001 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II. OTHER INFORMATION 10
JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF FINANCIAL POSITION
December 31, March 31, 2000 2001 ------------- -------------- ASSETS CASH AND CASH EQUIVALENTS $ 72,725 $ 62,595 ACCOUNTS RECEIVABLE - 33,500 INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION, net of accumulated amortization of $8,887,206 as of December 31, 2000 and March 31, 2001, respectively - - ------------- -------------- Total assets $ 72,725 $ 96,095 ============= ============== LIABILITIES AND PARTNERS' DEFICIT LIABILITIES: Accounts payable to affiliates $ 1,973 $ 31,902 Accrued liabilities 198,124 175,559 ------------- -------------- Total liabilities 200,097 207,461 ------------- -------------- PARTNERS' DEFICIT: General partner - Contributed capital 1,000 1,000 Distributions (42,440) (42,440) Accumulated deficit (13,799) (13,639) ------------- -------------- Total general partner's deficit (55,239) (55,079) ------------- -------------- Limited partners - Contributed capital, net of offering costs (12,743 units outstanding as of December 31, 2000 and March 31, 2001) 5,459,327 5,459,327 Distributions (4,201,502) (4,201,502) Accumulated deficit (1,329,958) (1,314,112) ------------- -------------- Total limited partners' deficit (72,133) (56,287) ------------- -------------- Total partners' deficit (127,372) (111,366) ------------- -------------- Total liabilities and partners' deficit $ 72,725 $ 96,095 ============= ==============
The accompanying notes are an integral part of these financial statements. -3- JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, ----------------------------------- 2000 2001 ------------- ------------- REVENUES $ - $ 34,695 COSTS AND EXPENSES: Distribution fees and expenses - 8,079 Operating, general and administrative expenses 13,907 11,284 ------------- ------------- Total costs and expenses 13,907 19,363 ------------- ------------- OPERATING INCOME (LOSS) (13,907) 15,332 ------------- ------------- INTEREST INCOME 1,143 674 ------------- ------------- NET INCOME (LOSS) $ (12,764) $ 16,006 ============= ============= ALLOCATION OF NET INCOME (LOSS): General Partner $ (128) $ 160 ============= ============= Limited Partners $ (12,636) $ 15,846 ============= ============= NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ (.99) $ 1.24 ============= ============= WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 12,743 12,743 ============= =============
The accompanying notes are an integral part of these financial statements. -4- JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, -------------------------------- 2000 2001 -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (12,764) $ 16,006 Adjustments to reconcile net loss to net cash provided by (used in) operating activities Net change in assets and liabilities: Decrease (increase) in foreign income receivable 156 (33,500) Decrease in domestic income receivable 3,472 - Net change in amounts due to affiliates 32,335 29,929 Decrease in accrued liabilities (4,006) (22,565) -------------- ------------ Net cash provided by (used in) operating activities 19,193 (10,130) -------------- ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19,193 (10,130) CASH AND CASH EQUIVALENTS, beginning of period 86,626 72,725 -------------- ------------ CASH AND CASH EQUIVALENTS, end of period $ 105,819 $ 62,595 ============== ============
The accompanying notes are an integral part of these financial statements. -5- JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION This Form 10-Q is being filed in conformity with the SEC requirements for unaudited financial statements and does not contain all of the necessary footnote disclosures required for a fair presentation of the Statements of Financial Position and Statements of Operations and Cash Flows in conformity with accounting principles generally accepted in the United States. However, in the opinion of management, this data includes all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Jones Programming Partners 1-A, Ltd. (the "Partnership") as of December 31, 2000 and March 31, 2001 and its results of operations and its cash flows for the three month periods ended March 31, 2000 and 2001. Results of operations for these periods are not necessarily indicative of results to be expected for the full year. (2) TRANSACTIONS WITH AFFILIATED ENTITIES Jones Entertainment Group, Ltd. ("General Partner") is entitled to reimbursement from the Partnership for its direct and indirect expenses allocable to the operations of the Partnership, which shall include, but not be limited to, rent, supplies, telephone, travel, legal expenses, accounting expenses, preparation and distribution of reports to investors and salaries of any full or part-time employees. Because the indirect expenses incurred by the General Partner on behalf of the Partnership are immaterial, the General Partner generally does not charge indirect expenses to the Partnership. The General Partner charged direct expenses of $4,681 and $5,847, to the Partnership for the three-month periods ended March 31, 2000 and 2001, respectively. (3) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION "THE LITTLE KIDNAPPERS" In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement with Jones Maple Leaf Productions to produce a full-length feature film for television entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which includes a production and overhead fee of $300,000 paid to the General Partner. From inception to March 31, 2001, the Partnership has recognized approximately $3,036,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to finance the film's production. In March 1999, the Partnership fully amortized its net investment in this film. "THE STORY LADY" In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC Productions, Inc. ("NBCP") for the production of a full-length made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for worldwide distribution rights to this film, excluding United States and Canadian broadcast television rights. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. From inception to March 31, 2001, the Partnership has recognized approximately $2,299,000 of revenue from this film. In December 1995, the Partnership fully amortized its net investment in this film. The Partnership has an agreement with NBCP to distribute "The Story Lady" in foreign markets. The Partnership licensed back the foreign rights to NBCP for an eight year term (which expired at the end of 1999 and has been extended on a month to month basis) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television, and non-theatrical. The Partnership and NBCP revenues are pooled and are to be paid to the parties until each receives its original investment plus interest (the "unrecouped amount"). The Partnership is fully recouped. In September 1999, NBCP first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $200,000. The Partnership does not believe that NBCP is entitled to the distribution fees that it claims. -6- As of March 31, 2001, NBCP reported that it had not recouped approximately $170,000 of its original investment in this film and approximately $283,000 in interest thereon. Interest will continue to accrue on this unrecouped balance. Through March 31, 2001, the Partnership had received approximately $174,000 from distributors, which was not applied to NBCP's unrecouped amount. As of March 31, 2001, the Partnership had reported this amount as an accrued liability. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make any such payments to NBCP, nor is it likely that the Partnership could borrow the necessary funds. "CURACAO" In October 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") for the production of a full-length, made-for-television film entitled "Curacao." The total production cost of the film incurred by the Partnership was approximately $4,410,000. In addition to the costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime pre-sale and supervising production of this picture. From inception to March 31, 2001, the Partnership has recognized approximately $4,064,000 of revenue from this film, which includes the initial license fee and home video advance from Showtime of $2,650,000, which was used to finance the film's production. In December 1999, after consideration of approximately $3,450,000 in amortization and approximately $960,000 in write-downs, the Partnership fully amortized its net investment in this film. -7- JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Partnership's principal sources of liquidity are cash on hand and amounts received from the domestic and international distribution of the Partnership's programming. As of March 31, 2001, the Partnership had approximately $63,000 in cash. Cash used in operations for the three months ended March 31, 2001 was approximately $10,000. The Partnership will not invest in any additional programming projects, but instead will focus on the distribution and/or sale of its three existing films. The Partnership will retain a certain level of working capital, including any necessary reserves, to fund its operating activities. It is anticipated that future distributions, if any, will only be made from proceeds received from the sale of the Partnership's assets. There is no assurance regarding the timing or amount of any future distributions. The General Partner, on behalf of the Partnership, is pursuing the sale of the Partnership's interests in its programming. The General Partner has no obligation to purchase any assets of the Partnership, nor is it anticipated that the General Partner will purchase any of such assets. The General Partner cannot predict when or at what price the Partnership's interests in its programming ultimately will be sold, but has initiated sales efforts. The films may be sold as a group or on an individual basis, in the judgement of the General Partner. The films could also be packaged with the films of an affiliated public limited partnership. Any direct costs incurred by the General Partner on behalf of the Partnership in soliciting and arranging for the sale, or sales, of the Partnership's programming projects will be charged to the Partnership. The Partnership does not have the funds necessary to pay NBCP its claimed fees and unrecouped cost and interest involved with "The Story Lady" and even if the Partnership is successful in finding a buyer or buyers for some or all of its programming, the proceeds may not be sufficient to allow for any distributions to the Partners. It is probable that the distributions of the proceeds from the sales of the Partnership's programming projects, if any, together with all prior distributions paid to the limited partners, will return to the limited partners less than 75% of their initial capital contributions to the Partnership. The Partnership has retained the services of a broker to assist in the sale of the Partnership's films. Pursuant to the services agreement, the broker will receive a 10% commission for arranging the sale, or sales, of the Partnership's films. The General Partner believes that the Partnership has, and will continue to have, sufficient liquidity to fund its ongoing operations and to meet its obligations so long as quarterly distributions are suspended and provided the Partnership is able to reach a satisfactory resolution with respect to the claims made by NBCP. However, there can be no assurance that such a resolution can be achieved. The General Partner does not anticipate cash flow from the films to increase significantly in the future. The lack of significant cash flow presently being generated by the Partnership's films may negatively effect the ultimate sales price of the films. RESULTS OF OPERATIONS Revenues of the Partnership increased $34,695, from $0 to $34,695 for the three months ended March 31, 2000 and 2001, respectively. This increase in revenue was the result of royalties received from "Curacao" and distribution revenue recognized for "The Little Kidnappers". Distribution fees and expenses increased $8,079, from $0 to $8,079 for the three months ended March 31, 2000 and 2001, respectively. This increase was primarily the result of an $8,000 payment made to an unaffiliated company to perform technical work on "The Little Kidnappers", potentially allowing for the film to be redistributed in parts of Europe. Distribution fees and expenses typically relate to the compensation due and costs incurred in connection with selling the Partnership's programming in the domestic and international markets. The timing and amount of distribution fees and expenses vary depending upon the individual market in which programming is distributed. -8- Operating, general and administrative expenses decreased $2,623, from $13,907 to $11,284 for the three months ended March 31, 2000 and 2001, respectively. This decrease was primarily due to a decrease in legal and accounting expenses during the three months ended March 31, 2001 compared to the same period in 2000. Interest income decreased $469, from $1,143 to $674 for the three months ended March 31, 2000 and 2001, respectively. This decrease in interest income was primarily the result of lower average levels of invested cash balances and lower interest rates during the first three months of 2001 compared to the same period in 2000. Limited Partners' net income (loss) per partnership unit changed $2.23, from $(.99) to $1.24 for the three months ended March 31, 2000 and 2001, respectively. This change was due to the result of the operations as discussed above. -9- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. a) Exhibits None b) Reports on Form 8-K None -10- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JONES PROGRAMMING PARTNERS 1-A, LTD. BY: JONES ENTERTAINMENT GROUP, LTD. General Partner By: /s/ Timothy J. Burke -------------------------------------- Timothy J. Burke Vice President Dated: May 10, 2001 -11- FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number: 0-19075 JONES PROGRAMMING PARTNERS 1-A, LTD. (Exact name of registrant as specified in charter) Colorado 84-1088820 -------- ---------- (State of organization) (I.R.S. Employer Identification No.) 9697 E. Mineral Avenue, Englewood, Colorado 80112 (303) 792-3111 - -------------------------------------------------- -------------- (Address of principal executive office and Zip Code) (Registrant's telephone no, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interest Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 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 / / JONES PROGRAMMING PARTNERS 1-A, LTD. INDEX
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Statements of Financial Position December 31, 2000 and June 30, 2001 3 Unaudited Statements of Operations Three and Six Months Ended June 30, 2000 and 2001 4 Unaudited Statements of Cash Flows Six Months Ended June 30, 2000 and 2001 5 Notes to Unaudited Financial Statements June 30, 2001 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II. OTHER INFORMATION 10
JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF FINANCIAL POSITION
December 31, June 30, 2000 2001 ----------- ----------- ASSETS CASH AND CASH EQUIVALENTS $ 72,725 $ 63,585 ACCOUNTS RECEIVABLE -- 33,500 INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION, net of accumulated amortization of $8,887,206 and $8,887,206 as of December 31, 2000 and June 30, 2001, respectively (Note 3) -- -- ----------- ----------- Total assets $ 72,725 $ 97,085 =========== =========== LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) LIABILITIES: Accounts payable to affiliates $ 1,973 $ 45,191 Accrued liabilities 198,124 177,184 ----------- ----------- Total liabilities 200,097 222,375 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General partner - Contributed capital 1,000 1,000 Distributions (42,440) (42,440) Accumulated deficit (13,799) (13,778) ----------- ----------- Total general partner's deficit (55,239) (55,218) ----------- ----------- Limited partners - Contributed capital, net of offering costs (12,743 units outstanding as of December 31, 2000 and June 30, 2001) 5,459,327 5,459,327 Distributions (4,201,502) (4,201,502) Accumulated deficit (1,329,958) (1,327,897) ----------- ----------- Total limited partners' deficit (72,133) (70,072) ----------- ----------- Total partners' deficit (127,372) (125,290) ----------- ----------- Total liabilities and partners' deficit $ 72,725 $ 97,085 =========== ===========
The accompanying notes are an integral part of these unaudited financial statements. 3 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITIED STATEMENTS OF OPERATIONS
For the Three Months For the Six Months Ended June 30, Ended June 30, ------------------------- -------------------------- 2000 2001 2000 2001 -------- -------- -------- -------- REVENUES $ 26,804 $ 54 $ 26,804 $ 34,749 COSTS AND EXPENSES: Distribution fees and expenses 41 -- 41 8,079 Operating, general and administrative expenses 14,660 14,914 28,567 26,198 -------- -------- -------- -------- Total costs and expenses 14,701 14,914 28,608 34,277 -------- -------- -------- -------- OPERATING INCOME (LOSS) 12,103 (14,860) (1,804) 472 -------- -------- -------- -------- INTEREST INCOME 1,456 936 2,599 1,610 NET INCOME (LOSS) $ 13,559 $(13,924) $ 795 $ 2,082 ======== ======== ======== ======== ALLOCATION OF NET INCOME (LOSS): General partner $ 136 $ (139) $ 8 $ 21 ======== ======== ======== ======== Limited partners $ 13,423 $(13,785) $ 787 $ 2,061 ======== ======== ======== ======== NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ 1.05 $ (1.08) $ .06 $ .16 ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 12,743 12,743 12,743 12,743 ======== ======== ======== ========
The accompanying notes are an integral part of these unaudited financial statements. 4 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, ---------------------------- 2000 2001 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 795 $ 2,082 Adjustments to reconcile net income to net cash provided by (used in) operating activities Net change in assets and liabilities: Decrease (increase) in accounts receivable 3,628 (33,500) Decrease in accrued liabilities (3,856) (20,940) Increase in accounts payable to affiliates 46,889 43,218 --------- --------- Net cash provided by (used in) operating activities 47,456 (9,140) --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47,456 (9,140) CASH AND CASH EQUIVALENTS, beginning of period 86,626 72,725 --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 134,082 $ 63,585 ========= =========
The accompanying notes are an integral part of these unaudited financial statements. 5 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION This Form 10-Q is being filed in conformity with the SEC requirements for unaudited financial statements and does not contain all of the necessary footnote disclosures required for a fair presentation of the Statements of Financial Position and Statements of Operations and Cash Flows in conformity with accounting principles generally accepted in the United States. However, in the opinion of management, this data includes all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Jones Programming Partners 1-A, Ltd. (the "Partnership") as of December 31, 2000 and June 30, 2001, its results of operations for the three and six month periods ended June 30, 2000 and 2001, and its cash flows for the six month periods ended June 30, 2000 and 2001. Results of operations for these periods are not necessarily indicative of results to be expected for the full year. (2) TRANSACTIONS WITH AFFILIATED ENTITIES Jones Entertainment Group, Ltd. (the "General Partner") is entitled to reimbursement from the Partnership for its direct and indirect expenses allocable to the operations of the Partnership, which shall include, but not be limited to, rent, supplies, telephone, travel, legal expenses, accounting expenses, preparation and distribution of reports to investors and salaries of any full or part-time employees. Because the indirect expenses incurred by the General Partner on behalf of the Partnership are immaterial, the General Partner generally does not charge indirect expenses to the Partnership. The General Partner charged direct expenses of $1,676 and $4,705, to the Partnership for the three month periods ended June 30, 2000 and 2001, respectively. For the six month periods ended June 30, 2000 and 2001, $6,357 and $10,552, respectively, were charged to the Partnership for direct expenses. (3) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION "THE LITTLE KIDNAPPERS" The total cost of this film was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which includes a production and overhead fee of $300,000 paid to the General Partner. From inception to June 30, 2001, the Partnership has recognized approximately $3,036,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to finance the film's production. In March 1999, the Partnership fully amortized its net investment in this film. In March 2001, EuroArts Medien AG extended its license for certain foreign television rights to this film for $33,500. The Partnership expects to collect the $33,500 receivable in the second half of 2001. "THE STORY LADY" The total cost of this film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for worldwide distribution rights to this film, excluding United States and Canadian broadcast television rights. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. From inception to June 30, 2001, the Partnership has recognized approximately $2,299,000 of revenue from this film. In December 1995, the Partnership fully amortized its net investment in this film. The Partnership licensed back the foreign rights to NBC Productions, Inc. ("NBCP") for an eight year term (which expired at the end of 1999 and was extended until July 12, 2001, when it was terminated) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television and non-theatrical. The Partnership and NBCP revenues are pooled and are to be paid to the parties until each recoups its original investment plus interest. The Partnership is fully recouped. In September 1999, NBCP first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $192,500. The Partnership does not believe that NBCP is entitled to the distribution fees that it claims. 6 NBCP also has reported that it has not recouped approximately $170,000 of its original investment in this film and approximately $283,000 of interest thereon. Interest will continue to accrue on this unrecouped balance. Through June 30, 2001, the Partnership had received approximately $175,000 from distributors which has not been applied to NBCP's unrecouped amount. As of June 30, 2001, the Partnership has reported this amount as an accrued liability, but believes there is a basis to deny some or all of such liability. Litigation could result because of the dispute with NBCP. Such litigation would be costly and time consuming. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make any such payments to NBCP, nor is it likely that the Partnership could borrow the necessary funds. "CURACAO" The total production cost of this film was approximately $4,410,000. In addition to the costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime pre-sale and supervising production of this picture. From inception to June 30, 2001, the Partnership has recognized approximately $4,064,000 of revenue from this film, which includes the initial license fee and home video advance from Showtime of $2,650,000, which was used to finance the film's production. In December 1999, after consideration of approximately $3,450,000 in amortization and approximately $960,000 in write-downs, the Partnership fully amortized its net investment in this film. 7 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Partnership's principal sources of liquidity are cash on hand and amounts received from the domestic and international distribution of the Partnership's programming. As of June 30, 2001, the Partnership had approximately $64,000 in cash. Cash used in operations for the six months ended June 30, 2001 was approximately $9,000. As of June 30, 2001, accounts payable to affiliates totaled approximately $45,000. The Partnership made a $30,000 payment towards this accounts payable liability in July 2001. The Partnership will not invest in any additional programming projects, but instead will focus on the distribution and/or sale of its three films. The Partnership will retain a certain level of working capital, including any necessary reserves, to fund its operating activities. It is anticipated that future distributions, if any, will only be made from proceeds received from the sale of the Partnership's assets. There is no assurance regarding the timing or amount of future distributions, if any. The General Partner, on behalf of the Partnership, is pursuing the sale of the Partnership's assets. This activity is the principal focus of the Partnership. The General Partner will not purchase any of such assets. The General Partner cannot predict when or at what price the Partnership's interests in its programming ultimately will be sold, but has initiated sales efforts. The sale of the Partnership's assets will be subject to a vote of the limited partners. The films may be sold as a group or on an individual basis, in the judgement of the General Partner. The films could also be packaged with the films of an affiliated public limited partnership. Any direct costs incurred by the General Partner on behalf of the Partnership in soliciting and arranging for the sale, or sales, of the Partnership's assets will be charged to the Partnership. The Partnership does not have the funds necessary to pay NBCP its claimed fees and unrecouped cost and interest involved with "The Story Lady", and even if the Partnership is successful in finding a buyer or buyers for some or all of its programming, the proceeds may not be sufficient to allow for any distributions to the Partners. It is probable that the distributions of the proceeds from the sales of the Partnership's assets, if any, together with all prior distributions paid to the limited partners, will return to the limited partners less than 75% of their initial capital contributions to the Partnership. The Partnership has retained the services of a broker to assist in the sale of the Partnership's films. The broker was paid $5,500 for film evaluation services. Pursuant to the services agreement, the broker will also receive a 10% commission for arranging the sale, or sales, of the Partnership's films. The General Partner believes that the Partnership has sufficient liquidity to fund its operations and to meet its obligations through the remainder of the year, so long as distributions are suspended and provided the Partnership is able to reach a satisfactory resolution with respect to the claims made by NBCP. However, there can be no assurance that such a resolution can be achieved. The General Partner does not anticipate cash flow from the films to increase significantly in the future. The lack of significant cash flow presently being generated by the Partnership's films may negatively affect the ultimate sales price of the films. RESULTS OF OPERATIONS Revenues of the Partnership decreased $26,750, from $26,804 to $54 for the three months ended June 30, 2000 and 2001, respectively. This decrease was primarily due to a significant decrease in distribution revenue and royalties received for "Curacao" during the three months ended June 30, 2001 compared to the same period in 2000. Revenues of the Partnership increased $7,945, from $26,804 to $34,749 for the six months ended June 30, 2000 and 2001, respectively. This increase was primarily the result of an increase in international distribution revenue recognized for "The Little Kidnappers", partially offset by the decrease in "Curacao" revenue described above. Distribution fees and expenses decreased $41, from $41 to $0 for the three months ended June 30, 2000 and 2001, respectively. This decrease resulted from the payment of royalties in 2000 of $41 to artisan guilds for "The Little Kidnappers". Distribution fees and expenses increased $8,038, from $41 to $8,079 for the six months ended June 30, 2000 8 and 2001, respectively. This increase was primarily the result of an $8,000 payment made to an unaffiliated company to perform technical work on "The Little Kidnappers", allowing for the film to be redistributed in parts of Europe. Distribution fees and expenses typically relate to the compensation due and costs incurred in connection with selling the Partnership's programming in the domestic and international markets. The timing and amount of distribution fees and expenses vary depending upon the individual market in which programming is distributed. Operating, general and administrative expenses increased $254, from $14,660 to $14,914 for the three months ended June 30, 2000 and 2001, respectively. This increase was primarily due to an increase in tax preparation expenses along with an increase in accounting and professional service expenses related to the potential sale or sales of the Partnership's assets, offset by a decrease in legal expenses. Operating, general and administrative expenses decreased $2,369, from $28,567 to $26,198 for the six months ended June 30, 2000 and 2001, respectively. This decrease was primarily the result of a decrease in legal and accounting expenses partially offset by an increase in professional service expenses related to the potential sale of the Partnership's assets. Interest income decreased $520, from $1,456 to $936 for the three months ended June 30, 2000 and 2001, respectively. Interest income decreased $989, from $2,599 to $1,610 for the six months ended June 30, 2000 and 2001, respectively. The decrease in interest income was primarily the result of lower average levels of invested cash during the three and six month periods ended June 30, 2001 as compared to the same periods in 2000. Limited Partners' net income (loss) per partnership unit changed $(2.13), from $1.05 to $(1.08) for the three months ended June 30, 2000 and 2001, respectively. Limited Partners' net income per partnership unit increased $.10, from $.06 to $.16 for the six months ended June 30, 2000 and 2001, respectively. These changes were due to the results of operations as discussed above. 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. a) Exhibits None b) Reports on Form 8-K None 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JONES PROGRAMMING PARTNERS 1-A, LTD. BY: JONES ENTERTAINMENT GROUP, LTD. General Partner By: /s/ Timothy J. Burke -------------------------------- Timothy J. Burke Vice President Dated: August 6, 2001 11 EX-4.1 3 a2057914zex-4_1.txt EXHIBIT 4.1 AMENDMENT TO PARTNERSHIP AGREEMENT OF JONES PROGRAMMING PARTNERS I, LTD. Pursuant to the provisions of Section 6.1 of the Limited Partnership Agreement for Jones Programming Partners 1-A, Ltd. (the "Partnership"), the General Partner of the Partnership desires to amend Section 3.5(a) of the Limited Partnership Agreement in order to correct an apparent ambiguity and to thereby clarify the limitations on the powers of the General Partner to approve transfers made by Limited Partners of certain rights with respect to the Partnership. Accordingly, Section 3.5(a) is hereby amended to add the following sentence as the last sentence of such section: "Notwithstanding the foregoing, an economic interest in the Partnership can be transferred without compliance with (1) and (2) above." IN WITNESS WHEREOF, this Amendment has been adopted with retroactive effect to the date of formation of the Partnership by Jones Entertainment Group, Ltd., General Partner. Dated this 31st day of December, 1990. JONES ENTERTAINMENT GROUP, LTD. General Partner By: /s/ Theodore A. Henderson --------------------------------- JONES PROGRMMING PARTNERS 1-A, LTD. LIMITED PARTNERSHIP AGREEMENT This Limited Partnership Agreement made and entered into, as of this 27th day of April, 1989, by and among Jones 21st Century Entertainment, Inc., a Colorado corporation, as general partner (hereinafter called the "General Partner") and the limited partners listed on the detachable Subscription Agreements annexed hereto and such additional limited partners as may individually be called "Limited Partner" and collectively called "Limited Partners". In consideration of the mutual promises contained herein, the parties agree as follows with such changes or variations thereof as may be convenient or necessary to comply with law: ARTICLE 1 THE LIMITED PARTNERSHIP 1.1 NAME OF LIMITED PARTNERSHIP. The name of the Limited Partnership formed hereunder is Jones Programming Partners 1-A, Ltd. (hereinafter called the "Partnership"). 1.2 CHARACTER OF BUSINESS. The character of the business to be conducted by the Partnership shall be to acquire, develop, produce and exploit original programming (the "Programming"), and to conduct, without limitation, such other activities and businesses which are incidental or necessary to the foregoing. 1.3 PRINCIPAL PLACE OF BUSINESS. The location of the principal place of business of the Partnership shall initially be 9697 East Mineral Avenue, Englewood, Colorado 80112. The General Partner may change such place of business in its discretion and may maintain such other offices at any other place or places as it deems advisable. 1.4 PARTNERS' NAMES AND RESIDENCES. The name and mailing address of the General Partner is Jones 21st Century Entertainment, Inc., 9697 East Mineral Avenue, Englewood, Colorado 80112, and the name and mailing address of each Limited Partner is as designated on the detachable Subscription Agreements annexed hereto and such additional detachable Subscription Agreements as may hereafter be added in connection with additional Limited Partners. 1.5 TERM. The term of the Partnership shall commence on the date of filing of the Certificate of Limited Partnership in accordance with the Colorado Uniform Limited Partnership Act of 1981 (the "Act"), and shall expire on the twenty-fifth anniversary of such filing, unless sooner terminated as provided hereinafter. 1.6 FORMATION. The Partnership created hereunder shall be formed pursuant to the Act. The General Partner and the Limited Partners, acting directly or through an attorney-in-fact, shall promptly sign and acknowledge under the Act a Certificate of Limited Partnership, shall cause the Certificate of Limited Partnership to be filed for record in the office of the Secretary of State of Colorado, and shall thereafter, from time to time, execute such further documents and take such further action as shall be deemed appropriate by the General Partner to comply with requirements of law for the formation and operation of a limited partnership in all other counties, states and other jurisdictions where the Partnership may elect to do business. The General Partner shall not be required to furnish copies of the Certificate of Limited Partnership to the Limited Partners. 1.7 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar year. 1.8 NAMES AND IDENTIFYING MARKS, SOFTWARE. The names "Jones," "21st Century," "Jones 21st Century," and Jones 21st Century Entertainment, Inc.'s identifying marks and all other Jones 21st Century, Inc. and Jones 21st Century Entertainment, Inc.'s and affiliates' identification marks and logos of all kinds and descriptions, used now or hereafter, including those used on marketing materials are owned by Jones International, Ltd. or its affiliates and shall remain exclusively so, regardless of the termination of this Agreement or the removal of the General Partner or otherwise and shall not be used without written permission. In addition, any computer software developed by the General Partner or its affiliates which is used by the Partnership is, and shall remain, the exclusive property of the General Partner, or its affiliates, regardless of the termination of this Agreement, the removal of the General Partner or otherwise and shall not be used without written permission. The expenses of developing such software will be paid solely by the General Partner or its affiliates. ARTICLE 2 THE GENERAL PARTNER 2.1 MANAGEMENT CONTROL. Subject to the provisions of the Act and except as otherwise expressly herein provided, the General Partner shall have complete and unrestricted power and authority to manage the business, properties and activities of the Partnership in its sole and exclusive discretion. 2.2 SPECIFIC POWERS OF THE GENERAL PARTNER. Without limiting the rights and powers given the General Partner under the Act or otherwise by law or this Agreement, the General Partner shall have the following specific powers: (a) To pay or cause to be paid or reimbursed from Partnership funds all costs and expenses in seeking, acquiring, developing, producing and exploiting the Programming; and to pay or cause to be paid or reimbursed from Partnership funds all costs and expenses in connection therewith; 2 (b) To maintain, at the expense of the Partnership, complete and accurate financial records for the Partnership; and to furnish at Partnership expense the Limited Partners with reports called for by Section 3.7 of this Agreement, together with all tax reporting information which reasonably may be important to the Limited Partners; (c) To maintain, at the expense of the Partnership, adequate records of all operations of the Partnership; (d) To provide, at the expense of the Partnership, for the operations and management of the Partnership, including the acquisition, production and distribution activities for the Programming and, subject to the limitations contained in Section 2.2(n) and 2.3 hereof, to enter into agreements with others, including the General Partner and its affiliates or enterprises in which the General Partner or its affiliates has an interest by ownership, or otherwise, including Jones 21st Century, Inc.; (e) To purchase, at the expense of the Partnership, liability and other insurance to protect the Partnership's properties and business; (f) To execute on behalf of the Partnership any and all documents, contracts or instruments of any kind which the General Partner may deem necessary or appropriate in carrying out the business and purposes of the Partnership, and all other agreements, documents or instruments of any kind or character whatsoever, or amendments thereto, which in any manner relate to the business and purposes of the Partnership; (g) To purchase, sell or lease property, including real property, for Partnership use; (h) To make all payments required of the Partnership pursuant to this Agreement and for all direct and indirect costs and expenses incurred in the conduct of its business, including, without limitation, all costs and expenses for legal, audit, accounting and other technical and professional services, reports and other communications to, and costs of maintaining relations with, the Limited Partners, printing, postage, telephone and telegraph, travel, insurance, interest, messengers, office supplies, data processing, taxes, permits and licenses; (i) To borrow money from banks, other lending institutions or other sources, for Partnership purposes, and in connection therewith to mortgage, pledge or create other security interests on any or all of the Partnership properties, Programming and income therefrom and to secure or provide for the repayment of such borrowing; 3 (j) To hold Partnership assets in the name of the Partnership, or (except for Partnership funds) the name of the General Partner or the name of a nominee chosen by the General Partner; (k) To license, lease or sell any assets of the Partnership for any Partnership purpose, including, but not by way of limitation, the Programming or any portion thereof and any rights in the Programming or any portion thereof, including sales to the General Partner and its affiliates as provided in this Agreement; (l) To make or revoke tax elections on behalf of the Partnership, including the election provided by Section 754 of the Internal Revenue Code of 1954, as amended (the "Code"); (m) To select and employ with Partnership funds such legal counsel, certified public accountants or other consultants as are deemed by the General Partner to be appropriate for carrying on the business of the Partnership; (n) To enter into contracts and other transactions for all Partnership purposes, including, but not limited to: (i) contracts with Jones International Securities, Ltd., an affiliate of the General Partner, for securities brokerage services, contracts with affiliates of the General Partner for the distribution of Programming, on terms and for fees which are comparable to those which are customary in the industry, and the licensing of Programming to affiliates of the General Partner on competitive terms; (ii) contracts and other transactions with other affiliates of the General Partner, including the development of educational programming therefor, provided, however, that any such contract or other transaction with such other affiliates of the General Partner shall be on terms which are comparable to those which are customary in the industry. All contracts with other affiliates of the General Partner will be in writing and will be terminable without penalty by the Partnership upon sixty days' notice; (o) On behalf of the Partnership, to enter into joint ventures or general partnerships and other participation with affiliated or unaffiliated entities for the purpose of acquiring, developing, producing and exploiting Programming or rights therein; In joint venture arrangements with other programs formed by the General Partner: 4 (i) The Partnership must have a right of first refusal to buy if the other program wishes to sell property held in the joint venture; and (ii) The investment of each program must be on substantially the same terms and conditions. In joint venture arrangements with third parties: The Partnership will endeavor to obtain a right of first refusal to buy if the other party wishes to sell its property held in the joint venture but there is no assurance the Partnership will be able to obtain such right. (p) On behalf of the Partnership, to arrange for the sale of any Programming (or rights therein) to the General Partner or any affiliate of the General Partner. The sale price shall be determined by the average of three separate independent appraisals (the cost of which shall be borne by the General Partner or its affiliate and not by the Partnership). In addition, the General Partner may purchase a Programming project (or rights therein) in its own name or in the name of a nominee, an affiliate of the General Partner, or otherwise and temporarily holding it for the purpose of facilitating the acquisition thereof by the Partnership, provided that such Programming project is purchased by the Partnership for a purchase price no greater than the cost (including as costs any expenses incurred by the General Partner or an affiliate in so holding the Programming project) of such Programming to the General Partner or an affiliate thereof; (q) To engage in any other activity customary or incident to any of the foregoing; (r) To admit Partners after the formation of the Partnership; (s) To purchase, on its own behalf or on behalf of the Partnership, Interests in the Partnership from Limited Partners on terms agreed upon by the parties. The above enumeration of specific powers of the General Partner in Sections 2.2(a) through (s) shall not require the exercise of any such power by the General Partner except in its sole discretion or as otherwise required by this Agreement. The General Partner and its affiliates shall not be liable to the Partnership or to the Limited Partners for any loss suffered by the Partnership which arises out of any action or inaction of the General Partner or its affiliates if the General Partner or its affiliates, in good faith, determined that such course of conduct was in the best interest of the Partnership and such course of conduct did not constitute negligence or misconduct of the General Partner or its affiliates. 2.3 LIMITATIONS ON POWERS OF GENERAL PARTNER. The General Partner shall not cause the Partnership to do any of the following: 5 (i) commingle its funds with those of any other person; (ii) make loans to the General Partner or affiliates of the General Partner; (iii) underwrite securities of other issuers; (iv) acquire property in exchange for Limited Partnership Interests; (v) permit the General Partner or any affiliate thereof to receive any insurance brokerage fee or write any insurance policy covering the Partnership or any of its property; (vi) permit the General Partner or any affiliate thereof to receive any rebate or give-up or permit the participation of such entities in any reciprocal business arrangements to circumvent restrictions contained herein with regard to the Partnership's dealings with the General Partner or its affiliates except as otherwise herein provided; (vii) obtain permanent financing from the General Partner or, with regard to nonpermanent financing made available to the Partnership by the General Partner or an affiliate thereof, permit the receipt of interest or other financing charges or fees other than in amounts equal to the General Partner's weighted average cost of all debt financing from unaffiliated parties or permit a prepayment charge or penalty on any such loan; (viii) purchase limited partnership interests in any other limited partnership; (ix) contract away its fiduciary duty owed to General Partners under the common law; and (x) permit its General Partner any exclusive right or employment to sell property for the Partnership. 2.4 OTHER ACTIVITIES. The General Partner may devote only so much time to the business of the Partnership as deemed necessary by the General Partner. 2.5 WITHDRAWAL. The General Partner may, at any time upon ninety days' written notice, retire or resign from the Partnership. On such retirement or resignation, the General Partner may, at its option, remain the General Partner for the sole purpose of winding up the Partnership, or the General Partner may apply to a court of proper jurisdiction for the appointment of a receiver for this purpose. 2.6 CAPITAL CONTRIBUTION. The General Partner shall initially contribute $1,000 to the capital of the Partnership and, at its sole option, may from time to time contribute an 6 additional sum or sums or purchase Limited Partnership Interest to meet various blue sky law requirements or for other purposes. A capital account shall be maintained for the General Partner, which account shall be credited with the General Partner's contributions to the Partnership and with its share of Partnership net profits and debited with the General Partner's share of Partnership net losses and distributions to the General Partner. 2.7 RIGHTS OF THE GENERAL PARTNER UPON REMOVAL. If the General Partner is removed pursuant to a vote of the Limited Partners under Section 3.2(l) and a new General Partner is elected by the Limited Partners, the Partnership shall purchase the interest in the Partnership of, and, if requested by the General Partner, any Limited Partnership Interests owned by, the removed General Partner. The purchase price shall be determined as if the Partnership had dissolved and sold its assets and made the distributions as set forth in Section 7.2 of this Agreement, with all such events being deemed to have occurred on the date of the removal of the General Partner. The value of the assets of the Partnership for this purpose shall be determined by agreement between the Partnership and the removed General Partner; provided, if they cannot so agree, then each shall appoint an appraiser and such appraisers shall select a third appraiser. The fair market value shall be the average of the three appraisals and the three appraisals shall value the assets of the Partnership on a going concern basis, without consideration for any increase or decrease in value attributable to or resulting from any proceedings related to the removal of the General Partner. The Partnership and the removed General Partner shall bear the respective costs of the appraiser selected by each of them and they shall each bear 1/2 of the costs of the appraiser selected by the other two appraisers. The purchase price shall be payable in the form of a three-year promissory note bearing interest on the unpaid principal amount at the stated prime rate of interest of the Central Bank of Denver, in effect from time to time. Such note shall be payable in equal annual installments of principal, plus interest thereon. The Partnership shall be obligated to make the scheduled payments on the three-year promissory note only if such payments do not materially impair the solvency of the Partnership; provided, however, that in any event all payments under the promissory note shall be paid within five years of the date of the removal of the General Partner. If the Partnership sells any Programming, any cash therefrom shall be applied to any accrued interest on such note, and then to the unpaid principal thereof. 2.8 NEW GENERAL PARTNER. A new General Partner elected under Section 3.2(l) by the Limited Partners shall purchase from the Partnership no later than the time of the payment to the removed General Partner under Section 2.7, the interest (and any Limited Partnership Interests) which the Partnership purchased from the removed General Partner. The new General Partner shall pay for such interest (and any Limited Partnership Interests) a price agreed to by the Partnership and the new General Partner; provided, that if the parties are not able to agree on the price, the price shall be the same amount as the Partnership pays for the interest (and any Limited Partnership Interests) of the removed General Partner as set forth in Section 2.7 and the price shall be paid in cash, unless otherwise agreed to by the parties. 7 2.9 FUNDS AND ASSETS. The General Partner has a fiduciary responsibility for the proper use of all funds and assets of the Partnership and it shall not employ or permit another to employ such funds or assets in any manner except for the benefit of the Partnership. ARTICLE 3 THE LIMITED PARTNERS 3.1 SINGLE CLASS. There shall be only one class of Limited Partners. Each person desiring to become a Limited Partner shall execute a detachable Subscription Agreement in the form attached hereto or shall authorize his registered representative to execute and submit the Subscription Agreement on his behalf and shall contribute cash to the Partnership in the amount stated on such Subscription Agreement. The participation of the Limited Partners in the Partnership shall be divided into limited partnership interests (hereinafter called "Limited Partnership Interests" or "Interests") and each Limited Partner shall have one Interest for each $500 of capital contributions to the Partnership. The participation of each Limited Partner in the Limited Partners' share of the Partnership assets, profits, losses and distributions shall be the proportion which the number of Interests owned by him bears to the total number of Interests owned by all Limited Partners in the Partnership at the time when a determination of participation is made. In the event that the net proceeds of the offering of the Interests are not invested in, or have not been committed for, the acquisition or development of Programming or the establishment of a working capital reserve by the Partnership within two years after the close of the offering of Interests for the Partnership, all funds not so invested or committed will be returned to the Limited Partners along with a proportionate share of the organization and offering costs and sales commissions taken on the uninvested proceeds. 3.2 RIGHTS, POWERS, AND OBLIGATIONS. Limited Partners shall have the following rights, powers and obligations: (a) No Limited Partner, as such, shall be personally liable for any of the debts of the Partnership or any of the losses of the Partnership beyond the amount committed by him to the capital of the Partnership and his share of undistributed profits of the Partnership. A Limited Partner shall have the obligation to the Partnership for the amount of any portion of the contribution returned to him as set forth in section 7-62-608 of the Act. (b) No Limited Partner, as such, shall take part in the control of the business or shall transact any business for the Partnership. (c) No Limited Partner, as such, shall have the power to sign for or bind the Partnership. 8 (d) No Limited Partner shall be obligated to make any contribution to the Partnership beyond the amount set forth on his Subscription Agreement to this Agreement. (e) Except as provided in Article 7 with respect to dissolution, no Limited Partners shall be entitled to withdraw from the Partnership or be entitled to return of all or any part of his capital contribution. (f) No Limited Partner shall be entitled to demand or receive property other than cash in return for his contribution. (g) No Limited Partner, as such, shall be entitled to interest on his capital contribution. (h) A Limited Partner may, with the consent of the General Partner, transact other business with the Partnership. (i) Upon reasonable request, any Limited Partner or his duly authorized representative shall have the right to inspect and copy any of the Partnership books. A Limited Partner shall pay any actual cost of copying of any of said books, and shall pay any special costs, such as enlargement from microfilm or computer printout, which may be required in connection with such inspection. Such inspection shall be conducted at a time and in a manner so as not to interfere with the operation of the business of the Partnership. In no event shall the General Partner be compelled to prepare compilations or summaries which are not customarily maintained in the conduct of the business of the Partnership. In the event a Limited Partner wishes to inspect records which are not maintained at the principal place of business, such as records on a shared or rented computer system, the General Partner shall have a reasonable time to produce such records at the principal place of business of the Partnership. Any Limited Partner shall also have the right to secure a list of the names, addresses and related interest holdings of all of the Limited Partners, for a proper purpose, stated in writing. Such requesting Limited Partner shall prepay the costs of preparation of such list. (j) The Limited Partners may, at a meeting of the Partnership, by vote of Limited Partners holding a majority of the Limited Partnership Interests, dissolve the Partnership at any time. (k) The Limited Partners may vote to amend this Agreement pursuant to Section 6.2 hereof (l) The Limited Partners may remove the General Partner by a vote of Limited Partners holding a majority of the Limited Partnership Interests. The Limited 9 Partners shall also have the right, by a vote of Limited Partners holding seventy-five percent of the Limited Partnership Interests, to elect a new General Partner within 90 days after the vote to remove the General Partner. 3.3 GENERAL PARTNER AS LIMITED PARTNER. The General Partner, or any affiliate of the General Partner, may at any time invest in or acquire Interests in the Partnership. With respect to Interests so acquired, the General Partner, or its affiliates, will acquire the same rights and obligations as other Limited Partners, however Interests owned by the General Partner will not be voted on removal of the General Partner, the election of a new General Partner, or any amendments to the Limited Partnership Agreement which would adversely affect the General Partner. 3.4 CAPITAL ACCOUNTS. A capital account shall be maintained for each Limited Partner. A Limited Partner's capital account will be credited initially with his contribution to the Partnership capital and thereafter with his share of Partnership net profits, debited with his share of Partnership net losses and distributions to him, and otherwise maintained in accordance with Treasury Regulations published under Section 704(b) of the Code. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of capital accounts are intended to comply with Treasury Regulation Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the capital accounts, or any debits or credits thereto, are computed in order to comply with such regulations, the General Partner may make such modification, provided that it is not likely to have a material effect on the amounts distributable to Limited Partners pursuant to Article 7 upon the dissolution of the Partnership. The General Partner shall also make appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with the Treasury Regulations under Section 704(b) of the Code. The General Partner shall adjust the amounts debited or credited to capital accounts with respect to (a) any property contributed to the Partnership or distributed to the General Partner and Limited Partners, and (b) any liabilities that are secured by such contributed or distributed property or that are assumed by the Partnership or the General Partner and Limited Partners in the event the General Partner shall determine that such adjustments are necessary or appropriate pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv). 3.5 TRANSFER OF LIMITED PARTNERSHIP INTERESTS. (a) Subject to compliance with applicable state securities (blue sky) laws, Limited Partnership Interests may be transferred only in whole interests and only in accordance with the following terms: (1) Interests may be assigned only with the consent of the General Partner in its sole discretion; (2) the transfer of the interests shall be accomplished by an instrument in writing, in form and substance satisfactory to the General Partner, which writing may include a power of attorney and which shall set forth the intention that the purchaser is 10 to be an additional Limited Partner and the stock ownership, if any, of the purchaser in the General Partner or any affiliate thereof; (3) a counterpart of the instrument of transfer, executed and acknowledged by the transferor Limited Partner shall be delivered to the General Partner; (4) any assignment of interests must be in compliance with applicable state securities (blue sky) laws; (5) no assignments will be permitted if such assignments would result in 49% or more of the interests being transferred within a twelve-month period; (6) the purchaser must agree that he will not directly or indirectly make or operate a secondary market or the substantial equivalent thereof in the Interests of the Partnership; (7) the General Partner may refuse to consent to any transfer if, in the sole discretion and judgment of the General Partner, the transfer would be transacted on or treated as transacted on a secondary market or the substantial equivalent thereof or would cause the aggregate transfer to exceed permissible safe harbor limits under administrative interpretations; (8) no assignments will be permitted if such assignments would cause the assets of the Partnership to be treated as "plan assets" as defined in regulations promulgated by the Department of Labor; (9) the Partnership may charge the transferor Limited Partner a fee not exceeding $50 to defray the costs of effecting the transfer of his interests in the Partnership; (10) the transferor and the purchaser shall execute and deliver to the General Partner an amended Limited Partnership Agreement; and (11) the purchaser shall become a Limited Partner only upon amendment of this Agreement. (b) The death, legal disability, bankruptcy or dissolution of a Limited Partner or the assignment by any Limited Partner of all or a part of any Limited Partnership Interests owned by him (whether or not in compliance with the terms of this Agreement) shall not dissolve the Partnership. The successor in interest of such Limited Partner shall have the rights of such Limited Partner for the purpose of settling the estate or business of such Limited Partner, including the rights as defined above to transfer such interests or to become an additional Limited Partner with respect thereto. 3.6 MEETINGS. Meetings of the Partnership may be called by the General Partner or Limited Partners holding more than 10% of the outstanding Limited Partnership Interests, for purposes of voting by the Limited Partners on any matters for which the Limited Partners are specifically given voting rights in this Agreement. At any such meeting a Limited Partner may also advise the General Partner of his wishes and advisory votes may be taken to poll or ascertain preferences of other Limited Partners, but no such expression of opinion by such advisory vote shall be binding on the General Partner or constitute any exercise of control of the business of the Partnership. A list of the names and mailing addresses of all Limited Partners shall be maintained as part of the books and records of the Partnership and shall be made available on request to or mailed to any Limited Partner or his representative at his cost. Upon receipt of a proper written request, either in person or by registered or certified mail stating the purpose of the meeting, the General Partner shall provide all partners, within 30 days 11 after receipt of said request, written notice by certified mail, of a meeting and the purpose of such meeting to be held on a date not less than 30 nor more than 90 days after receipt of said request, at a time and place set forth in the notice. 3.7 REPORTS. The General Partner shall cause to be prepared and distributed to Limited Partners the following reports: (a) Within 60 days after each complete calendar quarter of the Partnership's operations, a report containing a summary of pertinent information regarding the Partnership's activities during the quarter covered by the report. (b) Within 75 days after the end of each taxable year of the Partnership, a report containing information necessary for the preparation of the Limited Partners' Federal income tax returns; and (c) Within 120 days after the end of each fiscal year of the Partnership, an annual report containing (i) a statement of financial condition as of the year then ended, an operating statement for the year then ended and a statement of changes in financial position for the year then ended, all of which shall be prepared according to generally accepted accounting principles and shall be audited by independent certified public accountants; if an opinion of independent certified public accountants is not obtainable, the report shall include such qualified, limited or other advice from independent certified public accountants as may then be available; (ii) a summary of the activities of the Partnership during the period covered by the report; (iii) a summary of distributions to the Limited Partners for the period covered, including a description of the source or sources of such distributions; and (iv) a detailed statement of fees, commissions and compensation paid or to be paid to the General Partner and its affiliates for the fiscal period just completed. Such statement will identify separately the amount paid to each recipient and the services giving rise to each such payment and will include a statement showing the actual computation of each fee, commission or compensation. Upon written request, the Limited Partners will be furnished a copy of each Form 10-Q Quarterly Report of the Partnership, which is required to be filed with the Securities and Exchange Commission. 3.8 PURCHASE OF STOCK OF GENERAL PARTNER OR AFFILIATES BY LIMITED PARTNERS. Each Limited Partner shall consent to be restricted in his purchase of stock of the General Partner and its affiliates as follows: (a) Each Limited Partner shall, upon request, represent and warrant the number of shares, if any, of the stock of the General Partner, or any affiliate thereof, that such Limited Partner owns of record or beneficially. Each Limited Partner shall further agree in subscribing for Interests in the Partnership that in the 12 event that the Limited Partners of all the Partnerships organized under the JONES PROGRAMMING PARTNERS series of limited partnerships own, directly or indirectly, individually or in the aggregate, more than 20% of any class of stock of the General Partner or any affiliates as defined in Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"), on request of the General Partner, such Limited Partner will immediately divest himself or herself of all shares of the stock of the General Partner or any affiliates that such Limited Partner owns. For the purpose of determining stock ownership in the General Partner or its affiliates, the attribution rules set forth in Section 318 of the Code are applicable. (b) In the event of the breach of the foregoing agreement by any Limited Partner, the General Partner may, but shall not be required to, as an alternative to the request for divestiture as provided in the next preceding subsection (a), purchase the Interests of such Limited Partner at an amount equal to the capital contribution of such Limited Partner (or his predecessor) less all distributions paid on account of the Interests being repurchased. In the event of such repurchase of Interests by the General Partner, the General Partner shall be substituted in the place of the Limited Partner as to such Interests. The General Partner shall notify any such Limited Partner in writing of its election to repurchase such Interests within 30 days after the General Partner has actual knowledge of any such breach. 3.9 ADMISSION OF LIMITED PARTNERS. Admission of Limited Partners to the Partnership shall be subject to the following: Upon the original sale of Interests by the Partnership, the purchasers shall be admitted as Limited Partners not later than 15 days after the release from escrow of the purchasers' funds to the Partnership, and thereafter purchasers shall be admitted not later than the last day of the calendar month following the day their subscription was accepted by the General Partner. Subscriptions shall be accepted or rejected by the General Partner within 30 days of their receipt; if rejected, all funds shall be returned to the subscriber within 10 business days. ARTICLE 4 PRODUCTION AND OVERHEAD FEE; PARTNERSHIP EXPENSES; REIMBURSEMENT OF PARTNERSHIP EXPENSES 4.1 PRODUCTION AND OVERHEAD FEE. The General Partner shall receive a fee for its services to the Partnership (the "Production and Overhead Fee") equal to 12% of all of the Direct Costs of each Programming project. Such fee shall be calculated and be payable at the time the principal photography commences on each particular Programming project and in the case of a series, such fee is payable on a per episode basis. 13 4.2 PARTNERSHIP EXPENSES; REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF THE PARTNERSHIP. The Partnership shall pay all of its own operating, overhead and administrative expenses of every kind, including all expenses involved with all aspects of its Programming activities. The General Partner shall be entitled to reimbursement from the Partnership for its general overhead and administrative expenses, which shall include, but not be limited to, all direct and indirect expenses (such as home office rent, supplies, telephone, travel and copying charges) and salaries of full and part-time employees allocable to the operation of the Partnership. ARTICLE 5 ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTION OF FUNDS 5.1 ALLOCATION OF PROFITS. Except as otherwise provided in Sections 5.2(e), 5.3 and 5.4, Profits for any taxable year shall be allocated in the following order and priority: (a) first, 99% to the Limited Partners and 1% to the General Partner until the cumulative Profits allocated pursuant to this Section 5.1(a) re equal to the cumulative Losses allocated pursuant to Section 5.2(a) hereof for all prior taxable years; (b) second, 99% to the Limited Partners and 1% to the General Partner until the Limited Partners have been allocated cumulative Profits pursuant to this Section 5.1(b) in an amount equal to the sum of the syndication expenses for the current and all prior taxable years. For this purpose, syndication expenses shall be as defined in Treasury regulation Section 1.709-2; (c) third, 99% to the Limited Partners and 1% to the General Partner until the Limited Partners have been allocated cumulative Profits pursuant to this Section 5.1(c) in an amount equal to a 12% per annum, cumulative and noncompounded, return on the capital contributions of the Limited Partners (such amount to be reduced by all previous distributions to the Limited Partners made in accordance with Section 5.5(a) of this Agreement). For purposes of computing the 12% per annum cumulative and noncompounded return, the capital contributions of the Limited Partners, as determined for any particular year or portion thereof, shall be reduced by the amount of all prior distributions to the Limited Partners made in accordance with Section 5.5(b); and (d) The balance, if any, 80% to the Limited Partners and 20% to the General Partner. 14 (e) For purposes of this Section 5.1, Profits shall be equal to the net income from the Partnership, if any, including all items of income, gain, loss and deduction required to be separately stated by Section 703(a)(1) of the Code and also including any tax-exempt income and nondeductible expenses (other than syndication expenses) of the Partnership. (f) For purposes of this Section 5.1, the calculation of cumulative Profits with respect to a Limited Partner shall commence no later than the end of the calendar quarter in which the investment by such Limited Partner was made. 5.2 ALLOCATION OF LOSSES. Losses for any taxable year shall be allocated in the following order and priority: (a) Except as provided in Section 5.2(b), Losses shall be allocated 99% to the Limited Partners and 1% to the General Partner; and (b) To the extent Profits have been allocated pursuant to Section 5.1(b), 5.1(c) or 5.1(d), Losses shall be allocated first to offset any Profits allocated pursuant to Section 5.1(d), next to offset any Profits allocated pursuant to Section 5.1(c), and then to offset any Profits allocated pursuant to Section 5.1(b). To the extent any allocations of Profits are offset pursuant to this Section 5.2(b), such allocation of Profits shall be disregarded for purposes of computing subsequent allocations pursuant to this Section 5.2(b). (c) For purposes of this Section 5.2, Losses shall be equal to the net loss from the Partnership, if any, including all items of income, gain, loss and deduction required to be separately stated by Section 703(a)(1) of the Code and also including any tax-exempt income and nondeductible expenses (other than syndication expenses) of the Partnership. (d) Losses allocated to Limited Partners pursuant to this Section 5.2 shall not exceed an amount which would cause the capital accounts of the Limited Partners to be in deficit at the end of a taxable year except to the extent that any such deficit is attributable to nonrecourse debt, as permitted by Treasury regulations under Section 704 of the Code. Any amount of Loss which cannot be allocated to Limited Partners as a result of this restriction shall be allocated 100% to the General Partner. (e) If Losses are allocated to the General Partner as a result of the operation of Section 5.2(d), Profits in any subsequent taxable year(s) shall be allocated 100% to the General Partner until the cumulative Profits allocated pursuant to this Section 5.2(e) are equal to the cumulative Losses allocated pursuant to Section 5.2(d) hereof for all prior taxable years. 15 5.3 ALLOCATION OF MINIMUM GAIN AND OTHER MATTERS. Notwithstanding the other provisions contained herein, (a) To the extent that any Limited Partner has a negative capital account balance as of the end of any taxable year of the Partnership after giving effect to any distributions made or to be made with respect to such taxable year, and such negative balance exceeds such Partner's share of "minimum gain" (as defined in regulations promulgated under Section 704 of the Code) allocable to such Limited Partner as of the end of such taxable year, then an amount of income equal to such excess will be allocated to such Limited Partner. This Section 5.3(a) is intended to constitute a minimum gain chargeback within the meaning of the Treasury regulations under Section 704 of the Code and shall be construed in accordance with such intention. To the extent this minimum gain chargeback would distort the allocations of Profits and Losses as detailed in Sections 5.1 and 5.2, the General Partner is hereby authorized to make subsequent allocations of Profits and Losses in any reasonable manner so as to eliminate any such distortion. (b) In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-l(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate the deficit balances in their capital accounts created by such adjustments, allocations or distributions as quickly as possible. Any special allocations of items of income or gain pursuant to this Section 5.3(b) shall be taken into account in computing subsequent allocations of income pursuant to this Section 5, so that the net amount and character of any items so allocated and the income or gain allocated to each Partner pursuant to this Section 5 shall, to the extent possible, be equal to the net amount and character of the items that would have been allocated to each such Partner pursuant to the provisions of this Section 5 if such unexpected adjustments, allocations or distributions had not occurred. This Section 5.3(b) is intended to be a qualified income offset within the meaning of the Treasury regulations under Section 704(b) of the Code and shall be construed in accordance with such intention. (c) The allocations of income and loss as detailed in Sections 5.1, 5.2, 5.3 and 5.4 are intended to comply with the regulations under Section 704 of the Code which require that partnership allocations have substantial economic effect. The General Partner is authorized in Section 6.1(e) to adjust the allocations in Section 5 of this Agreement to comport with the requirements of the Code, regulations or interpretations of the law, including the requirements of Section 704. 16 5.4 ALLOCATION OF INCOME AND GAIN UPON LIQUIDATION OF THE PARTNERSHIP. In the final taxable year of the Partnership, gain from the sale of Programming projects and income and gain from other sources shall be allocated as follows: (a) To the extent that the capital accounts of the Limited Partners are negative, income or gain shall first be allocated 99% to the Limited Partners and 1% to the General Partner until the capital accounts of the Limited Partners equal zero; (b) To the extent that the General Partner has any remaining negative balance in its capital account, that amount of income or gain shall next be allocated to the General Partner until the capital account of the General Partner equals zero; (c) Income or gain shall next be allocated 99% to the Limited Partners and 1% to the General Partner to the extent necessary to make the aggregate balance of the capital accounts of the Limited Partners an amount equal to a 12% per annum, cumulative and noncompounded, return on the capital contributions of the Limited Partners (such amount to be reduced by all previous distributions to the Limited Partners made in accordance with Section 5.5(a) of this Agreement). For purposes of computing the 12% per annum cumulative and noncompounded return, the capital contributions of the Limited Partners, as determined for any particular year or portion thereof, shall be reduced by the amount of all prior distributions to the Limited Partners made in accordance with Section 5.5(b); (d) Income or gain shall next be allocated 99% to the Limited Partners and 1% to he General Partner to the extent necessary to make the aggregate balance of the capital accounts of the Limited Partners an amount equal to the amount of their initial capital contributions (less all previous distributions to the Limited Partners made in accordance with Section 5.5(b) of this Agreement); (e) Income or gain shall next be allocated to the capital account of the General Partner to the extent necessary to make the aggregate balance thereof an amount equal to the amount of its initial capital contribution (less all previous distributions to the General Partner made in accordance with Section 5.5(b) of this Agreement); (f) The balance of any income or gain shall next be allocated to the capital accounts of the Limited Partners and the General Partner in amounts that shall cause the capital accounts of the Limited Partners to equal 80% of the total capital accounts of the Limited Partners and the General Partner after such allocations and after all allocations and distributions have been made pursuant to Sections 5.5(a) and 5.5(b). However, in the event that there are no distributions to be made to the General Partner pursuant to Section 5.5(c) of 17 this Agreement, all remaining income or gain to be allocated pursuant to this Section 5.4(f) shall be allocated to the Limited Partners. 5.5 ORDER OF DISTRIBUTION. Partnership distributions shall be made as follows: (a) first, 99% to the Limited Partners and 1% to the General Partner until the Limited Partners have been allocated an amount equal to a 12% per annum, cumulative and noncompounded, return on the capital contributions of the Limited Partners (such amount to be reduced by all previous distributions to the Limited Partners in accordance with this Section 5.5(a)). For purposes of computing the 12% per annum cumulative and noncompounded return, the capital contributions of the Limited Partners, as determined for any particular year or portion thereof, shall be reduced by the amount of all prior distributions to the Limited Partners made in accordance with Section 5.5(b); (b) second, 99% to the Limited Partners and 1% to the General Partner until the Limited Partners have received cumulative distributions in an amount equal to the amount of their initial capital contributions (less all previous distributions made to the Limited Partners in accordance with this Section 5.5(b)); (c) The balance, if any, 80% to the Limited Partners and 20% to the General Partner. (d) Any distribution of Partnership funds available for distribution shall be made or not made in the sole discretion of the General Partner. If any distribution is made, the General Partner shall at the time of such distribution, or in the quarterly report next following the distribution, notify the Limited Partners as to the source or sources of such distribution. The General Partner shall not be obligated to distribute funds at any time if in the sole discretion of the General Partner such funds are needed, or may reasonably be expected to be needed, for Partnership purposes. 5.6 TRANSFER OF LIMITED PARTNERSHIP INTERESTS. In the case of a transfer of a Limited Partnership Interest during any taxable year of the Partnership, every item of Partnership income, loss, deduction and credit attributable to such Limited Partnership Interest shall be divided and allocated proportionately between the transferor and transferee based upon the number of months during such taxable year for which each such Limited Partner is recognized as such in accordance with Section 3.5. For purposes of accounting simplicity in the case of a transfer of a Limited Partnership Interest, the Partnership will treat the party who is the recognized owner of the Limited Partnership Interest as of the close of business on the last day of any calendar month as the owner of the Limited Partnership Interest for the entire month. The General Partner is authorized to alter this accounting convention to conform with any regulation or administrative rulings issued by the Treasury Department or the IRS. 18 5.7 GENERAL PARTNER'S CAPITAL ACCOUNT. Except as may be required by Section 7.2 below, in connection with winding up the Partnership, a deficit may be carried in the capital account of the General Partner without the General Partner being required to make a contribution to the capital of the Partnership, unless such contribution is necessary in order to meet obligations to creditors of the Partnership other than Partners as Partners. ARTICLE 6 AMENDMENTS TO LIMITED PARTNERSHIP AGREEMENT 6.1 ROUTINE AMENDMENTS. Amendments to this Agreement and to any Certificate of Limited Partnership may be made by the General Partner through the use of the power of attorney granted by each Limited Partner in this Agreement if such Amendments: (a) in the opinion of the General Partner, with advice of counsel, may be necessary to preserve the limited liability of Limited Partners; or (b) in the opinion of the General Partner, with advice of counsel, may be necessary to preserve the status of the Partnership as a partnership, and not an association taxable as a corporation, for Federal income tax purposes; or (c) are required or contemplated by this Agreement in connection with substitution or addition or Limited Partners; or (d) are necessary or appropriate to cure any ambiguity or to correct or supplement any provision hereof which may be inconsistent with any other provision hereof; or (e) are necessary or appropriate to change the allocations of Partnership income, gain, losses, deductions, distributions or credits in Article 5 hereof to comport with the requirements of the Internal Revenue Code of 1986, as amended, regulations or interpretations of the law applicable to allocations or to conform the allocations to the order of distributions described in Section 5.5, if the General Partner concludes in good faith that such amendments are in the overall best interests of the Partners; provided, however, that the General Partner shall be authorized to amend such provisions only to the minimum extent which in good faith it judges to be necessary or advisable, based upon advice of counsel or accountants, to make the Partnership's allocations of these items effective for Federal income tax purposes; and provided further, that the General Partner shall be under no obligation to make any such amendment; or 19 (f) are necessary to comply with federal or state securities or blue sky laws, and do not adversely affect the rights and obligations of the Limited Partners hereunder. 6.2 OTHER AMENDMENTS. Any other amendments to this Agreement shall be proposed in writing by the General Partner or by Limited Partners holding not less than 10% of the Limited Partnership Interests. Following any proposal, whether by the General Partner or Limited Partners, the General Partner shall mail each Limited Partner a verbatim statement of the proposed amendment and a statement of the General Partner's recommendation as to whether the proposed amendment should be adopted. A proposed amendment under this Section 6.2 shall become effective when it has received due approval of the holders of a majority of the Interests; provided, however, that any amendment affecting Sections 1.8, 2.2, 2.3, 2.6, 2.7, 2.8, 3.2, 4.1, 4.2, 5.1, 5.2, 5.3, 5.4, 5.5, 6.2, 7.2 or 9.12, or otherwise affecting the General Partner's interest in the Partnership shall also require the approval of the General Partner. No amendment to this Agreement which requires an amendment to the Partnership's Certificate of Limited Partnership shall become effective until such amendment to such certificate is duly filed. ARTICLE 7 DISSOLUTION; WINDING UP; TERMINATION 7.1 DISSOLUTION. The Partnership shall be dissolved on the expiration of its term, or sooner upon the happening of any of the following events: (a) the withdrawal of the General Partner pursuant to Section 2.5 hereof; (b) the vote to dissolve the Partnership by Limited Partners as provided in Section 3.2(j); (c) (i) the entry of an order for relief involving liquidation of the Partnership or the General Partner under Chapter 7 of the bankruptcy law in the United States; the filing by the Partnership or the General Partner of a voluntary petition for liquidation under Chapter 7 of the bankruptcy law of the United States; (ii) the general assignment by the General Partner for the benefit of creditors under the laws of any state; (iii) or the appointment of a receiver for all or substantially all of the assets of the Partnership or the General Partner, unless such receivership is dissolved within 30 days after the appointment of such receiver; or (iv) the filing of a voluntary petition by the General Partner under Chapter 11 of the bankruptcy law of the United States. However, the filing of a voluntary petition under Chapter 11 of the bankruptcy law of the United States on behalf of the Partnership, or the entry of an order for relief pursuant to a voluntary or involuntary petition by or against the Partnership 20 under Chapter 11 of the bankruptcy law of the United States shall not, in itself, cause dissolution of the Partnership; (d) the disposition of substantially all of the assets of the Partnership; (e) a final adjudication that the application of any provision of this Agreement impairs the limited liability of the Limited Partners as provided in Section 9.2; (f) the happening of any event which makes it unlawful for the Partnership business to be continued; or (g) the removal of the General Partner, unless the Limited Partners elect a new General Partner pursuant to Section 3.2(l) and continue the business of the Partnership. If the Partnership is dissolved for any of the above reasons, the remaining Partners shall not have the power to continue its existence, except as provided in (g) above. 7.2 WINDING UP. In the event of the dissolution of the Partnership, the General Partner may wind up the affairs of the Partnership; sell all of its assets for cash or other assets (which may include securities); and after paying all liabilities, including all costs of dissolution and winding up, payment of all fees and compensation otherwise due the General Partner, setting up of reserves for contingencies, and repayment of loans of the Partnership, shall distribute the remainder of the Partnership assets in accordance with the priorities set forth in Section 5.5 and in the order prescribed thereby. In such event, any distributions by the Partnership shall be made either by the end of the taxable year of the "liquidation" of the Partnership or within 90 days of such "liquidation" as that term is defined by Treasury Regulations under Section 704(b) of the Code, whichever is later, or within such other time period as is permitted by Treasury regulations under Section 704(b) of the Code. In connection with distributions in winding up the affairs of the Partnership on dissolution, the General Partner shall be required to account to the Partnership for any deficit which may exist in the capital accounts of the General Partner by contributing to the capital of the Partnership an amount equal to the lesser of: (i) the deficit which may exist in its capital account at such time; or (ii) an amount equal to 1.01% of the initial capital contributions to the Partnership by the Limited Partners, reduced by the capital contributions to the Partnership by the General Partner. 7.3 TERMINATION. Upon completion of the dissolution, winding up, liquidation and distribution of the liquidation proceeds, the Partnership shall terminate. 21 ARTICLE 8 POWER OF ATTORNEY 8.1 GRANT. The General Partner is hereby granted and authorized on behalf of each Limited Partner to execute any and all instruments and to do or have done all things deemed by the General Partner to be necessary or convenient to the Partnership's business, and shall, to the extent necessary therefor, irrevocably be and hereby is made, constituted and appointed for each Limited Partner, agent and attorney-in-fact for all purposes relative to creation and continuation of the Partnership as a limited partnership and for the conduct of business. Without limitation of the foregoing, the General Partner shall have full power and authority to act in the name of, and on behalf of, each Limited Partner in the execution, acknowledgement, verification and filing of the following documents: (a) a Certificate of Limited Partnership, as well as certificates of amendments thereto, under the Act and the laws of any other state in which such certificates, affidavits and other documents creating, evidencing or preserving the Partnership as a limited or special partnership may or should, in the opinion of the General Partner, be filed or recorded; (b) any other instrument which may be required to be filed or recorded by the Partnership under the laws of any state or by any governmental agency, or which the General Partner deems it advisable to file or record; (c) any documents which may be required to effect the continuation of the Partnership, the substitution or addition to a Limited Partner, the amendment of the Certificate of Limited Partnership or the dissolution and termination of the Partnership, provided such continuation, substitution, addition, amendment or dissolution and termination are in accordance with the terms of this Agreement. 8.2 NATURE OF POWER OF ATTORNEY. The Power of Attorney granted by each Limited Partner to the General Partner pursuant to the preceding section: (a) is a special power of attorney coupled with an interest, is irrevocable, and shall survive the death, disability or dissolution of the Limited Partner; (b) may be exercised by the General Partner for all Limited Partners by a single signature (and acknowledgement or verification, if required) of the General Partner by one of its officers, acting as attorney-in-fact for all the Limited Partners together, or by listing all of the Limited Partners and executing any instrument with a single signature (and acknowledgement or verification, if 22 required) of the General Partner by one of its officers, acting as attorney-in-fact for all of the Limited Partners together; and (c) shall survive the delivery of an assignment by a Limited Partner of all or any portion of his interests; and where the assignee thereof has been approved by the General Partner for admission to the Partnership as a substituted Limited Partner, shall survive such admission and constitute a similar power of attorney from the substituted Limited Partner. ARTICLE 9 MISCELLANEOUS PROVISIONS 9.1 NOTICES. (a) Any notice or document required or desired to be given to any Partner or his transferee or to the Partnership shall be in writing and shall be deemed given: (i) to the Partnership or the General Partner when deposited in the United States Mail, registered and certified, postage prepaid, addressed to the Partnership or the General Partner at its principal offices at 9697 East Mineral Avenue, Englewood, Colorado 80112 (or such other address as the General Partner shall notify Limited Partners in writing in the manner set forth herein); and (ii) to any Limited Partner or his transferee when delivered personally to that person (or his personal representative or successor in interest) or when deposited in the United States Mail, postage prepaid, addressed to that person (or his personal representative or successor in interest) at his mailing address set forth in the records of the Partnership. (b) The General Partner shall maintain a record of names and addresses of all Limited Partners and any notice given Limited Partners shall be given according to the names and addresses on such record. (c) If any Limited Partnership Interest is held on the records of the Partnership in more than one name for the beneficial interest of another, notice only to the first named person in the records of the Partnership shall be sufficient. 9.2 SEVERANCE OF ANY PROVISION TO THE EXTENT INVALID. If any provision in this Agreement or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby; provided, however, if any provision of this Agreement is so applied as 23 to impair the limited liability of the Limited Partners, the Partnership shall dissolve and be wound up and terminated as provided in Article 7. 9.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties thereto, their successors, heirs, devisees, assigns, legal representatives, executors and administrators; but no interest in the Partnership may be transferred except in conformity with other provisions of this Agreement. 9.4 COMPETING OR RELATED BUSINESS. The General Partner (and any affiliate of the General Partner), any officer or director of any of the foregoing or any Limited Partner may acquire programming or interests therein for his or its own account, or engage in the acquisition, development, financing or exploitation of programming or related businesses on behalf of other enterprises formed by him or it or in which he or it may have an interest, including, without limitation, business ventures similar to, related to or in direct or indirect competition with any business of the Partnership. Neither the Partnership nor any Partner shall have any right by virtue of this Agreement in or to such other business venture or income or profits derived therefrom. 9.5 CONFLICTS OF INTEREST. The fact that any Partner, including the General Partner or any affiliate of the General Partner, is employed by, or is directly or indirectly interested in or affiliated or connected with, any enterprise employed by the Partnership to render or perform services shall not prohibit the General Partner from employing such enterprise or from otherwise dealing with it in any way not specifically prohibited by this Agreement. Neither the Partnership nor any Partner as such shall have any right in or to any income of profits derived from any such employment or other dealing by any such enterprise. 9.6 INDEMNIFICATION. The Partnership shall indemnify and save harmless the General Partner and its Affiliate and any agent or officer or director thereof against any losses, judgments, liabilities, expenses, including any legal expenses, and amounts paid in settlement of any claims, sustained by them in connection with the Partnership, provided that the General Partner or its Affiliates will not be indemnified for negligence or misconduct and provided further that only Affiliates acting within the scope of the General Partner's authority will be indemnified hereunder. Indemnification shall be from the assets of the Partnership and not from the Limited Partners. Notwithstanding the foregoing, the General Partner and its Affiliates and any person acting as a broker-dealer shall not be indemnified by the Partnership for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws unless (a) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnity and a court of competent jurisdiction has approved such indemnification, or (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee, or (c) a court of competent jurisdiction has approved a settlement of the claims against the particular indemnitee. In any claim for 24 indemnification for federal or state securities law violations, the party seeking indemnification will place before the court the positions of the Securities and Exchange Commission and the Massachusetts Securities Division and other state securities administrators with respect to the issue of indemnification for securities law violations. The Partnership shall not incur the cost of that portion of any insurance, other than public liability insurance, which insures the General Partner and its Affiliates against any liability the indemnification of which is herein prohibited. Expenses incurred by the General Partner or any Affiliate in defending any claim with respect to which the General Partner or an Affiliate may be entitled to indemnification by the Partnership may be advanced by the Partnership prior to final disposition of such claim provided (a) the claim relates to the performance of duties or services by the General Partner or the Affiliate on behalf of the Partnership, (b) the claim is initiated by a third party who is not a Limited Partner of the Partnership, and (c) the General Partner or the Affiliate undertake to repay the advanced funds to the Partnership if it is determined ultimately that the General Partner or the Affiliate is not entitled to indemnification by the Partnership. The advance shall be evidenced by a full-recourse promissory note. For purposes of this Section 9.6, the term "Affiliate" shall mean any person performing services on behalf of the Partnership who: (1) directly or indirectly controls, is controlled by or is under common control with the General Partner; (2) owns or controls 10% or more of the outstanding voting securities of the General Partner; (3) is an officer, director, partner or trustee, of any company for which the General Partner acts in any such capacity. 9.7 NONRECOURSE CREDITORS. A creditor who makes a nonrecourse loan to the Partnership must not have or acquire, at any time as a result of making the loan, any direct or indirect interest in the profits, capital or property of the Partnership other than as a secured creditor. 9.8 COUNTERPARTS. This Agreement may be executed in counterparts or with detachable signature pages and shall constitute one agreement, binding upon all parties thereto as if all parties signed the same document. 9.9 CAPTIONS. Captions to and headings of the Articles, Sections, Subsections, Paragraphs or Subparagraphs of this Agreement are solely for convenience, are not a part of the Agreement, and shall not be used for the interpretation or determination of the validity of this Agreement or any provision hereof. 9.10 GOVERNING LAW. The Partnership will be formed and will be governed under the laws of the State of Colorado. All questions concerning the intention, validity and meaning of this Agreement relating to the rights and obligations of the Partners with respect to performance under this Agreement shall be construed and resolved according to the laws of the State of Colorado. The General Partner is subject to the liabilities of a partner in a partnership without limited partners. Neither the Partnership Agreement 25 nor the Certificate of Limited Partnership will be amended to limit such liability of the General Partner. 9.11 DEFINITIONS. Unless a term is otherwise defined herein, the definitions in the Glossary of definitive Prospectus for the JONES PROGRAMMING PARTNERS series of limited partnerships shall be considered as the definitions of the terms used herein for purposes of this Agreement. 9.12 FIRST REFUSAL RIGHT ON SALE OF PARTNERSHIP PROPERTIES. In the event that the Partnership receives a detailed, bona fide written offer from any non-affiliated party (the "Offer") to purchase any Programming (or interest therein or rights the events) of the Partnership, and the Partnership has determined that it will sell on such terms, Jones 21st Century Management, Inc. ("Jones") separately, and not in its capacity as Managing General Partner, or any affiliate thereof, shall have the right to acquire the subject of the Offer on the same terms and conditions as are set forth in the Offer (unless such terms include payment not consisting solely of cash, in which event Jones or affiliate shall have the right to substitute the equivalent thereof in cash). The Partnership shall within five (5) days of receipt of any Offer, deliver a copy of the Offer to Jones. Jones (or affiliate) shall, within thirty (30) days of receipt of such Offer, give written notice to the Partnership as to whether or not it or any affiliate will purchase the Programming which is the subject of the Offer; provided, that in no event shall Jones or affiliate purchase such Programming for a price which is less than the price determined under the second sentence of Section 2.2(p). If Jones (or affiliate) has elected to purchase the Programming which is the subject of the Offer, Jones (or affiliate) shall expeditiously consummate the transaction. If such transaction is not so consummated with Jones (or affiliate), the Partnership may then sell the Programming to the third party named in the Offer on the terms and conditions set forth therein. This Section 9.12 shall survive regardless of any removal of the Managing General Partner. 9.13 RECORDS. The General Partner shall maintain a record of the information obtained to indicate that a Limited Partner meets the suitability standards employed in connection with the offering and sale of the Interests and the representation of the Limited Partner that he or she is purchasing for his or her own account or, in lieu of such representation, information indicating that the Limited Partner for whose account the purchase is made meets such suitability standards. JONES PROGRAMMING PARTNERS 1-A, LTD. By Jones 21st Century Entertainment, Inc., General Partner By /s/ Carl E. Vogel -------------------------- Carl E. Vogel, President 26 -----END PRIVACY-ENHANCED MESSAGE-----