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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:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
JONES GROWTH PARTNERS L.P.
-----------------------------------------------------
(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: 85,740
(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
$103,000,000 sales price that is to be paid to Jones Growth Partners
L.P. in connection with the transaction that is the subject of the
proxy solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$103,000,000
(5) Total fee paid: $20,600
[_] 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 APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS OF JONES GROWTH PARTNERS L.P.
To the Limited Partners of Jones Growth Partners L.P.:
A special vote of the limited partners of Jones Growth Partners L.P. (the
"Partnership") is being conducted through the mails on behalf of the
Partnership by Jones Spacelink Cable Corporation, the managing general partner
of the Partnership, for the purpose of obtaining limited partner approval of
the sale, to TCI Communications, Inc. or one of its affiliates, of the cable
television system serving the municipalities of Addison, Glen Ellyn, St.
Charles, Warrenville, West Chicago, Wheaton, Winfield and Geneva, and certain
portions of unincorporated areas of Du Page and Kane counties, all in the
State of Illinois (the "Wheaton System"), owned by the Partnership for
$103,000,000 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 this matter is set forth in the
accompanying Proxy Statement.
If the limited partners approve the proposed sale of the Wheaton System and
if the transaction is closed, the Partnership will repay all of its third
party indebtedness, which totaled $36,243,870 at June 30, 1998, repay advances
from the Managing General Partner, which totaled $2,083,098 at June 30, 1998,
settle working capital adjustments and deposit $3,118,500 into an indemnity
escrow account, and then the Partnership will distribute the remaining
$61,500,000 to its limited partners of record as of the closing date of the
sale of the Wheaton System. Because the distribution to be made to the limited
partners on the sale of the Wheaton System will not exceed 100 percent of the
amounts originally contributed to the Partnership by the limited partners plus
an amount equal to eight percent per annum, cumulative and noncompounded, on
an amount equal to their initial capital contributions, the general partners
will not receive general partner distributions on the sale of the Wheaton
System. The $61,500,000 distribution to the limited partners will give the
Partnership's limited partners an approximate return of $717 for each $1,000
limited partnership interest. Distribution checks will be issued to limited
partners' account registration or payment instruction of record.
There have been no prior distributions to the limited partners and it is
anticipated that there will be no further distributions to the limited
partners other than from any amounts remaining after November 15, 1999 in the
indemnity escrow account. Once the Partnership has completed the distribution
of the net proceeds from the sale of the Wheaton System, the limited partners
of the Partnership will have received a total of only $717 for each $1,000
limited partnership interest (excluding escrowed proceeds). After the closing
of the sale of the Wheaton System and the distribution of the net sale
proceeds therefrom, including the amounts, if any, remaining after November
15, 1999 in an indemnity escrow account, the Partnership will be liquidated
and dissolved, most likely in the fourth quarter of 1999.
Only limited partners of record at the close of business on October 15, 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 Partnership's ability 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 Wheaton System 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") requires that the proposal to sell the
Wheaton System be 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 consent returned to the managing
general partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Wheaton System. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Wheaton System, 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 Spacelink Cable Corporation, as managing general partner of the
Partnership, urges you to sign and return the enclosed proxy as promptly as
possible. The proxy should be returned in the enclosed envelope.
JONES SPACELINK CABLE CORPORATION
Managing General Partner
/s/ Elizabeth M. Steele
Elizabeth M. Steele
Secretary
Dated: October 30, 1998
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[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS
OF JONES GROWTH PARTNERS L.P.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Jones Growth Partners L.P.
(the "Partnership") by Jones Spacelink Cable Corporation, the managing general
partner of the Partnership (the "Managing General Partner"), on behalf of the
Partnership, for the purpose of obtaining limited partner approval of the sale
of the cable television system serving the municipalities of Addison, Glen
Ellyn, St. Charles, Warrenville, West Chicago, Wheaton, Winfield and Geneva,
and certain portions of unincorporated areas of Du Page and Kane counties, all
in the State of Illinois (the "Wheaton System") owned by the Partnership for
$103,000,000 in cash, subject to normal working capital closing adjustments,
to TCI Communications, Inc. or one of its affiliates ("TCI"). The
Partnership's associate general partner is Growth Partners, Inc., an affiliate
of Lehman Brothers Inc. (the "Associate General Partner"), and the Managing
General Partner and the Associate General Partner are referred to in this
Proxy Statement collectively as the "General Partners." TCI is not an
affiliate of the Partnership or of either of the General Partners.
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 Managing General Partner may solicit proxies by
mail, by fax, by telephone or by personal interview. The deadline for the
receipt of proxy votes is December 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 Managing 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 Managing 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 December 15, 1998. If the Managing 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 $1,000 of capital contributed to the Partnership.
As of September 18, 1998, the Partnership had 85,740 limited partnership
interests outstanding, held by 8,124 persons. There is no established trading
market for such interests. To the best of the Managing 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,
Smithtown Bay, LLC and Madison Partnership Liquidity
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Investors 30, LLC, two firms unaffiliated with the Partnership, the General
Partners and each other, have conducted tender offers for interests in the
Partnership. As of September 18, 1998, Smithtown Bay, LLC and its affiliates
owned 3,271 limited partnership interests, or 3.8 percent of the limited
partnership interests. As of such date, Madison Partnership Liquidity
Investors 30, LLC and its affiliates owned 4,051 limited partnership
interests, or 4.7 percent of the limited partnership interests. Pursuant to
the terms of agreements between the Partnership and the Managing 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 limited partners
who vote on the sale of the Wheaton System. Thus, for example, if the limited
partnership interests voted in favor of the 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 transaction to be approved by
a majority of all limited partnership interests, which is the vote necessary
to cause the transaction to be approved. The Managing General Partner owns 850
limited partnership interests. The Associate General Partner owns no limited
partnership interests. The limited partnership interests owned by the Managing
General Partner will be voted in favor of the sale of the Wheaton System to
TCI. The officers and directors of the General Partners do not own any limited
partnership interests. Only limited partners of record at the close of
business on October 15, 1998 will be entitled to notice of, and to participate
in, the vote.
Upon the consummation of the proposed sale of the Wheaton System, the
Partnership will repay all of its third party indebtedness, which totaled
$36,243,870 at June 30, 1998, repay advances from the Managing General
Partner, which totaled $2,083,098 at June 30, 1998, settle working capital
adjustments and deposit $3,118,500 into an indemnity escrow account, and then
the Partnership will distribute the remaining $61,500,000 to its limited
partners of record as of the closing date of the sale of the Wheaton System.
Because the distribution to be made to the limited partners on the sale of the
Wheaton System will not exceed 100 percent of the amounts originally
contributed to the Partnership by the limited partners plus an amount equal to
eight percent per annum, cumulative and noncompounded, on an amount equal to
their initial capital contributions, the General Partners will not receive
general partner distributions on the sale of the Wheaton System. As a result
of the Wheaton System's sale, the limited partners of the Partnership will
receive a $61,500,000 distribution, or $717 for each $1,000 limited
partnership interest. Distribution checks will be issued to limited partners'
account registration or payment instruction of record.
There have been no prior distributions and it is anticipated that there will
be no further distributions to the limited partners other than from any
amounts remaining after November 15, 1999 in the indemnity escrow account.
Once the Partnership has completed the distribution of the net proceeds from
the sale of the Wheaton System, the limited partners of the Partnership will
have received a total of only $717 for each $1,000 limited partnership
interest (excluding escrowed proceeds). Limited partners should note that
there are certain federal income tax consequences of the proposed transaction.
See "Federal Income Tax Consequences."
The Partnership's only asset is the Wheaton System. After the sale of the
Wheaton System and after the termination of the indemnity escrow period on
November 15, 1999, the Partnership will be liquidated and dissolved. The
Partnership will cease to be a public entity subject to the informational
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), when the Partnership is liquidated and dissolved, most likely
before the end of 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") requires that the proposal to sell the
Wheaton System be 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 consent returned to the Managing
General Partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Wheaton System. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Wheaton System, 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.
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The Board of Directors of Jones Intercable, Inc., the parent of the Managing
General Partner ("Intercable"), approved the proposed sale of the Wheaton
System and the Associate General Partner has given its consent to the proposed
sale of the Wheaton System. The General Partners therefore recommend approval
of the transaction by the holders of the Partnership's limited partnership
interests.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is October 30, 1998.
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 obtain capital appreciation in the value of the Partnership's cable
television properties; to obtain equity build-up through debt reduction; and
to generate tax losses that could be utilized to offset passive income. 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 Partners
determined that the Partnership's investment objectives had substantially been
achieved and after a holding period of five to seven years.
The Partnership was formed in June 1989 as a Colorado limited partnership in
connection with a public offering of its limited partnership interests. Sales
of limited partnership interests in the Partnership commenced in May 1989 and
closed in February 1990. The Partnership raised gross offering proceeds of
$85,740,000. The Partnership invested all of its net offering proceeds in the
Wheaton System. The Partnership acquired the Wheaton System on October 4,
1989.
Based upon the track record of prior public partnerships sponsored by the
Managing General Partner and its affiliates that had liquidated or were in the
process of liquidating their assets during the period that limited partnership
interests in the Partnership were being sold, and based upon disclosures made
to prospective investors about the Partnership's investment objectives in the
Jones Growth Partners L.P. Prospectus and in the 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 five to seven years. Due to
the uncertain and then adverse regulatory environment that developed in the
mid 1990s 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 Managing General Partner determined that it
would be prudent to delay the sale of the Wheaton System until market
conditions improved and, as a result, the Wheaton System has been held by the
Partnership for nine years.
The purpose of the sale of the Wheaton System, from the Partnership's
perspective, is to convert the Partnership's illiquid investment in the
Wheaton System to cash. The sale proceeds will be used to repay all
outstanding indebtedness of the Partnership, pay certain fees and expenses of
the transaction, settle working capital adjustments and deposit funds into an
indemnity escrow account, and then the remaining sale proceeds will be
distributed to the limited partners of the Partnership of record as of the
closing date of the sale of the Wheaton System in accordance with the
distribution procedures established by the Partnership Agreement. The sale of
the Wheaton System is thus the necessary final step in the Partnership's
accomplishment of its investment objectives with respect to the Wheaton
System.
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 amounts equal to 100 percent of their
initial capital contributions plus an amount equal to eight percent per annum,
cumulative and noncompounded, on an amount equal to their initial capital
contributions, and thereafter all such distributions are to be shared 75
percent to the limited partners, 15 percent to the Managing General Partner
and 10 percent to
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the Associate General Partner. The limited partners of the Partnership will
not receive distributions in an amount equal to 100 percent of their initial
capital contributions plus an amount equal to eight percent per annum,
cumulative and noncompounded, on an amount equal to their initial capital
contributions and thus the sharing arrangement between the limited partners
and the General Partners will never be triggered. The limited partners, as a
group, will receive $61,500,000 of the Wheaton System's net sale proceeds.
This distribution will provide the Partnership's limited partners with an
approximate return of $717 for each $1,000 limited partnership interest.
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 Wheaton System is the Partnership's sole asset, the proposed sale
of the Wheaton System to TCI is being submitted for limited partner approval.
PROPOSED SALE OF ASSETS
GENERAL
Pursuant to the terms and conditions of an asset purchase agreement dated as
of August 7, 1998 (the "Asset Purchase Agreement") by and between the
Partnership and TCI, the Partnership has agreed to sell the Wheaton System to
TCI for a sales price of $103,000,000, subject to customary working capital
closing adjustments. TCI is a Delaware corporation headquartered at 5619 DTC
Parkway, Englewood, Colorado 80111. TCI is not an affiliate of the Partnership
or of either of the General Partners. The Partnership has been informed that
TCI intends to finance its acquisition of the Wheaton System through cash on
hand and borrowings.
THE CLOSING
The closing of the sale of the Wheaton System is scheduled to occur during
the first quarter of 1999. Because the closing is conditioned upon, among
other things, the approvals of the limited partners of the Partnership and the
receipt of material third party consents necessary for the transfer of the
Wheaton System to TCI, there can be no assurance that the proposed sale will
occur. See "Proposed Sale of Assets, Conditions to Closing" for a description
of the material consents necessary for the transfer of the Wheaton System to
TCI.
THE WHEATON SYSTEM
The assets to be acquired by TCI consist primarily of the tangible and
intangible assets of the Wheaton System. The Wheaton System was purchased by
the Partnership in October 1989 for an aggregate purchase price of $97,100,000
paid to unaffiliated parties. The Partnership also paid acquisition fees to
affiliates of the General Partners totalling $2,427,500 as compensation to
such affiliates for acting as brokers and financial advisors in connection
with the transaction.
At acquisition in October 1989, the Wheaton System served approximately
33,600 basic subscribers and 40,700 premium units using 700 miles of cable
plant passing approximately 72,000 homes. At acquisition in October 1989, the
Wheaton System's basic penetration rate was 47 percent. The Wheaton System
currently is operated from one headend, with approximately 43 percent of the
system at 400 MHz, approximately 55 percent of the system at 450 MHz and the
remaining 2 percent of the system at 550 MHz. The Wheaton System now has a
total of 1,349 miles of cable plant (with 542 miles underground and 807 miles
aerial) passing approximately 87,000 homes. At closing, the Wheaton System is
expected to serve approximately 56,500 basic equivalent subscribers and have
approximately 35,400 premium units. The Wheaton System's basic penetration
rate at closing is expected to be 64 percent. The Wheaton System had annual
revenues in 1997 of $23,744,000 and annual cash flow of $9,338,000. The
Wheaton System is projected to have annual revenues in 1998 of $25,458,000 and
annual cash flow of $10,182,000. The $103,000,000 sales price therefore
represents 11.0 times 1997 cash flow and 10.1 times the projected 1998 cash
flow, and it also represents a sales price of $1,823 per
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subscriber. The most recent independent appraisal of the Wheaton System's fair
market value, which was completed at the direction of the Managing General
Partner in July 1997, valued the Wheaton System at $87,101,000. The proposed
sales price of $103,000,000 therefore represents a significant premium over
this most recent independent fair market value appraisal.
TCI will purchase all of the tangible assets of the Wheaton System that are
leased or owned by the Partnership and used in the operation of the system,
including the system's real estate, vehicles, headend equipment, underground
and aboveground cable distribution systems, towers, earth satellite receive
stations and furniture and fixtures. TCI also will acquire certain of the
intangible assets of the system, including all of the franchises, leases,
agreements, permits, licenses and other contracts and contract rights
necessary for the operation of the system. Also included in the sale are the
subscriber accounts receivable of the system and all of the system's 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 Wheaton System's 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
Wheaton System is $103,000,000. The Asset Purchase Agreement provides for
closing adjustments that may increase or reduce the sales price by a non-
material amount.
Adjustments on a pro rata basis as of the closing date will be made for all
prepaid expenses (to the extent the full benefit thereof will be realized by
TCI within twelve months after the closing date), accrued expenses (including
real and personal property taxes and the economic value of all accrued
vacation time permitted by TCI's policies to be taken after the closing date
by the employees of the Wheaton System hired by TCI), prepaid income,
subscriber prepayments and accounts receivable related to the Wheaton System,
all as determined in accordance with GAAP consistently applied and to reflect
the principle that all expenses and income attributable to the Wheaton System
for the period prior to the closing date are for the account of the
Partnership and all expenses and income attributable to the Wheaton System for
the period on and after the closing date are for the account of TCI.
The Partnership will receive no credit for any accounts receivable resulting
from (a) cable service sales any portion of which is 60 days or more past due
as of the closing date, (b) subscribers whose accounts are inactive or whose
services are pending disconnection for any reason as of the closing date or
(c) advertising sales any portion of which is 120 days or more past due as of
the closing date. TCI's account will be credited for the amount of all advance
payments to, or funds of third parties on deposit with, the Partnership as of
the closing date, relating to the Wheaton System, including advance payments
and deposits by subscribers served by the Wheaton System for converters,
encoders, decoders, cable television service and related sales, and the
liability therefore will be assumed by TCI.
If the number of basic equivalent subscribers delivered to TCI at closing is
less than 56,500, the sales price will be reduced by an amount equal to $1,823
multiplied by the number by which the number of basic equivalent subscribers
is less than 56,500. The Partnership will not have an obligation to close the
sale if the sales price would be reduced pursuant to this adjustment by an
amount greater than $5,469,000. TCI will not have an obligation to close if
the number of basic equivalent subscribers at closing is less than 53,500.
The Managing General Partner believes that these closing adjustments will
neither increase nor decrease the sales price by a material amount. Please see
the Notes to Unaudited Pro Forma Financial Statements for a detailed
accounting of the Managing General Partner's current best estimate of the
anticipated closing adjustments.
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CONDITIONS TO THE CLOSING
The obligations of both the Partnership and TCI to consummate the closing
are subject to the satisfaction or waiver of the following conditions: (a) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") relating to the transactions contemplated by the
Asset Purchase Agreement shall have expired or been terminated; (b) no action,
suit or proceeding is pending or threatened by or before any governmental
authority and no legal requirement has been enacted, promulgated or issued or
become or deemed applicable to any of the transactions contemplated by the
Asset Purchase Agreement by any governmental authority that would (i) prohibit
TCI's ownership or operation of all or a material portion of the Wheaton
System, its business or its assets, (ii) compel TCI to dispose of or hold
separate all or a material portion of the Wheaton System, its business or its
assets as a result of any of the transactions contemplated by the Asset
Purchase Agreement, (iii) if determined adversely to TCI's interest,
materially impair the ability of TCI to realize the benefits of the
transactions contemplated by the Asset Purchase Agreement or have a material
adverse effect on the right of TCI to exercise full rights of ownership of the
Wheaton System or (iv) prevent or make illegal the consummation of any of the
transactions contemplated by the Asset Purchase Agreement; and (c) the holders
of a majority of the limited partnership interests of the Partnership shall
have voted to approve the Partnership's sale of the Wheaton System to TCI.
The obligation of TCI to consummate the closing is further subject to the
satisfaction or waiver of other customary conditions, including the following
conditions: (a) all of the representations and warranties of the Partnership
in the Asset Purchase Agreement and any related document are, if specifically
qualified by materiality, true and correct in all respects and, if not so
qualified, are true and correct in all material respects, in each case on and
as of the closing date with the same effect as if made at and as of the
closing date, except for changes permitted or contemplated by the Asset
Purchase Agreement; (b) the Partnership has performed in all material respects
all obligations and agreements and complied in all material respects with all
covenants and conditions in the Asset Purchase Agreement and any related
document to be performed or complied with by the Partnership at or before the
closing; (c) the Partnership has delivered to TCI a bill of sale, a special
warranty deed related to the Wheaton System's real estate, an assignment and
assumption of contracts, assignments of leases, a guarantee signed by
Intercable, motor vehicle title certificates and such other transfer
instruments as TCI may deem necessary or advisable to transfer the assets of
the Wheaton System to TCI and to perfect TCI's rights in such assets, a legal
opinion of the Managing General Partner's general counsel, evidence
satisfactory to TCI that all encumbrances affecting any of the Wheaton
System's assets have been terminated and released, title insurance
commitments, the indemnity escrow agreement and such other closing agreements
as TCI may reasonably request in connection with the transactions contemplated
by the Asset Purchase Agreement; (d) the Partnership has delivered to TCI
evidence, in form and substance satisfactory to TCI, that all of the required
consents to the transaction, including without limitation, all consents of
franchising authorities, have been obtained or given (or deemed to have been
given) and are in full force and effect; (e) the environmental reports
prepared by the Partnership and delivered to TCI and any other environmental
audits or assessments conducted with respect to the Wheaton System's assets do
not indicate the existence of any conditions that could reasonably be expected
to give rise to any material risk of liability; (f) there has not been any
material adverse change in the business or the assets of the Wheaton System
since the date of the Asset Purchase Agreement other than any material adverse
change caused by or arising from other multiple channel distribution services
or any material adverse change affecting the United States cable television
industry as a whole, including any change arising from legislation,
litigation, rulemaking, regulation or competition; (g) as of the closing date
the Wheaton System has no fewer than 53,500 basic equivalent subscribers; (h)
cable television franchises covering at least 85 percent of the basic
equivalent subscribers of the Wheaton System have a term expiring no earlier
than March 31, 2001; and (i) the closing of TCI's sale of certain systems in a
separate transaction to permit TCI to accomplish a like-kind exchange under
Section 1031 of the Internal Revenue Code shall have occurred; provided,
however, if this last condition shall not have occurred on or before the day
that is nine months after the date of the Asset Purchase Agreement, this
condition shall no longer be a condition to the obligations of TCI to
consummate the transactions contemplated by the Asset Purchase Agreement. To
the extent that the Partnership must obtain an extension or renewal of any
cable television franchise to meet the condition that cable television
franchises covering at least
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85 percent of the basic equivalent subscribers of the Wheaton System have a
term expiring no earlier than March 31, 2001, any such extension or renewal
shall be on terms and conditions reasonably satisfactory to TCI and the
Partnership evaluated in the context of extensions or renewals of similarly
situated franchises in the greater Chicago metropolitan area that have been
extended or renewed (or granted) for a comparable period of time or duration,
and the Partnership and TCI will allocate the costs associated with obtaining
such extensions or renewals between them.
The obligation of the Partnership to consummate the closing is further
subject to the satisfaction or waiver of other customary conditions, including
the following conditions: (a) all of the representations and warranties of TCI
contained in the Asset Purchase Agreement and any related document are, if
specifically qualified by materiality, true and correct in all respects and,
if not so qualified, are true and correct in all material respects, in each
case on and as of the closing date with the same effect as if made on and as
of the closing date, except for changes permitted or contemplated by the Asset
Purchase Agreement; (b) TCI has performed in all material respects all
obligations and agreements and has complied in all material respects with all
covenants and conditions in the Asset Purchase Agreement and any related
document to be performed or complied with by TCI at or before the closing; (c)
TCI has delivered to the Partnership the purchase price for the Wheaton
System, a bill of sale, an assignment and assumption of contracts, a legal
opinion of TCI's counsel, the indemnity escrow agreement and such other
documents as the Partnership may reasonably request in connection with the
transactions contemplated by the Asset Purchase Agreement; and (d) as of the
closing date, either the Wheaton System shall have no fewer than 53,500 basic
equivalent subscribers or TCI shall agree to limit the sales price reduction
due to a basic equivalent subscriber shortfall to $5,469,000.
GUARANTEE AND COVENANTS TO TCI
In order to induce TCI to enter into the Asset Purchase Agreement,
Intercable will execute and deliver to TCI a guarantee by which Intercable
will guarantee all of the liabilities and obligations of the Partnership to
TCI under the Asset Purchase Agreement. TCI informed Intercable that it would
be unwilling to enter into the Asset Purchase Agreement without having
received Intercable's guarantee. Intercable received no payment from the
Partnership in return for giving this guarantee.
The parties have agreed that none of the Partnership, the General Partners
or Intercable, nor any of their respective affiliates, nor any of their
respective representatives or agents shall, directly or indirectly, solicit or
initiate discussions or negotiations with or provide any information to, any
entity concerning the sale of the Wheaton System so long as the Asset Purchase
Agreement is in effect. The Managing General Partner agreed with TCI that the
Managing General Partner would prepare and, as soon as practicable, and in any
event within 60 days after the date of the Asset Purchase Agreement, file with
the Securities and Exchange Commission a preliminary proxy statement
comprising preliminary proxy materials of the Partnership under the Exchange
Act with respect to the transactions contemplated by the Asset Purchase
Agreement.
In addition, the Partnership has agreed with TCI that the Partnership will
perform certain customary covenants, including the following covenants: (a)
the Partnership has agreed to give TCI and its counsel, accountants and other
representatives full access during normal business hours upon reasonable
notice to all of the premises and books and records of the business and assets
of the Wheaton System and to the Wheaton System's personnel and the
Partnership has agreed to furnish to TCI and its representatives all
documents, financial information and other information regarding the business
and assets of the Wheaton System as TCI may reasonably request; (b) the
Partnership has agreed to conduct the business and operations of the Wheaton
System in the usual, regular and ordinary course consistent with past
practices and in material compliance with the system's 1998 operating and
capital budgets; (c) the Partnership has agreed to maintain the assets of the
Wheaton System in good repair, order and condition and to maintain equipment
and inventory at historical levels consistent with past practices (and will
have at least a 30-day supply of inventory on hand for the Wheaton
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System at closing) and to maintain in full force and effect insurance policies
with respect to the Wheaton System in such amounts and with respect to such
risks as is customarily maintained by operators of cable television systems of
the size and geographic location as the Wheaton System and to continue to
implement its procedures for disconnection and discontinuance of service to
subscribers whose accounts are delinquent in accordance with those procedures
in effect on the date of the Asset Purchase Agreement; (d) the Partnership has
agreed that without the prior approval of TCI, the Partnership will not (i)
change the rates charged for its cable television services or add, delete, re-
tier or repackage any programming services except to the extent required by
law, (ii) make any cost of service elections with respect to the Wheaton
System, (iii) sell, transfer or assign any portion of the assets other than
sales in the ordinary course of business or permit the creation of any
encumbrance on any asset of the system other than an encumbrance that will be
released at or prior to closing, (iv) modify in any material respect,
terminate, suspend or abrogate any governmental permits or any other contract
or agreement with respect to the Wheaton System, (v) enter into any contract
or commitment or incur any indebtedness or other liability or obligation of
any kind relating to the Wheaton System involving an expenditure in excess of
$50,000 under a single contract or commitment, or $100,000 in the aggregate
under all such contracts and commitments, other than contracts or commitments
that are cancelable on 30 days' notice or less without penalty, (vi) take or
omit to take any action that would result in any of its representations or
warranties in the Asset Purchase Agreement or in any related document not
being true and correct when made or as of the closing date, (vii) engage in
any marketing, subscriber installation or collection practices that are
inconsistent with past practices other than marketing and/or installation
practices that are reasonably necessary to match offers being made by any
competitor of the Wheaton System or (viii) enter into any agreement with or
commitment to any competitive access providers with respect to the Wheaton
System; (e) the Partnership has agreed with TCI that it will duly and timely
file a valid notice of renewal with the appropriate governmental authorities
with respect to all cable television franchises of the Wheaton System that
will expire within 36 months after any date between the date of the Asset
Purchase Agreement and the closing date; (f) the Partnership has agreed to pay
the remaining balances on any leases for vehicles or capital leases on
equipment to be included in the equipment to be delivered at closing and the
Partnership has agreed to deliver title to such vehicles and equipment free
and clear of all encumbrances to TCI at the closing; (g) the Partnership has
agreed that it will use commercially reasonable efforts to obtain in writing
as promptly as possible and at its expense, all consents, authorizations and
approvals required to be obtained by the Partnership in connection with the
sale of the Wheaton System to TCI, in form and substance reasonably
satisfactory to TCI, and the Partnership has agreed to deliver to TCI copies
of such consents, authorizations and approvals promptly after they are
obtained by the Partnership; (h) the Partnership has agreed to work with TCI
to deliver, no later than 30 days after the date of the Asset Purchase
Agreement, to the appropriate governmental authority requests for the
necessary consents to transfer the Wheaton System's governmental permits to
operate the cable television system; (i) the Partnership has agreed that it
will use commercially reasonable efforts and TCI has agreed that it will
cooperate with and assist the Partnership in all reasonable respects
(including attendance at meetings and hearings before local franchising
authorities) to have cable television franchises covering at least 85 percent
of the basic equivalent subscribers of the Wheaton System extended or renewed
so that they expire no earlier than March 31, 2001, on terms and conditions
reasonably satisfactory to TCI and the Partnership, which terms and conditions
shall be evaluated by TCI and the Partnership in the context of extensions and
renewals of similarly situated franchises in the greater Chicago metropolitan
area that have been extended or renewed (or granted) for a comparable period
of time or duration and the Partnership has agreed to bear all costs required
to remedy any item of noncompliance with the terms of any franchise or to meet
current obligations under the terms of any franchise in connection with
obtaining such extension or renewal and TCI has agreed to bear all costs
associated with commitments made for capital expenditures to be made after the
closing date related to obtaining an extension or renewal; (j) the Partnership
has agreed that, within 60 days after the date of the Asset Purchase
Agreement, it will, at its expense, obtain and deliver to TCI for each parcel
of real property owned by the Partnership, an environmental site assessment
report prepared by a nationally known environmental engineering firm
reasonably satisfactory to TCI; and (k) the Partnership and TCI have agreed
that they will cooperate with each other in order that the transactions
contemplated by the Asset Purchase Agreement may be accomplished as part of a
deferred exchange pursuant to Section 1031 of the Internal Revenue Code and
applicable Treasury Regulations.
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INDEMNITY ESCROW
From the closing date until November 15, 1999, $3,118,500 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify TCI under the Asset Purchase Agreement. Pursuant to the terms of the
Asset Purchase Agreement, the Partnership has agreed to indemnify and hold TCI
harmless from all losses resulting from or arising out of (i) any breach of
any representation or warranty made by the Partnership in the Asset Purchase
Agreement or in the related documents delivered by the Partnership to TCI in
connection with the closing of the sale of the Wheaton System, (ii) any breach
of any covenant, agreement or obligation of the Partnership contained in the
Asset Purchase Agreement or in any of the related documents delivered by the
Partnership to TCI in connection with the closing of the sale of the Wheaton
System, (iii) any act or omission of the Partnership with respect to, or any
event or circumstance related to, the ownership or operation of the Wheaton
System or the conduct of its business, which act, omission, event or
circumstance occurred or existed prior to or at the closing date, without
regard to whether a claim with respect to such matter is asserted before or
after the closing date, (iv) any liability or obligation relating to the
Wheaton System not specifically assumed by TCI, (v) any title defect that the
Partnership fails to eliminate as an exception from the title insurance
commitment required to be provided to TCI at closing, (vi) any claim that the
transactions contemplated by the Asset Purchase Agreement violate the Workers
Adjustment Retraining and Notification Act or any similar state or local law
or any bulk transfer or fraudulent conveyance laws of any jurisdiction, (vii)
the presence, generation, removal or transportation of a hazardous substance
on or from any of the real property relating to the Wheaton System, including
the costs of removal or cleanup of such hazardous substance and other
compliance with the provisions of any environmental laws (whether before or
after closing) or (viii) any rate refund ordered to be made by the Wheaton
System by any governmental authority for periods prior to the closing date. In
addition, the Partnership has agreed to indemnify TCI from and against all
claims, actions, suits, proceedings, demands, judgments, assessments, fines,
interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts and other fees, costs and expenses)
incident or relating to or resulting from any of the foregoing matters.
The Partnership's primary exposure, if any, will arise from the
representations and warranties made about the Wheaton System in the Asset
Purchase Agreement. The Partnership will not be liable for any claim for a
breach of a representation or warranty unless and until the aggregate amount
of all claims is at least $250,000. TCI will have the right to make claims
against the indemnity escrow account and TCI must notify the Partnership of
such claims. If the Partnership objects to the payment of any claims by the
escrow agent, and if TCI 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.
Any amounts remaining from this indemnity escrow account at the end of the
escrow period and not subject to a claim by TCI will be returned to the
Partnership and distributed to the limited partners of the Partnership. If the
entire $3,118,500 escrow amount ultimately is distributed to limited partners,
of which there can be no assurance, the limited partners would receive $36 for
each $1,000 limited partnership interest 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.
REASONS FOR THE TIMING OF THE SALE
The Managing General Partner, through The Jones Group, Ltd., an affiliate of
the Managing General Partner, first marketed the Wheaton System for sale in
1996. The Jones Group, Ltd. prepared information books on the Wheaton System
in June 1996 and delivered them to six unaffiliated cable television system
operators that the Managing General Partner and The Jones Group, Ltd. deemed
to be the most likely potential buyers of the Wheaton System. One of the
prospective purchasers was TCI. The Jones Group, Ltd. communicated to each of
the recipients of the information books that due diligence visits could be
scheduled in August or September 1996 and that bids for the Wheaton System
would be accepted and were due by October 15, 1996. Of the
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prospective purchasers, only TCI made a due diligence visit to the Wheaton
System, which visit occurred in August 1996. The October 15, 1996 deadline
passed, however, without a bid from any of the parties, including TCI.
During 1996, Ameritech, the regional telephone service provider in Illinois
and neighboring states, began construction of cable television systems in
certain communities in the vicinity of the Wheaton System, including in the
Glen Ellyn franchise area served by the Wheaton System. The threat of
competition from Ameritech in the communities served by the Wheaton System was
a major factor in the lack of interest in the Wheaton System by other cable
television system operators. During the remainder of 1996 and throughout 1997,
The Jones Group, Ltd. continued to attempt to stimulate potential buyers'
interest in the Wheaton System. During most of this period, however, the cable
television industry was facing developing competition from direct broadcast
satellite providers, and Wall Street investors generally were bearish on the
industry. The continuing threat of competition from Ameritech made the market
for cable television properties in the Chicago metropolitan area very soft.
Throughout this period, Ameritech continued to acquire cable franchises in
suburban Chicago communities and it began constructing 750 MHz cable systems
in certain of those communities.
In November 1997, The Jones Group, Ltd. began a second serious dialogue with
TCI about the Wheaton System. Through the end of 1997 and the first quarter of
1998, The Jones Group, Ltd. provided TCI with additional information about the
Wheaton System, including information specifically requested by TCI to enable
it to evaluate the Wheaton System. By that time, TCI had agreed in principle
to acquire the other major cable television systems in the Chicago area that
it did not already own, making the Chicago area a more attractive potential
acquisition market for TCI and diminishing the onus of the potential Ameritech
competition. In February 1998, The Jones Group, Ltd. provided information
about the Wheaton System to three other potential purchasers of the system.
While these three companies indicated an interest in an investment in the
suburban Chicago cable system market, they expressed serious reservations
about acquiring the Wheaton System due to the potential Ameritech competition.
One of these three potential purchasers made a verbal offer to Intercable to
purchase all of the Chicago-area systems operated by Intercable for
$400,000,000. Because this bidder did not make an offer for such Chicago-area
systems individually, the Managing General Partner does not know what this
potential purchaser would have offered for the Wheaton System itself. Because
this offer was significantly lower than the cumulative offer being negotiated
with TCI for all of the Chicago-area systems operated by Intercable, The Jones
Group, Ltd. did not pursue it.
TCI made its initial formal bid for all of the Chicago-area systems managed
by Intercable on March 3, 1998. TCI offered to purchase the Wheaton System for
$100,000,000 conditioned upon the Wheaton System having 55,000 basic
equivalent subscribers at closing. This offer equated to a sales price of
$1,818 per subscriber and represented 10.7 times 1997 cash flow and 9.8 times
1998 budgeted cash flow. The Jones Group, Ltd. presented this offer to the
Managing General Partner on March 11, 1998. While the Managing General Partner
concluded that this offer was not unreasonable, it instructed The Jones Group,
Ltd. to attempt to negotiate a better price for the Wheaton System. After a
series of further negotiations, TCI made a revised offer for the Wheaton
System on April 8, 1998, increasing its bid to $103,000,000 conditioned on the
Wheaton System having 56,500 basic equivalent subscribers at closing. The
revised offer for the Wheaton System represented a sales price of $1,823 per
subscriber and represented 11.0 times 1997 cash flow and 10.1 times 1998
budgeted cash flow. The Managing General Partner deemed this revised offer
sufficient and fair, particularly in light of the fact that the most recent
independent fair market value appraisal of the Wheaton System undertaken in
July 1997 valued the Wheaton System at only $87,101,000. The Managing General
Partner accepted the revised offer on the Partnership's behalf on April 10,
1998.
The Partnership has a finite legal existence of 17 years, over nine of which
have passed. It was not intended or expected, however, that the Partnership
would hold its cable systems for as long as 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
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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.
When investing in the Partnership, by virtue of the provisions of the
Partnership Agreement, the limited partners vested in the Managing General
Partner the right and the responsibility to determine when the Partnership's
investment objectives had been achieved. The Wheaton System was acquired by
the Partnership because, in the opinion of the General Partners at the time of
the Wheaton System's acquisition, it had the potential for capital
appreciation within a reasonable period of time. Due to the developing threat
of competition from Ameritech in the suburban Chicago area, the rate re-
regulation of the cable television industry during the early 1990s and the
general decline in the values of cable television systems since the Wheaton
System was acquired in October 1989, the Wheaton System has not significantly
appreciated in value during the holding period. The Managing General Partner
determined nevertheless that now rather than later was the appropriate time
for the Partnership to sell the Wheaton System. The Managing General Partner
used no specific benchmarks or measurement tools in determining that now was
the time for the Partnership to sell the Wheaton System. The Managing General
Partner conducted a subjective evaluation of a variety of factors including
the length of the holding period and the prospects for future growth as
compared to the potential risks of a decline in the size and/or value of the
system.
The Managing General Partner generally considered the benefits to the
limited partners that might be derived by holding the Wheaton System for an
additional period of time. On the one hand, the Managing General Partner
assumed that the Wheaton System probably would continue to appreciate in value
and that as a result the Wheaton System might be able to be sold for a greater
sales price in the future. The Managing General Partner weighed these
assumptions against the potential risks to investors from a longer holding
period, i.e., the risk that regulatory, technology and/or competitive
developments could cause the Wheaton System to decline in value, which would
result in a lesser sales price in the future, and the risk that, if the offer
from TCI were not accepted, no other potential buyer of the Wheaton System
could be found or no other offer would be at such a fair price. A longer
holding period would expose investors to the risk that competition from direct
broadcast satellite companies, telephone companies, especially Ameritech,
and/or neighboring cable companies could diminish the number of subscribers to
the Wheaton System's basic and premium services, thereby decreasing the value
of the Wheaton System. A longer holding period also 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 Wheaton System.
Weighing all of these factors, the Managing General Partner concluded that now
rather than later was the time to sell the Wheaton System.
RECOMMENDATION OF THE MANAGING GENERAL PARTNER AND FAIRNESS OF THE PROPOSED
SALE OF ASSETS
The Managing General Partner believes that the proposed sale of the Wheaton
System and the distribution of the net proceeds therefrom are fair to all
partners of the Partnership, and it recommends that the limited partners
approve the transaction. In determining the fairness of the proposed
transaction, the Managing General Partner considered each of the following
factors, all of which had a positive effect on its 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 Wheaton System will provide limited partners with liquidity and with
the means to realize the appreciation in the value of the Wheaton System;
(ii) The sales price represents the fair market value of the Wheaton
System because the sales price was determined in an arm's-length
negotiation between the Managing General Partner, representing the
Partnership, and TCI;
(iii) The Partnership has held the Wheaton System for nine years, a
holding period beyond that originally anticipated;
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(iv) The conditions and prospects of the cable television industry in
which the Partnership is engaged, including the developing threat of
competition from DBS services and telephone companies, especially
Ameritech, and the working capital and other financial needs of the
Partnership if it were to continue to operate and upgrade the Wheaton
System, portions of which may need to be rebuilt as a condition to the
renewal of certain of the system's cable franchises; and
(v) The terms and conditions of the Asset Purchase Agreement by and
between the Partnership and TCI, including the fact that the sales price
will be paid in cash and the fact that TCI's obligation to close is not
contingent upon its ability to obtain financing.
The Managing General Partner negotiated the terms of the Asset Purchase
Agreement and the sales price and, based on its general knowledge of cable
television system transactions undertaken by cable television companies, the
Managing General Partner has concluded that the sales price and other
transaction terms were fair and were within industry norms for comparable
transactions.
CONSENT OF THE ASSOCIATE GENERAL PARTNER
Pursuant to Section 2.3(c)(ii) of the Partnership Agreement, the Partnership
could not proceed with the sale of the Wheaton System unless the Associate
General Partner consents to the transaction. After an independent review of
all of the terms and conditions of the proposed sale of the Wheaton System to
TCI, the Associate General Partner consented to the transaction in October
1998.
CERTAIN EFFECTS OF THE SALE
Upon the consummation of the proposed sale of the Wheaton System, the
proceeds of the sale will be used to repay all third party indebtedness of the
Partnership, which totaled $36,243,870 at June 30, 1998, repay advances from
the Managing General Partner, which totaled $2,083,098 at June 30, 1998,
settle working capital adjustments and deposit $3,118,500 into an indemnity
escrow account, and then the Partnership will distribute the remaining
$61,500,000 to its limited partners of record as of the closing date of the
sale of the Wheaton System. Because the distribution to be made to the limited
partners on the sale of the Wheaton System will not exceed 100 percent of the
amounts originally contributed to the Partnership by the limited partners plus
an amount equal to eight percent per annum, cumulative and noncompounded, on
an amount equal to their initial capital contributions, the General Partners
will not receive general partner distributions on the sale of the Wheaton
System. As a result of this distribution, the limited partners of the
Partnership will receive $61,500,000 of the net proceeds from the sale of the
Wheaton System. The limited partners will be subject to federal income tax on
the income resulting from the sale of the Wheaton System. See the detailed
information below under the caption "Federal Income Tax Consequences."
After the sale of the Wheaton System and the distribution of the net
proceeds therefrom and after the termination of the indemnity escrow period on
November 15, 1999, the Partnership will be liquidated and dissolved, most
likely in 1999. Neither Colorado law nor the Partnership Agreement afford
dissenters' or appraisal rights to limited partners in connection with the
proposed sale of the Wheaton System. If the proposed transaction is approved
by the holders of a majority of limited partnership interests, all limited
partners will receive a distribution in accordance with the 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 Managing General Partner's current management team will
continue to manage the Wheaton System on behalf of the Partnership until such
time as the Wheaton System can be sold.
All distributions to the limited partners of the Partnership from the
proceeds of the sale of the Wheaton System will be made to the Partnership's
limited partners of record as of the closing date of the sale of the Wheaton
System. This includes the distribution of the net sale proceeds to be made
shortly following the closing of the sale and the distribution of the amounts
remaining, if any, from the indemnity escrow account to be made late in 1999.
Because transferees of limited partnership interests following the closing
date of the sale of the Wheaton System would not be entitled to any
distributions from the Partnership, a transfer of limited partnership
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interests following the closing date of the sale of the Wheaton System would
have no economic value. The Managing General Partner therefore has determined
that, pursuant to the authority granted to it by Section 3.5 of the
Partnership Agreement, it will not approve any transfers of limited
partnership interests following the closing of the sale of the Wheaton System.
Sales of limited partnership interests pursuant to limited tender offers, in
the secondary market or otherwise will not be possible following the closing
of the sale of the Wheaton System.
FEDERAL INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transaction is to inform the limited partners of the Partnership
of the federal income tax consequences to the Partnership and to its partners
arising from the sale of the Wheaton System. The tax information included
herein was prepared by the tax department of the Managing General Partner. The
tax information is taken from tax data compiled by the Managing General
Partner in its role as the Partnership'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.
PROJECTED 1999 TAX RESULTS
By the expected date of the Wheaton System's sale, the limited partners will
have been allocated ordinary taxable losses of approximately $95,257,000
($1,111 per $1,000 invested). Except for 1989 and 1990, when a 20 percent and
a 10 percent deduction of current allocated losses were allowed, respectively,
application of the passive activity loss rules has fully limited the deduction
of Partnership losses except against passive income from other investments.
Assuming that limited partners have not utilized their previously limited
Partnership passive losses, the Managing General Partner estimates that
passive loss carryforwards of $93,007,936 ($1,085 per $1,000 invested) will be
available to fully offset the current year allocated income from the sale of
the Wheaton System.
The sale of the Wheaton System will result in a gain for federal income tax
purposes. The amount of this gain allocated to limited partners is
approximately $81,921,790 ($955 per $1,000 invested). The Managing General
Partner estimates that all of this gain will be treated as ordinary income.
This ordinary income characterization results from the recapture of
depreciation on personal property under Internal Revenue Code ("IRC") Section
1245. The Managing General Partner does not estimate that any of the gain will
be treated as long term capital gain under IRC Section 1231.
The taxable income will be reported in the year of the closing of the
Wheaton System's sale, which is expected to be 1999. The Managing General
Partner estimates that the reported gain should be completely offset by the
deduction of passive loss carryforwards of the limited partners resulting in
no federal taxable income. If prior year passive losses were deducted by
limited partners, their tax results will vary accordingly.
FEDERAL TAX WITHHOLDING ON FOREIGN LIMITED PARTNERS
Limited partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a withholding tax on their share of the
Partnership's income from the sale of the Wheaton System without consideration
of loss carryforwards. 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 person will receive a
credit on their U.S. tax return for the amount of the tax withheld by the
Partnership. The tax withheld will be treated as a distribution to the limited
partner.
SECONDARY MARKET PURCHASERS
Limited partners that have recently acquired their partnership interests in
the limited partnership secondary market or through tender offers will have
allocable income from the Wheaton System sale in the amounts
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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.
Newer investors in the Partnership 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 deductible as a long term capital loss under IRC Section 731 in
a manner similar to the Partnership syndication costs discussed below.
FEDERAL REPORTING BY TAX EXEMPT ENTITIES
The 1999 Wheaton System sale will generate Unrelated Business Taxable Income
(UBTI) to tax exempt entities, which will require the filing of Form 990-T.
Although many trust administrators complete the required tax returns,
responsibility for completion of the Form 990-T ultimately rests with the
beneficiaries of trusts, IRAs and other tax exempt entities. Because this is
an area in which there is a variance of policy among trust administrators,
each limited partner who is a beneficiary is advised to confirm with his or
her trust administrator how this filing requirement will be fulfilled.
The Managing General Partner has learned that some trust administrators will
file a Form 990-T without consideration of prior year loss carryforwards. If
your plan administrator employs this methodology, your tax exempt plan will be
subject to significant tax liabilities that would not be incurred if prior
year losses were reported. Each limited partner who is a beneficiary of a tax
exempt entity is advised to inquire about the reporting methodology employed
by his or her trust administrator if the trust administrator is filing the
Form 990-T for 1999.
PROJECTED TAX CONSEQUENCES
As previously reported, a portion of the proceeds from the sale of the
Wheaton System will remain in an indemnity escrow account from the closing
date until November 15, 1999. At that time, the escrow account will be
distributed to the limited partners in liquidation of the Partnership. The
final capital account balance reported on the 1999 Schedule K-1 of each
limited partner is anticipated to reflect a positive amount approximating
$11,101,200 ($129 per $1,000 invested). This balance represents partnership
syndication costs that may be deducted on the limited partners' tax return as
a long term capital loss under IRC Section 731. The deduction of long term
capital losses may be limited depending on each partners' specific income tax
situation.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP, THE GENERAL
PARTNERS AND THE PURCHASER OF THE WHEATON SYSTEM
The principal executive offices of the Partnership and the Managing 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 the Associate General Partner are located at 3 World Financial Center, 29th
Floor, New York, New York 10285, and its telephone number is (212) 526-7000.
The principal executive offices of TCI are located at 5619 DTC Parkway,
Englewood, Colorado 80111.
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 Securities and Exchange Commission
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 Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the following regional offices
of the Commission: 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 on the Internet
that contains reports, proxy statements and other
14
<PAGE>
information of registrants (including the Partnership) that file
electronically with the SEC at http://www.sec.gov. After the net proceeds from
the sale of the Wheaton System, including amounts to be held in an indemnity
escrow account until November 15, 1999, finally are distributed to the
Partnership's limited partners of record as of the closing date of the sale of
the Wheaton System, the Partnership will be liquidated and dissolved. The
Partnership's registration and reporting requirements under the Exchange Act
will be terminated upon the dissolution of the Partnership, most likely before
the end of 1999.
USE OF PROCEEDS FROM THE WHEATON SYSTEM'S SALE
The following is a brief summary of the Partnership's estimated use of the
proceeds from the sale of the Wheaton System. All of the following selected
financial information is based upon amounts as of June 30, 1998 and certain
estimates of liabilities at closing. Final results may differ from these
estimates. A more detailed discussion of the financial consequences of the
sale of the system is set forth below under the caption "Unaudited Pro Forma
Financial Information." All limited partners are encouraged to review
carefully the unaudited pro forma financial statements and notes thereto.
If the holders of a majority of limited partnership interests of the
Partnership approve the proposed sale of the Wheaton System and the
transaction is closed, the Partnership will pay all of its indebtedness, pay
certain fees and expenses of the transaction, settle working capital
adjustments, deposit funds into an indemnity escrow account and then the
Partnership will distribute the net sale proceeds to its limited partners of
record as of the closing date 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 Wheaton System...................... $103,000,000
Add:Cash on Hand................................................ 65,943
Less:Estimated Net Closing Adjustments.......................... (120,475)
Repayment of Debt............................................ (38,326,968)
Indemnity Escrow............................................. (3,118,500)
------------
Cash Available for Distribution by the Partnership......... $ 61,500,000
============
</TABLE>
Based on financial information available at June 30, 1998, the following
table presents the estimated results of the Partnership when it has completed
the sale of the Wheaton System:
<TABLE>
<S> <C>
Dollar Amount Raised........................................ $ 85,740,000
Number of Cable Television Systems Purchased................ One
Date of Closing of Offering................................. February 1990
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations....................................... $ (1,109)
--from recapture........................................ $ 955
Capital Gain (Loss)..................................... $ (129)
Cash Distributions to Investors
Source (on GAAP basis)
--investment income..................................... $ 0
--return of capital..................................... $ 717
Source (on cash basis)
--sales................................................. $ 717
</TABLE>
15
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF JONES GROWTH PARTNERS L.P.
The following unaudited pro forma balance sheet assumes that as of June 30,
1998, the Partnership had sold the Wheaton System for $103,000,000. The funds
available to the Partnership, adjusting for the estimated net closing
adjustments of the Wheaton System, are expected to total approximately
$102,879,525. Such funds will be used to repay all indebtedness of the
Partnership, pay certain fees and expenses of the transaction, settle working
capital adjustments and deposit funds into an indemnity escrow account, and
then the Partnership will distribute the remaining $61,500,000 to its limited
partners of record as of the closing date of the sale of the Wheaton System.
Because the distribution to be made to the limited partners on the sale of the
Wheaton System will not exceed 100 percent of the amounts originally
contributed to the Partnership by the limited partners plus an amount equal to
eight percent per annum, cumulative and noncompounded, on an amount equal to
their initial capital contributions, the General Partners will not receive
general partner distributions on the sale of the Wheaton System.
The unaudited pro forma balance sheet should be read in conjunction with the
appropriate notes to the unaudited pro forma balance sheet.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL INFORMATION IS BASED UPON
AMOUNTS AS OF JUNE 30, 1998 AND CERTAIN ESTIMATES OF LIABILITIES AT CLOSING.
FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
16
<PAGE>
JONES GROWTH PARTNERS L.P.
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents............... $ 65,943 $ 64,552,557 $64,618,500
Trade Receivables, net.................. 503,980 (503,980) --
Investment in Cable Television
Properties:
Property, plant and equipment, net.... 25,378,288 (25,378,288) --
Franchise costs and other intangibles,
net.................................. 9,985,828 (9,985,828) --
----------- ------------ -----------
Total investment in cable television
properties......................... 35,364,116 (35,364,116) --
Deposits, Prepaid Expenses and Deferred
Charges................................ 1,102,026 (1,102,026) --
----------- ------------ -----------
Total Assets............................ $37,036,065 $ 27,582,435 $64,618,500
=========== ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt.................................. $36,243,870 $(36,243,870) $ --
Trade accounts payable and accrued
liabilities.......................... 3,745,102 (3,745,102) --
Subscriber prepayments................ 68,765 (68,765) --
Accrued distribution to limited
partners............................. -- 61,500,000 61,500,000
----------- ------------ -----------
Total Liabilities................... 40,057,737 21,442,263 61,500,000
----------- ------------ -----------
Partners' Capital:
General Partners...................... (775,613) 775,613 --
Limited Partners...................... (2,246,059) 5,364,559 3,118,500
----------- ------------ -----------
Total Partners' Capital............. (3,021,672) 6,140,172 3,118,500
----------- ------------ -----------
Total Liabilities and Partners'
Capital ............................. $37,036,065 $ 27,582,435 $64,618,500
=========== ============ ===========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited balance sheet.
17
<PAGE>
JONES GROWTH PARTNERS L.P.
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.................................. $23,744,294 $(23,744,294) $ --
COSTS AND EXPENSES:
Operating expenses...................... 14,414,215 (14,414,215) --
Management and supervisory fees to the
General Partners and allocated overhead
from the Managing General Partner...... 2,736,695 (2,736,695) --
Depreciation and amortization........... 11,166,245 (11,166,245) --
----------- ------------ -----
OPERATING LOSS............................ (4,572,861) 4,572,861 --
----------- ------------ -----
OTHER INCOME (EXPENSE):
Interest expense........................ (2,542,388) 2,542,388 --
Other, net.............................. 19,996 (19,996) --
----------- ------------ -----
Total other income (expense), net..... (2,522,392) 2,522,392 --
----------- ------------ -----
NET LOSS.................................. $(7,095,253) $ 7,095,253 $ --
=========== ============ =====
NET LOSS PER LIMITED PARTNERSHIP
INTEREST ................................ $ (81.92) $ --
=========== =====
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
18
<PAGE>
JONES GROWTH PARTNERS L.P.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ ---------
<S> <C> <C> <C>
REVENUES.................................. $12,271,868 $(12,271,868) $ --
COSTS AND EXPENSES:
Operating expenses...................... 7,437,401 (7,437,401) --
Management and supervisory fees to the
General Partners and allocated overhead
from the Managing General Partner...... 1,433,641 (1,433,641) --
Depreciation and amortization........... 3,378,030 (3,378,030) --
----------- ------------ -----
OPERATING INCOME.......................... 22,796 (22,796) --
----------- ------------ -----
OTHER INCOME (EXPENSE):
Interest expense........................ (1,285,230) 1,285,230 --
Other, net.............................. 3,297 (3,297) --
----------- ------------ -----
Total other income (expense), net..... (1,281,933) 1,281,933 --
----------- ------------ -----
NET LOSS.................................. (1,259,137) 1,259,137 $ --
=========== ============ =====
NET LOSS PER LIMITED PARTNERSHIP
INTEREST................................. $ (14.54) $ --
=========== =====
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
19
<PAGE>
JONES GROWTH PARTNERS L.P.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1) The unaudited pro forma balance sheet of the Partnership assumes that the
Partnership had sold the Wheaton System for $103,000,000 as of June 30, 1998.
The unaudited pro forma statements of operations of the Partnership assume
that the Partnership had sold the Wheaton System for $103,000,000 as of
January 1, 1997.
2) The limited partners' distribution of $61,500,000 represents $717 for
each $1,000 limited partnership interest.
3) The estimated gain recognized from the sale of the Wheaton System and
corresponding estimated distribution to limited partners as of June 30, 1998
has been computed as follows:
GAIN ON SALE OF ASSETS:
<TABLE>
<S> <C>
Contract sales price.............................................. $103,000,000
Less: Net book value of investment in cable television properties
at June 30, 1998............................................ (35,364,116)
------------
Gain on sale of assets............................................ $ 67,635,884
============
DISTRIBUTION TO PARTNERS:
Contract sales price.............................................. $103,000,000
Working Capital Adjustment:
Add: Trade receivables, net...................................... 503,980
Prepaid expenses............................................ 1,102,026
Less: Accrued liabilities......................................... (1,657,716)
Subscriber prepayments...................................... (68,765)
------------
Adjusted cash received............................................ 102,879,525
Less: Outstanding debt to third parties........................... (36,243,870)
Outstanding advances from the Managing General Partner...... (2,083,098)
Add: Cash on hand................................................ 65,943
------------
Cash available from sale proceeds........................... 64,618,500
Portion of sale proceeds to be held in indemnity escrow..... (3,118,500)
------------
Cash available for distribution by the Partnership.......... $ 61,500,000
============
</TABLE>
20
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1998 and June 30, 1998 are 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 for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1998 and June 30, 1998 are incorporated by
reference in their entirety in this Proxy Statement.
21
<PAGE>
[JONES INTERCABLE, INC. LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE MANAGING GENERAL
PARTNER
The undersigned Limited Partner of Jones Growth Partners L.P., a Colorado
limited partnership, hereby votes on the sale of the Partnership's Wheaton,
Illinois cable television system to TCI Communications, Inc. or one of its
affiliates for a sales price of $103,000,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of August 7, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
<PAGE>
---------------------------------------
---------------------------------------
LOGO
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
PLEASE SIGN EXACTLY AS NAME
APPEARS.
DATED: _____________________, 1998
__________________________________
Beneficial Owner Signature
(Investor)
__________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
[JONES INTERCABLE, INC. LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE MANAGING GENERAL
PARTNER
The undersigned Limited Partner of Jones Growth Partners L.P., a Colorado
limited partnership, hereby votes on the sale of the Partnership's Wheaton,
Illinois cable television system to TCI Communications, Inc. or one of its
affiliates for a sales price of $103,000,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of August 7, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
<PAGE>
---------------------------------------
---------------------------------------
LOGO
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
All owners must sign exactly as
name(s) appear on label.
When limited partnership inter-
ests are held by more than one
person, all owners must sign.
When signing as attorney, as ex-
ecutor, administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporation name by
authorized officer. If a partner-
ship, 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.
