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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Limited
Partnership Interests
(2) Aggregate number of securities to which transaction applies: 51,276
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Pursuant to
Rule 0-11(c)(2), the transaction valuation is based upon the $23,500,000
sales price that is to be paid to the Registrant in connection with the
sale of the Registrant's cable television systems, the transaction that
is a subject of the proxy solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$23,500,000
(5) Total fee paid: $4,700
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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[LOGO OF JONES INTERCABLE, INC.]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS OF JONES SPACELINK INCOME/GROWTH FUND
1-A, LTD.
To the Limited Partners of Jones Spacelink Income/Growth Fund 1-A, Ltd.:
A special vote of the limited partners of Jones Spacelink Income/Growth Fund
1-A, Ltd. (the "Partnership") is being conducted through the mails on behalf
of the Partnership by Jones Intercable, Inc., the general partner of the
Partnership, for the purpose of obtaining limited partner approval of the
sale, to an unaffiliated third party, of the Partnership's cable television
systems serving the communities of Bluffton, Decatur, Monroe, Auburn, Butler,
Uniondale, Waterloo, Poneto, Vera Cruz and Garrett, and portions of
unincorporated Wells, Allen, Noble, Adams and DeKalb counties, all in the
State of Indiana (the "Northeast Indiana Systems") for $23,500,000 in cash,
subject to customary working capital closing adjustments that may have the
effect of increasing or decreasing the sales price by a non-material amount.
Information relating to these matters is set forth in the accompanying Proxy
Statement.
If the limited partners approve the proposed sale of the Northeast Indiana
Systems and if the transaction is closed, the Partnership will repay all of
the amounts borrowed under its credit facility and capital lease obligations,
pay certain fees and expenses of the transaction and deposit funds into an
indemnity escrow account, and then the $14,948,107 of net sale proceeds will
be distributed by the Partnership to its limited partners of record as of the
closing date of the sale of the Northeast Indiana Systems. It is estimated
that the Partnership will distribute to the limited partners $291.50 for each
$500 limited partnership interest, or $583 for each $1,000 invested in the
Partnership. Distributions will be net of Indiana non-resident withholding
tax, if applicable, and distribution checks will be issued to limited
partners' account registration or payment instruction of record.
Once the Partnership has completed the distribution of the net proceeds from
the sale of the Northeast Indiana Systems, limited partners of the Partnership
will have received a total of $590 for each $500 limited partnership interest,
or $1,180 for each $1,000 invested in the Partnership, taking into account the
prior distributions to limited partners from the Partnership's operating cash
flow and from the net proceeds of prior cable television system sales. After
the closing of the sale of the Northeast Indiana Systems and the distribution
of the net sale proceeds, including the amounts, if any, remaining one year
after closing in an indemnity escrow account, the Partnership will be
liquidated and dissolved, most likely sometime in 1999.
Only limited partners of record at the close of business on April 30, 1998
are entitled to notice of, and to participate in, this vote of limited
partners. It is very important that all limited partners participate in the
voting. The ability of the Partnership to complete the transaction discussed
in the Proxy Statement and the Partnership's ability to make a distribution to
its limited partners of the net proceeds of the sale of the Northeast Indiana
Systems are dependent upon the approval of the transaction by the holders of a
majority of the Partnership's limited partnership interests.
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The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement") provides that the proposal will be
adopted only if approved by the holders of a majority of the limited
partnership interests, abstentions and non-votes will be treated as votes
against the proposal. A properly executed proxy returned to the general
partner on which a limited partner does not mark a vote will be counted as a
vote for the proposed sale of the Northeast Indiana Systems. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Northeast Indiana Systems, if the holders of a majority
of the limited partnership interests approve the proposal, all limited
partners will receive a distribution of the net sale proceeds in accordance
with the procedures prescribed by the Partnership Agreement regardless of how
or whether they vote on the proposal.
Jones Intercable, Inc., as general partner of the Partnership, urges you to
sign and return the enclosed proxy card as promptly as possible. The proxy
card should be returned in the enclosed envelope.
JONES INTERCABLE, INC.
General Partner
[SIGNATURE OF ELIZABETH M. STEELE]
Elizabeth M. Steele
Secretary
Dated: May 12, 1998
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[LOGO OF JONES INTERCABLE, INC.]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS
OF JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Jones Spacelink
Income/Growth Fund 1-A, Ltd. (the "Partnership") by Jones Intercable, Inc.,
the general partner of the Partnership (the "General Partner"), on behalf of
the Partnership, for the purpose of obtaining limited partner approval of the
sale of the Partnership's cable television systems serving the communities of
Bluffton, Decatur, Monroe, Auburn, Butler, Uniondale, Waterloo, Poneto, Vera
Cruz and Garrett, and portions of unincorporated Wells, Allen, Noble, Adams
and DeKalb counties, all in the State of Indiana (the "Northeast Indiana
Systems") for $23,500,000 in cash, subject to customary working capital
closing adjustments that may have the effect of increasing or decreasing the
sales price by a non-material amount, to Triax Midwest Associates, L.P.
("Triax"). Triax is not affiliated with the Partnership or with the General
Partner.
The Board of Directors has approved the transaction and the General Partner
recommends that the holders of the Partnership's limited partnership interests
approve the transaction.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Limited partners are urged
to sign and return the enclosed proxy as promptly as possible. Proxies cannot
be revoked except by delivery of a proxy dated as of a later date. Officers
and other employees of the General Partner may solicit proxies by mail, by
fax, by telephone or by personal interview. The deadline for the receipt of
proxy votes is June 15, 1998, unless extended, but the vote of the
Partnership's limited partners will be deemed to be concluded on the date, at
least 20 business days from the date the proxy materials are sent to limited
partners, that the General Partner, on behalf of the Partnership, is in
receipt of proxies executed by the holders of a majority of the limited
partnership interests either consenting to or disapproving of the proposed
transaction. The General Partner may extend the deadline for receipt of proxy
votes if a majority of the limited partners fail to express an opinion on the
transaction by June 15, 1998. If the General Partner extends the deadline for
receipt of proxy votes, the limited partners will be informed by mail of the
reason for the extension and the new deadline. The cost of the proxy
solicitation will be paid by the Partnership.
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest for
each $500 of capital contributed to the Partnership.
As of April 30, 1998, the Partnership had 51,276 limited partnership
interests outstanding, held by 2,116 persons. There is no established trading
market for such interests. To the best of the General Partner's knowledge, no
person or group of persons beneficially own more than five percent of the
limited partnership interests. During the past several years, Madison
Partnership Liquidity Investors XIII, LLC and Smithtown Bay, LLC, two firms
unaffiliated with the Partnership, the General Partner and each other,
conducted tender offers for interests in the Partnership. As of April 30,
1998, Madison Partnership Liquidity Investors XIII, LLC and its
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affiliates owned 2,512 limited partnership interests, or 4.9 percent of the
Partnership's limited partnership interests. As of such date, Smithtown Bay,
LLC and its affiliates owned 1,090 interests, or 2.1 percent of the
Partnership's limited partnership interests. Pursuant to the terms of
agreements between the Partnership and the General Partner and such firms, all
of the limited partnership interests held by these firms will be voted in the
same manner as the majority of all other limited partners who vote on the
proposed transaction. Thus, for example, if the limited partnership interests
voted in favor of the proposed transaction constitute a majority of all
limited partnership interests voted but not a majority of all limited
partnership interests, these firms will be required to vote their limited
partnership interests in favor of the transaction, and in such event the votes
of these firms could be sufficient to cause the proposed transaction to be
approved by a majority of all limited partnership interests, which is the vote
necessary to cause the proposed transaction to be approved. The General
Partner owns no limited partnership interests. The officers and directors of
the General Partner also own no limited partnership interests. Only limited
partners of record at the close of business on April 30, 1998 will be entitled
to notice of, and to participate in, the vote.
Upon the consummation of the proposed sale of the Northeast Indiana Systems,
the Partnership will repay all of the $7,500,000 borrowed under its credit
facility and capital lease obligations totalling $120,042, leaving the
Partnership with no debt outstanding, pay certain fees and expenses of the
transaction and deposit $1,000,000 into an indemnity escrow account, and then
the $14,948,107 of net sale proceeds will be distributed to the Partnership's
limited partners of record as of the closing date of the sale of the Northeast
Indiana Systems. Distributions will be net of Indiana non-resident withholding
tax, if applicable, and distribution checks will be issued to limited
partners' account registration or payment instruction of record. Based upon
pro forma financial information as of December 31, 1997, as a result of the
sale of the Northeast Indiana Systems, the limited partners of the
Partnership, as a group, will receive $14,948,107. Limited partners will
receive $291.50 for each $500 limited partnership interest, or $583 for each
$1,000 invested in the Partnership.
Once the Partnership has completed the distribution of the net proceeds from
the sale of the Northeast Indiana Systems, limited partners of the Partnership
will have received a total of $590 for each $500 limited partnership interest,
or $1,180 for each $1,000 invested in the Partnership, taking into account the
prior distributions to limited partners from the Partnership's operating cash
flow and from the net proceeds of prior cable television system sales.
Limited partners should note that there are certain income tax consequences
of the proposed transactions. These consequences are outlined herein under the
caption "Federal and State Income Tax Consequences."
As of the date of this Proxy Statement, the Partnership's only assets are
the Northeast Indiana Systems. After the sale of the Northeast Indiana Systems
by the Partnership, and after the termination of the indemnity escrow period
in 1999, the Partnership will be liquidated and dissolved. The Partnership
will continue to be a public entity subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the Northeast Indiana Systems are sold. The Partnership will
cease to be subject to the informational reporting requirements of the
Exchange Act only after the Partnership is liquidated and dissolved, most
likely sometime in 1999.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement") provides that the proposal will be
adopted only if approved by the holders of a majority of the limited
partnership interests, abstentions and non-votes will be treated as votes
against the proposal. A properly executed proxy returned to the General
Partner on which a limited partner does not mark a vote will be counted as a
vote for the proposed sale of the Northeast Indiana Systems. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Northeast Indiana Systems, if the holders of a majority
of the limited partnership interests approve the proposal, all limited
partners will receive distributions of the net sale proceeds in accordance
with the procedures prescribed by the Partnership Agreement regardless of how
or whether they vote on the proposal.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is May 12, 1998.
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PARTNERSHIP INFORMATION
THE PARTNERSHIP'S INVESTMENT OBJECTIVES
The Partnership was formed to acquire, develop, operate and, ultimately,
sell cable television systems. The primary objectives of the Partnership have
been to preserve and protect the Partnership's invested capital, to obtain
long-term capital appreciation in the value of the Partnership's cable
television properties, and to generate a positive cash flow to permit cash
returns in the form of regular quarterly distributions to limited partners. It
was contemplated from the outset of the Partnership's existence that capital
appreciation in Partnership cable television properties would be converted to
cash by a sale of such properties at such time as the General Partner
determined that the Partnership's investment objectives had substantially been
achieved and after a holding period of approximately eight to ten years.
Sales of the Partnership's limited partnership interests commenced in March
1988 and the Partnership was formed on May 12, 1988 when subscriptions for the
minimum offering amount were received. The Partnership acquired the Northeast
Indiana Systems in September 1988. The Partnership also acquired the cable
television systems serving the communities of Ripon and Lake Geneva, Wisconsin
(the "Wisconsin Systems") in March 1991. The Wisconsin Systems were sold in
April 1996 to a subsidiary of the General Partner for a sales price of
$10,058,334, which price represented the average of three separate,
independent appraisals of the fair market value of the Wisconsin Systems. A
portion of the sale proceeds, $5,058,000, was used to reduce Partnership debt,
and the remainder of the sale proceeds, $5,000,000, was distributed to the
limited partners of the Partnership in April 1996. The distribution of the net
proceeds from the sale of the Wisconsin Systems resulted in the Partnership's
limited partners receiving a return of $97.50 for each $500 limited
partnership interest, or $195 for each $1,000 invested in the Partnership. No
vote of the limited partners of the Partnership was required in connection
with the sale of the Wisconsin Systems because the assets of the Wisconsin
Systems did not constitute all or substantially all of the Partnership's
assets.
A primary objective of the Partnership has been to provide quarterly cash
distributions to the limited partners from cash flow from the Partnership's
cable television systems' operations remaining after principal and interest
payments and the creation of any reserves necessary for the operation of the
Partnership. The Partnership has suspended such distributions and does not
plan on resuming such distributions because funds from cash flow are being
used for necessary capital additions to the Northeast Indiana Systems pending
their sale. From the Partnership's inception to date, limited partners have
received distributions from operating cash flow of the Partnership totaling
$201 for each $500 limited partnership interest, or $402 for each $1,000
invested in the Partnership.
Based upon disclosures made to prospective investors about the Partnership's
investment objectives in the Jones Spacelink Income/Growth Fund Limited
Partnership Program prospectus and accompanying sales brochure, investors in
the Partnership reasonably could have anticipated that the Partnership's
investment objectives would be achieved and its assets liquidated after a
holding period of approximately eight to ten years. Due to the uncertain and
then adverse regulatory environment that developed in the early 1990's for the
cable television industry, the resulting decline in the prices for cable
television systems and the subsequent inactivity in the cable television
system marketplace, the General Partner determined that it would be prudent to
delay the sale of the Northeast Indiana Systems until market conditions
improved, and as a result, the Northeast Indiana Systems have been held by the
Partnership for almost 10 years.
The purpose of the sale of the Northeast Indiana Systems, from the
Partnership's perspective, is to obtain the Partnership's primary investment
objective with respect to the Northeast Indiana Systems, i.e., to convert the
Partnership's illiquid investment in the Northeast Indiana Systems to cash.
The sale proceeds will be used to repay all of the Partnership's debts and
certain fees and expenses of the transaction, $1,000,000 of the sale proceeds
will be deposited in a one-year indemnity escrow account, and the remaining
sale proceeds will be
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distributed to the limited partners of the Partnership in accordance with the
distribution procedures established by the Partnership Agreement. The sale of
the Northeast Indiana Systems is thus the necessary final step in the
Partnership's accomplishment of its investment objectives with respect to the
Northeast Indiana Systems.
All distributions of the Partnership from the proceeds of the sales of cable
television systems are to be distributed 100 percent to the limited partners
until the limited partners receive an amount equal to 100 percent of their
initial capital contributions, as reduced by all prior distributions other
than distributions from cash flow, plus a 12 percent preferential return, and
thereafter all such distributions are to be shared 75 percent to the limited
partners and 25 percent to the General Partner. The limited partners of the
Partnership will not receive distributions in an amount equal to their initial
capital contributions plus the 12 percent preferential return, and thus the
sharing arrangement with the General Partner will never be triggered, i.e.,
the General Partner will receive no distribution of any sale proceeds.
VOTING PROVISION OF THE PARTNERSHIP AGREEMENT
Section 2.2(k) of the Partnership Agreement provides that the sale of all or
substantially all of the Partnership's assets is subject to the approval of
the holders of a majority of the Partnership's limited partnership interests.
Because the Northeast Indiana Systems are the Partnership's sole remaining
asset, the proposed sale of the Northeast Indiana Systems is being submitted
for limited partner approval.
SALE OF THE NORTHEAST INDIANA SYSTEMS
GENERAL
Pursuant to the terms and conditions of an Asset Purchase Agreement dated as
of December 17, 1997 (the "Agreement") by and between the Partnership and
Triax, the Partnership has agreed to sell the Northeast Indiana Systems to
Triax for a sales price of $23,500,000, subject to customary working capital
closing adjustments that may have the effect of increasing or decreasing the
sales price by a non-material amount. Triax is a Missouri limited partnership
headquartered at 100 Fillmore Street, Suite 600, Denver, Colorado, 80206.
Triax is not affiliated with the Partnership or with the General Partner. The
Partnership has been informed that Triax intends to finance its acquisition of
the Northeast Indiana Systems through cash on hand and borrowings.
THE CLOSING
The closing of the sale is scheduled to occur in June 1998. Because the
closing is conditioned upon, among other things, the approval of the limited
partners of the Partnership and the receipt of material third party consents
necessary for the transfer of the Northeast Indiana Systems to Triax, there
can be no assurance that the proposed sale will occur. The Agreement may be
terminated by either the Partnership or Triax if the closing is not
consummated on or before June 30, 1998.
THE NORTHEAST INDIANA SYSTEMS
The Northeast Indiana Systems were acquired by the Partnership in September
1988 for a purchase price of $17,500,000. In addition, at acquisition, as
permitted by Section 2.2(n)(i) of the Partnership Agreement, an affiliate of
the General Partner received a brokerage fee of approximately $700,000, which
represented 4 percent of the purchase price, for acting as the Partnership's
broker in connection with the acquisition. At acquisition, the Northeast
Indiana Systems consisted of approximately 220 miles of cable plant passing
approximately 14,500 dwelling units and serving approximately 9,400 basic
subscribers. The $17,500,000 purchase price represented a purchase price per
basic subscriber of $1,862.
At the closing of the Partnership's sale of the Northeast Indiana Systems in
the second quarter of 1998, the Northeast Indiana Systems are expected to
consist of approximately 441 miles of cable plant passing
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approximately 21,790 dwelling units and serving approximately 15,250 basic
subscribers. During the holding period, the Partnership used approximately
$6,715,000 in capital expenditures to expand and/or upgrade the cable plant of
the Northeast Indiana Systems. The $23,500,000 sales price represents a sales
price per basic subscriber of $1,541.
Triax will purchase all of the tangible assets of the Northeast Indiana
Systems that are leased or owned by the Partnership and used in the operation
of the systems, including the systems' real estate, vehicles, headend
equipment, underground and aboveground cable distribution systems, towers,
earth satellite receive stations and furniture and fixtures. Triax also will
acquire certain of the intangible assets of the systems, including all of the
franchises, leases, agreements, permits, licenses and other contracts and
contract rights necessary for the operation of the systems. Also included in
the sale are the subscriber accounts receivable of the systems and all of the
systems' records, files, schematics, maps, reports, promotional graphics,
marketing materials, and reports filed with federal, state and local
regulatory agencies. The foregoing notwithstanding, certain of the systems'
assets will be retained by the Partnership, including cash or cash equivalents
on hand and in banks, insurance policies and any federal, state or local
income or other tax refunds to which the Partnership may be entitled.
SALES PRICE
Subject to the closing adjustments described below, the sales price for the
Northeast Indiana Systems is $23,500,000. The Agreement provides for customary
closing adjustments that may either increase or decrease the sales price by a
non-material amount. Triax also will pay to the Partnership 100 percent of the
face amount of all subscriber accounts receivable that are current or 30 days
or less past due as of the closing date and 90 percent of the face amount of
all subscriber accounts receivable that are between 31 and 60 days past due as
of the closing date. The Partnership and Triax have agreed to make cash
adjustments and payments between them at the closing to transfer to Triax any
converter and other subscriber deposits received or held by the Partnership,
and any sums that the Partnership would have a present or future legal
obligation to refund.
The Partnership and Triax have further agreed to make such cash adjustments
and payments between them at closing and as soon as practicable after the
closing date (but not later than 90 days following the closing) to reflect the
principles that: (i) all expenses and income attributable to the assets of the
systems that are being retained by the Partnership are for the account of
Partnership; (ii) all expenses and income attributable to the construction,
installation, ownership or operation of the systems prior to the closing date
are for the account of the Partnership (including amounts payable for
supplies, inventories and other assets acquired by the Partnership, which the
Partnership will deliver to Triax at closing); and (iii) all expenses and
income attributable to the construction, installation, ownership or operation
of the systems on and after the closing date are for the account of Triax.
Such adjustments will include, but will not be limited to, an allocation of
the following between the Partnership and Triax: (i) franchise, copyright,
license or other fees; (ii) pole attachment fees and rentals and charges
payable in respect of leasehold interests; (iii) property taxes and
assessments payable in respect of any assets of the systems transferred to
Triax; (iv) charges for utilities, microwave relay and other services
furnished to or in connection with the business of operating the systems;
provided that pay television and other programming expenses will be
independently incurred and paid for by the Partnership and Triax before and
after the closing, respectively, and will not be subject to adjustment; (v)
fees payable to the FCC or other governmental authority in connection with the
systems or the ownership or operation thereof; and (vi) wages, salaries,
commissions, bonuses (based on any commitment therefore or amount thereof paid
for the most recent year), accrued vacation and other fringe benefits of the
systems' employees as of the closing date who become and continue as employees
of Triax during and beyond the 90-day period following the closing date (the
Partnership will be liable for all forms of compensation due the employees who
do not become and continue as Triax's employees, except for actual wage or
salary payments and directly related fringe benefits payable solely with
respect to employment of such employees by Triax and services rendered by such
employees to Triax at the request of Triax, which will be paid by Triax). The
Partnership will make all payments due the systems' employees for services
rendered by such employees prior to the closing date or otherwise accruing to
such
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employees as of the closing date in accordance with the Partnership's normal
payment practices, but in no event later than 30 days following the closing
date. There will be no prorating of any income tax or similar type of tax.
If the number of basic subscribers delivered to Triax at closing is less
than 15,250, the purchase price will be reduced by an amount equal to $1,541
multiplied by the number by which the number of basic subscribers is less than
15,250 (the "Subscribers Adjustment Amount"). The Partnership will not have an
obligation to close the sale if the amount pursuant to this adjustment is
greater than $900,000. To the extent that relatively recent subscribers to any
of the Northeast Indiana Systems are not counted as subscribers as of the
closing date pursuant to the terms of the Agreement, such subscribers will be
retroactively counted as subscribers if they pay a full monthly bill generated
in the ordinary course of business within 60 days following the closing date.
If the three-month average revenue per subscriber is less than the average
revenue per subscriber for the Northeast Indiana Systems required by the
Agreement as of the closing date, the purchase price will be reduced by an
amount equal to the product of the purchase price less any Subscriber
Adjustment Amount multiplied by a fraction, the numerator of which will be the
amount by which the three-month average revenue per subscriber is less than
the required average revenue per subscriber, and the denominator of which is
the required average revenue per subscriber (the "Revenue Adjustment Amount").
For purposes of the Agreement, the term "required average revenue per
subscriber" has alternate meanings depending upon whether the closing occurs
before or after April 1, 1998. Because the closing will occur after April 1,
1998, the term "required average revenue per subscriber" means $30.60.
If the number of basic subscribers delivered to Triax at the closing is
greater than 15,250 and (i) the product of the number of basic subscribers
multiplied by the three-month average revenue per subscriber is greater than
(ii) the product of 15,250 multiplied by the required average revenue per
subscriber, then there will be no Revenue Adjustment Amount, even if the
three-month average revenue per subscriber is less than the required average
revenue per subscriber.
The General Partner believes that these closing adjustments will neither
increase nor decrease the purchase price by a material amount. Please see the
Notes to Unaudited Pro Forma Financial Statements for a detailed accounting of
the General Partner's current best estimate of the anticipated closing
adjustments.
CONDITIONS TO THE CLOSING OF THE SALE
The obligations of Triax to consummate the closing are subject to the
satisfaction or waiver of the following conditions: (a) the representations
and warranties of the Partnership in the Agreement shall be true and accurate
in all material respects at and as of the closing date with the same effect as
if made at and as of the closing date; (b) the Partnership shall have
performed in all material respects all obligations and agreements and shall
have complied with all covenants in the Agreement or in any related document
to be performed or complied with by it at or before closing; (c) Triax shall
have received a certificate executed by the Partnership, dated as of the
closing date, certifying that the conditions to closing described in (a) and
(b) above have been satisfied; (d) there shall be no legal requirement and no
judgment shall have been entered and not vacated by any governmental authority
of competent jurisdiction in any litigation or other matter that seeks to
enjoin, restrain, make illegal or prohibit consummation of the sale of the
Northeast Indiana Systems; (e) Triax shall have received an opinion of the
general counsel of the General Partner addressed to Triax and dated as of the
closing date in form and substance reasonably satisfactory to Triax; (f) Triax
shall have received an opinion of the Partnership's FCC counsel addressed to
Triax and its lenders and dated as of the closing date in form and substance
reasonably satisfactory to Triax; (g) all waiting periods under the Hart Scott
Rodino Anti-Trust Improvements Act of 1976 (the "HSR Act") applicable to the
Agreement or the transactions contemplated thereby shall have expired or been
terminated; (h) the Partnership shall have delivered to Triax all material
consents to the transfer of the assets of the Northeast Indiana Systems from
the Partnership to Triax and shall have timely issued all notifications
necessary for such transfer; and (i) there shall have been no material adverse
change in the assets or the financial condition, liabilities or operations of
the Northeast Indiana Systems.
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The obligations of the Partnership to consummate the closing are subject to
the satisfaction or waiver of the following conditions: (a) the
representations and warranties of Triax in the Agreement shall be true and
accurate in all material respects at and as of the closing date with the same
effect as if made at and as of the closing date; (b) Triax shall have
performed in all material respects all obligations and agreements and shall
have complied with all covenants in the Agreement or in any related document
to be performed or complied with by it at or before closing; (c) the
Partnership shall have received a certificate executed by Triax, dated as of
the closing date, certifying that the conditions to closing described in (a)
and (b) above have been satisfied; (d) there shall be no legal requirement and
no judgment shall have been entered and not vacated by any governmental
authority of competent jurisdiction in any litigation or other matter that
seeks to enjoin, restrain, make illegal or prohibit consummation of the
transactions contemplated by the Agreement; (e) the Partnership shall have
received an opinion of Gallop, Johnson & Neuman, L.C., counsel to Triax, dated
as of the closing date in form and substance reasonably satisfactory to it;
(f) all waiting periods under the HSR Act applicable to the Agreement or the
transactions contemplated thereby shall have expired or been terminated; (g)
material consents to the transfer of the assets of the Northeast Indiana
Systems from the Partnership to Triax shall have been obtained; (h) the
Agreement and the transactions contemplated thereby shall have been approved
by the Partnership's limited partners; and (i) the sum of the Subscribers
Adjustment Amount and the Revenue Adjustment Amount shall be no greater than
$900,000.
INDEMNITY ESCROW
For a period of one year following the closing date, $1,000,000 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify Triax under the Agreement. Pursuant to the terms of the Agreement,
the Partnership has agreed to indemnify and defend Triax against and hold
Triax harmless from any loss, claim, damage, liability or expense (including
reasonable attorneys' fees) (i) incurred or sustained by Triax on account of
any and all liabilities of the Partnership other than those assumed by Triax,
(ii) incurred or sustained by Triax as a result of any misrepresentation or
breach of any representation or warranty of the Partnership in the Agreement
or any schedule or other instrument or document delivered pursuant thereto, or
(iii) arising in connection with (a) any law pertaining to bulk sales or
transfers of assets or affecting the rights of creditors of the Partnership,
(b) any sales, use, transfer, documentary, vehicle title transfer, excise or
license tax, (c) any fee or charge applicable to any of the assets transferred
by the Partnership to Triax, (d) any appraisal rights or other liability owing
to any partner of the Partnership, (e) any loss incurred or sustained by Triax
as a result of any refund of rates mandated under FCC regulations owed to
customers of the Northeast Indiana Systems for the period during which the
Partnership owned the systems or (f) otherwise arising from any breach by the
Partnership of the Agreement.
The Partnership's primary exposure, if any, will relate to the
representations and warranties made about the Northeast Indiana Systems in the
Agreement. No claim may be brought unless and until the aggregate amount of
all claims is at least $50,000. Triax will have the right to make claims
against the indemnity escrow account and Triax must notify the Partnership of
such claims. If the Partnership objects to the payment of any claims by the
escrow agent, and if Triax and the Partnership are unable to agree on how the
escrowed funds should be distributed, the escrow agent will be authorized to
submit the dispute to arbitration. The escrow agent will be Colorado National
Bank located in Englewood, Colorado.
Any amounts remaining from this indemnity escrow account at the end of the
one year period and not subject to a claim by Triax will be distributed to the
limited partners of the Partnership at that time. If the entire $1,000,000
escrow amount ultimately is distributed to limited partners, of which there
can be no assurance, limited partners would receive $19.50 for each $500
limited partnership interest, or $39 for each $1,000 invested in the
Partnership, from this portion of the sale proceeds. The Partnership will
continue in existence at least until any amounts remaining from the indemnity
escrow account have been distributed. If any disputes with respect to
indemnification arise, the Partnership would not be dissolved until such
disputes were resolved, which could result in the Partnership continuing in
existence beyond 1999.
7
<PAGE>
REASONS FOR THE TIMING OF THE SALE
The decision to proceed with the sale of the Northeast Indiana Systems at
this time was based upon the General Partner's conclusion in 1997 that it
would be in the Partnership's best interests to sell the Northeast Indiana
Systems now rather than at a later date. Since acquisition, the Northeast
Indiana Systems have experienced competition from private cable television
systems in their market and the Northeast Indiana Systems soon may experience
competition in portions of their service areas from the local telephone
company. During the holding period, the Northeast Indiana Systems have grown
from serving approximately 9,400 basic subscribers to a system serving
approximately 15,250 basic subscribers. The cable plant mileage has increased
from approximately 220 miles of cable plant at acquisition to approximately
441 miles of cable plant expected at the time of the sale. At acquisition, the
Northeast Indiana Systems passed approximately 14,500 dwelling units. The
Northeast Indiana Systems are expected to pass approximately 21,790 dwelling
units at closing.
In accordance with the General Partner's decision that it was time for the
Partnership to sell the Northeast Indiana Systems, an information package
describing the Northeast Indiana Systems was prepared by The Jones Group,
Ltd., the General Partner's cable system brokerage subsidiary. The Jones
Group, Ltd. began marketing the Northeast Indiana Systems for sale in June
1997. Upon their request, the information package describing the systems was
sent to four unaffiliated cable television system operators, each of which are
multiple cable television system operators. Of the four original prospects,
only Triax and Marcus Cable ("Marcus") pursued the acquisition and submitted
offers for the Northeast Indiana Systems by the September 1997 deadline. Triax
bid $19,500,000 and Marcus bid $20,000,000 for the Northeast Indiana Systems.
The General Partner rejected both offers as too low, and through subsequent
negotiations in October and November 1997, Triax increased its offer, first to
$20,500,000 and then to $23,500,000, which the General Partner accepted on
behalf of the Partnership. A definitive agreement was negotiated at arm's-
length between the General Partner, representing the Partnership, as seller
and Triax as buyer over a period of several months. The definitive agreement
was executed on December 17, 1997.
The Partnership has a finite legal existence of 17 years, almost 10 of which
have passed. It was not intended or expected, however, that the Partnership
would hold its cable systems for 17 years. Although it was not possible at the
outset of the Partnership to determine precisely how quickly the investment
objectives with respect to any particular system would be achieved, investors
were informed that past experience with prior partnerships had shown that five
to seven years was the average length of time from the acquisition of a cable
system to its sale. Investors in the Partnership also were able to examine the
track record of prior partnerships because such track record was set forth in
the prospectus delivered in connection with the Partnership's initial public
offering. At the time of the formation of the Partnership, the track record
showed that prior partnerships had rarely held their cable systems for any
longer than six years. The Partnership had somewhat different investment
objectives from most of the General Partner's prior partnerships, however, in
that it sought to provide both current distributions and capital appreciation
in its cable systems. The expected holding period for the Partnership's
systems was therefore eight to ten years.
When investing in the Partnership, by virtue of the provisions of Section
2.2(k) of the Partnership Agreement, the limited partners vested in the
General Partner the right and responsibility to determine when the
Partnership's investment objectives had been achieved. The Northeast Indiana
Systems were acquired by the Partnership because, in the opinion of the
General Partner at the time of the acquisition, these systems had the
potential for capital appreciation within a reasonable period of time. Due to
the competition that the system has faced during the holding period, the rate
re-regulation of the cable industry during the early 1990s and the general
decline in the values of cable television systems since the systems were
acquired in September 1988, the systems have not greatly appreciated in value
during the holding period. The General Partner determined nevertheless that
now rather than later was the appropriate time for the Partnership to sell the
systems. The General Partner used no specific benchmarks or measurement tools
in determining that now was the time for the Partnership to sell the systems.
The General Partner conducted a subjective evaluation of a variety of factors,
including the length of the holding period and the prospects for future growth
of the systems as compared to the potential risks of a decline in the size
and/or value of the systems.
8
<PAGE>
In evaluating whether now was the time for the Partnership to sell the
Northeast Indiana Systems, the General Partner generally considered the
benefits to the limited partners that might be derived by the Partnership's
holding the systems for an additional period of time. The General Partner
assumed that the systems might continue to appreciate in value and, if so, the
Northeast Indiana Systems might be able to be sold for a greater sales price
in the future. The General Partner weighed these assumptions against the
potential risk to investors from a longer holding period, i.e., the risks that
regulatory, technology and/or competitive developments could cause the systems
to decline in value, which could result in a lower sales price in the future.
A longer holding period would expose investors to the risk that competition
from direct broadcast satellite companies, telephone companies and/or
neighboring cable companies could diminish the number of subscribers to the
systems' basic and premium services, thereby decreasing the value of the
systems. A longer holding period would expose investors to the risk that
changes in the regulations promulgated by the governmental agencies that
oversee cable operations could make cable systems a less desirable investment,
thereby decreasing the value of the Northeast Indiana Systems. The General
Partner's decision to sell the systems at this time was greatly influenced by
the fact that the originally contemplated holding period has been exceeded.
RECOMMENDATION OF THE GENERAL PARTNER AND FAIRNESS OF THE PROPOSED SALE
The General Partner believes that the Partnership's proposed sale of the
Northeast Indiana Systems to Triax on the terms and conditions of the
Agreement and the proposed distribution of the net sale proceeds therefrom to
the Partnership's limited partners are fair to all limited partners of the
Partnership, and it recommends that the limited partners of the Partnership
approve the Partnership's sale of the Northeast Indiana Systems to Triax on
the terms and conditions of the Agreement. In determining the fairness of the
proposed transaction, the General Partner's officers and directors considered
each of the following factors, all of which had a positive effect on the
General Partner's fairness determination:
(i) the limited partnership interests are at present illiquid and the cash
to be distributed to limited partners as a result of the proposed sale of the
Northeast Indiana Systems will provide limited partners with liquidity;
(ii) the sales price represents the fair market value of the Northeast
Indiana Systems because the sales price was determined in an arm's-length
negotiation between the General Partner, representing the Partnership, and
Triax, an unaffiliated entity;
(iii) the Partnership has held the Northeast Indiana Systems for almost 10
years;
(iv) the conditions and prospects of the cable television industry in which
the Partnership is engaged, including the competition and threat of
competition from overbuilders, from DBS services and telephone companies, and
the working capital and other financial needs of the Partnership if it were to
continue to operate and upgrade the Northeast Indiana Systems; and
(v) the terms and conditions of the Agreement by and between the Partnership
and Triax, including the fact that the sales price will be paid in cash and
the fact that Triax's obligation to close is not contingent upon its ability
to obtain financing.
The General Partner's officers and directors reviewed the terms of the
Agreement and the sales price and, based on their general knowledge of cable
television system transactions undertaken by cable television companies,
concluded that the sales price and other transaction terms were fair and were
within industry norms for comparable transactions.
CERTAIN EFFECTS OF THE SALE
Upon consummation of the sale of the Northeast Indiana Systems, the proceeds
of the sale will be used to repay all of the amounts borrowed under the
Partnership's credit facility and capital lease obligations, pay certain fees
and expenses of the transaction and $1,000,000 will be deposited into a one
year indemnity escrow account and then the $14,948,107 of net sale proceeds
will be distributed by the Partnership to its limited partners of
9
<PAGE>
record as of the closing date of the sale of the systems pursuant to the terms
of the Partnership Agreement. Based upon pro forma financial information as of
December 31, 1997, and assuming an unadjusted sales price of $23,500,000, as a
result of the sale of the Northeast Indiana Systems, the limited partners of
the Partnership, as a group, will receive $14,948,107. Limited partners will
receive $291.50 for each $500 limited partnership interest, or $583 for each
$1,000 invested in the Partnership.
The limited partners will be subject to federal and state income tax on the
income resulting from the sale of the Northeast Indiana Systems. See the
detailed information below under the caption "Federal and State Income Tax
Consequences."
After the sale of the Northeast Indiana Systems and the distribution of the
net proceeds therefrom, including the indemnity escrow amount, the Partnership
will be liquidated and dissolved, most likely sometime in 1999.
Neither Colorado law nor the Partnership Agreement afford dissenters' or
appraisal rights to limited partners in connection with the Partnership's
proposed sale of the Northeast Indiana Systems. If the proposed transaction is
approved by the holders of a majority of limited partnership interests, all
limited partners of the Partnership will receive a distribution of the net
sale proceeds in accordance with procedures prescribed by the Partnership
Agreement regardless of how or whether they vote on the proposal.
It is anticipated that if the proposed transaction is not consummated, the
General Partner's current management team will continue to manage the
Northeast Indiana Systems on behalf of the Partnership until such time as the
Northeast Indiana Systems can be sold. No other alternatives have been or
currently are being considered.
FEDERAL AND STATE INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transactions is to inform the limited partners of the federal and
state income tax consequences to the Partnership and to its limited partners
arising from the proposed sale of the Northeast Indiana Systems. These tax
consequences are expected to be incurred in 1998, the year in which the sale
is expected to close. The tax information included herein was prepared by the
tax department of the General Partner. The tax information is taken from tax
data compiled by the General Partner in its role as the Partnerships's tax
administrator and is not based upon the advice or formal opinion of counsel.
The tax discussion that follows is merely intended to inform the limited
partners of factual information and should not be considered tax advice.
By the expected date of the proposed system sale in 1998, most of the
limited partners will have received certain tax benefits from their investment
in the Partnership. Assuming maximum federal income tax rates and no other
sources of passive income, original limited partners of the Partnership will
have received $1,550,450 in tax benefits from Partnership losses ($61 per
$1,000 invested). Tax benefits derived from allocable Partnership losses have
been limited due to the passive loss limitation rules enacted in 1986.
The 1998 sale of the Northeast Indiana Systems will generate Partnership
gain, which will be allocable to the limited partners in an amount
approximating $16,078,500 ($627 per $1,000 invested). The General Partner
estimates that all of the gain will be characterized as ordinary income from
IRC Section 1245 recapture of depreciation and amortization on Partnership
operating assets. It is not anticipated that any of the allocable gain will be
treated as long term capital gain under IRC Section 1231. Some or all of this
allocable gain may be offset by passive loss carryforwards of the limited
partners, which is discussed in more detail below.
The Tax Reform Act of 1986 enacted a limitation on a limited partners'
ability to currently deduct allocable partnership losses, which were deemed to
be passive losses. The law phased in the disallowance of passive loss
10
<PAGE>
deductions until 1991, when no passive losses were allowable except to the
extent of passive income or a disposition of the passive activity. The proper
application of these loss limitation rules should have resulted in the
existence of passive loss carryforwards for the Partnership's limited
partners. These potential passive loss carryforwards can be deducted in the
current year to offset the allocable Partnership gains detailed above.
The General Partner estimates that the Partnership has generated potential
passive loss carryforwards of $6,732,000 ($263 per $1,000 invested) which may
be available for deduction in 1998. The carryforward amount is calculated by
applying the passive loss limitations to historical partnership losses and
assuming that the limited partners of the Partnership would not have utilized
prior year limited passive losses on account of other sources of passive
income except from the Partnership. The availability of these loss
carryforwards depends on the particular tax history of each limited partner.
Partners that have utilized some or all of prior Partnership losses limited by
the passive loss rules will have deductible losses that vary accordingly.
Assuming the 31 percent rate applies to ordinary income, a limited partner
with the maximum available passive loss carryforwards will be subject to 1998
federal income taxes of approximately $113 per $1,000 invested in the
Partnership.
Limited partners that have more recently acquired their partnership
interests in the limited partnership secondary market and/or through limited
tender offers will have allocable income from the sale in the amounts reported
above. Because the Partnership does not have an IRC Section 754 election in
effect, the purchase of a limited partnership interest in the Partnership
places the new investor in the same position as the limited partner from whom
the interest was purchased. However, the new investor will not have the prior
investor's passive loss carryforwards or tax basis in the Partnership.
Newer investors in the Partnership will not have the passive loss
carryforwards reported above and will likely have a greater reportable net
taxable income from the sale of the Northeast Indiana Systems than investors
who have held their limited partnership interests for a longer period of time.
Also, recent investors will not have their net tax basis in their partnership
interests reflected on their annual Schedule K-1. Such limited partners must
track their tax basis by adjusting their original cost by allocable income or
loss and partnership distributions. Their adjusted tax basis will be pertinent
in the year when they sell their limited partnership interests or when the
Partnership is liquidated.
Limited partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a federal withholding tax on their share of
the Partnership's income from the sale of the Northeast Indiana Systems. The
withholding rates are 39.6 percent for individual partners and 35 percent for
corporate partners. The tax withheld will be remitted to the Internal Revenue
Service and the foreign persons will receive a credit on their 1998 U.S. tax
return for the amount of the tax withheld by the Partnership. The withheld tax
will be treated as a distribution to the limited partner.
The sale of the Northeast Indiana Systems will require limited partner
reporting to the state of Indiana. The General Partner is required by state
law to withhold 3.4 percent of each partner's allocable income occurring from
sale activity within Indiana without consideration of loss carryforwards. This
withholding requirement applies to individual and tax exempt entities such as
trusts and IRAs. Limited partners will need to file non-resident state tax
returns to compute the appropriate state tax liability. Withheld taxes, which
will be reported on specified forms to limited partners in January 1999, will
apply against the computed liability. The General Partner anticipates that
most partners will likely receive a refund from this reporting process.
Detailed Indiana reporting instructions and blank forms will be provided to
limited partners in their 1998 annual tax reporting package, which will be
mailed to limited partners in March 1999.
Due to the existence of the one year indemnity escrow arrangement resulting
from the sale of the Northeast Indiana Systems, the Partnership will not have
a final liquidating distribution until 1999. At that time it is anticipated
that original limited partners will be able to deduct their allocable
syndication costs of approximately $3,525,225 ($138 per $1,000 invested).
These amounts will be treated as long term capital losses under IRC
11
<PAGE>
Section 731. The limited partners should also expect an allocation of
partnership interest income earned on the escrow balances held in 1998 and
1999. The General Partner anticipates that 1999 will be the final tax
reporting year of the Partnership and that final tax information relating to
the Partnership's activities will be reported in February 2000.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP, THE GENERAL
PARTNER AND THE PURCHASER OF THE SYSTEMS
The principal executive offices of the Partnership and the General Partner
are located at 9697 East Mineral Avenue, Englewood, Colorado 80112, and their
telephone number is (303) 792-3111. The principal executive offices of Triax
are located at 100 Fillmore Street, Suite 600, Denver, Colorado 80206.
The limited partnership interests of the Partnership are registered pursuant
to Section 12(g) of the Exchange Act. As such, the Partnership currently is
subject to the informational reporting requirements of the Exchange Act and,
in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the SEC relating to its business,
financial condition and other matters. Reports and other information filed by
the Partnership can be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the following regional offices of the SEC: 7 World Trade Center,
Suite 1300, New York, New York 10048 and Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. The SEC also maintains a
World Wide Web site that contains reports, proxy statements and information
statements of registrants (including the Partnership) that file electronically
with the SEC at http://www.sec.gov. The Partnership will continue to be
subject to the informational reporting requirements of the Exchange Act after
the sale of the Northeast Indiana Systems. The Partnership will cease to be
subject to the informational reporting requirements of the Exchange Act only
after the Partnership is liquidated and dissolved, most likely sometime in
1999.
12
<PAGE>
USE OF PROCEEDS FROM THE SALE
The following is a brief summary of the Partnership's estimated use of its
portion of the proceeds from the sale of the Northeast Indiana Systems. All of
the following selected financial information is based upon amounts as of
December 31, 1997 and certain estimates of liabilities and the number of basic
subscribers at closing. Final results may differ materially from these
estimates. A more detailed discussion of the financial consequences of the
sale of the system is set forth below under the captions "Unaudited Pro Forma
Consolidated Financial Information." All limited partners are encouraged to
review carefully the unaudited pro forma consolidated financial statements and
notes thereto.
If the holders of a majority of limited partnership interests of the
Partnership approve the proposed sale of the systems and the transaction is
closed, the Partnership will repay all of the amounts borrowed under its
credit facility and deposit $1,000,000 in a one-year indemnity escrow account
and then the $14,948,107 of net sale proceeds will be distributed to the
Partnership's limited partners of record as of the closing date of the sale of
the systems and pursuant to the terms of the Partnership Agreement. The
estimated uses of the sale proceeds are as follows:
<TABLE>
<S> <C>
Contract Sales Price of the Northeast Indiana Systems........... $23,500,000
Add: Estimated Net Closing Adjustments......................... 68,149
Less: Repayment of Debt......................................... (7,620,042)
Indemity Escrow........................................... (1,000,000)
-----------
Cash Available for Distribution by the Partnership to its
Limited Partners......................................... $14,948,107
===========
</TABLE>
Based on financial information available at December 31, 1997, the following
table presents the estimated results of the Partnership when the sale of the
Northeast Indiana Systems is completed:
<TABLE>
<S> <C>
Dollar Amount Raised............................................. $25,638,000
Number of Cable Television Systems Purchased Directly............ Three
Date of Closing of Offering...................................... June 1989
</TABLE>
<TABLE>
<S> <C>
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations............................................. $ (462)
--from recapture.............................................. $ 818
Capital Gain (Loss)........................................... $ (138)
Cash Distributions to Investors
Source (on GAAP basis)
--investment income........................................... $ 180
--return of capital........................................... $1,000
Source (on cash basis)
--sales....................................................... $1,180
</TABLE>
13
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
The following unaudited pro forma financial statements assume that as of
December 31, 1997, the Partnership had sold the Northeast Indiana Systems for
$23,500,000. The funds available to the Partnership from the sale, adjusting
for the estimated net closing adjustments of the sale, are expected to total
$23,421,492. Such funds will be used to repay all of the amounts borrowed by
the Partnership under its credit facility and outstanding capital lease
obligations and make a $1,000,000 deposit into the indemnity escrow account,
and the balance will be distributed to the Partnership's limited partners as a
return of capital initially contributed to the Partnership by the limited
partners plus a portion of the limited partners' preferential return.
The unaudited pro forma financial statements should be read in conjunction
with the appropriate notes to the unaudited pro forma financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL INFORMATION IS BASED UPON
AMOUNTS AS OF DECEMBER 31, 1997 AND CERTAIN ESTIMATES OF LIABILITIES AT
CLOSING. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
14
<PAGE>
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents................ $ 146,657 $15,801,450 $15,948,107
Trade Receivables, net................... 182,946 (182,946) --
Investment in Cable Television
Properties:
Property, plant and equipment, net..... 6,082,230 (6,082,230) --
Franchise costs and other intangibles,
net................................... 4,455,263 (4,455,263) --
----------- ----------- -----------
Total investment in cable television
properties.......................... 10,537,493 (10,537,493) --
Deposits, Prepaid Expenses and Deferred
Charges................................. 77,615 (77,615) --
----------- ----------- -----------
Total Assets......................... $10,944,711 $ 5,003,396 $15,948,107
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt................................... $ 7,620,042 $(7,620,042) $ --
Trade accounts payable and accrued
liabilities........................... 307,207 (307,207) --
Subscriber prepayments................. 31,862 (31,862) --
Accrued distribution to limited
partners.............................. -- 14,948,107 14,948,107
----------- ----------- -----------
Total Liabilities.................... 7,959,111 6,988,996 14,948,107
----------- ----------- -----------
Partners' Capital (Deficit):
General Partner........................ (17,258) 17,258 --
Limited Partners....................... 3,002,858 (2,002,858) 1,000,000
----------- ----------- -----------
Total Partners' Capital (Deficit).... 2,985,600 (1,985,600) 1,000,000
----------- ----------- -----------
Total Liabilities and Partners' Capital
(Deficit)............................. $10,944,711 $ 5,003,396 $15,948,107
=========== =========== ===========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited pro forma balance sheet.
15
<PAGE>
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ---------
<S> <C> <C> <C>
REVENUES.................................... $5,522,807 $(5,522,807) $ --
COSTS AND EXPENSES:
Operating Expenses ....................... 2,844,900 (2,844,900) --
Management fees and allocated overhead
from
the General Partner...................... 601,332 (601,332) --
Depreciation and Amortization............. 1,680,105 (1,680,105) --
---------- ----------- -------
OPERATING LOSS.............................. 396,470 (396,470) --
---------- ----------- -------
OTHER INCOME (EXPENSE):
Interest expense ......................... (664,204) 664,204 --
Other, net................................ (13,641) 13,641 --
---------- ----------- -------
Total other income (expense), net....... (677,845) 677,845 --
---------- ----------- -------
NET LOSS.................................... (281,375) $ 281,375 --
========== =========== =======
NET LOSS PER LIMITED PARTNERSHIP INTEREST... $ (5.43) $ --
========== =======
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited pro forma statement.
16
<PAGE>
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1) The unaudited pro forma balance sheet of the Partnership assumes that the
Partnership had sold the Northeast Indiana Systems for $23,500,000 as of
December 31, 1997. The unaudited pro forma statement of operations of the
Partnership assumes that the Partnership had sold the Northeast Indiana
Systems for $23,500,000 as of January 1, 1997.
2) The Partnership will have $14,948,107 of net sale proceeds from the sale
of the Northeast Indiana Systems, which it will distribute to its limited
partners. The limited partnership distribution of $14,948,107 represents
$291.50 for each $500 limited partnership interest or $583 for each $1,000
invested in the Partnership.
3) The estimated gain recognized from the sale of the Northeast Indiana
Systems and corresponding estimated distribution to limited partners as of
December 31, 1997 have been computed as follows:
GAIN ON SALE:
<TABLE>
<S> <C>
Contract sales price............................................... $23,500,000
Less: Net book value of investment at December 31, 1997........... 10,537,493
-----------
Gain on sale................................................ $12,962,507
===========
DISTRIBUTION TO PARTNERS:
Contract sales price............................................... $23,500,000
Add: Trade receivables, net...................................... 182,946
Prepaid expenses............................................ 77,615
Less: Trade accounts payable and accrued liabilities.............. (307,207)
Subscribers prepayments..................................... (31,862)
-----------
Adjusted cash received............................................. 23,421,492
Less: Outstanding debt to third parties........................... (7,620,042)
Add: Cash on hand................................................ 146,657
-----------
Cash available from sale proceeds.................................. $15,948,107
-----------
Portion of sale proceeds to be held in escrow...................... (1,000,000)
-----------
Cash available for distribution in 1998............................ $14,948,107
===========
</TABLE>
17
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K/A No. 1 for the fiscal year
ended December 31, 1997 is being mailed to the limited partners of the
Partnership together with this Proxy Statement.
INCORPORATION BY REFERENCE
The Partnership's Annual Report on Form 10-K/A No. 1 for the fiscal year
ended December 31, 1997 is incorporated by reference in its entirety in this
Proxy Statement.
18
<PAGE>
[LOGO OF JONES INTERCABLE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Jones Spacelink Income/Growth Fund 1-A,
Ltd., a Colorado limited partnership, hereby votes on the proposed sale of the
Northeast Indiana Systems to Triax Midwest Associates, L.P. on the terms and
conditions of the Asset Purchase Agreement dated as of December 17, 1997, as
follows:
FOR AGAINST ABSTAIN
[_] [_] [_]
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE WITH RESPECT TO THE
PROPOSAL, THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
PLEASE SIGN EXACTLY AS NAME
APPEARS ON LABEL.
DATED: ______________________, 1998
___________________________________
Beneficial Owner Signature
(Investor)
___________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
[LOGO OF JONES INTERCABLE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Jones Spacelink Income/Growth Fund 1-A,
Ltd., a Colorado limited partnership, hereby votes on the proposed sale of the
Northeast Indiana Systems to Triax Midwest Associates, L.P. on the terms and
conditions of the Asset Purchase Agreement dated as of December 17, 1997, as
follows:
FOR AGAINST ABSTAIN
[_] [_] [_]
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER(S). IF NO DIRECTION IS MADE WITH RESPECT TO
THE PROPOSAL, THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
ALL OWNERS MUST SIGN EXACTLY AS
NAME(S) APPEAR ON LABEL.
When limited partnership
interests are held by more than
one person, all owners must sign.
When signing as attorney, as
executor, administrator, trustee
or guardian, please give full
title as such. If a corpo-ration,
please sign in full corporation
name by autho-rized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: ______________________, 1998
___________________________________
Signature - Investor 1
___________________________________
Signature - Investor 2
___________________________________
Signature - Investor 3
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
