HomeMy WebLinkAbout1978-12-05; City Council; 5207-5; Assignment of Cable TV FranchiseCITY OF CARLSBAD
AGENDA BILL NO.
DATE: December 5, 1978
DEPARTMENT:Utilities & Maintenance
'II
Initial:
Dept. M
C. Atty
C. Mgr.
.l/>2_
Subject:APPROVING ASSIGNMENT OF CABLE TV FRANCHISE FROM
DANIEL'S CABLEVISION TO CARLSBAD CABLEVISION
Statement of the Matter
Council awarded a cable TV franchise to Daniel's Cablevision on March 21, 1978.
Daniels has diligently proceeded to meet their franchise obligations and have commenced
construction/installation of the system. Daniels is presently serving the Seaport
subdivision and Palisades through existing facilities and have opened a local office.
Daniels Cablevision desires to refinance construction loans and to arrange permanent
financing for long term operation at this time due to the extraordinary escalation
of interest rates. Operation of the franchise will be conducted by Carlsbad
Cablevision, a limited partnership, managed by Daniels & Associates the same managing
company as previously. The limited partnership will also provide for the opportunity
for local ownership of partnership shares. A memorandum from the Director of
Utilities & Maintenance is contained at Exhibit A. The request for assignment of
the franchise to Carlsbad Cablevision is contained at Exhibit B.
EXHIBITS:
Memorandum from the Director of Utilities and Maintenance to the City
Manager dated November 27 f 1978 (Letter from Urban Institute will be
distributed upon receipt) .
Letter from Daniels and Associates to City Council of November 9, 1978supplemented by letter dated November 20, 1978.
Resolution No.jr&3«> which approves the assignment of the franchise by
Daniel's Cablevision to Carlsbad Cablevision
D. Resolution No.
Carlsbad Cablevision
ich approves the acceptance of the franchise by
RECOMMENDATION:
If Council approves the assignment of the franchise from Daniel's Cablevision
to Carlsbad Cablevision, adopt Resolution No*s~4.?y and No.s£fcj£.
Counci1 action:
12-5-78 Council adopted Resolution 5629, approving the assignment of
the Cable TV Franchise from Daniel's Cablevision, Inc. to
Carlsbad Cablevision; and
adopted Resolution 5630, approving the acceptance of the Cable
TV Franchise by Carlsbad Cablevision.
78-275
November 27, 1978
MEMORANDUM
TO:
FROM:
SUBJECT:
City Manager
Director of Utilities & Maintenance
Reassignment of Cable TV Franchise;
Daniel's Properties to Carlsbad Cablevision,
a Limited Partnership
I was contacted on October 31, 1978 by Samuel P. Evans, Vice President
of Daniel's and Associates to arrange for a meeting on November 3, 1978
to discuss reassignment of the Carlsbad Cable TV franchise from Daniel's
Cablevision to Carlsbad Cablevision, a limited partnership. Reassignment
of the franchise is provided for in paragraph 5.28.140 of the Carlsbad
Municipal Code, a copy of the pertinent section is attached.
I met with Mr. Evans, Mr. Keith Burcham and Mr. Duane Linholm on November
3, 1978 to discuss this matter. A "block diagram" of the evaluation of
this change is attached. Daniel's is interested in reassigning the franchise
at this time in order to complete the permanent financial arrangements for
the system. This is necessitated by the extraordinary increase in interest
rates and to resolve minor problems in their construction loan (this is their
basis for change at this time). The general partner of the proposed Carlsbad
Cablevision is "Second IR (Integrated Resources) - Daniel's Corporation" a
company owned by Daniels and Associates and Integrated Resources. The "Second"
in the corporate name is to designate the second such arrangement between the
parties for permanent financing of cable TV enterprises. It is the intention
of the partners to continue these arrangements for additional such enterprises
and to number them consecutively, i.e. First..., Second..., Third... . The
management of Carlsbad Cablevision will be Daniels and Associates, the same
management arrangement that had been made for Daniels Cablevision. This
arrangement is made through a 10 year agreement between the general partner
and Daniels and Associates.
The Carlsbad Municipal Code provides for the reassignment of the franchise with
the usual caveats and protective clauses and upon meeting those conditions
cannot be "unreasonably refused". The Code is quite specific, however, in
discussing the reassignment before completion of construction. The specific
wording is quoted for clarity - "In the absence of extraordinary circumstances,
the Council will not approve any transfer or assignment of the franchise before
completion of construction of the energized cable." The purpose of this clause
is to preclude the franchise from becoming a marketable commodity prior to the
system being placed in operation and to ensure that the original franchise holder
will fulfill the purpose of the franchise i.e. to ensure the citizens of quality
cable reception at a reasonable cost.
EXHIBIT "A1
Cable TV (continued) -2- November 27, 1978
I did arrange for a review by the Cable Television Bureau of the Urban
Institute of all documentation submitted in order to develop a recommendation
for Council consideration. A copy of this review is also attached. Mr. Guinn
Leverett is no longer associated with ACSI, our previous consultant, and ACSI
did not wish to provide consulting services at this time on the matter.
It appears that two issues must be resolved by Council in order to approve
the reassignment:
1. Does the limited partnership meet all the criteria for assignment
of the franchise as did Daniel's Cablevision, the original franchisee.
2. Does the rapidly increasing interest rates fall within the meaning
of "extraordinary circumstances".
ISSUE 1. Daniels Cablevision has proceeded in an orderly and
timely manner to achieve the franchise requirement of 20% of system
completion within a year after the final regulatory approval. FCC
certified Daniels Cablevision to operate on July 26, 1978. Daniel's
has purchased about 80% of the materials to construct the plant and
has established a construction yard on State Street (just to the
west of Allegro Antiques). A local office has been established at
2725 Jefferson, Suite C (office complex at corner of Jefferson and
Laguna) and negotiations have been started to construct a 10,000
sq. ft. office/studio on El Camino Real north of the Beckman Instru-
ment entry driveway. Construction contracts have been signed for
overhead construction and will commence as soon as pole rearrangements
have been accomplished by SDG&E and Pacific Telephone. The head end
location has been established on the high ground across from Rancho
Carlsbad and construction will commence shortly. Daniels and Associates,
the management organization, will continue as the management for
Carlsbad Cablevision. It appears that performance under the franchise
is appropriate and I have no criticisms at this time.
Ownership of the enterprise is, however, changing. Daniels and
Associates (the management organization) and Integrated Resources,
Inc. have entered a joint venture agreement. This entity, known
as Second IR-Daniels Corporation is the managing general partner
of the limited partners hip. It appears, based on information
submitted, that financing is sound and that the change in ownership
will not have an adverse affect upon the performance of the enterprise.
ISSUE 2. Do extraordinary circumstances exist?
The primary motive for this change as stated by the applicant, is the
rapid escalation of interest charges on money borrowed to construct
the system. One only has to look at the almost 1% increase in the prime
Cable TV (continued) -3- November 27, 1978
over the last month to be aware of escalating interest costs.
Construction loans (as are many other loans) are tied to the
prime rate and as the prime increases, these loans are automati-
cally increased. Suffice to say, this rapid escalation of the
prime rate, can be of great concern to a borrower under these
conditions and it may well be considered extraordinary from their
viewpoint. The Code does not define "extraordinary conditions"
but leaves that interpretation to the discretion of the Council.
Ordinary, as defined in Websters is "the regular or customary
condition or course of things" - thus, extraordinary can be under-
stood as something "beyond the regular or customary condition or
course of things". It appears that the escalating interest rates
are beyond the customary condition of the money market and that
Council can find that extraordinary circumstances do exist and
approve the reassignment at this time on that basis. I further
believe that performance to date, the continuity of the same
management entity and the reputation of the Daniel's associated
enterprises, minimizes risk in making this finding.
Carlsbad Cablevision is a Colorado Limited Partnership. Daniel's
has provided me an opinion by their attorney that Carlsbad Cable-
vision meets all requirements of the laws of California to do
business in the State of California.
The applicant has, in conversation, recognized that processing of
this change under short time constraints is to their benefit and
has created costs not normally associated with administration of
the existing franchise. Accordingly, they have expressed willingness
to reimburse the City for these extraordinary expenses.
It is recommended that:
1. Council approve the assignment of the franchise from Daniel's
Cablevision to Carlsbad Cablevision.
2. That all costs associated with this change be billed to Carlsbad
Cablevision.
ROG^fW. GRFER
Director of Utilities & Maintenance
Attachments
RWGrpag
Daniels & 293° East Tnird Avenue
Associates Inc P.O. Box 6008Associaies, inc. Denver Colorado 80206
303321-7550
John Saeman
President and
Chief Executive Officer
November 9, 1978
City Council
City of Carlsbad
Carlsbad, California
Dear Council Members:
In December, 1977, Daniels Properties, Inc. was granted a cable television fran-
chise for Carlsbad, California. The franchise was accepted in April, 1978 by
Daniels Cablevision, Inc., a company wholly owned by Bill Daniels. Daniels Ca-
blevision, Inc. received it's Federal Communications Commission authorization
for Carlsbad on August 19, 1978. All of the system electronics, cable, hardware
and headend equipment required to construct the Carlsbad system have been ordered
(over $800,000 total cost) and 85% have been received to our storage yard in
Carlsbad. A temporary office has been leased in Carlsbad, a permanent office
site has been selected in Carlsbad, the first five (5) miles of system construc-
tion have been completed in the Seaport area of Carlsbad, and construction is
continuing on schedule for the remainder of Carlsbad (a detailed progress re-
port is attached as Exhibit A).
Daniels Cablevision intended to use a bank construction loan to finance the con-
struction phase of the project. Upon completion, we intended to put the perma-
nent financing for the system in place. However, due to the extraordinary in-
crease in interest rates and certain minor problems with our construction loan,
we would like to permanently finance the system now and not wait until next year.
In order to do that, we need your approval.
The permanent financing method that we have chosen involves a limited partnership
called Carlsbad Cablevision. The following points highlight this arrangement:
1. The partnership has entered intd a ten-year management contract with Dan-
iels & Associates, Inc. (see Exhibit B). This is the same company that
manages all of Daniels' cable systems throughout the United States. As a
result, the people of Carlsbad are assured that the cable television sys-
tem will be operated by the same highly skilled people. In other words,
the permanent financing method will not affect the construction or opera-
tion of the system in any manner whatsoever.
Mayor of City Council
Page 2
November 9, 1978
2. The general partner in the partnership is a company jointly owned by Dan-
iels & Associates, Inc. and Integrated Resources, Inc. (through its wholly
owned subsidiary IR Cable Company). Daniels & Associates is a company wholly
owned by Bill Daniels. Integrated Resources, Inc. is a publicly owned com-
pany that specializes in leasing, partnership financing, and insurance. In-
tegrated has committed to raise $700,000 for the partnership by selling
Limited Partnership Interests. If for any reason they are unable to do so,
they (Integrated) will advance the funds so that the project will be fully
funded. A copy of this commitment is enclosed as Exhibit C.
3. The partnership has a firm commitment from a bank for $1,000,000 in senior
debt. This, combined with the $700,000 in equity mentioned above, will pro-
vide ample funds to construct and operate the system. (Exhibit D is a copy
of the bank's commitment).
4. The partnership has arranged for all bonds and insurance required by the
franchise (see Exhibit E).
5. Daniels Cablevision, Inc. has formally assigned the franchise to the part-
nership, and the latter has formally accepted it. Copies of these documents
are included herein as Exhibit F.
6. Ttie partnership has executed the "hold harmless" clause contained in the
franchise and is committed to an Affirmative Action Plan for equal employ-
ment opportunity.
7. Enclosed as Exhibit 6 is a copy of the partnership agreement, and enclosed
as Exhibit H is a list of all cable systems currently operated by Daniels &
Associates, Inc.
In summary, Daniels Cablevision respectfully requests that you approve of the
assignment of the cable television franchise to Carlsbad Cablevision, a Limited
Partnership. The transfer will provide permanent financing for the system, and
the city will get exactly the same high quality cable television system, managed
by the same company, on the same schedule as previously promised. In all respects,
it is a change only in form and not of substance.
Very J:ruly vo/rs,
V. Saeman
President
JVS:LBC
Enclosures
cc Roger Greer
Howard Gann
EXHIBIT A
DETAILED PROGRESS REPORT
Will be supplied later.
EXHIBIT B
MANAGEMENT CONTRACT
MANAGEMENT AGREEMENT
THIS AGREEMENT is made this day of 19 by and
between Carlsbad Cablevision, A Limited Partnership, hereinafter called the "Owner", and
Daniels & Associates, Inc., a Delaware corporation, hereinafter called the "Manager".
WITNESSETH;
WHEREAS, Owner has one or more franchises or permits authorizing construction
and operation of community antenna television system(s) (hereinafter called the "System"
or the "Systems") in or in the vicinity of the cities, villages and counties identified on
Exhibit "A"; and
WHEREAS, Manager has the experience and ability to manage the System and is
willing to do so; and
WHEREAS, Owner desires to enter into a Management Agreement with Manager
providing for the management of the operation of the System;
NOW, THEREFORE, in consideration of the premises, the mutual covenants, and the
mutual benefits to be derived therefrom, the parties hereto agree as follows:
I.
APPOINTMENT OF MANAGER
1.1 Owner hereby designates Manager and Manager hereby accepts the designation
of exclusive management agent of the System, upon the conditions and for the term and
compensation herein set forth.
II.
TERM OF APPOINTMENT
2.1 This Agreement shall become effective on the date hereof and shall continue
in full force and effect from its effective date until terminated in accordance with the
provisions of Article VIII hereof.
m.
SERVICES TO BE PERFORMED
3.1 Manager shall at all times have exclusive control of the physical plant and
equipment of the Systems, including all phases of installation and operation thereof.
3.2 Manager shall have the responsibility for the supervisory management of the
contractor or contractors or other persons retained to build and construct Systems. Upon
completion of such construction, Manager shall have the responsibility for the supervisory
management of the day-to-day operation of the Systems and shall devote thereto such
time as may be necessary for the proper and efficient management of the Systems.
3.3 Manager shall make available to the Systems its experience and knowledge as
to preferred operating methods, and will advise Owner of all phases of the operation of
the Systems.
3.4 Manager shall keep or cause to be kept (at its or Owner's expense, as herein
provided) all necessary books and records of all Systems' affairs, in which shall be entered
the transactions of the Systems. Said books and records shall be open to the inspection
and examination of Owner or its representatives at any reasonable time. The books of
account shall be kept in accordance with generally accepted accounting principles and
procedures consistently applied.
3.5 The annual accounting period of the Systems shall be as determined by Owner
and the Systems' books of account shall be kept on the accrual basis of accounting.
3.6 Manager shall render to Owner (and to any stockholders of or lenders to Owner
which are entitled thereto) on or about the last day of each month (or on such earlier date
as may be required by the terms of the Note Purchase Agreement) an unaudited balance
sheet of the Systems as of the end of the preceding month, an unaudited statement of the
Systems' profits and losses for such month and an unaudited statement of sources and uses
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of funds for such month and for the period since the end of the preceding fiscal year
(which statements may be under whatever names are then employed for statements
containing the same financial information), all prepared in accordance with generally
accepted accounting principles and procedures consistently applied. If requested by
Owner, it shall also render a monthly statement showing all connections to and
disconnections from Owner's CATV Systems.
3.7 Promptly after the end of each fiscal year, Manager, at Owner's expense, shall
cause the books and records of the Systems to be audited by an independent Certified
Public Accountant jointly chosen by Manager and Owner, who shall prepare and render his
audit opinion on the year-end balance sheet, the profit and loss statement, and on such
related statements as he deems necessary.
3.8 Manager shall timely file or cause to be filed all federal, state, and local
reports as may be required, including, without limitation, tax reports, income tax
withholding reports, social security reports, PICA tax reports, unemployment
compensation reports, information reports, FCC reports, etc., and shall cause all
payments required thereunder to be made by the Systems from Owner's funds.
3.9 All costs with respect to record keeping, preparation of monthly and annual
reports, auditing, and certification and filing of reports shall be paid as follows: Day-to-
day bookkeeping with respect to subscriber billings, receipt of subscriber charges and
other receipts, routine payment of accounts and other ordinary on-site activities shall be
performed by employees of the Systems at the expense of Owner, but under the general
supervision and direction of employees of Manager. Such Systems' employees shall also
prepare and file,«s directed by Manager, routine reports as required by local authorities
and develop and provide to Manager the basic information required for other reports to
the extent that the same is required from the local level. Manager, at its expense, shall
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prepare all monthly financial reports, shall supervise the day-to-day bookkeeping
activities of the Systems' employees and, except to the extent that the independent
Certified Public Accountant is required to be involved therein, and except for the
aforementioned reports by Systems' employees, shall, at its expense, perform all general
accounting functions and prepare and file all reports and returns provided for under
Section 3.7 and Section 3.8.
3.10 Manager and Owner shall select and engage and Manager shall supervise such
contractors or other persons considered by Manager and Owner to be necessary for the
construction of the Systems. None of such persons shall be employees of the Manager and
Manager shall not be liable to Owner or to others for any act or omission on the part of
any such persons.
3.11 Manager shall select, employ, supervise, instruct, discharge, pay on behalf of
Owner, and otherwise manage all on-site servants, employees, agents, or contractors
considered by Manager to be necessary prior to or after completion of the Systems for the
efficient operation thereof. All of such persons shall be employees of the Systems and not
of Manager. Manager shall not be liable to Ownfer or to others for any act or omission on
the part of such employees if Manager has taken reasonable care in the selection and
supervision of such employees in their employment.
3.12 Manager shall comply with all union contracts, and all pension, insurance, and
other employee benefit programs and other obligations relating to the Systems' employees,
the costs of which shall be paid from Owner's funds.
3.13 Manager shall carry out all negotiations with unions, whether relating to
elections, contracts, grievances, or other matters and shall assist the Owner's attorneys in
the preparation of union contracts, if any are required. Manager shall have no authority
to consent to unionization of the Systems unless authorized by Owner.
3.14 Manager shall negotiate all contracts necessary for the construction,
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operation, maintenance, servicing, protection, improvement, and expansion of the
Systems. It shall issue purchase orders for all necessary materials and supplies and
supervise the work of all employees, contractors, and others.
3.15 Manager, at Owner's expense, shall cause the Systems to be maintained and
serviced at all times as first-class, high-grade community antenna television systems, and
shall not permit the Systems to become unkept or run down at any time. Any and all
construction, reconstruction, and expansion of any System shall be at the sole expense of
Owner.
3.16 Manager will cause to be purchased and maintained in effect (a) such policies
of insurance as Owner may from time to time direct to be carried against fire and
extended coverage (and other such hazards as Owner may elect to insure against) and
(b) policies of insurance against liability for injury or death to persons and damage to
property and (c) policies of insurance or other coverage for workmen's compensation in
such forms and in such amounts as Manager may from time to time consider appropriate.
Each of said policies and coverages shall be at the expense of Owner and, except with
respect to fire and extended coverage or other hazard insurance, shall name both Owner
and Manager as insured thereunder.
3.17 Manager shall perform all other supervisory management services as required
to result in the efficient operation of the Systems.
IV.
AUTHORITY OF MANAGER
4.1 Except as prohibited or limited by this Agreement, Manager shall be
authorized to perform all services necessary for the management of the Systems.
4.2 Manager is authorized to take any action not specifically prohibited or limited
by this Agreement, or by law or administrative enactment, which may be required in the
judgment of Manager in order to obtain the maximum benefits from the Systems.
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4.3 Manager shall not, without written authorization from Owner, for and on
behalf of Owner, engage any affiliate of the general partner of the Owner to perform
services hereunder, or add or terminate any of Owner's CATV franchises of the Systems,
or extend or eliminate any service of any non-franchise areas of teh Systems.
4.4 At least annually and on such more frequent occasions as it deems necessary,
Manager shall prepare and submit to Owner, a budget setting forth Manager's proposed
expenditures on behalf of Owner for the repair, maintenance, or expansion of Owner's
CATV Systems for the next or balance of the current fiscal year of Owner (as the case
may be) and upon receipt of all required approvals thereof, Manager shall be entitled to
make disbursements of Owner's funds in accordance with said budget without additional
consent or approval from Owner or the other entities having a right of approval thereof.
Manager shall not, without authorization from Owner, and from other entities having a
right of approval thereof, make, cause to be made, contract for, or agree to any
expenditure not provided for in the approved budget for repair, maintenance, or expansion
of the System, if the total cost therefor will exceed $35,000.00.
4.5 Manager shall not, without written authorization from Owner, commence or
institute any legal action or litigation in the name of Owner, except that Manager may, in
its discretion, institute collection proceedings, including legal actions incident thereto, in
the name of and at the expense of Owner, to enforce the collection of payments due from
customers of the Systems.
4.6 Manager shall have no authority to consent to unionization of the Systems or
of the employees of the Systems.
4.7 Manager shall not be authorized to make any payment on behalf of Owner or to
obligate Owner to make any payment regarding or relating to any expenditure or
obligation of Owner outside the scope of this Agreement or outside the scope of the
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normal operating expenditures contemplated by this Agreement. Manager shall, upon
receipt of any statement, invoice, bill, or other notification of any items clearly outside
the scope of this Agreement, immediately forward such notification to Owner.
4.8 Manager shall not, without written authorization from Owner, have authority
to sell or hypothecate any of the assets of the Systems, except it may sell or abandon
worn out or obsolete materials, supplies, and equipment, any proceeds of which shall be
the property of Owner to the extent not expended for replacement of such materials,
supplies, or equipment.
4.9 Manager shall employ and maintain on its staff, at its sole cost and expense, an
adequate and competent staff of experts and specialists required for the operation and
management of CATV Systems, including, as required, one or more accountants,
engineers, operations supervisors, and advertising personnel. However, it is recognized
that circumstances may occur under which the employment of an outside expert or
specialist having particular expertise in a matter particularly applicable to Owner's
Systems is necessary or desirable and, in such event, Manager is authorized, in its
discretion, to maintain and employ, at Owner's expense, such outside experts or
specialists, including the aforementioned as well as attorneys, architects, and specialized
organizations for such purposes as special promotions, canvassing, and the like.
Professional and other expert services for extensive and non-regular activities (such as,
for example, engineering services for construction, expansion or rebuilding the Systems)
shall be under the general supervision of Manager's employees, but may be performed by
outside persons at the expense of Owner.
V.
METHOD OF PERFORMING SERVICES
5J There shall be employed by Manager, but at the expense of Owner, a local or
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resident manager (the "Resident Manager") for any one or more of the various CATV
Systems. Such Resident Manager shall be in charge of and have authority over the routine
day-to-day operations of the System or Systems to which assigned, subject to the general
supervision and control of the Manager and its designated home office officers and
employees. In the event the size and requirements of any System are such that one or
more Assistant Resident Managers are required, in the opinion of the Manager, for the
proper and efficient management of such System, then such Assistant Resident Manager
or Managers shall be employed by the Manager at the expense of Owner and he or they
shall serve under the supervisions and authority of the Resident Manager and the Manager.
All on-site employees under the supervision and authority of the Resident Manager shall
be considered employees of the Systems at the expense of Owner.
5.2 General supervision, direction, and control of the Systems by the Manager shall
be provided by officers, agents, and employees of Manager who are experienced and
qualified in the CATV business and no additional charge shall be made for routine
supervisory and management services performed by such persons or for periodic and
routine visitations to and inspections of the Systems or for regular consultations with and
advice to the Resident Managers.
VI.
ALLOCATION OF COSTS
6.1 All expenses relating to the supervisory management of the Systems as
contemplated by Section 5.2 of this Agreement shall be Manager's costs.
6.2 Except as otherwise provided in this Agreement, Manager's indirect expenses,
such as salaries of Manager's officers and employees and Manager's front office overhead,
shall be Manager's costs.
6.3 All operating expenses of the Systems, including salaries and other labor costs
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of the Resident Manager and all other persons working in or in the construction of the
Systems, shall be Owner's costs.
6.4 All expenses which are directly or indirectly related to the Systems or their
operation, maintenance, repair, expansion, or upkeep, except expenses described in
Sections 6.1 and 6.2, shall be Owner's costs, including, but without limitation, the costs and
expenses which Manager is expressly authorized by this Agreement to incur on Owner's
behalf.
6.5 The fees of outside experts and specialists, as provided in Section 4.9 of this
Agreement, shall be Owner's costs.
6.6 All unusual or extraordinary expenses which have been approved by Owner,
whether or not related to the Systems, shall be Owner's costs.
vn.
COMPENSATION OF MANAGER
7.1 Manager shall receive five and one-half (5i%) of the Owner's "gross receipts"
as a management fee for supervisory management services rendered by Manager as
provided for herein, provided that, Manager shall in any event for such services receive
not less than $25,000 as a management fee for each 12-month period or portion thereof
throughout the term of this Agreement, pro-rated through the date of termination of this
Agreement.
7.2 In addition to the above-described basic management fee, Manager shall be
entitled to reimbursement for reasonable travel and away-from-home living expenses of
Manager's personnel directly incurred in the performance of services under this
Agreement and for any other out-of-pocket expenses incurred by it in the performance of
its duties and obligations hereunder, except for those expenses which are herein described
as the expenses of Manager, provided that the total of such reimbursement in any one
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fiscal year of the Owner shall not exceed $25,000.00.
7.3 For purposes of this Agreement, the term "gross receipts" shall include all
moneys and other things of value received by the Owner or others on Owner's behalf with
respect to the ownership or operation of the Systems, including, but without limitation,
service fees, connection or reconnection charges, sub-rents, advertising income, pay cable
receipts, leased cable receipts, fees for services provided by the Systems and its
employees to third parties, and subscriber fees or charges paid by Systems' customers; not
included are proceeds from the sale of assets and interest or other income from the
investment of net proceeds paid or payable to Owner and derived from non-CATV
activities in which Manager is not a participant.
7.4 In the event it becomes necessary to temporarily assign home office personnel
or other employees of the Manager to the Systems, or any part thereof, to perform work
or services which would otherwise be performed by employees of the Systems employed at
Owner's expense and for other than typical routine management and supervisory purposes
(and in any event for periods in excess of three days), then an additional charge not in
excess of charges for similar services from unrelated third parties may be made therefor.
7.5 The fees and charges provided for in Sections 7.1, 7.2, and 7.4 of this
Agreement shall be paid to Manager on a monthly basis as follows: Based on gross
receipts to date, Manager shall estimate the management fee on a monthly basis and shall
submit a statement for said fee and all of said charges accrued to date to Owner within
20 days after the close of each calendar month, provided that, Manager shall receive not
less than -$2,083.33 as a fee for each such month. Manager may withdraw from the
Management Account and pay to itself the amount of such statement and any other sums
due it hereunder or, if the amount in such Management Account is insufficient therefor,
Owner shall pay such estimated fee and other charges within 10 days after receiving
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Manager's monthly estimate and statement. Such monthly payments of the estimated fees
shall be adjusted annually to agree with the total fee as based on the annual audit as
provided for in Section 3.7 of this Agreement. If such annual adjustment results in
additional fees owing to Manager, such additional fee shall be paid or withdrawn from the
Management Account within 10 days after notice of such adjustment calculations is given
to Owner. If such adjustment results in a rebate owing to Owner, such rebate will be
accomplished by a deduction from the next monthly fee which would otherwise have been
payable to Manager.
7.6 In addition to the foregoing fees and charges, Manager shall be entitled to
reimbursement of any costs chargeable to Owner, but advanced by Manager. Manager
shall render monthly statements for any such additional reimbursement and such
statements shall be paid by Owner within 10 days after receipt thereof.
7.7 Any fee, charge, rebate, or other compensation payable under this Agreement
which is not paid when due hereunder or within 15 days thereafter shall draw interest at
the rate of nine percent (9%) per annum, compounded annually, from the due date thereof
until paid and the party entitled thereto shall, in addition, be entitled to collect from the
delinquent party all costs of collection, including reasonable attorneys' fees and costs.
7.8 The Manager shall be the exclusive agent and broker of Owner in connection
with the sale of any of Owner's property. Manager shall receive in addition to any other
sum payable by reason of this Agreement a brokerage fee for services involved in a sale,
at such time as any such property is sold, of five percent (5%) of the sales price thereof.
VIII.
MANAGEMENT AND OPERATING ACCOUNT
8.1 Manager shall create and maintain separate and apart from any account kept
and maintained by it for any other purpose a bank account in a commercial bank of its
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selection, which account is herein referred to as the "Management Account". Any and all
receipts of whatever nature and from whatever source derived from the operation of the
Systems shall be promptly deposited in said account. All funds in said account from time
to time shall be the property of the Owner, but said funds shall be disbursed from said
account by Manager on Owner's behalf in accordance with the provisions of this
Agreement. Only such person or persons as Manager may from time to time designate,
with the approval of Owner, shall have authority to draw checks or drafts upon or make
withdrawals from said account. At Manager's option, one or more additional operating
bank accounts (the "Operating Account") may be created and maintained in such
commercial bank or banks as Manager may select for the purpose of making funds
available to the Resident Manager and/or other operating personnel for the conduct of
day-to-day business. Such person or persons as Manager shall designate from time to time
shall have authority and be authorized to draw or issue checks or drafts upon such
Operating Account. Unless approved by Owner, no more than $25,000.00 shall be
maintained in the Operating Account at any one time.
8.2 Manager shall make or cause to be made from the Management Account and/or
the Operating Account all payments of costs, expenses, fees, and charges payable by the
Owner with respect to the Systems as provided for hereunder, including fees, charges,
compensation, and reimbursement payable to Manager hereunder. It shall also pay or
cause to be paid therefrom any payments of principal and/or interest owed by Owner on
indebtedness secured by an encumbrance upon the assets of the Systems. Provided the
funds are available therefor in the Management Account or the Operating Account, all
such payments shall be made promptly when due, provided notice of the existence of the
claims therefor has been received by Manager. In the event that at any time there shall
be insufficient funds in the Management Account and/or Operating Account with which to
-12-
make any payment provided for hereunder, then, upon the request of Manager, Owner shall
forthwith deposit therein a sufficient sum as reasonably determined by Manager to make
all then due and anticipated payments. Manager may advance, but shall have no obligation
to advance, moneys from its own funds for such purpose and, in such event, Owner shall
forthwith reimburse Manager therefor, together with interest on such advance as herein
provided. Periodically, but not less often than quarter-annually, Manager shall pay over to
Owner the balance of the Management Account after reserving therein such amount as in
its reasonable discretion is necessary to provide for currently due and anticipated future
costs, expenses, compensation, fees, reimbursements, debt retirement, and a reasonable
reserve for contingencies. In the event of a dispute between Owner and Manager as to the
reasonableness of reserves, the matter shall be resolved by the Certified Public
Accountant regularly employed pursuant to the provisions of Section 3.7 hereof, but such
accountant is directed to make his determination with a view to providing an ample
reserve for future expenditures. At the request and expense of Owner, any persons having
authority to draw checks or drafts upon or make withdrawals from the Management
Account or the Operating Account shall be bonded in such amount as Owner shall direct.
IX.
DEFAULT AND TERMINATION
9.1 A default by Owner or Manager shall occur hereunder if Owner or Manager
shall breach any material covenant or condition of this Agreement to be kept or
performed by it.
9.2 This Agreement may be terminated as follows:
a. By either Owner or Manager on written notice to the other in the event
of any default by the other which continues uncured for 15 days (in the case of any failure
to make a payment of money) or for 60 days (in the case of any other material breach)
-13-
after written notice from the non-defaulting party to the other party.
b. At any time 10 years or more after the effective date of this Agreement,
by either Owner or Manager, on written notice to the other given at least 60 days before
the effective date of termination as stated therein.
9.3 After receipt of notice of termination and before the date of termination
provided by the notice or this Agreement, Manager shall continue management of the
System in accordance with this Agreement, unless instructed by Owner to the contrary, in
which case such instructions shall prevail over any other provisions of this Agreement,
except those relating to compensation of Manager. In addition, Manager shall take all
actions necessary to deliver to Owner possession or control of all property of Owner or its
designee in an orderly manner and without interruption of Owner's obligations to its
obligees, including but not limited to its subscribers, customers, advertisers, servants,
employees, agents, contractors, and all governmental authorities.
9.4 Subject to any special instructions by Owner, upon termination of this
Agreement, Manager shall immediately relinquish to Owner, or its designee, possession
and control of all property of Owner, including, but not limited to, the physical plant and
equipment, and all documents, records, and data pertaining to the System.
9.5 In the event of termination of this Agreement pursuant to the terms hereof,
Manager shall remain liable to Owner for any required payment to Owner or other
obligations hereunder accrued prior to the date of termination; and Manager shall be
entitled to receive the amount of any accrued but unpaid management fees and the
amount of any accrued but unpaid claims for reimbursement or for services or work
performed under the provisions hereof.
9.6 If a petition in bankruptcy or insolvency is filed by either the Owner or the
Manager, or if either shall make an assignment for the benefit of creditors, or if either
-14-
shall file a petition for a reorganization, or for the appointment of a receiver or trustee of
all or a substantial portion of its property, or if a petition in bankruptcy or other above-
described petition is filed against either which is not discharged within 120 days
thereafter, then either party may terminate this Agreement by serving written notice on
the other party as herein provided.
X.
MISCELLANEOUS
10.1 All communications permitted or required between the parties hereto shall be
effective when sent by registered or certified mail, with postage prepaid, addressed to the
following addresses or at such other addresses as may be designated from time to time by
written notice to the other party:
a. If to Owner: Carlsbad Cablevision, A Limited Partnership
2930 East Third Avenue
Denver, Colorado 80206
cc: Second I-R Daniels Corp.
295 Madison Avenue
New York, New York 10017
b. If to Manager: Daniels & Associates, Inc.
2930 East Third Avenue
Denver, Colorado 80206
Attention: John V. Saeman
10.2 Neither party shall have the right to assign this Agreement without the written
consent of the other party, nor shall this Agreement or any of the rights or obligations of
the parties hereunder be transferable by operation of law or otherwise, except that the
Manager's interest may be transferred to an entity which becomes a successor of Daniels
&. Associates, Inc., as a result of a merger or consolidation or to a purchaser of all or a
substantial portion of the assets of Daniels & Associates, Inc., if such purchaser is
approved as the Manager of the System by the Owner. Upon any permitted assignment,
-15-
this Agreement shall inure to the benefit of and be binding upon the parties hereto and
their respective successors and assigns.
10.3 This Agreement may not be modified, altered, or amended in any manner
except by agreement in writing duly executed by the parties hereto. This Agreement
constitutes the entire agreement between the parties with respect to the subject matter
hereof.
10.4 This Agreement may be signed in any number of counterparts with the same
effect as if the signatures to each counterpart were upon the same instrument.
10.5 This Agreement shall be governed by and construed according to the laws of
the State of Colorado.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the day and year first above written.
MANAGER:
DANIELS & ASSOCIATES, INC.,
a Delaware corporation
ATTEST:
By
President
Secretary
OWNER:
CARLSBAD CABLEVISION, A LIMITED PARTNERSHIP
By: SECOND I-R DANIELS CORP.,
a Delaware corporation,
as Managing General Partner
By:
-16-
EXHIBIT C
COMMITMENT LETTER
INT^CATED RESOURCES, INC.-
H95 MADISON AVENUE ' NEW YORK, N.Y. 1OO17 • 212-49O-75OO
OctobeA. 37, 1975
P. EvanA
VanieJtA & At>4ociateA, Inc..
2930 EaAt ThiAd Avenue.
VenveA, ColaAado S0206
Re.: CaAlAbad Cable.viAi.on, A Limited. PaAtneAAhip
Sam:
JhiA tetteA. witt confiiAm oust agfie.ement that, pusuuant to the.
ve.ntufi.e. agfie.we.yit dcutzd kptuJi 8, 1977 betvoe.e.n QUA JL&&P active. c.ompayu.&& ,
lyite.gtioute.d ReAouAcfc6, Inc. vtiJJL awiange. to Mui&e. $700,000 o^ equity
CA.pjJtaJt ^ofi CaA&bbad Ca.bte.viAi.on, A Lcrru^ted PaAtneAAkip. In tke. event
•&u.c.h e.qu^ty co.p^to£ -06 fie.quuAe.d ptu.oti to the. time. Lun-cted ?asitnesiAhi.p
InteAeAtA can be. &otd, lnte.giate.d agtLe.eA to cooAe an i,nteA.eAt beafu.ng
advance. o£ up to $700,000 to be. made, to the. ?antneAAhi.p upon /Lti
tue.qu.eAt. Re.paymejit o& the. pfiincipat ofi thiA advance, vtiJUL be. only
the. &ate. o& PasitneAAhip InteAeAtt, i.n ac.c.oidance. uiith QUA. pa&t
QUA. corrmitine.nt iA c.onditi.one.d upon the. PaAtneAAhip fLaiAi,ng $1,000,000
Oj$ tong-teAm non-A.e.c.ouAAe. debt fiAom a fainanciat jjn&tlhi£ion, the.
PaAtneAAhip A.e.c.eA.v<Lng a ^AanchiAe. to opeAate. the. cable. tele.viAi.on &y&
i.n CoAlAbad, CatL&oAnLa and the. completion o& fyiwJL document* t>atiA{lactoA.y
to UA.
QUA company iA e.xtnweJty inteAeAtejd in paAti.cipati,ng with you. in thiA
ve.ntuAe., and we. look ^oAuoand to the. closing o<$ thiA tAanAaction.
VeAy tAuly youAA,
WEGRATED RESOURCES, INC.
Tay Chazanot
Executive Vi.ce. PA.eAid.ent
EXHIBIT D
BANK'S COMMITMENT LETTER
SECURITY PACIFIC NATIONAL BANK
HEAD OFFICE, SECURITY PACIFIC PLAZA, 333 SO. HOPE STREET, LOS ANGELES, CALIFORNIA
MAILING ADDRESS: P. 0. BOX 2097, TERMINAL ANNEX, LOS ANGELES, CALIFORNIA 90051
October 26, 1978
Carlsbad Cablevision
A Limited Partnership
2930 East Third Avenue
Denver, Colorado 80206
Attention: Mr. Samuel P. Evans, Vice President
Gentlemen:
This letter will confirm our commitment to make a $1,000,000 non-recourse loan
to Carlsbad Cablevision, a Limited Partnership.
The purpose of the loan is to meet, in part, the cost of construction of a
cable television system in Carlsbad, California.
The loan will be structured as a one-year Revolving Credit converting into a
seven year Term Loan. Principal payments during the Term Loan will be as
follows:
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
$0
50,000
100,000
150,000
200,000
250,000
250,000
$ 1.OOP.OOP
The loan will bear interest at 3% over our prime rate until the annualized cash
flow, as customarily defined, exceeds 20% of the outstanding debt. At such
time, the interest rate will become 2%% over prime. It is understood that you
will pay a loan closing fee of %% and also will pay a commitment fee on unused
funds at a rate of %% per annum.
The loan will be secured by a First Mortgage and security interest on all of
the borrower's plant, equipment, and general tangibles now owned or hereafter
acquired. We agree, however, that we will have recourse only to the collateral
and will not have recourse against the Partnership nor any third party for any
deficiency arising hereunder.
Page 2
October 26, 1978
Our commitment to make a loan is conditioned on the following:
(a) An irrevocable guarantee, acceptable to us, that $700,000
in equity or subordinated debt will be available to the
Partnership upon its demand. It is agreed that up to
$400,000 may be advanced against the Revolving Credit prior
to the Partnership's receipt of the aforementioned equity/
subordinated debt provided that the guarantee is and continues
in full force and effect.
(b) Evidence acceptable to us that the city of Carlsbad,
California will authorize the transfer of the cable television
franchise from Daniels Cablevision, a Limited Partnership.
(c) The definitization of a formal loan agreement in form and
substance satisfactory to you and the Bank as well as
receipt from you of the Management Agreement with Daniels
t- Associates, Inc., the Partnership Agreement and other
related documentation.
If the foregoing is acceptable to you, please sign the enclosed copy of this
letter at the indicated place, and return it to us.
Sincerely,
B. J. Howell
Assistant Vice President
AGREED AND ACCEPTED
CARLSBAD CABLEVISION, A LIMITED PARTNERSHIP
BY: SECOND IR DANIELS CORPORATION
ITS GENERAL PARTNER.
Samuel P. Evans
Vice President
EXHIBIT E
INSURANCE AND BOND COMMITMENT LETTER
FinnnciflL GUARDIAA msunnncE
noEncv. inc.
245 COLUMBINE ST. • DENVER, COLORADO 80206 • 303/399-2550
November 73 1978
City Manager
City of Carlsbad, California
Ee: Daniels Cablevision, Inc.
Gentlemen:
This letter is to confirm that when the City of Carlsbad, California
does agree and implement the change of the ownership of the franchise
under Ordinance 607 from Daniels Cablevision, Inc. to Carlsbad Cablevision, a
Limited Partnership, then the required insurance and bond will also be trans-
ferred at the same time to the owners Carlsbad Cablevision, a Limited Partner-
ship. As the insurance and bonding agent for both Daniels and Cablevision we
can assure you that the insurance and the $100,000 bond presently filed with
your community for the requirements of Ordinance 607 will be transferred and
shall be in force for the new ownership of this franchise. We shall promptly
furnish new evidence to this effect but wish you to have this letter indicating
the matter will be promptly handled as soon as the transfer of the franchise is
approved.
Very truly yours.
John N. Toner
Bond Manager
JNT:ls
cc: Daniels Cdblevision
EXHIBIT F
DOCUMENTS
ASSIGNMENT OF FRANCHISE
IN CONSIDERATION OF TEN DOLLARS AND OTHER GOOD AND
VALUABLE CONSIDERATION in hand paid to the undersigned,
Daniels Cablevision, Inc. (the "Assignor"), a Delaware
corporation, the receipt and sufficiency of which is here-
by acknowledged, by Carlsbad Cablevision, A Limited Partner-
ship (the "Assignee"), a Colorado limited partnership, does
by these presents grant, bargain, sell, transfer, assign,
and set over unto Assignee, its successors and assigns, all
of Assignor's right, title and interest in and to the Franchise
or Franchises granted pursuant to Ordinance No. 6058 (a copy
of which ordinance and City of Carlsbad ordinances affecting
said Franchise or Franchises are annexed hereto and made a
part hereof for all purposes) passed and adopted by the City
Council of the City of Carlsbad, California, on October 18, 1977
(which Franchise or Franchises were originally granted to and
accepted by Daniels Properties, Inc. and transferred and
assigned with the prior consent and approval of the said City
Council by the said Daniels Properties, Inc. to the Assignor),
together with any and all interests of Assignor in and to
rights arising out of or incidental to said Franchise or
Franchises for the operation of Community Antenna Television
Systems in or in the vicinity of the City of Carlsbad, California.
TO HAVE AND TO HOLD all and singular the above-described
rights, title, interests, powers and instruments, together with
all of the rights and privileges belonging thereto unto the said
Assignee, its successors and assigns.
And Assignor covenants that it is the current holder and
owner of said Franchise or Franchises with full power, right and
authority to grant, transfer and assign the said rights, title,
interests, powers and instruments. Assignor and Assignee acknow-
ledge that it is necessary and desirable to obtain the consent
of the City of Carlsbad to the within transfer, assignment and
conveyance and to that end will use their mutual best efforts
to acquire and effectuate such consent. Nevertheless, BE
between Assignor and Assignee, the parties hereto expressly agree
that the within transfer, assignment, and conveyance shall be
effective as of the date hereof, provided that, Assignee shall
provide and file with the City of Carlsbad, California, Assignee's
written acceptance of the said Franchise or Franchises as required
by the terms thereof promptly upon obtaining any necessary consents
as aforesaid.
IN WITNESS WHEREOF, this Assignment of Franchise is executed
this day of • , 1978.
DANIELS CABLEVISION, INC., a
Delaware corporation, Assignor
By
STATE OF COLORADO )
CITY AND ) SS.
COUNTY OF DENVER )
The above and foregoing Assignment of Franchise was sub-
scribed and sworn to before me this day of , 1978,
by as of
Daniels Cablevision, Inc., a Delaware corporation.
Witness my hand and official seal.
My commission expires:
Notary Public
ACCEPTED AND AGREED TO this day of , 1978.
CARLSBAD CABLEVISION, A
Limited Partnership, Assignee
By: SECOND IR-DANIELS CORP., a
Delaware corporation, its general
partner
By_
STATE OF COLORADO )
CITY AND ) SS.
COUNTY OF DENVER )
The above and foregoing Assignment of Franchise was sub-
scribed and sworn to before me this day of , 1978,
by as of
Second IR-Daniels Corp., a Delaware corporation, general partner of
Carlsbad Cablevision, A Limited Partnership.
Witness my hand and official seal.
My commission expires:
Notary Public
-2-
AGREEMENT
AN AGREEMENT BY Carlsbad Cablevision, A Limited Partnership
accepting the franchise granted by Ordinance No. 6058, adopted by
the City Council of the City of Carlsbad, California, on
October 18, 1977.
RECITALS
WHEREAS, the City of Carlsbad, after public hearing,
adopted Ordinance No. 6058 on October 18, 1977, to grant to
Daniels Properties, Inc., a nonexclusive franchise for a cable
television service in certain designated areas of the City
of Carlsbad; and
WHEREAS, said Ordinance No. 6058 contains and sets forth
the terms and conditions of said franchise, including the
incorporation by reference of all of the provisions of
Chapter 5.28 of the Carlsbad Municipal Code (Ordinance No. 6055,
as amended by Ordinance No. 6057); and
WHEREAS, said Ordinance provides that the franchise is not
effective until the franchisee has filed a written acceptance
of the grant with the City Clerk, which accepts each and every
term and condition and limitation contained in Chapter 5.28 of
the Carlsbad Municipal Code or said Ordinance; and
WHEREAS, the franchisee is required by said Ordinance and
Chapter 5.28 to agree to hold the City harmless and to file a
surety bond with the City Clerk; and
WHEREAS, the said Daniels Properties, Inc. has heretofore
filed a written acceptance of the grant of said franchise with
the City Clerk accepting each and every term and condition and
limitation contained in said Chapter 5.28 and thereafter, with
the prior approval and consent of the City of Carlsbad transferred
and conveyed all of its right, title and interest in and to said
franchise to Daniels Cablevision, Inc.; and
WHEREAS, Daniels Cablevision, Inc. has heretofore filed a
written acceptance of said franchise with the City Clerk
accepting each and every terra and condition and limitation
contained in said Chapter 5.28 and thereafter, with the prior
approval and consent of the City of Carlsbad transferred and
conveyed all of its right, title and interest in and to said
franchise to Daniels Cablevision, A Limited Partnership;
NOW, THEREFORE, BE IT RESOLVED that Daniels Cablevision,
A Limited Partnership agrees as follows:
1. That all of the above recitations are true and
correct as set forth above and are, and shall be, a part of
this agreement.
2. That by the execution of this agreement, Daniels
Cablevision, A Limited Partnership hereby makes its written
acceptance of the franchise granted by Ordinance No. 6058,
in accordance with the provisions of said Ordinance and
Chapter 5.28 of the Carlsbad Municipal Code.
3. That Daniels Cablevision, A Limited Partnership the
franchisee of the above-referenced franchise, hereby accepts
every term, condition and limitation contained in said fran-
chise or in Chapter 5.28 of the Carlsbad Municipal Code (Ordinance
No. 6055, as amended by Ordinance No. 6057) and hereby agrees
to fulfill the same as franchisee thereunder. That franchisee
also agrees to be bound by and comply with and do all the
things required by the provisions of that franchise and
Chapter 5.28 of the Carlsbad Municipal Code as it now exists,
or as it may be hereafter amended.
4. That Daniels Cablevision, A Limited Partnership hereby
submits for approval its bond in the amount of $100,000.
5. That the franchisee hereby agrees to indemnify and
hold harmless the City, its officers, boards, commissions, agents,
and employees against, and from any and all claims, demands,
causes of action, actions, suits, proceedings, damages (including
but not limited to damages to city property and damages arising
out of copyright infringements, and damages arising out of any
failure by franchisee to secure consents from the owners, authorized
distributors or licensees of programs to be delivered by
-2-
franchisee's cable television system), costs or liabilities
(including costs or liabilities of the City with respect to its
employees) of every kind and nature whatsoever, including but
not limited to damages for injury or death or damage to person
or property, regardless of the merit of any of the same, including
reasonable attorney fees, reasonable accountant fees,
reasonable expert witness or consultant fees, court costs,
reasonable per diem expense, traveling and transportation
expense or other provable and reasonable costs or expense
arising out of or pertaining to the exercise or the enjoy-
ment of the franchise granted by Ordinance No. 6058 or the
granting thereof by the City.
DATED:
STATE OF COLORADO )
CITY AND ) SS.
COUNTY OF DENVER )
The above and foregoing Agreement was subscribed and
sworn to before me this day of , 1978,
by as of
Daniels Cablevision, A Limited Partnership.
Witness my hand and official seal.
My commission expires
Notary Public
APPROVED AS TO FORM:
City Attorney
CERTIFICATE OF CITY CLERK
I hereby certify that the foregoing acceptance of
franchise was received by me at a.m./p.m. on the
day of , 197 .
City Clerk
-3-
EXHIBIT G
LIMITED PARTNERSHIP AGREEMENT
THE INTERESTS IN CARLSBAD CABLEVISION, A LIMITED PARTNERSHIP
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE RESOLD UNLESS SUBSEQUENTLY REGISTERED UNDER SUCH ACT
OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. ADDITIONAL
RESTRICTIONS ON TRANSFERABILITY ARE CONTAINED IN PARAGRAPH 9 OF
THIS AGREEMENT.
CARLSBAD.CABLEVISION, A LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
SECOND IR-DANIELS CORP., the general partner,
(herein referred to as the
General Partner)
and each person who shall at any time become a limited partner
under this Agreement (such persons are herein collectively re-
ferred to as the Limited Partners)
Dated as of September 15, 1978
Name(s) of Limited Partner(s)
signatory to this counterpart:
(Uru W \\rtJf
Q(PRINT)
Disc 41166B B1-B24
In order to form a limited partnership (the "Partnership"),
the parties hereto agree as follows:
CERTAIN DEFINITIONS
For purposes of this agreement, unless the context other-
wise requires, the following terms shall have the following respec-
tive meanings:
"Additional Contribution1
"Affiliate"
'Capital Account1
"Cash Disbursements"
The face amount of the Notes, as
described in subparagraph 5(b)
hereof, contributed by the Part-
ners to the Partnership, which
amount is in addition to the Ini-
tial Contribution of the Partners,
(i) any person (including any
natural person, partnership, cor-
poration, association or other
legal entity - hereinafter "Per-
son") directly or indirectly
controlling., controlled by or
under common control with another
Person, .(ii) a Person owning or
controlling 10% or more of the
outstanding voting securities
of such other Person, (iii) any
officer, director, partner or
employee of such Person and (iv)
if such other Person is an of-
ficer, director, partner or em-
ployee, any company for which
such Person acts in any .such
capacity.
The Total Contribution of each
Partner increased by his re-
spective share of Income and
reduced by his respective share
of Losses and Distributions, as
adjusted by Tax Adjustments.
The total amount of the costs and
expenses (including amortization
of indebtedness but excluding de-
preciation) actually paid by the
"Cash Flow"
"Cash Receipts'
"CATV"
"Certificate"
"Credits'
'Credits Recapture1
'Distribution Percentage'
'Distributions'
"General Partner"
Partnership during the fiscal year
in connection with the affairs of
the Partnership and the operation
of the business of the Partnership
from funds generated from Opera-
tions.
The excess of Cash Receipts over
Cash Disbursements for each fis-
cal year.
The total amount of funds gener-
ated by Operations which are
actually received by the Partner-
ship in cash during the fiscal
year.
Community Antenna Television.
The Certificate of Formation of
Limited Partnership and any amend-
ments thereto required to be filed
by the Partnership pursuant to the
laws of the State of Colorado.
All credits of the Partnership, as
determined for federal, state or
local income tax purposes, as the
case may be, in any fiscal year.
All credits of the Partnership
which are recaptured in any fis-
cal year for federal, state or
local income tax purposes.
The percentage used to determine
the allocation of Distributions
to which each General Partner or
Limited Partner, as the case may
be, shall be entitled pursuant
to subparagraph 6(c).
Distributions of cash or other
property made by the Partnership
to the Partners from any source.
The general partner or general
partners, from time to time, of
the Partnership, including the
Managing General Partner and any
additional or successor general
partner or general partners. At
'Income'
'Initial Contribution1
'Interest1
"Limited Partners"
'Losses'
'Managing General Partner1
"Net Proceeds'
such time as there is no Manag-
ing General Partner, any General
Partner, acting singly, may ex-
ercise all powers, and take all
actions, which otherwise may be
exercised or taken by the Manag-
ing General Partner.
All income and gains of the Part-
nership, as determined for federal
income tax purposes prior to Tax
Adjustments.
The amount of cash contributed by
the Partners in accordance with
subparagraph 5(a) hereof.
The individual interest of each
Partner in the Partnership.
The limited partner or limited
partners, from time to time, of
the Partnership.
All losses of the Partnership,
as determined for federal in-
come tax purposes prior to Tax
Adjustments.
Second IR-Daniels Corp., or if
Second IR-Daniels Corp. shall
cease to be the Managing General
Partner, then the Managing Gen-
eral Partner designated pursuant
to paragraph 7(a)(x).
The net cash proceeds (after
application of gross proceeds
to the intended uses, satisfac-
tion of Partnership liabilities
to be satisfied in connection
therewith, and payment of costs
and expenses incident thereto)
of (a) borrowings by the Part-
nership (including, without lim-
itation, refinancing of existing
indebtedness) and (b) the sale,
condemnation, casualty or other
voluntary or involuntary disposi-
tion of all or any portion of
the Property (other than in the
ordinary course of the Partner-
'Operations'
"Partner"
'Partnership'
'Property"
"Schedule of Partners'
Contributions"
'Tax Adjustments'
'Total Contribution1
'Transfer*
ship's business), to the extent
such proceeds are not used, in
the case of condemnation or
casualty, to acquire replace-
ment property or repair or
restore damaged property.
The ordinary course of operations
of the business of the Partner-
ship, which shall not be deemed
to include the incurring or re-
financing of indebtedness or
sales or other voluntary or
involuntary dispositions of
property not in the ordinary
course of the business of the
Partnership.
Each General Partner and Limited
Partner of the Partnership.
Carlsbad Cablevision, A
Limited Partnership.
The property described in Exhibit
A annexed hereto.
The Schedule attached to each
counterpart of this Agreement
setting forth the Initial, Addi-
tional and Total Contributions
and the Distribution Percentage
of the Partners signatory to
such counterpart.
Adjustments for federal income
tax purposes to a Partner's dis-
tributive share of Partnership
income, gains, losses or Credits
resulting from elections made by
t.he Managing General Partner pur-
suant to subparagraph 7(a)(xi).
The total of the Initial and Addi-
tional Contribution made by each
Partner.
Any sale, transfer, gift, assign-
ment or pledge or grant of a se-
curity interest, by operation of
law or otherwise, in or of an In-
terest, excluding however, any
grant of such a security interest
in favor of the Partnership.
FORMATION AND PURPOSE;
ADMISSION OF LIMITED PARTNERS
1. The Partnership is being formed in accordance with
the laws of the State of Colorado. The Managing General Partner
may take such further action as it deems necessary or proper to
permit the Partnership to conduct business as a limited partner-
ship in the State of Illinois and such other states where it may
•desire to conduct business.
2. The Partnership is called Carlsbad Cablevision, A
Limited Partnership and shall have its principal office and place
of business at 2930 East Third Avenue, Denver, Colorado 80206,
and/or such other address as may be designated from time to time
by the Managing General Partner.
3.(a) The term of the Partnership shall commence upon
execution of the Limited Partnership Agreement by the General
Partner and one Limited Partner and shall end on December 31, 2028,
unless sooner terminated in accordance with this Agreement.
(b) Each subsequent Limited Partner signatory to this
Agreement shall become a Limited Partner upon execution of a coun-
terpart of this Agreement by such signatory and the General Partner,
subject however, to the provisions of Paragraph 9 relating to Trans-
fers.
4. The purposes of the Partnership shall be, subject to
and in accordance with the provisions of this Agreement, to acquire,
construct, own> develop, operate, manage, cause to be managed, main-
tain, lease, mortgage, sell, convey or otherwise dispose of the
Property or any part thereof and any additions thereto and any other
property related thereto.
CONTRIBUTIONS
5. (a) The Initial Contribution of each Partner signatory
to this counterpart of this Agreement shall be as specified in the
Schedule of Partners' Contributions attached to this counterpart and
shall be made at the time he becomes a party to this Agreement.
(b) The Additional Contribution of each Partner who
shall purchase an Interest by paying a portion of the purchase
price by issuing promissory notes shall be as specified in the
Schedule of Partners' Contributions attached to this counterpart
and shall be made by each such Partner by delivering to the Part-
nership promissory notes payable to the Partnership. The promis-
sory notes with respect thereto shall bear interest at the rate
of eight and one half (8.5%) percent per annum, not to exceed the
applicable maximum legal rate of interest. The promissory notes
shall be negotiable and shall be secured by letters of credit and
a security interest in the Interest of the maker.
(c) No Partner shall be required or obligated to make
any contribution beyond those specified in Paragraphs 5(a) and (b).
(d) Upon a determination by the Managing General
Partner that the Partnership will be unable to acquire the fran-
chise with respect to the operation of a CATV system in Carlsbad,
California, the cash contributed by each Partner and the notes
and letters of credit, if any, issued by each Partner to the
Partnership will be returned to each Partner, without interest.
(e) If a Partner advances any funds to the Partner-
ship in excess of his Total Contribution, such advances shall be
treated as loans to the Partnership bearing interest at the rate
of eight (8%) percent per annum, but not to exceed the applicable
maximum legal rate of interest. Such loans shall be repaid before
any Distribution is made to any of the Partners pursuant to Para-
graph 6, but no such loans shall be repaid to any General Partner
as long as the Partnership is indebted to any Limited Partner for
such advances. Notwithstanding the foregoing, no Partner shall be
required or obligated to make any such loans.
(f) The Managing General Partner is hereby authorized
to complete or cause to be completed any items omitted from this
Agreement, or the Schedules or Exhibits annexed or relating here-
to, to reflect such omitted items, including, without limitation,
the Initial Contribution, Additional Contribution, and Distribu-
tion Percentage and other information called for by the Schedule
of Partners' Contributions attached to this counterpart, and to
modify or correct any such Schedule or Exhibit or cause the same
to be modified or corrected. Such completion, modification or
correction may be made from time to time as and when the Managing
General Partner considers it appropriate in order to reflect the
agreement of the parties or the Initial Contributions and Addi-
tional Contributions made by, subscribed for or agreed to by the
Limited Partners. From time to time the Managing General Partner
may make or cause to be made a composite Schedule of Partners' Con-
tributions based on the then current contributions, Distribution
Percentages and other information relating to the Partners, and
such composite Schedule of Partners' Contributions shall be con-
clusive as to the contribution and Distribution Percentage of each
Partner.
f
DISTRIBUTIONS AND ALLOCATION OF INCOME
6. (a) The Managing General Partner shall have discretion
as to the making and timing of Distributions, subject to the follow-
ing provisions and to subparagraph 5(e):
(i) The Partnership shall retain funds neces-
sary, as determined by the Managing General Partner
or as required by loan or other contractual agreements,
to cover its business needs, which shall include with-
out limitation capital expenditures and reserves against
possible losses and the payment, or making provision for
the payment, of liabilities and obligations (both contin-
gent and accrued) of the Partnership, or those secured
by, or by a lien on, or a security interest in, property
of the Partnership.
(ii) The Partnership shall distribute to each
Partner entitled thereto pursuant to subparagraph 6(c):
(A) as soon after the end of each fiscal year of the
Partnership as is reasonably practicable, each Part-
ner's portion of any Cash Flow not retained pursuant
to subparagraph 6(a)(i); and (B) as soon as is reason-
ably practicable, each Partner's portion of any Distri-
butions other than Cash Flow (including without limita-
tion Net Proceeds) not retained pursuant to subparagraph
6(a)(i).
(b) The Partnership shall divide each fiscal year in-
to two equal segments (or such minimium number of segments as may
be required by applicable law or regulation) for the purpose of
allocating income, gains, Losses, Credits and Distributions to
Limited Partners who were members of the Partnership during each
such segment (hereinafter "segment").
(c) All Distributions shall be made to the Partners
in the manner set forth in subparagraph 6(d) and shall be charged
to their respective Capital Accounts in accordance therewith. All
Distributions set forth in subparagraph 6(d) shall be determined
on a cumulative basis over the life of the Partnership. The aggre-
gate Distributions to which the Limited Partners are entitled shall
be allocated among the Limited Partners in proportion to their re-
spective Distribution Percentages on the day of the distribution.
The Distribution Percentages allocable to the Limited Partners shall
be allocated among them based upon the ratio of the Total Contribu-
tions of each Limited Partner to the Total Contributions to be made
by all Limited Partners, assuming the sale of all Limited Partner-
ship Interests offered by the Partnership.
s
(d)(i) Except as provided in subparagraph 6(d)(ii),
all Distributions, including distributions of Net Proceeds, shall
be distributed as follows:
8
(A) 99% to the Limited Partners and 1% to
the General Partner until the cumulative
amount of all Distributions made pursuant
to this subparagraph 6(d)(i)(A) shall equal
the Total Contributions of the Partners;
(B) Thereafter, 70% to the Limited Partners
and 30% to the General Partner until the cumu-
lative amount of all Distributions pursuant
to this subparagraph 6(d)(i)(B) shall equal
$2,400,000.00;
(C) Thereafter, 50% to the Limited Partners
and 50% to the General Partner.
(ii) Upon termination of the Partnership, Dis-
tributions shall be made to the Partners in accord-
ance with their respective Capital Accounts, as in-
creased or decreased to reflect all allocations made
pursuant to paragraph 6(f).
(e) For all purposes, including without limitation
federal, state and local income tax purposes, all income, gains,
Losses, and Credits (and all items thereof) shall be allocated to
the Partners in the manner set forth in subparagraph 6(f) and shall
be appropriately credited or charged to their respective Capital Ac-
counts in accordance therewith. All allocations of income, gains
and Losses set forth in subparagraph 6(f) shall be determined on a
cumulative basis over the life of the Partnership. Except as
otherwise provided in subparagraph 6(f) the aggregate share of the
income, gains, Losses, and Credits of the Partnership in a parti-
cular segment which is allocable to the Limited Partners shall be
allocated among them in proportion to their Distribution Percent-
ages on the last day of the applicable segment.
(f)(i) Income shall be allocated as follows:
(A) 99% to the Limited Partners and 1% to
the General Partner until the cumulative
amount of all income, if any, allocated
pursuant to this subparagraph 6(f)(i)(A)
shall equal the cumulative amount of all
losses, if any, allocated pursuant to sub-
paragraph 6(f)(ii)(C);
t
(B) Thereafter, 70% to the Limited Partners
and 30% to the General Partner until the cumu-
lative amount of all income, if any, allocated
pursuant to this subparagraph 6{f)(i)(B), re-
duced by Losses, if any, allocated pursuant
to subparagraph 6(f) (ii)(B), shall equal
$2 ,400,000.00;
(C) Thereafter, 50% to the Limited Partners
and 50% to the General Partner.
(ii) Losses shall be allocated as follows:
(A) 50% to the Limited Partners and 50% to
the General Partner until the cumulative
amount of all Losses, if any, allocated
pursuant to this subparagraph 6(f)(ii)(A)
shall equal the cumulative amount of all
income, if any, allocated pursuant to sub-
paragraph 6(f)(i)(C);
(B) Thereafter, 70% to the Limited Partners
and 30% to the General Partner until the cumu-
lative amount of all Losses, if any, allocated
pursuant to this subparagraph 6(f)(ii) (B)
shall equal the cumulative amount of all in-
come, if any, allocated pursuant to subpara-
graph 6(f) (i)(B);
(C) Thereafter, 99% to the Limited Partners
and 1% to the General Partner.
(iii) Credits shall be allocated in accordance
with the general profits of the Partnership, as such
phrase is defined in Treasury Regulation section
1.46-3(f) (2)(i) , and Credits Recapture shall be
allocated in the same manner as Credits with respect
to the related property.
(iv) Items constituting ordinary income or loss
shall be allocated and exhausted prior to allocating
items constituting capital gain or loss.
(g) After the allocations provided pursuant to subpara-
graph 6(f) have been made, appropriate Tax Adjustments, if any,
shall be made to the income, gains and losses of each Partner.
(h) In no event shall any Limited Partner be liable to pay
for any loss beyond the amount of his Total Contribution, nor shall
he be personally liable for any debts of the Partnership to any extent
whatsoever. Each Limited Partner understands, however, that, to the
extent required by applicable partnership law, if he receives the
return in whole or in part of his Total Contribution, he may be
liable to the Partnership for any sum, not in excess of such return
with interest, necessary to discharge the Partnership's liabilities
to all creditors who extended credit or whose claims arose before
such return.
10
(i) No Limited Partner shall have the right to withdraw
or reduce his Total Contribution except as provided in this Agree-
ment.
(j) An annual statement showing the income, expenses,
assets and liabilities of the Partnership at the end of the fis-
cal year shall be prepared by the Partnership's accountant, with-
in seventy-five (75) days after the end of each fiscal year, the
Managing General Partner shall furnish each Partner with a copy
of such statement.
(k) The fiscal year of the Partnership shall be the cal-
endar year, except that in the year the Partnership commences or
if the Partnership terminates for any reason in the year of ter-
mination, the then current fiscal year shall either begin on the
date of commencement or end on the date of such termination, as
the case may be. The Partnership shall.use the method of account-
ing directed by the Managing General Partner. In any case where
the fiscal year is less than twelve months, each segment shall be
one-half of such abbreviated fiscal year.
GENERAL PARTNER
POWERS AND DUTIES
7.(a) The Managing General Partner shall, except as other-
wise provided in this Agreement or limited by applicable law, have
and possess the same rights and powers as any general partner in a
partnership without limited partners formed, under the laws of the
State of Colorado, including, without limitation, the power and
right to:
(i) manage the affairs of the Partnership and to
manage the Property;
(ii) execute such documents as he may deem neces-
sary or desirable for Partnership purposes;
(iii) acquire, own, develop, construct, cause to
be constructed, operate, manage, cause to be managed,
maintain, expand, lease, mortgage, refinance, sell,
convey or otherwise dispose of all or any part of the
Property and any additions thereto and any other prop-
erty related thereto;
' (iv) sell all or substantially all of the Property
to the extent required or permitted under any present or
future security agreement, mortgage or lease of all or
any portion of the Property (each Limited Partner hereby
consenting to any sale of the Property which is required
or permitted under any present or future security agree-
11
ment, mortgage or lease of all or any portion of the
Property and to execution of any and all documents which
may be required to effectuate such sale, and each Lim-
ited Partner hereby agreeing that the execution by the
Managing General Partner of any such security agreement,
mortgage or lease or other documents relating thereto
shall not require any further consent of the Limited
Partners);
(v) borrow money for the acquisition, construction
and operation of the Property and the conduct of the
Partnership's business, and/or prepay (in whole or in
part) indebtedness of the Partnership; and in connection
therewith, sell, assign, pledge, grant security interests
in, or otherwise encumber or dispose of all or any part
of the Property and/or any other property of the Partner-
ship, including without limitation the Notes and all or
any collateral, including letters of credit, securing
payment of the Notes;
(vi) perform or cause to be performed all of the
Partnership's obligations under any agreement to which
the Partnership is a party or to which the Partnership,
the Property or any other property of the Partnership
is subject, or any obligations of the Partnership or
otherwise in respect of any indebtedness secured in
whole or in part by, or by lien on, or security inter-
est in, any portion of the Property and/or any other
property of the Partnership;
(vii) employ, engage, retain or deal with any per-
sons, firms or corporations to act as managing agents,
brokers, consultants, accountants or lawyers or in such
other capacity as the Managing General Partner may deem
necessary or desirable. The fact that a General Partner
or Limited Partner or an Affiliate of either is, or is
employed by, or is directly or indirectly affiliated or
connected with, any such person, firm or corporation
shall not prohibit the Managing General Partner from
employing or otherwise dealing with such person, firm
or corporation, and all Partners hereby consent to any
such employment and to the receipt of resulting benefits
or profits by the Partner, Partners or their Affiliates
so employed. Any of the Partners, General or Limited,
and any entity or individual affiliated with any of them,
may engage in other business ventures of every nature
and description, independently or with others, including
without limitation all phases of the CATV business, which
shall include but not be limited to, the construction,
12
ownership, operation, brokerage, management, syndication
and development of CATV systems wherever located, and
neither the Partnership nor the Partners shall have any
rights in or to such independent ventures or the income
or profits derived therefrom;
(viii) open and maintain bank accounts; sign checks
on Partnership bank accounts; and execute and/or accept
any instrument or agreement incident to the Partnership's
business and in furtherance of its purposes; (any such
instrument or agreement so executed or accepted by the
Managing General Partner in his name shall be deemed
executed and accepted on behalf of the Partnership by
the Managing General Partner);
(ix) admit additional Limited Partners and/or per-
mit Limited Partners to increase their Total Contribu-
tions without obtaining the consent of any Limited Part-
ner, provided that such admission or increase in Total
Contribution shall not dilute the Distribution Percentage
of any Limited Partner;
(x) admit one or more additional General Partners
with the consent of all of the Partners. At such time
as there is only one General Partner such General Partner
shall be the Managing General Partner. At such times as
there is more than one General Partner the General Part-
ners shall designate one of them to be the Managing Gen-
eral Partner, and, any General Partner, acting singly,
may exercise all powers, and take all actions, which may
be exercised or taken by the General Partner except those
reserved to the Managing General Partners. At such time
as there is no Managing General Partner, any General Part-
ner, acting singly, may exercise all powers, and take all
actions, which otherwise may be exercised or taken by the
Managing General Partner. At such times as there is more
than one General Partner, the aggregate share of the in-
come, gains, losses and Credits and of Distributions of
the Partnership which are allocable to the General Part-
ners pursuant to this Agreement shall be allocated among
the General Partners in such manner as the General Part-
ners shall have agreed; and
(xi) make such elections under the Internal Revenue
Code of 1954, as amended, (the "Code") or any successor
there'to, (including without limitation adjustments pur-
suant to section 754 of the Code) as he shall determine
to be in the best interests of the Partnership.
(b) Each General Partner shall have the power and right:
13
(i) if such General Partner shall be an individual,
to transfer all or part of his Interest by will or in-
testacy, if the remaining General Partners elect to con-
tinue the business of the Partnership pursuant to sub-
paragraph 10(b); upon satisfaction of the conditions in
subparagraphs 9(b) and (c), the transferee shall be ad-
mitted as a Limited Partner, however, the interest of such
transferee for purposes of allocation of income, gains,
losses, deductions and Credits and of Distributions shall
be deemed to be a General Partnership Interest with the
same Distribution Percentage, Additional Contribution and
Total Contribution as the transferee of such interest;
(ii) to transfer all or part of its Interest to
Daniels & Associates, Inc. or to a wholly-owned subsidi-
ary of Daniels & Associates, Inc. and/or to Integrated
Resources, Inc. or to a wholly-owned subsidiary of In-
tegrated Resources, Inc., and such transferee(s) shall
become a General Partner (and each Limited Partner, by
execution of this Agreement, consents to such Transfer);
provided that such transfer, if made by a Limited Partner,
would not be prohibited by Paragraph 9(f) and provided
further, that the remaining General Partner(s), if any,
elects to continue the Partnership pursuant to the pro-
visions of the Agreement. In the event the remaining
General Partner, if an individual, does not have a sub-
stantial net worth, or if a corporation, does not satisfy
the requirements of Rev. Proc. 72-13, 1972-1 C.B. 735
or such other rules or regulations then applicable with
respect to net worth, or in the event there is no remain-
ing General Partner, then such Transfer will be further
conditioned on the satisfaction by the transferee(s) of
the requirements of Rev. Proc. 72-13, 1972-1 C.B. 735,
or such other rules or regulations then applicable with
respect to net worth; and
(c) The Managing General Partner shall, at all times dur-
ing the term of the Partnership, accurately record or cause to be
recorded each transaction of the Partnership, including all trans-
actions relating to the operation of the Property, and keep or
cause to be kept full and accurate books of the Partnership. Such
books, and a certified copy of the Certificate and amendments there-
to, shall be open for reasonable inspection and examination by the
Limited Partners or their duly authorized representatives.
t
(d) The Managing General Partner shall be responsible
for:
14
(i) hiring, directing, and supervising a managing
agent to conduct and oversee the affairs, operations and
business of the Partnership;
(ii) the performance of the other duties specified
in this Paragraph 7.
(e) Notwithstanding anything to the contrary contained
in this Agreement, if there shall be more than one General Partner,
then the unanimous prior agreement or consent of all the General
Partners shall be required for any decisions relating to or affect-
ing:
(i) Any indebtedness of the Partnership or other
indebtedness secured by, or by a lien on, or a security
interest in, any property of the Partnership;
(ii) The sale of the Partnership's assets, other
than in the ordinary course of the Partnership's busi-
ness, including without limitation, the sale of any
particular CATV system as an entity or the sale of the
equipment and assets related thereto;
(iii) The addition or termination of any franchise,
or the extension of service into, or the elimination of
service in, any nonfranchise area; and
(iv) Any material contract or agreement by the
Partnership and any Affiliate of any General Partner.
(f) All expenses incurred on behalf of the Partner-
ship shall be paid by the Partnership, No General Partner shall
be liable to the Partnership or to the Limited Partners or to any
other General Partner for any loss or liability incurred in con-
nection with any act performed or omitted, nor for negligence or
any other matter, except that the General Partner so acting shall
be liable for any loss or liability incurred in connection with
such General Partner's willful misconduct or gross negligence.
(g) The Partnership's funds shall be deposited by the
Managing General Partner in one or more banks or trust companies
in the Partnership's name, and the Partnership's funds shall not
be commingled with funds not belonging to the Partnership. The
Partnex-ship's funds shall be used only for the affairs or business
of the Partnership.
j-
LIMITED PARTNERS
RESTRICTIONS AND LIMITATIONS
8. No Limited Partner shall take part in the management
or control of the business of the Partnership. Limited Partners
15
shall have no rights other than those provided for herein or granted
by law where not inconsistent with a valid provision hereof.
9. (a) A Limited Partner may not Transfer his Interest
in the Partnership or any part thereof except as permitted in
this Agreement, and any act in violation of this Paragraph 9 shall
not be binding upon or recognized by the Partnership regardless of
whether any General Partner shall have knowledge thereof.
(b) Except as hereinafter provided in subparagraph 9{d),
no Transfer by a Limited Partner of all or part of his Interest
shall be effective nor shall any proposed transferee of all or any
part of a Limited Partner's Interest be admitted to the Partnership
as a Limited Partner or be entitled to receive Distributions from
the Partnership applicable to the Interest acquired by reason of
such Transfer, unless
(i) the transferor has executed and delivered
to the Managing General Partner an assignment in form
satisfactory to the Managing General Partner, and
(ii) the written consent of the Managing General
Partner to such transfer has been obtained, which con-
sent may be withheld in the complete discretion of the
Managing General Partner.
(c) No consent by the Managing General Partner to any
Transfer of all or any part of a Limited Partner's Interest or to
the admission of a proposed transferee as a Limited Partner in the
Partnership shall be effective unless the transferee executes and
delivers to the Managing General Partner: (i) an undertaking of
the transferee to be bound by all the terms and provisions of this
Agreement and such other instruments as may be required by law,
and where the transferee is to be admitted as a Limited Partner,
a counterpart of this Agreement; (ii) a confirmation that the
proposed transferee is acquiring the Interest for his own account,
for investment only and not with a view toward the resale or dis-
tribution thereof; and (iii) if requested by the Managing General
Partner, an undertaking to pay all reasonable expenses incurred by
the Partnership in connection with the Transfer, including without
limitation the cost of preparing, filing and publishing such amend-
ments to the Certificate as may be required by law. The require-
ments of this paragraph 9(c) may be waived, in whole or in part,
by a written waiver executed by the Managing General Partner.
(d) Notwithstanding the provisions of subparagraph
9(b), any Limited Partner may, without obtaining the Managing
General Partner's consent, transfer all or any part of his Inter-
est by will or intestacy. In no event shall a Transfer by will
16
or intestacy be deemed effective to entitle the transferee to be
admitted as a Limited Partner unless and until all the conditions
of subparagraphs 9(b) and (c) are complied with.
(e) No Transfer of all or part of an Interest of a
Limited Partner may be made to a corporate General Partner or to
any corporation affiliated with a corporate General Partner under
Section 1504(a) of the Internal Revenue Code as in effect on the
date of this Agreement. If any such Transfer would otherwise be
made by bequest, inheritance or operation of law, such Interest
shall be deemed transferred to the Partnership in liquidation of
such Interest immediately prior to such Transfer in the same manner
as provided in subparagraph 9(f)(iii).
(f) Anything else to the contrary contained herein not-
withstanding:
(i) No Transfer of an Interest may be made in
any 12-month period if such Transfer when added to
all other Transfers of Interests which have already
taken place in such period would represent Distri-
bution Percentages aggregating 49% or more. This
limitation is herein referred to as the "forty-nine
(49%) percent limitation."
(ii) Subparagraph (i) hereof shall not apply
to a Transfer by gift, bequest or inheritance, or
to a Transfer to the Partnership in liquidation
of a Partner's Interest pursuant to subparagraph
9(f)(iii), and for purposes of the forty-nine (49%)
percent limitation, any such Transfer shall not be
treated as such.
(iii) If, after the forty-nine (49%) percent lim-
itation is reached in any 12-month period, a Transfer
of an Interest would otherwise take place by operation
of law, or if any Transfer of an Interest would other-
wise take place by operation of law which would cause
a violation of the forty-nine (49%) percent limitation
(but not including any Transfer referred to in sub-
paragraph (ii) hereof), then said Interest shall be
deemed transferred by the transferor to the Partner-
ship in liquidation of said Interest immediately prior
to the date on which such Transfer would otherwise have
taken place for a price equal to the fair market value
of said Interest on the date on which such Transfer
17
would otherwise have taken place. The price
shall be paid within ninety (90) days after
the date on which such Transfer is deemed to
have occurred. If the Partnership and the
transferor do not agree upon the fair market .
value of the Interest, the liquidation price
shall be determined in accordance with Para-
graph 11. The liquidation price shall be
paid in cash within ten (10) days after
such determination, except that to the
extent there remains unpaid at the time of
purchase any portion of the principal of or
interest on the notes issued in connection
with such Interest, the purchase price shall
first be applied to pay all such principal
and interest, whether or not then due and
payable.
(g) Each Limited Partner hereby indemnifies the Part-
nership and each Partner against any and all loss, damage or ex-
pense (including, without limitation, tax liabilities or loss of
tax benefits) arising, directly or indirectly, as a result of any
Transfer or purported Transfer in violation of any provision con-
tained in this Paragraph 9.
10. (a) The Interest of a Limited Partner shall be deemed
offered for sale to a person designated by the Managing General
Partner (which designee may be an individual General Partner) upon
the happening of any of the following events:
(i) a petition in bankruptcy having been filed
against such Limited Partner and not discharged within
ninety (90) days from the date of such filing; or
(ii) a receiver having been appointed to manage
such Limited Partner's property; or
(iii) a creditor of such Limited Partner having
attached his respective Interest, and such attach-
ment not having been discharged or vacated within
ninety (90) days from the date it became effective.
The Managing General Partner shall have ninety (90)
days after notification to or actual knowledge by the Managing
General Partner of the occurrence of any of the foregoing within
which to designate such a purchaser and transmit written notice
thereof to such Limited Partner. If the Managing General Partner
does not make such designation within ninety (90) days, as afore-
said, the offer shall be deemed withdrawn. The purchase price for
18
such-Interest in the case of (i), (ii) or (iii) above shall be its
value as determined in accordance with Paragraph 11. The purchaser
shall tender to the selling Limited Partner the purchase price, in
cash, within ten (10) days after such determination, except that
to the extent that there remains unpaid at the time of purchase
any portion of the principal of or interest on the Notes issued in
connection with such Interest, the purchase price shall first be
applied to reduce or, if sufficient, to pay in full such principal
and interest, whether or not then due and payable. Upon tender of
payment of the purchase price to the Managing General 'Partner on
behalf of the selling Limited Partner, his Interest shall be deemed
transferred to the aforesaid purchaser. The aforesaid purchaser
shall be admitted as a Limited Partner upon satisfaction of the
conditions of subparagraphs 9(b) and (c).
(b) If any of the events described in subparagraph
I2(a)(v) should occur to a General Partner, the remaining Gen-
eral Partner or General Partners, if there be any, shall have
sixty (60) days after the occurrence of such event to elect to
continue the business of the Partnership (such election requiring
the unanimous consent of the General Partners), during which period
the Partnership shall not be dissolved. If the remaining General
Partner or General Partners elect to continue the business of the
Partnership, the Partnership shall be continued and the following
provisions shall apply:
(i) In the event of the dissolution, retirement
or resignation of a corporate General Partner, or the
bankruptcy or insolvency of a General Partner which
is not discharged or vacated within ninety (90) days
from the date thereof, the remaining General Partner
or General Partners, shall succeed pro rata to the
Interest of the General Partner to whom such event
shall have occurred. The General Partner to whom any
such event shall have occurred shall be entitled to
receive the greater of one dollar or the balance in
its Capital Account from the General Partner or
General Partners succeeding thereto.
(ii) In the event of the retirement or resig-
nation of an individual General Partner, unless
such event shall occur as the result of the Trans-
fer of the Interest of the individual General Part-
ner in accordance with the terms of this Agree-
ment, the remaining General Partner or General Part-
ners so electing to continue the business of the
19
Partnership shall succeed pro rata to the
Interest of the individual General Partner
to whom such event shall have occurred. The
individual General Partner to whom any such
event shall have occurred shall be entitled
to receive the greater of one dollar or the
balance in his Capital Account from the Gen-
eral Partner or General Partners succeeding
thereto.
(iii) In the event of the death of an in-
dividual General Partner, the provisions of
subparagraph 7(b)(i) shall apply. In the event
of the insanity of an individual General Part-
ner, the legal representative of such General
Partner shall be considered the transferee of
such General Partner by intestacy, and the
provisions of subparagraph 7(b)(i) shall apply.
(c) If any of the events described in subparagraph
12(a)(v) should occur to any General Partner and there is then no
other General Partner, or, if there then is one or more other Gen-
eral Partners, but the remaining General Partners do not elect to
continue the business of the Partnership pursuant to subparagraph
10(b), or if any of such events should occur to all General Part-
ners, and, in any such case, if a new limited partnership is formed
pursuant to subparagraph 12(e), the general partner of such new
limited partnership shall succeed to the Interest of the General
Partner or the General Partners, in which event such general part-
ner shall pay the General Partner or General Partners to which it
succeeds an amount equal to the greater of one dollar or the
balance in the Capital Account of the General Partner or General
Partners, as the case may be.
IK For the purposes of this Agreement, the value of an
Interest shall be determined by an appraiser of appropriate profes-
sional standing selected, at the request of the General Partner, in
accordance with the rules of the American Arbitration Association.
The appraisal made by such appraiser shall be binding and conclu-
sive as between the selling Partner or Partners and the persons pur-
chasing such Interest. The cost of such appraisal shall be borne
equally by the selling and purchasing parties, and by the latter,
among themselves, in proportion to their respective shares, except
that in the case of any transfer resulting from an event described
in subparagraph 10(a), the entire cost of appraisal shall be borne
by the transferor Partner.
f
DISSOLUTION
12.(a) The Partnership shall be dissolved upon the ear-
liest of:
20
(i) the expiration of its term as provided in this
Agreement,
(ii) the failure to acquire the franchise with re-
spect to the operation of a CATV system in Carlsbad,
California,
(iii) the sale of all of the Property,
(iv) a determination by a General Partner, con-
curred in by the written consent of Limited Partners
representing one hundred (100%) percent in interest
of the Distribution Percentages of the Limited Part-
ners who have been admitted to the Partnership, to
dissolve the Partnership, or
(v) subject to the provisions of subparagraph
10(b), the dissolution, retirement or resignation of
a corporate General Partner, the retirement, death,
insanity, incompetency or resignation of an individual
General Partner or the bankruptcy or insolvency of a
General Partner which is not discharged or vacated
within ninety (90)- days from the date thereof.
(b) Upon dissolution, all certificates or notices
thereof required by law shall be filed and the Partnership busi-
ness shall be concluded as hereinafter provided.
(c) Upon dissolution, unless the business of the Partner-
ship is continued pursuant to subparagraph 12(e), all property of
the Partnership other than cash shall, within a reasonable time,
be sold or otherwise converted into cash or receivables (or trans-
ferred in satisfaction of Partnership debts) and the proceeds there-
of shall, to the extent available, after payment or making provision
for payment, when due, of any debts of the Partnership, be distri-
buted to the Partners in cash and/or in kind, subject to any lia-
bilities of the Partnership, in accordance with the provisions of
Paragraph 6.
(d) The Partnership's accountant shall prepare and fur-
nish to each Partner a statement setting forth the assets and lia-
bilities of the Partnership as of the date of complete liquidation.
Upon complete liquidation of the Partnership property, the Limited
Partners shall cease to be such and any General Partner shall exe-
cute, acknowledge and cause to be filed all certificates necessary
to terminate the Partnership.
(e) If any of the events specified in subparagraph 12
(a)(v) should occur to any General Partner and there is then no
other General Partner or, if there then is one or more other Gen-
21
eral Partners, but the remaining General Partners do not elect to
continue the business of the Partnership pursuant to subparagraph
10(b), or if any of such events should occur to all General Part-
ners, then, and in any such event, the Limited Partners having one
hundred (100%) percent in interest of the total Distribution Per-
centages of the Limited Partners who have been admitted to the
Partnership may elect within 120 days of the occurrence of any
such event to form a new limited partnership on substantially
identical terms to the Partnership to carry on the business of
the Partnership and may, by unanimous vote or action, select a
general partner for such new limited partnership. In such event,
the general partner of such new limited partnership shall succeed
to the Interest of all the General Partners pursuant to Paragraph
10(c). The new limited partnership shall succeed to all rights
and assets of the Partnership subject to all liabilities of the
Partnership. Each Limited Partner shall be a limited partner of
any limited partnership formed pursuant to this paragraph and
agrees to execute all documents and take such further action as
may be necessary in connection therewith. Until such time as the
new limited partnership agreement is executed by all of the Partners
this Agreement shall continue to be binding on all of the Limited
Partners; and upon execution of a declaration to be bound by the
terms of this Agreement and delivery of such declaration to any
Limited Partner the general partner of such new limited partnership
shall succeed to all the rights and liabilities of the General
Partners under this Agreement.
GENERAL PROVISIONS
13.(a) An individual General Partner may also be a Lim-
ited Partner in the Partnership, provided that in such event refer-
ence herein to the General Partner, Limited Partner or -the Interest
of either shall, in the case of such individual, refer only to the
one specified.
(b) Each Limited Partner and General Partner irre-
vocably constitutes and appoints each and every General Partner
and, so long as Second IR-Daniels Corp. is a General Partner, Jay
Chazanoff, Gary W. Krat, Jackson D. Rule, Jr., Arthur H. Goldberg,
Stephen Goldsmith, John V. Saeman, Frank L. Griggs, Gerald B.
Buford, R. Keith Bur chain, Thomas B. Murray and Samuel P. Evans,
being officers of Second IR-Daniels Corp., acting singly, with full
power of substitution, as his true and lawful attorney in his name,
place and stead to make, execute, acknowledge, deliver, swear to and
file: (i) any counterparts of this Agreement; (ii) any certificate
of formation of limited partnership required by law and all amend-
ments thereto; (iii) all certificates and other instruments neces-
sary to qualify or continue the Partnership in the states where it
may be doing business; (iv) all assignments, conveyances or other
instruments or documents necessary to effect the dissolution of the
22
Partnership; and (v) all other filings with agencies of the
federal government, of any state or local government, or of any
other jurisdiction which the Managing General Partner considers
necessary or desirable for Partnership purposes. It is expressly
intended by each Limited Partner that said power of attorney is
coupled with an interest, that it shall be irrevocable and that it
shall survive the death or incapacity of a Limited Partner or the
transfer by a Limited Partner of the whole or any part of his
Interest.
(c) All notices, offers or other communications re-
quired or permitted pursuant to this Agreement shall be in writing
and shall be deemed to be sufficiently given or served for all
purposes when presented personally or sent by registered mail,
return receipt:
(i) if to the Partnership or the General Partner
at the address of the General Partner shown on the
Schedule of Partners' Contributions attached hereto,
with copies to the General Partner c/o Integrated Re-
sources, Inc., 295 Madison Avenue, New York, New York
10017, and c/o Daniels & Associates, Inc., 2930 East
Third Avenue, Denver, Colorado 80206, or to such other
person and/or addresses as a General Partner may here-
after specify by notice to the Limited Partners; or
(ii) if to any Limited.Partner, at his address
specified in the Schedule of Partners' Contributions
attached hereto, or as any Limited Partner may hereafter
specify by notice to the Partnership.
(d) This Agreement shall be governed and construed in
accordance with the laws of the State of Colorado.
(e) The Partners will execute and deliver such fur-
ther instruments and do such further acts and things as may be
required to carry out the purpose and intent of this Agreement.
(f) This Agreement constitutes the entire agreement
among the Partners pertaining to the subject matter hereof. No
covenant, representation or condition not expressed in this Agree-
ment shall affect or be effective to interpret, change or restrict
the express provisions of this Agreement. The provisions of this
Agreement may not be modified or waived except by written agreement
executed by the parties to be bound thereby.
f
(g) None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditors of the Part-
nership.
23
(h) Except as otherwise herein provided, this Agreement
shall be binding upon and inure to the benefit of the Partners and
their successors, personal representatives, heirs and assigns.
(i) This Agreement may be executed in any number of coun-
terparts and each of such counterparts shall for all purposes con-
stitute one Agreement, binding on all the Partners, notwithstanding
that all Partners are not signatories to the same counterpart. All
references herein to this Agreement are deemed to refer to all such
counterparts.
IN WITNESS WHEREOF, this Agreement has been executed by
the Partners.
GENERAL. PARTNER:
)tR-DANIELS CORP.
resident
LIMITED PARTNERS
24
EXHIBIT A
Community Antenna Television (CATV) systems, Master Antenna
Television (MATV) systems, and all property, real or personal, tangi-
ble or intangible, necessary or desirable in connection with the
operation of CATV and/or MATV systems, including without limitation
MATV systems located in, or in the vicinity of, San Diego County,
California and/or Orange County, California and the franchise for
the operation of a CATV system in Carlsbad, California.
(COLORADO)
STATE OF NEW YORK )
) ss. :
COUNTY OF NEW YORK)
I, DONNA M. CERRATO, a notary public, do hereby
certify that on this 27th day of September, 1978, personally
appeared before me JAY D. CHAZANOFF, who being by me duly
sworn declared that he is the Vice President of SECOND IR-
DANIELS CORP., that he signed the foregoing document as Vice
President of the corporation and that the statements contained
therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and
seal this 27th day of September, A.D. 1978.
My commission expires
Notary Public
DONNA M. CERRATO
NOTARY PUBLIC, STATE OF NEW YORK
No. 03-4663355
Qualified in Bronx County £)
Expires March 30, 198...,
(COLORADO)
STATE OF NEW YORK )
) SS. :
COUNTY OF NEW YORK)
I, DONNA M. CERRATO , a notary public, do hereby
certify that on this 27th day of September, 1978, personally
appeared before me GARY W. KRAT, who being by me duly sworn,
declared that he signed the foregoing document and that the
statements contained therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and
seal this 27th day of September, A.D. 1978.
My commission expires
Notary Public
DONNA M. CERRATO
NOTARY PUBLIC, STATE OF NEW YORK
No. 03-4663355
Qualified in Bronx County .•*
Commission Expires March 30, ISS.J-'
(CALIFORNIA)
STATE OF NEW YORK )
) ss. :
COUNTY OF NEW YORK)
On this 27th day of September in the year 1978
before me, DONNA M. CERRATO , a Notary Public of said State,
duly commissioned and sworn, personally appeared JAY D.
CKAZANOFF, known to me to be the Vice President* of the cor-
poration that executed the within instrument and acknowledged
to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereto set my hand and
affixed my seal the day and year in this certificate first
above written.
Notary Public in and
for said State
DONNA M. CERRATO
NOTARY PUBLIC, STATE OF NEW YORK
No. 03-4663355
Qualified in Brrnx County Q
Commission Expires March 30, 198..-
(CALIFORNIA)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On this 27th day of September in the year 1978
before me, DONNA M. CERRATO , a Notary Public of said State,
duly commissioned and sworn, personally appeared GARY W.
KRAT, known to me to be the person whose name is subscribed
to the within instrument and acknowledged that he executed
the same.
IN WITNESS WHEREOF, I have hereto set my hand and
affixed my seal the day and year in this certificate first
above written.
Notary Public in and
for said State
DONNA M. CERRATO
NOTARY PUBLIC, STATE OF NEW YORK
No. 03-4663355
Qualifi'i1 in Bronx County p.
Commission Expiies March 30, 198.V
EXHIBIT H
CABLE SYSTEMS CURRENTLY OPERATED BY DANIELS & ASSOCIATES. INC.
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Daniels &
Associates, Inc.
2930 East Third Avenue
P.O. Box 6008
Denver, Colorado 80206
303 321-7550
John Saeman
President and
Chief Executive Officer
November 20, 1978
Council Members
City of Carlsbad
1200 Elm Avenue
Carlsbad, CA 92008
Dear Council Members:
In my letter to you of November 9, 1978, I indicated that I would provide you
with our latest progress report covering construction of the cable television
system in Carlsbad. Enclosed is the report. Also we will be providing your
Director of Utilities and Maintenance, Mr. Roger Greer, a copy of similar re-
ports on a regular basis in the future.
I would also like to take this opportunity to cover two points raised by your
consultant, Mr. Howard Gann, regarding the transfer of the franchise from Daniels
Cablevision, Inc. to Carlsbad Cablevision, a Limited Partnership.
First, Mr. Gann suggested that we elaborate upon why we believe there are extra-
ordinary circumstances sufficient to justify a transfer. As of this date, the
prime interest rate at our bank is 11%, and it is projected to exceed 12% during
1979. Historically, the prime rate has never exceeded 12% and only once before
was it as high as it is today. This interest rate is truly extraordinary; it is
five full percentage points over our projected rate and has an adverse effect on
the project. We can minimize its effect by bringing in the equity funds now in-
stead of waiting until the construction is complete. This means that the project
will be able to avoid paying these extraordinary interest charges on a portion of
the funds required for construction. Please note that this does not result in any
"financial bonanza" to the partnership but merely enables it to bring its interest
cost down to a "normal" amount.
Mr. Gann's second point involved the ownership of the General Partner, Second IR
Daniels Corporation. He asked if Integrated Resources was expected to maintain
its 50% ownership in the company for some period of time.
The answer is "yes" because neither Daniels nor Integrated can sell or transfer any
of their stock in the General Partner for a period of four years. After that per-
iod, if one wants to sell, the other has a right of first refusal to buy (a draft
copy of this agreement is attached to this letter). Therefore, the City is assured
of having the same entities involved in the cable television system on a long-term
basis.
Council Members
Page 2
November 20, 1978
In conclusion, I would like to reiterate that we hope that you will approve our
request so that we may put our permanent financing in place and continue our
construction on schecule.
Verv truly yours,
John Saeman
President
JSrLBC
Enclosures
cc Roger Greer
Howard Gann
EXHIBIT A
DETAILED PROGRESS REPORT
DETAILED PROGRESS REPORT ON CARLSBAD, CALIFORNIA SYSTEM
1. Daniels has leased a construction and storage yard at 380 Grand Avenue
which is the location of the major portion of our construction
materials.
2. The Special Use Permit to construct our head-end site received a
recommendation of approval from the Environmental Review Board. We
are ready to begin the construction just as soon as the county
permit is issued. Most of the equipment, such as antennas, including
the satellite receiver station, are already in the storage yard.
3. All of the strand mapping, system design, and equipment requirements
have been completed.
4. The pole attachment agreements with both the phone company and San
Diego Gas & Electric are signed.
5. Pole applications have been filed with the phone company and S.D.G.& E.
on the first 500 poles, with another 200 ready to be filed next
week. We are hoping that re-arrangements will be started this
month. This re-arrangement work is controlled by the utilities and
their manpower availability.
6. We have selected the contractor to build the overhead plant and he
is ready to start as soon as pole re-arrangements are started.
7. We will do the underground construction ourselves. The necessary
construction equipment is on hand.
8. Carlsbad Cablevision (Daniels) has five full time employees. We are
interviewing at this time to add 5 more (underground construction
crew).
9. In December, 1977, we sent letters to all the master antenna systems
we were aware of in an effort to inform them of the cable television
franchise which had been awarded to Daniels and to explore the
possibilities of purchasing their systems so as to be able to bring
them up to the new standards. These efforts resulted in the purchase
of the Palisades system and negotiations with Tom Shea on the
Altamire and Tanglewood systems. Last week, we received invoices
and statements from Mr. Shea which we are evaluating at this time.
The three remaining systems which we contacted (Rancho Carlsbad,
Buena Woods, and Lakeshore Gardens) expressed no immediate desire
to sell their existing systems.
10. Through an arrangement with La Costa, we have been serving the
Seaport development since May of 1978.
Status Report
Page two
11. Daniels has completed prewiring all existing homes in the following
developments: Seaport, Spinnaker Hills, and Chestnut Hills.
Daniels also has installed conduit and/or cable in all the new
developments of Tanglewood.
12. Agreement has been reached on the location where we will build our
office. It is on the east side of El Camino Real approximately
.7 of a mile north of Palomar Airport Road.
13. An office at 2725 Jefferson, Suite 7, Carlsbad has been leased and
will be used until permanent facilities are completed.
14. Daniels projects to construct ninety (90) miles of plant at a rate
of 15 miles per month. Allowing for an extra 60 days to cover
pole re-arrangement delays by the utility companies, Daniels should
be in a position to provide cable service to all potential subscribers
in Carlsbad (except possibly some existing MATV systems) by
August 1, 1979.
SHAREHOLDERS AGREEMENT
AGREEMENT dated as of^September 15, 1978 by and among IR
CABLE CORP. ("IR")/ a Delaware corporation having an address at
295 Madison Avenue, New York, New York 10017; DANIELS & ASSOCIATES
INC. ("Daniels"), a Delaware corporation having an address at 2930
East Third Avenue, Denver, Colorado 80206; andASECOND IR-DANIELS
CORP. (the "Corporation"), a Delaware corporation which will have
its principal business office at 2930 East Third Avenue, Denver,
Colorado 80206.
WHEREAS, IR and Daniels (said parties being hereinafter
referred to collectively as "Shareholders" and individually as
"Shareholder") caused the Corporation to be organized for the pur-
pose of acting as the general partner of^Carlsbad Cablevision,
A Limited Partnership (the "Partnership"), a limited partner-
ship which has been formed for the purpose of engaging in the
community antenna television ("CATV") business; and
WHEREAS, the Shareholders deem it to be in their best
interests to set forth the following provisions with respect to
restrictions upon the sale, transfer or other disposition of the
shares of the Corporation held by them (the "Shares"), and with
respect to certain other matters,
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto agree
as follows:
1789 A16-25
1. The Shareholders will, prior to the acquisition
of any property by the Partnership, contribute to the capital
of the Corporation as follows:
(a) IR - a demand negotiable promissory note of
Integrated Resources, Inc. ("Integrated"), a Delaware corpora-
±T
tion, and the parent of IR, in a principal amount of $75,080,"
together with a security agreement by Integrated and its sub-
sidiary, Underwriters Service Agency, Inc. ("Underwriters"), pur-
suant to which Integrated and Underwriters secured the payment of
such promissory note through a collateral assignment of certain
renewal insurance premiums due to Underwriters from Monarch Life
Insurance Company (such note and the security securing such
promissory note hereinafter collectively referred to as the "IR
Capitalization");
(b) Daniels - a demand negotiable promissory
note of Daniels, a Delaware corporation in a principal amount
of C7S)OQO, together with an irrevocable letter of credit in ^(.
such amount (such note and the letter of credit securing such
promissory note hereinafter collectively referred to as the
"Daniels Capitalization").
2. The Shareholders shall not, directly or indirectly,
sell, bequeath, pledge, encumber, distribute, transfer, give or
assign, or in any other manner whatsoever dispose or attempt to
dispose of the whole or any part of the Shares, except as herein-
after expressly permitted by this Agreement. The Corporation shall
not transfer on its books any shares of the Corporation or issue
any certificate or certificates on account of or in lieu thereof,
unless and until all terms and conditions of this Agreement have
been complied with.
3. So long as this Agreement shall remain in force,
there shall be inscribed conspicuously upon each certificate repre-
senting shares of the Corporation, the following restrictive legend;
"The shares represented by this certificate
are subject to a certain Agreement dated as
nffSfrntfamhpr 15. 1978, and all amendments
thereto, copies of which Agreement and all amendments
thereto are on file at the principal office of the
Corporation, and any sale, bequest, pledge, encumbrance,
distribution, transfer, gift, assignment, or other
disposition of this certificate in violation of said
Agreement shall be invalid."
4. The Shareholders shall not, directly or indirectly,
sell, bequeath, pledge, encumber, distribute, transfer, give or -
assign, or in any manner dispose or attempt to dispose of the
whole or any part of the Shares for a period of four (4) years
from the date herein (the "Holding Period").
5. After the Holding Period, if either Shareholder
shall have received a bona fide written offer (herein referred
to as the "Offer") to purchase all of its shares from any
third party (herein referred to as the "Transferee"), such
Shareholder (herein referred to as the "Transferring Shareholder")
shall serve a notice (herein referred to as the "Transfer
Notice") upon the Corporation and the other Shareholder
(herein referred to as the "Remaining Shareholder"). The Transfer
Notice shall set forth the exact terms of the Offer, together with
a copy of the Offer, and shall state the desire of the Transferring
Shareholder to sell such shares on such terms and conditions. If
in connection with the Offer, and the sale pursuant thereto, the
Transferring Shareholder desires to withdraw its Capitalization and
to have the Transferee replace such Capitalization, the Transfer
Notice shall also set forth the manner in which the Transferee
proposes to replace such Capitalization. The Transferring Share-
holder shall also obtain an opinion of a counsel acceptable to the
Remaining Shareholder, which counsel shall opine that the proposed
Capitalization by the Transferee, together with the Capitalization
of the Remaining Shareholder shall be sufficient to satisfy the net
worth requirement set forth in Rev. Proc. 72-13, 1972-1 Cum. Bui.
735, or any successor thereto.
6. The Corporation, and if the Corporation fails to act,
the Remaining Shareholder, shall have the right and option, which
shall be non-assignable, to purchase all (but not less than all)
the shares owned by the Transferring Shareholder at the price per
share specified in the Offer or, at the option of the Corporation
or the Remaining Shareholder, as the case may be, at the Appraised
Value of the Corporation (as that term is hereinafter defined) as
at the last day of the month in which the Transfer Notice was
served. If the Corporation desires to exercise its option, it
shall give notice (hereinafter referred to as the "Counter Notice")
to that effect to the Transferring Shareholder within thirty (30)
days after receipt of the Transfer Notice. Such Counter Notice
shall set forth a date, not later than thirty (30) days from the
service of the Counter Notice, on which the closing shall be held
at the office of the Corporation and shall contain an agreement of
the Remaining Shareholder to increase the Capitalization of•
the Corporation to satisfy the net worth requirement set forth
in Rev. Proc. 72-13, 1972-1, Cum. Bui. 735, or any successor
thereto. The Corporation's failure to give a timely Counter
Notice (or its notice of refusal to purchase) shall give rise
to an identical option to the Remaining Shareholder. If the
Remaining Shareholder desires to exercise its option it shall
thereupon have a period of thirty (30) days from the expiration of
the time in which the Corporation's Counter Notice could have been
served, or from the date on which the Corporation sent notice of
its refusal to purchase, to give its Counter Notice. Such Counter
Notice shall set forth a date not later than thirty (30) days from
the service of such Counter Notice, on which the closing shall be
held at the office of the Corporation. In the event that neither
the Corporation nor the Remaining Shareholder exercise their
options to purchase all of the shares owned by the Transferring
Shareholder or fail to give timely notice of the exercise of such
options, then the Transferring Shareholder may, within the next 30
days, sell all such shares in accordance with the Offer, provided
that the terms of the Offer contains a binding obligation upon the
Transferee to replace the Transferring Shareholders Capitalization
as provided in the Transfer Notice and to enter into a shareholders
agreement substantially similar to the Agreement.
Appraised Value, as such term is used in this Agreement,
shall mean the per share value determined jointly by the Sharehol-
ders, or if the Shareholders fail to agree as to such value, the
value per share determined by appraisers selected in the following
manner: IR and Daniels shall each appoint an appraiser and the per
share value shall be as determined by the two appraisers so ap-
pointed. If the two appraisers so appointed are unable to agree
upon the per share value, such value shall be determined by a third
appraiser selected by the two appraisers so appointed by IR and
Daniels. The appraisal made by such appraisers shall be binding
and conclusive as between IR, Daniels and the Corporation, and the
cost of such appraisal shall be borne equally by IR and Daniels.
7. At the closing to be held pursuant to paragraph 6,
the Corporation or the Remaining Shareholder, as the case may be,
shall deliver to the Transferring Shareholder payment for the full
amount of the purchase price of the shares being sold hereunder.
Such payment may be made by a certified check of the Corporation
or the Remaining Shareholder, as the case may be, or by the deliv-
ery by the Corporation of the Capitalization of the Transferring
Shareholder, together with a certified check for the balance of the
purchase price, if any. The Transferring Shareholder shall deliver
to the Corporation or the Remaining Shareholder, as the case may
be, certificate or certificates representing all of the shares
being sold by the Transferring Shareholder duly endorsed in blank
with the proper amount of transfer tax stamps attached to such
certificate or certificates. In addition, in the event the
Corporation purchases the shares being sold by the Transferring
Shareholder, the Remaining Shareholder shall deliver to the
Corporation the additional Capitalization as set forth in the
Counter Notice.
At any closing to be held pursuant to the provisions of
paragraph 6 between the Transferring Shareholder and the Transferee,
the Transferee shall deliver to the Transferring Shareholder pay-
ment in full for the shares to be transferred and shall deliver to
the Corporation the Capitalization required by the Offer and speci-
fied in the Transfer Notice and shall enter into a shareholders
agreement with the Remaining Shareholder substantially identical to
this Agreement. Upon receipt by the Corporation of the Capitaliza-
tion of the Transferee and the new shareholders agreement, the Cor-
poration shall deliver to the Transferring Shareholder the Capi-
talization of the Transferring Shareholder. The Transferring Share-
holder shall deliver to the Transferee certificate or certificates
representing all of the shares being sold by the Transferring
Shareholder duly endorsed in blank with the proper amount of
transfer tax stamps affixed to such certificate or certificates.
8. Absent any other agreement to the contrary, each
Shareholder shall be free to engage in such other business activi-
ties and shall be permitted to compete with the Corporation and
with each other as it shall deem desirable. Neither the Share-
holders, their principals, nor their employees shall be required to
devote any amount of time to the affairs of the Corporation except
as each deems necessary or desirable.
9. Any notice, instruction, or other communication re-
quired or permitted to be given under this Agreement, shall be in
writing and shall be deemed to have been duly given or served when
delivered personally or sent by Telex, Cable, or by Certified or
Registered Mail, Return Receipt Requested, postage pre-paid, as
follows:
As to IR:
with a copy to:
As to Daniels:
with a copy to:
As to the Corporation:
with a copy to:
IR Cable Corp.
c/o Integrated Resources Inc.
295 Madison Avenue
New York, New York
Proskauer Rose Goetz & Mendelsohn
300 Park Avenue
New York, New York 10022
Attention: Arnold Jay Levine, Esq.
Daniels & Associates Inc.
2930 East Third Avenue
Denver, Colorado .80206
Law, tfagel and Clark
3100 First of Denver Plaza Building
633 17th Street—
Denver, Colorado 80202
Attenbipp: Kenneth Farabee,—
jLSecond. IR-DanTeTs.Corp.
2930 East Third Avenue
Denver, Colorado 80206
IR Cable Corp. at its address
specified above.
Any party may change its address for the purpose of this
Agreement by written notice of such change to the other parties in
8
the manner herein provided for giving notice.
10. The parties acknowledge that this Agreement .has
A*i ivaroA in the State of Delaware and shall be
governed by and construed and enforced in accordance with the laws
of the State of Delaware from time to time obtaining.
11. This Agreement constitutes the entire final agree-
ment among the parties with respect to the subject matter hereof
and may not be amended, modified or terminated except by a writing
signed by the parties hereto.
This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their
successors and assigns.
If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall
attach only to such provision and shall not in any way affect or
render invalid or unenforceable any other provision of this Agree-
ment, and this Agreement shall be carried out as if such invalid or
unenforceable provision were not contained herein.
This Agreement may be executed in any number of counter-
parts, all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
IR CABLE CORP.
By
DANIELS & ASSOCIATES INC,
By
.SECOND.IR-DANIELS CORP.
By
10
1 RESOLUTION NO. 5629
2 ' A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF CARLSBAD, CALIFORNIA, APPROVING
3 THE ASSIGNMENT OF THE CABLE TV FRANCHISE
FROM DANIEL'S CABLEVISION, INC. TO CARLSBAD
4 CABLEVISION PURSUANT TO SECTION 5.28.140(d)
OF THE CARLSBAD MUNICIPAL CODE.
5
6 WHEREAS, in accordance with the provisions of Section 5.28.140(d) of
7 the Carlsbad Municipal Code Daniel's Cablevision, Inc. has requested approval
8 of the assignment of the Cable TV franchise from Daniel's Cablevision, Inc.
9 to Carlsbad Cablevision, a limited partnership; and
10 WHEREAS, the assignment is considered to meet the requirement for
11 extraordinary circumstances for approving the assignment due to rapidly
12 escalating interest rates; and
13 WHEREAS, Carlsbad Cablevision, a limited partnership authorized to do
14 business in the State of California is considered to be capable of fulfilling
15 all of the obligations accepted by the original franchisee; and
16 WHEREAS, this change has resulted in administrative costs to the city
17 due solely for the benefit of Carlsbad Cablevision; and
18 WHEREAS, Daniel's Cablevision, Inc. has provided an assignment of
19 franchise to Carlsbad Cablevision for the amount of ten dollars and
I
20 other valuable considerations,
21 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
22 Carlsbad as follows:
23 1. That the above recitations are true and correct.
24 2. Costs borne by the city relative to the change in ownership
25 will be reimbursed to the city.
26 3. Pursuant to Section 5.28.140(d) of the Carlsbad Municipal Code
27
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the City Council of the City of Carlsbad recognizes the unusual circumstances
of and approves the assignment of the Cable TV franchise from Daniel's
Cablevision, Inc. to Carlsbad Cablevision, a limited partnership.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad
City Council held on the 5thday of December » 1978 by the following
vote, to wit:
AYES:
NOES:
ABSENT: None
Councilmen Packard, Skotnicki, Lewis and
Councilwoman Casler
Councilman Anear
RONALD C. PACKARD, Mayor
ATTEST:
ALETHA L. RAUTENKRANZ, City Clerrtf
(SEAL)
1 RESOLUTION NO. 5630
2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD, CALIFORNIA, APPROVING THE ACCEPTANCE
3 OF THE CABLE TV FRANCHISE BY CARLSBAD CABLEVISION,
A LIMITED PARTNERSHIP, PURSUANT TO SECTION 5.28.130(a)
4 OF THE CARLSBAD MUNICIPAL CODE.
5 WHEREAS, the City Council of the City of Carlsbad approved the
6 assignment by Daniel's Cablevision, Inc. of the Cable TV franchise granted
7 to them by Resolution No. 5629 to Carlsbad Cablevision, Inc.; and
8 WHEREAS, Carlsbad Cablevision has submitted an agreement in the form
9 and substance approved by the City Attorney accepting the franchise within
10 the approved time frame;
11 NOW THEREFORE, BE IT RESOLVED by the City Council of the City of
12 Carlsbad as follows:
13 1. The above recitations are true and correct.
14 2. Pursuant to Chapter 5.28.130 (a) of the Carlsbad Municipal Code
15 acceptance of the Cable TV franchise by Carlsbad Cablevision, a
16 limited partnership is approved.
17 PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad
18 City Council held on the 5th day of Decembei? 1978 by the following
19 vote, to wit:
20 AYES: Councilmen Packard, Skotnicki, Lewis and
Councilwoman Casler
21 NOES: Councilman Anear
22 ABSENT: None
23
24 RONALD C. PACKARD, Mayor
25 ATTEST:
26
,. f\- v\ <3si~T7>*^x>Aa
27 ALETHA L.~RAUTENKRANZ, City Cl
28 (SEAL)
December 5, 1978
MEMORANDUM
TO: City Manager
FROM: Director of Utilities & Maintenance
SUBJECT: Consultant Review: Reassignment of Cable TV
Franchise from Daniels Cablevision to Carlsbad Cablevision.
Attached is a report from the Cabletelevision Information Center of the
Urban Institute regarding the reassignment of the franchise from Daniel's
Cablevision to Carlsbad Cablevision. The report makes no adverse criticism
of this reassignment, although it does express concern that subsequent
changes of ovynership by the limited partnership may tend to increase the
rate base and artifically increase rates charged to subscribers. Rates are
set by Council and I do not perceive the latter as a problem at this time.
My recommendations of November 27 remain the same.
Additionally, I have received signed copies of:
1. The Management Agreement between 2nd IR-Daniels and Daniels
and Associates (the management firm).
2. Assignment of the Franchise from Daniels Cablevision to
Carlsbad Cablevision (the limited partnership).
3. Acceptance of the franchise by Carlsbad Cablevision.
(-^s-
Director of Utilities & Maintenance
Attachment
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