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
CABLE TV FUND 12-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.
[_] 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: 104,000
(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 $86,000,000
sales price that is to be paid to Cable TV Fund 12-A, Ltd. in connection
with the transaction that is the subject of the proxy solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$86,000,000
(5) Total fee paid: $17,200
[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:
[JONES INTERCABLE, INC. LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS OF CABLE TV FUND 12-A, LTD.
To the Limited Partners of Cable TV Fund 12-A, Ltd.:
A special vote of the limited partners of Cable TV Fund 12-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 TCI
Communications, Inc. or one of its affiliates, of the cable television system
serving the villages of Orland Park, Grayslake, Libertyville, Mundelein,
Wauconda and Park Forest and certain unincorporated areas of the counties of
Lake, Will and Cook, all in the State of Illinois (the "Systems") owned by the
Partnership for $86,000,000 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 Systems and if the
transaction is closed, the Partnership will repay all of its indebtedness
(including $20,925,000 borrowed under its term loan and capital lease
obligations of $76,821), pay a brokerage fee totaling $2,150,000 (representing
2.5 percent of the sales price) to The Jones Group, Ltd., a subsidiary of
Jones Intercable, Inc., for acting as a broker in this transaction, settle
working capital adjustments, deposit $2,604,000 into an indemnity escrow
account and then distribute the approximate $63,282,500 of net sale proceeds
to the partners of record as of the closing date of the sale of the Systems.
Because the distribution made in August 1998 to the limited partners on the
July 1998 sale of the Partnership's Fort Myers, Florida cable system returned
to limited partners more than 100 percent of the amounts originally
contributed to the Partnership by the limited partners, the net proceeds from
the sale of the Systems will be allocated 75 percent to the limited partners
($47,461,875) and 25 percent to the General Partner ($15,820,625). The
$47,461,875 distribution to the limited partners will give the limited
partners a return of $456 for each $500 limited partnership interest, or $912
for each $1,000 invested in the Partnership. Distribution checks will be
issued to limited partners' account registration or payment instruction of
record.
On July 15, 1998, the Partnership sold its Fort Myers, Florida cable system
to an unaffiliated cable television system operator for a sales price of
$110,000,000, subject to customary closing adjustments. From the proceeds of
the sale of the Fort Myers, Florida system, the Partnership paid a brokerage
fee totaling $2,750,000 (representing 2.5 percent of the sales price) to The
Jones Group, Ltd. for acting as a broker in the transaction, settled working
capital adjustments and distributed, in August 1998, the remaining net sale
proceeds of $106,854,400 to its partners of record as of July 15, 1998.
Pursuant to the terms of the Partnership's limited partnership agreement (the
"Partnership Agreement"), from the net sale proceeds the Partnership returned
to the
limited partners the capital they initially contributed to the Partnership
($52,000,000), and the remainder was allocated 75 percent to the limited
partners ($41,140,800) and 25 percent to the General Partner ($13,713,600).
The $93,140,800 distribution to limited partners from the net proceeds of the
sale of the Fort Myers, Florida cable system represented $895 for each $500
limited partnership interest, or $1,790 for each $1,000 invested in the
Partnership.
Taking into account the distribution to limited partners from the sale of
the Fort Myers, Florida system and the anticipated distribution to limited
partners from the sale of the Systems (excluding escrowed proceeds), Jones
Intercable, Inc. expects that the Partnership's limited partners will have
received a total return of $1,351 for each $500 limited partnership interest,
or $2,702 for each $1,000 invested in the Partnership, at the time the
Partnership is liquidated and dissolved.
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. After the closing of the sale of the Systems and the
distribution of the net sale proceeds therefrom, including the amounts, if
any, remaining after November 15, 1999 in the 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 August 31, 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
partners of the net proceeds of the sale of the Systems are dependent upon the
approval of the transaction by the holders of a majority of the Partnership's
limited partnership interests.
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 Agreement requires that the
proposal to sell the Systems 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
general partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Systems. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the 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 as promptly as possible. The proxy should
be returned in the enclosed envelope.
JONES INTERCABLE, INC.
General Partner
/s/ELIZABETH M. STEELE
Elizabeth M. Steele
Secretary
Dated: September 15, 1998
[JONES INTERCABLE, INC. LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS
OF CABLE TV FUND 12-A, LTD.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Cable TV Fund 12-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 cable
television system serving the villages of Orland Park, Grayslake,
Libertyville, Mundelein, Wauconda and Park Forest and certain unincorporated
areas of the counties of Lake, Will and Cook, all in the State of Illinois
(the "Systems") owned by the Partnership for $86,000,000 in cash, subject to
normal working capital closing adjustments, to TCI Communications, Inc. or one
of its affiliates ("TCI"). TCI is not an affiliate of the Partnership or of
the General Partner.
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 October 30, 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 October 30, 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 August 31, 1998, the Partnership had 104,000 limited partnership
interests outstanding, held by approximately 6,775 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, Smithtown Bay, LLC and Madison Partnership Liquidity Investors XIII,
LLC, two firms unaffiliated with the Partnership, the General Partner and each
other, have conducted tender offers for interests in the Partnership. As of
August 31, 1998, Smithtown Bay, LLC and its affiliates owned 5,013 limited
partnership interests, or 4.8 percent of the limited partnership interests. As
of such date, Madison Partnership Liquidity Investors XIII, LLC and its
affiliates owned 5,095 limited partnership interests, or 4.9 percent of the
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 limited partners who vote on the sale of the Systems.
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 General Partner owns 50 limited partnership interests. The
limited partnership interests owned by the General Partner will be voted in
favor of the sale of the Systems to TCI. The officers and directors of the
General Partner do not own any limited partnership interests. Only limited
partners of record at the close of business on August 31, 1998 will be
entitled to notice of, and to participate in, the vote.
Upon the consummation of the proposed sale of the Systems, the Partnership
will repay all of its indebtedness (including $20,925,000 borrowed under its
term loan and capital lease obligations of $76,821), pay a brokerage fee
totaling $2,150,000 (representing 2.5 percent of the sales price) to The Jones
Group, Ltd., a subsidiary of the General Partner, for acting as a broker in
this transaction, settle working capital adjustments, deposit $2,604,000 into
an indemnity escrow account and then distribute the approximate $63,282,500 of
net sale proceeds to its partners of record as of the closing date of the sale
of the Systems. Because the distribution made in August 1998 to the limited
partners on the July 1998 sale of the Partnership's Fort Myers, Florida cable
system (the "Fort Myers System") returned to the limited partners more than
100 percent of the amounts originally contributed to the Partnership by the
limited partners, the net proceeds from the sale of the Systems will be
allocated 75 percent to the limited partners ($47,461,875) and 25 percent to
the General Partner ($15,820,625). As a result of the Systems' sale, the
limited partners of the Partnership will receive a $47,461,875 distribution,
or $456 for each $500 limited partnership interest, or $912 for each $1,000
invested in the Partnership. Distribution checks will be issued to limited
partners' account registration or payment instruction of record.
As a result of the sale of the Fort Myers System in July 1998, the limited
partners of the Partnership received, in August 1998, a $93,140,800
distribution, or $895 for each $500 limited partnership interest, or $1,790
for each $1,000 invested in the Partnership. Taking into account the
distribution to limited partners from the sale of the Fort Myers System and
the anticipated distribution to limited partners from the sale of the Systems
(excluding escrowed proceeds), the General Partner expects that the
Partnership's limited partners will have received a total return of $1,351 for
each $500 limited partnership interest, or $2,702 for each $1,000 invested in
the Partnership, at the time the Partnership is liquidated and dissolved. 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. 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 assets are the Systems. After the sale of the Systems
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.
2
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
Systems 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 General Partner on which
a limited partner does not mark a vote will be counted as a vote for the
proposed sale of the Systems. Because limited partners do not have dissenters'
or appraisal rights in connection with the proposed sale of the 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.
The Board of Directors of the General Partner approved the proposed sale of
the Systems and the General Partner therefore recommends 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 September 15, 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 Partner
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 February 1985 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
on January 7, 1985 and closed on May 31, 1985. The Partnership raised gross
offering proceeds of $52,000,000. The Partnership acquired the Systems on May
31, 1985.
Based upon the track record of prior public partnerships sponsored by the
General Partner 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 Cable TV Fund
12 Limited Partnership Program 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 General Partner determined that it would be
prudent to delay the sale of the Systems until market conditions improved and,
as a result, the Systems have been held by the Partnership for over 13 years.
The purpose of the sale of the Systems, from the Partnership's perspective,
is to attain the Partnership's primary investment objective with respect to
the Systems, i.e., to convert the Partnership's capital appreciation in the
Systems 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 partners of the Partnership of record as of the closing
date of the sale of the Systems in accordance with the distribution
3
procedures established by the Partnership Agreement. The sale of the Systems
is thus the necessary final step in the Partnership's accomplishment of its
investment objectives with respect to the 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 amounts equal to 100 percent of their
initial capital contributions, and thereafter all such distributions are to be
shared 75 percent to the limited partners and 25 percent to the General
Partner. Because the limited partners of the Partnership already have received
distributions in an amount in excess of 100 percent of their initial capital
contributions, the sharing arrangement between the limited partners and the
General Partner already has been triggered. The limited partners, as a group,
will receive $47,461,875 of the Systems' net sale proceeds and the General
Partner will receive $15,820,625 of the Systems' net sale proceeds. This
distribution to limited partners will provide the limited partners with a
return of $456 for each $500 limited partnership interest, or $912 for each
$1,000 invested in the Partnership.
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 Systems are the Partnership's sole remaining assets, the proposed
sale of the Systems 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 July 10, 1998 (the "Asset Purchase Agreement") by and between the
Partnership and TCI, the Partnership has agreed to sell the Systems to TCI for
a sales price of $86,000,000, 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
the General Partner. The Partnership has been informed that TCI intends to
finance its acquisition of the Systems through cash on hand and borrowings.
THE CLOSING
The closing of the sale of the Systems is scheduled to occur during the
fourth quarter of 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
Systems 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 Systems to TCI.
THE SYSTEMS
The assets to be acquired by TCI consist primarily of the tangible and
intangible assets of the Systems. The Systems were purchased by the
Partnership in May 1985 for an aggregate purchase price of approximately
$22,400,000. The Systems were acquired in several transactions.
The portion of the Systems serving the communities of Libertyville,
Mundelein, Wauconda, Grayslake and Orland Park, Illinois and a cable
television system serving the village of Maywood, Illinois were acquired in
May 1985 from the General Partner for a purchase price of $17,400,000, the
purchase price that the General Partner paid an unaffiliated third party to
acquire these systems for the Partnership's account in December 1984, and the
Partnership reimbursed the General Partner for the costs incurred by the
General Partner for capital expenditures made by the General Partner during
the period that it held these systems for the Partnership's account and the
amount of operating and interest expenses in excess of operating receipts
incurred by the General
4
Partner from the date of its acquisition of these systems for the
Partnership's account in December 1984 through the end of May 1985, when these
systems were transferred to the Partnership. The Partnership also paid an
acquisition fee of $781,000 (representing 4.5 percent of the purchase price)
to The Jones Group, Ltd. as compensation to it for acting as the broker in the
transaction. At acquisition in May 1985, these systems served approximately
16,500 basic equivalent subscribers and had 28,400 premium units using 343
miles of cable plant passing approximately 28,500 homes.
Also in May 1985, the Partnership acquired the portion of the Systems
serving Park Forest, Illinois directly from an unaffiliated third party for a
purchase price of $5,000,000. The Partnership paid an acquisition fee of
$225,000 (representing 4.5 percent of the purchase price) to The Jones Group,
Ltd. as compensation to it for acting as the broker in this transaction. At
acquisition in May 1985, the Park Forest, Illinois system served approximately
4,700 basic subscribers using 79 miles of cable plant passing approximately
8,740 homes.
In 1987, the Partnership sold the cable television system serving the
village of Maywood, Illinois to an unaffiliated third party for a sales price
of $4,400,000, subject to customary closing adjustments. The Jones Group, Ltd.
received a brokerage fee of $110,000 (representing 2.5 percent of the sales
price) for acting as broker and financial advisor in this transaction. The
proceeds of the sale of the Maywood, Illinois system were used to reduce
Partnership debt.
The Systems currently are operated from three headends, with approximately
82 percent of the Systems at 400 MHz, 15 percent of the Systems at 450 MHz and
the remaining 3 percent of the Systems at 550 MHz. The Systems have a total of
726 miles of cable plant (with 425 miles underground and 301 miles aerial)
passing approximately 60,000 homes. At closing, the Systems are expected to
have approximately 44,000 basic equivalent subscribers and 27,000 premium
units. The Systems' basic penetration rate at closing is expected to be 72
percent. The Systems had annual revenues in 1997 of $17,752,000 and annual
cash flow of $7,332,000. The Systems are projected to have annual revenues in
1998 of $19,212,000 and annual cash flow of $7,746,000. The $86,000,000 sale
price therefore represents 11.7 times 1997 cash flow and 11.1 times projected
1998 cash flow, and it also represents a sales price of $1,955 per subscriber.
The most recent independent appraisal of the Systems' fair market value, which
was completed at the direction of the General Partner in July 1997, valued the
Systems at $71,155,000. The proposed sales price of $86,000,000 therefore
represents a significant premium over this most recent independent fair market
value appraisal.
TCI will purchase all of the tangible assets of the 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. TCI 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
Systems is $86,000,000. 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 Systems hired by TCI), prepaid income,
5
subscriber prepayments and accounts receivable related to the Systems, all as
determined in accordance with GAAP consistently applied and to reflect the
principle that all expenses and income attributable to the Systems for the
period prior to the closing date are for the account of the Partnership and
all expenses and income attributable to the Systems 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 if the past due amount is greater than $5.00, (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 Systems, including advance payments and deposits by
subscribers served by the Systems 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 44,000, the sales price will be reduced by an amount equal to $1,955
multiplied by the number by which the number of basic equivalent subscribers
is less than 44,000. 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 $4,398,750. TCI will not have an obligation to close if
the number of basic equivalent subscribers at closing is less than 41,750.
The 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 Consolidated 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 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 Systems,
their business or their assets, (ii) compel TCI to dispose of or hold separate
all or a material portion of the Systems, their business or their 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 Systems 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 Systems 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 Systems' real estate, an assignment and
assumption of contracts, assignments of leases, a guarantee signed by the
General Partner, motor vehicle title certificates and such other transfer
instruments as TCI may deem necessary or advisable to transfer the assets of
the Systems to TCI and to perfect TCI's rights in
6
such assets, a legal opinion of the General Partner's general counsel,
evidence satisfactory to TCI that all encumbrances affecting any of the
Systems' 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 Systems' 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 Systems 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 Systems
have no fewer than 41,750 basic equivalent subscribers; (h) each cable
television franchise of the Systems has 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 all of the cable television franchises
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 Systems, 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 Systems shall have no fewer than 41,750 basic equivalent
subscribers or TCI shall agree to limit the sales price reduction due to a
basic equivalent subscriber shortfall to $4,398,750.
GUARANTEE AND COVENANTS TO TCI
In order to induce TCI to enter into the Asset Purchase Agreement, the
General Partner will execute and deliver to TCI a guarantee by which the
General Partner will guarantee all of the liabilities and obligations of the
Partnership to TCI under the Asset Purchase Agreement. TCI informed the
General Partner that it would be unwilling to enter into the Asset Purchase
Agreement without having received the General Partner's guarantee. The General
Partner received no payment from the Partnership in return for giving this
guarantee.
The parties have agreed that neither the Partnership, nor the General
Partner, 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 Systems so
7
long as the Asset Purchase Agreement is in effect. The General Partner agreed
with TCI that the General Partner would prepare and, as soon as practicable,
and in any event within 30 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 Systems and to the Systems' 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 Systems as TCI
may reasonably request; (b) the Partnership has agreed to conduct the business
and operations of the Systems in the usual, regular and ordinary course
consistent with past practices and in material compliance with the Systems'
1998 operating and capital budgets; (c) the Partnership has agreed to maintain
the assets of the Systems 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 Systems
at closing) and to maintain in full force and effect insurance policies with
respect to the Systems 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 Systems 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 Systems, (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 Systems 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 Systems, (v) enter into any contract or commitment or incur any
indebtedness or other liability or obligation of any kind relating to the
Systems involving an expenditure in excess of $40,000 under a single contract
or commitment, or $80,000 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 Systems or
(viii) enter into any agreement with or commitment to any competitive access
providers with respect to the Systems; (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 Systems 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 Systems 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 Systems' governmental permits to operate
the cable television systems; (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 the cable
television franchises of the Systems extended or
8
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.
INDEMNITY ESCROW
From the closing date until November 15, 1999, $2,604,000 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 Systems, (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 Systems,
(iii) any act or omission of the Partnership with respect to, or any event or
circumstance related to, the ownership or operation of the Systems or the
conduct of their 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 Systems 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 Systems, 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 Systems 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 Systems 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 partners of the Partnership. If the entire
$2,604,000 escrow amount ultimately is distributed to Partnership's partners,
of which there can be no assurance, the $2,604,000 would be allocated 75
percent to the limited partners ($1,953,000) and 25 percent to
9
the General Partner ($651,000). The $1,953,000 distribution to the limited
partners would represent approximately $19 for each $500 limited partnership
interest, or $38 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.
REASONS FOR THE TIMING OF THE SALE
The General Partner, through The Jones Group, Ltd., a subsidiary of the
General Partner, first marketed the Systems for sale in 1996. The Jones Group,
Ltd. prepared information books on the Systems in June 1996 and delivered them
to six unaffiliated cable television system operators that the General Partner
and The Jones Group, Ltd. deemed to be the most likely potential buyers of the
Systems. 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 Systems would be accepted and were due by October 15, 1996. Of the
prospective purchasers, only TCI made a due diligence visit to the Systems,
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 Systems, including in certain
communities with cable television systems managed by affiliates of the General
Partner. The threat of competition from Ameritech in the communities served by
the Systems was a major factor in the lack of interest in the Systems 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 Systems. 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 Systems. Through the end of 1997 and the first quarter of 1998,
The Jones Group, Ltd. provided TCI with additional information about the
Systems, including information specifically requested by TCI to enable it to
evaluate the Systems. 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 Systems to three other potential purchasers of the Systems. While
these three companies indicated an interest in an investment in the suburban
Chicago cable system market, they expressed serious reservations about
acquiring the Systems due to the potential Ameritech competition. One of these
three potential purchasers made a verbal offer to the General Partner to
purchase all of the Chicago-area systems operated by the General Partner for
$400,000,000. Because this bidder did not make an offer for such Chicago-area
systems individually, the General Partner does not know what this potential
purchaser would have offered for the Systems themselves. Because this offer
was lower than the cumulative offer being negotiated with TCI, The Jones
Group, Ltd. did not pursue it.
TCI made its initial formal bid for all of the Chicago-area systems managed
by the General Partner on March 3, 1998. TCI offered to purchase the Systems
for $80,000,000 conditioned upon the Systems having 42,000 basic equivalent
subscribers at closing. This offer equated to a sales price of $1,905 per
subscriber and represented 10.9 times 1997 cash flow and 10.3 times 1998
budgeted cash flow. The Jones Group, Ltd. presented this offer to the General
Partner on March 11, 1998. While the General Partner concluded that this offer
was not unreasonable, it instructed The Jones Group, Ltd. to attempt to
negotiate a better price for the Systems. After a series of further
negotiations, TCI made a revised offer for the Systems on April 8, 1998,
increasing its bid to $86,000,000 conditioned on the Systems having 44,000
basic equivalent subscribers at closing. The revised offer for the Systems
represented a sales price of $1,955 per subscriber and represented 11.7 times
1997 cash flow
10
and 11.1 times 1998 budgeted cash flow. The 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 Systems undertaken
in July 1997 valued the Systems at only $71,155,000. The 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 13 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 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 General Partner the
right and the responsibility to determine when the Partnership's investment
objectives had been achieved. The Systems were acquired because, in the
opinion of the General Partner at the time of the Systems' acquisition, they
had the potential for capital appreciation within a reasonable period of time.
It is the General Partner's opinion that during the 13 years that the Systems
have been held by the Partnership, the Partnership's investment objectives
with respect to the Systems have been achieved. The General Partner used no
specific benchmarks or measurement tools in determining that the Partnership's
investment objectives have been achieved. The General Partner conducted a
subjective evaluation of a variety of factors including the length of the
holding period, the prospects for future growth as compared to the potential
risks, the cash on cash return to investors, the after-tax internal rate of
return to limited partners and the amount of gain to be recognized on the sale
of assets.
The General Partner generally considered the benefits to the limited
partners that might be derived by holding the Systems for an additional period
of time. On the one hand, the General Partner assumed that the Systems
probably would continue to appreciate in value and that as a result the
Systems might be able to be sold for a greater sales price in the future. The
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 Systems 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 Systems 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 Systems' basic and premium services, thereby decreasing the
value of the Systems. 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 Systems. Weighing
all of these factors, the General Partner concluded that now rather than later
was the time to sell the Systems.
RECOMMENDATION OF THE GENERAL PARTNER AND FAIRNESS OF THE PROPOSED SALE OF
ASSETS
The General Partner believes that the proposed sale of the Systems 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
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 Systems will provide limited partners with liquidity and with the
means to realize the appreciation in the value of the Systems;
(ii) The sales price represents the fair market value of the Systems
because the sales price was determined in an arm's-length negotiation
between the General Partner, representing the Partnership, and TCI;
11
(iii) The Partnership has held the Systems for 13 years, a holding period
beyond that originally anticipated;
(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 Systems,
portions of which may need to be rebuilt as a condition to the renewal of
certain of the Systems' 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 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 General Partner has
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 the consummation of the proposed sale of the Systems, the proceeds of
the sale will be used to repay all indebtedness of the Partnership (including
$20,925,000 borrowed under its term loan and capital lease obligations of
$76,821), pay a brokerage fee totaling $2,150,000 (representing 2.5 percent of
the sales price) to The Jones Group, Ltd., a subsidiary of the General
Partner, for acting as a broker in this transaction, settle working capital
adjustments and deposit $2,604,000 into an indemnity escrow account, and then
the Partnership will distribute the approximate $63,282,500 of net sale
proceeds to its partners of record as of the closing date of the sale of the
Systems. Because the distribution made in August 1998 to the limited partners
on the July 1998 sale of the Fort Myers System returned to the limited
partners more than 100 percent of the amounts originally contributed to the
Partnership by the limited partners, the net proceeds from the sale of the
Systems will be allocated 75 percent to the limited partners ($47,461,875) and
25 percent to the General Partner ($15,820,625). As a result of the sale of
the Systems, the limited partners of the Partnership will receive a
$47,461,875 distribution. The limited partners will be subject to federal
income tax on the income resulting from the sale of the Systems. See the
detailed information below under the caption "Federal Income Tax
Consequences."
After the sale of the Systems 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 Systems. 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 General
Partner's current management team will continue to manage the Systems on
behalf of the Partnership until such time as the Systems can be sold.
All distributions of the Partnership from the proceeds of the sale of the
Systems will be made to the Partnership's limited partners of record as of the
closing date of the sale of the Systems. This includes the distribution of the
Partnership's portion 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
Systems would not be entitled to any distributions from the Partnership, a
transfer of limited partnership interests following the closing date of the
sale of the Systems would have no economic value. The 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
Systems.
12
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 Systems.
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 Fort Myers System in July 1998 and from the sale
of the Systems, which is expected to close before the end of 1998. 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 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 1998 TAX RESULTS
The July 15, 1998 sale of the Partnership's Fort Myers System resulted in
estimated taxable income allocated to the limited partners of the Partnership
of approximately $84,470,355 ($1,625 per $1,000 invested). The General Partner
estimates that $61,033,950 ($1,174 per $1,000 invested) of this gain will be
treated as ordinary income. This amount of ordinary income results from the
recapture of depreciation expense on business assets under Internal Revenue
Code ("IRC") Section 1245. The General Partner estimates that the remainder of
the gain, $23,436,405 ($451 per $1,000 invested), will be treated as IRC
Section 1231 long-term capital gain.
The proposed sale of the Systems is anticipated to generate taxable income
allocated to the limited partners of approximately $56,566,976 ($1,088 per
$1,000 invested). The General Partner estimates that $27,512,270 ($529 per
$1,000 invested) of this gain will be treated as ordinary income. This amount
of ordinary income results from the recapture of depreciation expense under
IRC Section 1245. The General Partner estimates that the remainder of the
gain, $29,054,706 ($559 per $1,000 invested), will be treated as IRC Section
1231 long-term capital gain.
The combined 1998 limited partner allocation from the two cable system sales
is estimated to be ordinary income of $88,546,220 ($1,703 per $1,000 invested)
and Section 1231 long-term capital gain of $52,491,111 ($1,010 per $1,000
invested). This 1998 income may be offset by passive loss carryforwards of the
limited partners. Historically, the limited partners have been allocated
ordinary losses of approximately $52,806,581 ($1,015 per $1,000 invested).
Although a portion of these losses were currently deductible in prior years as
a result of allowances under the passive loss rules or against partnership
allocable income, the General Partner anticipates that passive loss
carryforwards may currently exist in the amount of $18,795,599 ($361 per
$1,000 invested). This computation assumes that limited partners have not
utilized their previously limited Partnership passive losses except against
passive income of the Partnership. If limited partners have previously
utilized Partnership passive losses against other passive income sources,
their results will vary accordingly.
Assuming the 31 percent rate applies to ordinary income and a limited
partner has the maximum amount of passive loss carryforwards, the limited
partner will be subject to federal income taxes of $618 per $1,000 invested in
the Partnership as a result of the sales of the Fort Myers System and the
Systems. The taxable income will be recognized in the year of the closings of
the sales, which is expected to be 1998.
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 Fort Myers System and the Systems
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.
13
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 two system sales 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. The new investor will not have the old investor's
passive loss carryforwards or tax basis in the Partnership.
Newer investors in the Partnership will not have the above-calculated
passive loss carryforwards and will likely have a greater reportable net
taxable income from the two system sales than investors who have held their
partnership interests for a longer period of time. Newer investors in the
Partnership also 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 two 1998 system sales 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 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 1998.
PROJECTED 1999 TAX CONSEQUENCES
As previously discussed, a portion of the proceeds from the sale of the
Systems will remain in an indemnity escrow account from the closing date until
November 15, 1999. At that time, the balance of the escrow account will be
distributed to the 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 ending capital account balance
that is projected to equal $138 per $1,000 invested. This amount 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.
14
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 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 information of registrants
(including the Partnership and the General Partner) that file electronically
with the SEC at http://www.sec.gov. After the net proceeds from the sale of
the Systems, 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 Systems, 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.
15
USE OF PROCEEDS FROM THE SALE OF THE SYSTEMS
The following is a brief summary of the Partnership's estimated use of the
proceeds from the sale of the Systems. 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 Systems
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 Systems 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 remaining sale proceeds will be
distributed to the Partnership's partners of record as of the closing date of
the sale of the Systems pursuant to the terms of the Partnership Agreement.
The estimated uses of the sale proceeds are as follows:
Contract Sales Price of the Systems............................. $ 86,000,000
Add: Cash on Hand.............................................. 3,159,959
Less: Estimated Net Closing Adjustments......................... (121,638)
Repayment of Debt......................................... (21,001,821)
Brokerage Fee............................................. (2,150,000)
Portion of Proceeds to be held in Indemnity Escrow........ (2,604,000)
------------
Cash Available for Distribution by the Partnership.. $ 63,282,500
============
Based upon financial information available at June 30, 1998, below is an
estimate of all cash distributions that will have been made to limited
partners after the distribution of the proceeds from the sale of the Systems
is completed.
Summary of Estimated Cash Distributions to Limited Partners:
Return of Limited Partners' Initial Capital on the 1998
Sale of the Partnership's Fort Myers System................ $ 52,000,000
Limited Partners' Share of Residual Proceeds on the
1998 Sale of the Partnership's Fort Myers System........... 41,140,800
Limited Partners' Share of Proceeds on the 1998
Sale of the Systems........................................ 47,461,875
------------
Total Estimated Cash Received by Limited Partners........... $140,602,675
============
Total Cash Received per $1,000 of Limited Partnership
Capital.................................................... $ 2,702
============
Total Cash Received per $500 Limited Partnership Interest... $ 1,351
============
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 Systems:
Dollar Amount Raised.......................................... $52,000,000
Number of Cable Television Systems Purchased.................. Two
Date of Closing of Offering................................... May 1985
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations......................................... $ (894)
--from recapture.......................................... $ 1,703
Capital Gain (Loss)....................................... $ 893
Cash Distributions to Investors
Source (on GAAP basis)
--investment income....................................... $ 1,702
--return of capital....................................... $ 1,000
Source (on cash basis)
--sales................................................... $ 2,702
16
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF CABLE TV FUND 12-A, LTD.
The following unaudited pro forma balance sheet assumes that as of June 30,
1998, the Partnership had sold the Fort Myers System for $110,000,000 and had
sold the Systems for $86,000,000. The funds available to the Partnership,
adjusting for the estimated net closing adjustments of the Systems, are
expected to total approximately $85,878,362. 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 balance remaining will be distributed
to the Partnership's partners of record as of the closing date of the sale of
the Systems. As a result of the sale of the Fort Myers System in July 1998,
the limited partners of the Partnership received, in August 1998, a
$93,140,800 distribution, or $895 for each $500 limited partnership interest,
or $1,790 for each $1,000 invested in the Partnership. As a result of the sale
of the Systems, the limited partners of the Partnership will receive a
$47,461,875 distribution, or $456 for each $500 limited partnership interest,
or $912 for each $1,000 invested in the Partnership. Taking into account the
distribution to limited partners from the sale of the Fort Myers System and
the anticipated distribution to limited partners from the sale of the Systems
(excluding escrowed proceeds), the General Partner expects that the
Partnership's limited partners will have received a total return of $1,351 for
each $500 limited partnership interest, or $2,702 for each $1,000 invested in
the Partnership, at the time the Partnership is liquidated and dissolved.
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.
17
CABLE TV FUND 12-A, LTD.
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1998
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ -----------
ASSETS
Cash and Cash Equivalents............... $ 3,159,959 $ 62,726,541 $65,886,500
Trade Receivables, net.................. 397,560 (397,560) --
Investment in Cable Television
Properties:
Property, plant and equipment, net.... 31,271,801 (31,271,801) --
Franchise costs and other intangibles,
net.................................. 1,002,632 (1,002,632) --
----------- ------------ -----------
Total investment in cable television
properties......................... 32,274,433 (32,274,433) --
Deposits, Prepaid Expenses and Deferred
Charges................................ 983,065 (983,065) --
----------- ------------ -----------
Total Assets............................ $36,815,017 $ 29,071,483 $65,886,500
=========== ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt.................................. $21,135,652 $(21,135,652) $ --
Trade accounts payable and accrued
liabilities.......................... 1,609,393 (1,609,393) --
Subscriber prepayments................ 154,634 (154,634) --
Accrued distribution to limited
partners............................. -- 47,461,875 47,461,875
Accrued distribution to General
Partner.............................. -- 15,820,625 15,820,625
----------- ------------ -----------
Total Liabilities................... 22,899,679 40,382,821 63,282,500
----------- ------------ -----------
Partners' Capital:
General Partner....................... (308,354) 959,354 651,000
Limited Partners...................... 14,223,692 (12,270,692) 1,953,000
----------- ------------ -----------
Total Partners' Capital............. 13,915,338 (11,311,338) 2,604,000
----------- ------------ -----------
Total Liabilities and Partners'
Capital.............................. $36,815,017 $ 29,071,483 $65,886,500
=========== ============ ===========
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited balance sheet.
18
CABLE TV FUND 12-A, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
------------ ------------ ------------
REVENUES.............................. $ 36,986,475 $(36,986,475) $ --
COSTS AND EXPENSES:
Operating expenses.................. 21,035,811 (21,035,811) --
Management fees and allocated over-
head from the General Partner...... 3,967,845 (3,967,845) --
Depreciation and amortization....... 7,152,481 (7,152,481) --
------------ ------------ ------------
OPERATING INCOME...................... 4,830,338 (4,830,338) --
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense.................... (1,765,957) 1,765,957 --
Other, net.......................... (20,306) 20,306 --
------------ ------------ ------------
Total other income (expense),
net.............................. (1,786,263) 1,786,263 --
------------ ------------ ------------
NET INCOME............................ $ 3,044,075 $ (3,044,075) $ --
============ ============ ============
NET INCOME PER LIMITED PARTNERSHIP
INTEREST............................. $ 28.98 $ --
============ ============
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
19
CABLE TV FUND 12-A, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ ------------
REVENUES............................... $19,985,317 $(19,985,317) $ --
COSTS AND EXPENSES:
Operating expenses................... 10,994,187 (10,994,187) --
Management fees and allocated
overhead from the General Partner... 2,172,751 (2,172,751) --
Depreciation and amortization........ 3,664,470 (3,664,470) --
----------- ------------ ------------
OPERATING INCOME....................... 3,153,909 (3,153,909) --
----------- ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense..................... (819,814) 819,814 --
Other, net........................... (368,087) 368,087 --
----------- ------------ ------------
Total other income (expense), net.. (1,187,901) 1,187,901 --
----------- ------------ ------------
NET INCOME............................. $ 1,966,008 $ (1,966,008) $ --
=========== ============ ============
NET INCOME PER LIMITED PARTNERSHIP
INTEREST.............................. $ 18.71 $ --
=========== ============
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
20
CABLE TV FUND 12-A, LTD.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1) The following calculations present the sale of the Systems and the
resulting estimated proceeds expected to be received by the Partnership.
2) The unaudited pro forma balance sheet of the Partnership assumes that the
Partnership had sold the Fort Myers System for $110,000,000 and had sold the
Systems for $86,000,000 as of June 30, 1998. The unaudited pro forma
statements of operations of the Partnership assume that the Partnership had
sold the Fort Myers System for $110,000,000 and had sold the Systems for
$86,000,000 as of January 1, 1997.
3) The net proceeds from the sale of the Systems will be distributed 75
percent to the limited partner and 25 percent to the General Partner. The
limited partners' distribution of $47,461,875 represents $456 for each $500
limited partnership interest, or $912 for each $1,000 invested in the
Partnership.
4) The estimated gain recognized from the sale of the Systems and
corresponding estimated distribution to limited partners as of June 30, 1998
has been computed as follows:
GAIN ON SALE OF ASSETS:
Contract sales price............................................. $ 86,000,000
Less: Net book value of investment in cable television properties
at June 30, 1998........................................... (15,653,448)
Brokerage fee to The Jones Group, Ltd...................... (2,150,000)
------------
Gain on sale of assets........................................... $ 68,196,552
============
DISTRIBUTION TO PARTNERS:
Contract sales price............................................. $ 86,000,000
Working Capital Adjustment:
Add: Trade receivables, net..................................... 109,948
Prepaid expenses........................................... 743,695
Less: Accrued liabilities........................................ (912,376)
Subscriber prepayments..................................... (62,905)
------------
Adjusted cash received........................................... 85,878,362
Less: Outstanding debt to third parties.......................... (21,001,821)
Brokerage fee.............................................. (2,150,000)
Add: Cash on hand............................................... 3,159,959
------------
Cash available from sale proceeds.......................... $ 65,886,500
------------
Portion of sale proceeds to be held in indemnity escrow.... (2,604,000)
------------
Cash available for distribution by the Partnership......... $ 63,282,500
============
Limited partners' share (75%).................................... $ 47,461,875
============
General Partner's share (25%).................................... $ 15,820,625
============
21
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.
22
[JONES INTERCABLE, INC. LOGO]
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 Cable TV Fund 12-A, Ltd., a Colorado
limited partnership, hereby votes on the sale of the Partnership's Illinois
cable television systems to TCI Communications, Inc. or one of its affiliates
for a sales price of $86,000,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of July 10, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
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.
[JONES INTERCABLE, INC. LOGO]
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 Cable TV Fund 12-A, Ltd., a Colorado
limited partnership, hereby votes on the sale of the Partnership's Illinois
cable television systems to TCI Communications, Inc. or one of its affiliates
for a sales price of $86,000,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of July 10, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(You must sign on the reverse side of this proxy card for your vote to count.)
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.