AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION
ON NOVEMBER 29, 2002
PRELIMINARY CONSENT SOLICITATION STATEMENT
FILED ON SCHEDULE 14A
CONSENT SOLICITATION STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
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(Name of Registrant as Specified In Its Charter)
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:
Units of Limited Partnership Interest.
(2) Aggregate number of securities to which transaction
applies: 59,830
(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):
The filing fee is based on the aggregate cash to be received
from the proposed sale of assets, which the Registrant
believes will be $5,574,201 multiplied by .000092.
(4) Proposed maximum aggregate value of transaction: $
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(5) Total fee paid: $513.00
/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
THE TRANSACTION DESCRIBED IN THE ATTACHED CONSENT SOLICITATION STATEMENT HAS
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION OR AGENCY, NOR HAS THE
COMMISSION OR ANY SUCH STATE COMMISSION OR AGENCY PASSED UPON THE FAIRNESS
OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
, 2002
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Dear Limited Partner:
As a holder of limited partnership units ("units") of Enstar
Income/Growth Program Five-B, L.P. ("Enstar 5B" or the "partnership"), you
are being asked to vote upon a plan of liquidation (the "Liquidation Plan")
for Enstar 5B. Enstar 5B's principal asset is its 50% ownership interest in
Enstar Cable of Cumberland Valley, a Georgia general partnership (the "joint
venture"). The joint venture owns and operates cable television systems in
Kentucky, Tennessee and Missouri (collectively, the "system"). If
consummated, the Liquidation Plan will result in the sale of the system and
the subsequent dissolution and termination of the joint venture. After the
joint venture terminates, Enstar 5B will subsequently liquidate and
dissolve. Under the Liquidation Plan, we expect that Enstar 5B will
distribute to each holder of units (each a "unitholder") a total of
approximately $119 per unit, before applicable taxes, in respect of the sale
of the system.
As more fully described in the attached consent solicitation
statement, the Liquidation Plan authorizes:
o the joint venture to sell that portion of the system serving the
communities in and around Monticello, Whitley City, Liberty,
Cumberland, Greensburg, Williamsburg, and Hustonville/Moreland,
Kentucky and Jellico, Tennessee (collectively, the "Access system")
to Access Cable Television, Inc., a Kentucky corporation
("Access"), under an asset purchase agreement for a sale price of
approximately $6,938,400 in cash, subject to closing sale price
adjustments, an escrow for indemnity claims and customary closing
conditions (the "Access Sale");
o the joint venture to sell that portion of the system serving the
communities in and around Russell Springs, Jamestown and Russell
County, Kentucky (collectively, the "Cumberland system") to
Cumberland Cellular, Inc., a Kentucky corporation ("Cumberland"),
under an asset purchase agreement for a sale price of approximately
$3,707,200 in cash, subject to closing sale price adjustments, an
escrow for indemnity claims and customary closing conditions (the
"Cumberland Sale");
o the joint venture to sell that portion of the system serving the
communities in and around Pomme de Terre, Missouri (collectively,
the "Missouri system") to Telecommunications Management, LLC, a
Missouri limited liability company ("Telecommunications"), under an
asset purchase agreement for a sale price of approximately $502,800
in cash, subject to closing sale price adjustments, an escrow for
indemnity claims and customary closing conditions (the "Missouri
Sale");
o the subsequent dissolution, termination and liquidation of the
joint venture and its remaining assets through one or more
liquidating distributions to the two general partners, one of which
is Enstar 5B, in accordance with the partnership agreement of the
joint venture (the "Joint Venture Liquidation"); and
o the subsequent dissolution, termination and liquidation of Enstar
5B through one or more liquidating distributions to the general
partners and the unitholders, in accordance with Enstar 5B's
partnership agreement (the "Enstar Liquidation").
The Liquidation Plan will not be implemented unless it is approved
by unitholders holding a majority of the units. In addition, the Liquidation
Plan will not become effective unless the Access Sale, the Cumberland Sale,
the Missouri Sale and the Joint Venture Liquidation also are approved by a
majority-in-interest of the limited partners of Enstar 5B's co-partner in
the joint venture, Enstar Income/Growth Program Five-A, L.P.
Access, Cumberland and Telecommunications, the three potential
buyers of the system, ultimately were the purchasers we found who made what
we believe were the best offers for the best resulting transactions for the
sale of the respective portions of the system during the more than two-year
period in which we sought purchasers for the system. Access, Cumberland and
Telecommunications are independent third party buyers and are not affiliated
with Enstar 5B, the joint venture or the general partners of Enstar 5B. We
negotiated for the sale of the system in a process which we believe produced
the best possible sale transaction for the system. For this and other
reasons that are discussed in the accompanying consent solicitation
statement, we believe that the Liquidation Plan is the best alternative
available to the unitholders, and recommend that you vote to APPROVE the
Liquidation Plan.
Please complete and return your consent card as soon as possible.
If you fail to send in your consent card, it will have the same effect as a
vote to "DISAPPROVE" the Liquidation Plan.
We urge you to read carefully the attached consent solicitation
statement in its entirety before voting. The consent solicitation statement
sets forth our reasons for believing that the Liquidation Plan is the best
alternative available to the unaffiliated unitholders (see "Special
Factors--Best Available Transaction" on pages 23-27) and the basis for our
recommendation (see "--Recommendation of the General Partner and other
Filing Persons" on pages 28-29); and describes in detail the Access Sale,
the Cumberland Sale, the Missouri Sale, the Joint Venture Liquidation and
the Enstar Liquidation (see "Liquidation Plan Summary" on pages 5-9, and
"Questions and Answers About the Liquidation Plan" on pages 10-13 and
"Special Factors" on pages 18-54). If you have any questions, or need
assistance in completing and returning your consent card, please feel free
to contact Enstar 5B's soliciting agent, D.F. King & Co., Inc., at (800)
207-2014.
You may also contact us at our principal executive offices at 12405
Powerscourt Drive, St. Louis, Missouri 63131; telephone: (314) 543-2389.
Very truly yours,
Enstar Communications Corporation
Corporate General Partner
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
NOTICE OF CONSENT SOLICITATION
, 2002
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To the Limited Partners of Enstar Income/Growth Program Five-B, L.P.:
NOTICE IS HEREBY GIVEN to the holders (the "unitholders") of the
limited partnership units (the "units") of Enstar Income/Growth Program
Five-B, L.P., a Georgia limited partnership ("Enstar 5B" or the
"partnership"), that Enstar Communications Corporation, a Georgia
corporation and a general partner of Enstar 5B ("Enstar Communications", the
"corporate general partner", "we" or "us"), is soliciting written consents
on behalf of Enstar 5B to approve a plan of liquidation (the "Liquidation
Plan").
Enstar 5B currently owns a 50% interest in Enstar Cable of
Cumberland Valley, a Georgia general partnership (the "joint venture"). The
joint venture owns and operates cable television systems in Kentucky,
Tennessee and Missouri (collectively, the "system"). Under the Liquidation
Plan, the joint venture will sell in three separate transactions its cable
television system assets to Access Cable Television, Inc., a Kentucky
corporation ("Access"), Cumberland Cellular, Inc., a Kentucky corporation
("Cumberland"), and Telecommunications Management, LLC, a Missouri limited
liability company ("Telecommunications"), and the joint venture will
subsequently dissolve and terminate its operations.
The Liquidation Plan authorizes:
o the joint venture to sell that portion of the system serving the
communities in and around Monticello, Whitley City, Liberty,
Cumberland, Greensburg, Williamsburg, and Hustonville/Moreland,
Kentucky and Jellico, Tennessee (collectively, the "Access system")
to Access under an asset purchase agreement for a sale price of
approximately $6,938,400 in cash, subject to closing sale price
adjustments, an escrow for indemnity claims and customary closing
conditions (the "Access Sale");
o the joint venture to sell that portion of the system serving the
communities in and around Russell Springs, Jamestown and Russell
County, Kentucky (collectively, the "Cumberland system") to
Cumberland under an asset purchase agreement for a sale price of
approximately $3,707,200 in cash, subject to closing sale price
adjustments, an escrow for indemnity claims and customary closing
conditions (the "Cumberland Sale");
o the joint venture to sell that portion of the system serving the
communities in and around Pomme de Terre, Missouri (collectively,
the "Missouri system") to Telecommunications under an asset
purchase agreement for a sale price of approximately $502,800 in
cash, subject to closing sale price adjustments, an escrow for
indemnity claims and customary closing conditions (the "Missouri
Sale");
o the subsequent dissolution, termination and liquidation of the
joint venture and its remaining assets through one or more
liquidating distributions to the two general partners, one of which
is Enstar 5B, in accordance with the partnership agreement of the
joint venture (the "Joint Venture Liquidation"); and
o the subsequent dissolution, termination and liquidation of Enstar
5B through one or more liquidating distributions to the general
partners and the unitholders, in accordance with Enstar 5B's
partnership agreement (the "Enstar Liquidation").
The Access Sale, the Cumberland Sale, the Missouri Sale, the Joint
Venture Liquidation and the Enstar Liquidation are more fully described in
the attached consent solicitation statement under "Liquidation Plan Summary"
on pages 5-9, "Questions and Answers About the Liquidation Plan" on pages
10-13, "Special Factors" on pages 18-54 and "Voting Procedures" on pages
62-63.
Enstar 5B is seeking to obtain approval of the Liquidation Plan
from its unitholders through the solicitation of written consents. No
meeting of the unitholders will be held. The consent of unitholders holding
a majority of the outstanding units on the record date (as defined below) is
required in order to adopt the Liquidation Plan, and will bind all of the
unitholders.
The close of business on , 2002 is the record date for
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determining the limited partners entitled to receive notice of the
solicitation of consents and to consent to the Liquidation Plan. Consents of
the limited partners will be solicited during the period (the "Solicitation
Period"), which begins on , 2002 and will end at 5:00 p.m., New
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York City time, on the earlier of (1) the date on which the consents of
limited partners holding a majority of the units entitled to consent are
received by us and/or the soliciting agent; or (2) , 2002 (or, if
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the Solicitation Period is extended by the general partner, at 5:00 p.m.,
New York City time, on the expiration date of the extended Solicitation
Period).
In addition, the Liquidation Plan will not become effective unless
the Access Sale, the Cumberland Sale, the Missouri Sale and the Joint
Venture Liquidation also are approved by a majority-in-interest of the
limited partners of Enstar 5B's equal co-partner in the joint venture,
Enstar Income/Growth Program Five-A, L.P.
Please indicate your approval, disapproval or abstention with
respect to the Liquidation Plan by marking and signing the enclosed consent
card and returning it in the enclosed self-addressed envelope to D.F. King &
Co., Inc., our soliciting agent, at 77 Water Street, New York, New York
10005. If you sign and send in the enclosed consent card but do not indicate
how you want to vote as to the Liquidation Plan, your consent card will be
treated as voting to APPROVE the Liquidation Plan.
You may change your vote at any time before 5:00 p.m., New York
City time, on the earlier of: (1) the date on which the consents of the
holders of a majority of the units entitled to consent are received by us
and/or the soliciting agent; or (2) , 2002 (or, if the general
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partner extends the Solicitation Period, at any time before 5:00 p.m., New
York City time, on the expiration date of the extended Solicitation Period).
You can do this by sending a written notice dated later than your consent
card stating that you would like to revoke or change your vote, or by
completing and submitting a new consent card dated later than your original
consent card. If you choose either of these two methods, you must submit
your notice of revocation or new consent card to the soliciting agent, D.F.
King & Co., Inc. If you instructed a broker to vote your units, you must
follow your broker's directions for changing those instructions. To be
effective, your notice of revocation or new consent card must be received by
D.F. King & Co., Inc. before the end of the original Solicitation Period or
extended Solicitation Period, as the case may be.
You may also contact the partnership and the general partner at
their principal executive offices at 12405 Powerscourt Drive, St. Louis,
Missouri 63131; telephone: (314) 543-2389.
Your approval is important. Please read the consent solicitation
statement and attached exhibits carefully and then complete, sign and date
the enclosed consent card and return it in the self-addressed
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prepaid envelope or by sending a facsimile of the front and back of the
consent card to D.F. King & Co., Inc. Your prompt response is appreciated.
ENSTAR COMMUNICATIONS CORPORATION
CORPORATE GENERAL PARTNER
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TABLE OF CONTENTS
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
LIQUIDATION PLAN SUMMARY............................................................................ 5
QUESTIONS AND ANSWERS ABOUT THE LIQUIDATION PLAN.................................................... 10
WHO CAN HELP ANSWER YOUR QUESTIONS.................................................................. 14
OWNERSHIP STRUCTURE CHART........................................................................... 15
SELECTED FINANCIAL INFORMATION...................................................................... 16
SPECIAL FACTORS..................................................................................... 18
General.......................................................................................... 18
Background, Purpose and Reasons for the Access Sale, the Cumberland Sale
and the Missouri Sale........................................................................ 18
Alternatives to Liquidation Plan Not Prudent..................................................... 20
Ability to Sell Units............................................................................ 21
Effects of the Transaction....................................................................... 21
Best Available Transaction....................................................................... 23
Recommendation of the Corporate General Partner and Other Filing Persons......................... 28
Related Party Transactions....................................................................... 30
Conflicts of Interest............................................................................ 30
The Access Purchase Agreement.................................................................... 31
The Cumberland Purchase Agreement................................................................ 36
The Telecommunications Purchase Agreement........................................................ 42
Description of Assets............................................................................ 48
Use of Proceeds and Cash Distributions........................................................... 48
Disadvantages of the Liquidation Plan............................................................ 50
Consequences of Failure to Approve the Liquidation Plan.......................................... 50
Approval of the Liquidation Plan by Enstar 5A.................................................... 51
Liquidation of the Joint Venture................................................................. 51
Liquidation of Enstar 5B......................................................................... 51
Federal Income Tax Consequences of the Liquidation Plan.......................................... 52
State Tax Consequences........................................................................... 54
No Appraisal Rights.............................................................................. 54
NO ESTABLISHED MARKET PRICES FOR PARTNERSHIP UNITS.................................................. 54
DISTRIBUTIONS TO UNITHOLDERS........................................................................ 55
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF..................................................... 55
IDENTITY AND BACKGROUND OF CERTAIN PERSONS.......................................................... 56
Enstar Communications Corporation................................................................ 56
Charter Communications, Inc...................................................................... 60
Charter Communications Holding Company, LLC...................................................... 62
VOTING PROCEDURES................................................................................... 62
AVAILABLE INFORMATION............................................................................... 63
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
, 2002
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CONSENT SOLICITATION STATEMENT
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INTRODUCTION
Enstar Communications Corporation, a Georgia corporation ("Enstar
Communications," the "corporate general partner", "we" or "us"), is one of
two general partners of Enstar Income/Growth Program Five-B, L.P., a Georgia
limited partnership ("Enstar 5B" or the "partnership"). The other general
partner is Robert T. Graff, Jr. (the "individual general partner").
Enstar 5B currently owns a 50% interest in Enstar Cable of
Cumberland Valley (the "joint venture" or the "general partnership"). The
joint venture owns and operates cable television systems in and around the
communities of Monticello, Whitley City, Liberty, Cumberland, Greensburg,
Williamsburg, Hustonville/Moreland and Russell Springs, Kentucky, Jellico,
Tennessee and Pomme de Terre, Missouri, which had an aggregate of
approximately 13,300 basic subscribers as of September 30, 2002. The other
co-general partner in the joint venture is Enstar Income/Growth Program
Five-A, L.P. ("Enstar 5A"), another limited partnership sponsored by the
corporate general partner. The general partners of Enstar 5A are the same as
the general partners of Enstar 5B. The cable television systems and their
related assets owned by the joint venture are collectively referred to as
the "system," the "Enstar system," or "Enstar's system." Because all of the
partnership's cable television operations are conducted through its interest
in the joint venture, much of the discussion in this consent solicitation
statement relates to the joint venture and its activities. References to the
"partnership" include the joint venture, where appropriate.
Through this consent solicitation statement, we are asking the
holders of Enstar 5B's limited partnership units ("units" and the holders
thereof "unitholders") to approve a plan of liquidation for the general
partnership and Enstar 5B, including the proposed sale of the general
partnership's cable system assets and the subsequent dissolution of the
joint venture and Enstar 5B.
In particular, you are being asked to vote on the following plan of
liquidation (the "Liquidation Plan") that includes authorization of the
following:
o the sale by the joint venture of that portion of the system serving
the communities in and around Monticello, Whitley City, Liberty,
Cumberland, Greensburg, Williamsburg, and Hustonville/Moreland,
Kentucky and Jellico, Tennessee (collectively, the "Access system")
to Access Cable Television, Inc., a Kentucky corporation
("Access"), under an asset purchase agreement for a sale price of
approximately $6,938,400 in cash, subject to closing sale price
adjustments, an escrow for indemnity claims and customary closing
conditions (the "Access Sale");
o the sale by the joint venture of that portion of the system serving
the communities in and around Russell Springs, Jamestown and
Russell County, Kentucky (collectively, the "Cumberland system") to
Cumberland Cellular, Inc., a Kentucky corporation ("Cumberland"),
under an asset purchase agreement for a sale price of approximately
$3,707,200 in cash, subject to closing sale price
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adjustments, an escrow for indemnity claims and customary closing
conditions (the "Cumberland Sale");
o the sale by the joint venture of that portion of the system serving
the communities in and around Pomme de Terre, Missouri
(collectively, the "Missouri system") to Telecommunications
Management, LLC, a Missouri limited liability company
("Telecommunications"), under an asset purchase agreement for a
sale price of approximately $502,800 in cash, subject to closing
sale price adjustments, an escrow for indemnity claims and
customary closing conditions (the "Missouri Sale");
o the subsequent dissolution, termination and liquidation of the
joint venture and its remaining assets through one or more
liquidating distributions to the two general partners, one of which
is Enstar 5B, in accordance with the partnership agreement of the
joint venture (the "Joint Venture Liquidation"); and
o the subsequent dissolution, termination and liquidation of Enstar
5B through one or more liquidating distributions to the general
partners and the unitholders, in accordance with Enstar 5B's
partnership agreement (the "Enstar Liquidation").
The close of business on , 2002 is the record date for
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determining the unitholders entitled to receive notice of the solicitation
of consents and to consent to the Liquidation Plan. On November 22, 2002,
there were 59,830 outstanding units of Enstar 5B entitled to vote on the
Liquidation Plan, which were held by approximately 1,232 unitholders.
Unitholders will be notified as soon as practicable as to the results of
this solicitation. The Liquidation Plan will not become effective unless the
Access Sale, the Cumberland Sale, the Missouri Sale and the Joint Venture
Liquidation also are approved by a majority-in-interest of the limited
partners of Enstar 5A.
The soliciting agent, D.F. King & Co., Inc., has been retained to
assist Enstar Communications in soliciting the consents with respect to the
Liquidation Plan for a base fee of approximately $3,750, plus additional
fees and reimbursement of expenses, estimated at approximately $250. All
costs associated with the solicitation will be paid by Enstar 5B.
Neither Enstar 5B's partnership agreement nor the Georgia Revised
Uniform Limited Partnership Act, under which Enstar 5B is governed, provides
rights of appraisal or other similar rights to unitholders who dissent from
the vote of a majority-in-interest in approving or disapproving the
Liquidation Plan. For more information, please see "Special Factors--No
Appraisal Rights" on page 54.
This consent solicitation statement is being furnished to the
unitholders by the following entities, which are collectively called the
"Filing Persons:" the partnership; the corporate general partner of the
partnership; Charter Communications Holding Company, LLC ("Holdco"); and
their ultimate parent, Charter Communications, Inc. ("Charter, Inc."). More
information about the Filing Persons and their respective executive officers
and directors is contained in the "Ownership Structure Chart" on page 15,
and "Identity and Background of Certain Persons" on pages 56-62.
For the reasons set forth in the sections of this consent
solicitation statement under the headings "Special Factors--Background,
Purpose and Reasons for the Access Sale, the Cumberland Sale and the
Missouri Sale -- Reasons" (on pages 18-20), "-- Best Available Transaction
(on pages 23-27) and "-- Recommendation of the Corporate General Partner and
other Filing Persons" (on pages 28-29), the corporate general partner
believes that the Liquidation Plan is in the best interests of Enstar 5B and
the unitholders, and the corporate general partner and the other Filing
Persons believe that the Liquidation Plan
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is the best alternative available to the unitholders, and recommend that you
vote to "APPROVE" the Liquidation Plan.
Please read this consent solicitation statement and the
accompanying exhibits carefully. You can find additional information about
Enstar 5B in its Annual Report on Form 10-K for the year ended December 31,
2001, its Quarterly Reports on Form 10-Q for the periods ended March 31,
2002, June 30, 2002 and September 30, 2002 and its other reports filed with
the Securities and Exchange Commission. You can obtain these reports from
the partnership and/or the corporate general partner at their principal
executive offices at 12405 Powerscourt Drive, St. Louis, Missouri 63131,
Attention: Partnership Relations; or call (314) 543-2389 (which is also the
principal executive offices of each of the other Filing Persons).
This consent solicitation statement and the accompanying consent
card are first being mailed to the limited partners on or about ,
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2002.
The date of this consent solicitation statement is ,
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2002.
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LIQUIDATION PLAN SUMMARY
The following summary highlights very important information
contained elsewhere in this consent solicitation statement, but does not
contain all of the information in this consent solicitation statement that
may be important to your decision. You should carefully read this entire
document, including the exhibits, before you decide whether to consent to
the Plan of Liquidation.
o BACKGROUND. In 1999 we commenced a process of seeking purchasers
for all of the cable television systems of the joint venture, as well as 13
other, affiliated limited partnership cable operators of which we also are
the general partner. This effort was undertaken primarily because, based on
our experience in the cable television industry, we concluded that generally
applicable market conditions and competitive factors were making (and would
increasingly make) it extremely difficult for smaller operators of rural
cable systems (such as the joint venture and the other affiliated Enstar
partnerships) to effectively compete and be financially successful.
o THE ACCESS SALE. The terms and conditions of the Access Sale are
summarized below. The Access Sale will be accounted for using the purchase
method of accounting. For more information, please see "Special Factors --
The Access Purchase Agreement" on pages 31-36.
THE SALE PRICE. Access will pay a sale price of
approximately $6,938,400, subject to closing sale price
adjustments, an escrow for indemnity claims and customary closing
conditions, in immediately available funds, for the Access system.
SALE PRICE ADJUSTMENTS. The sale price to be paid to the
joint venture is subject to customary working capital closing
adjustments. In addition, the joint venture was assigned a
prescribed target number of 10,659 basic subscribers at closing,
and any shortfall in that target number at closing will result in
the sale price being reduced by $650 per shortfall subscriber. At
October 31, 2002, the Access system had approximately 9,850 basic
subscribers. In addition, at closing, Access will deposit $208,152
of the purchase price in escrow to provide funds for the payment of
any indemnification to which Access may be entitled arising after
the closing when claims exceed $150,000. Total indemnification
claims may not exceed $750,000. Accordingly, the joint venture will
not receive the full purchase price at closing. For more
information, please see "Special Factors -- The Access Purchase
Agreement" on pages 31-36.
CLOSING CONDITIONS. The closing of the Access Sale is
subject to several conditions, any or all of which may be waived,
which include:
o each representation and warranty made by the
joint venture in the asset purchase agreement
with Access shall have been materially true and
correct as of the date made and as of the closing
date;
o the joint venture shall have performed and complied
in all material respects with all covenants made by
it;
o the joint venture shall have obtained the
required number of Material Consents and Required
Consents, as those terms are respectively defined
in the asset purchase agreement with Access;
o no judgment, decree, order or other legal
prohibition having the force of law shall be in
effect on the closing date that would prevent or
make unlawful the closing;
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o the joint venture shall have furnished to Access
certain required certificates, bills of sale,
assignments, assumptions, consents and other
agreements;
o the joint venture shall have obtained any and all
necessary partner consents, which includes the
consent of limited partners of Enstar 5A;
o there shall have been no material adverse change
in the business, financial condition or prospects
of the Access system since the date of the asset
purchase agreement with Access; and
o other closing conditions that are customary in the
industry.
o THE CUMBERLAND SALE. The terms and conditions of the Cumberland
Sale are summarized below. The Cumberland Sale will be accounted for using the
purchase method of accounting. For more information, please see "Special
Factors -- The Cumberland Purchase Agreement" on pages 36-42.
THE SALE PRICE. Cumberland will pay a sale price of
approximately $3,707,200, subject to closing sale price
adjustments, an escrow for indemnity claims and customary closing
conditions, in immediately available funds, for the Cumberland
system.
SALE PRICE ADJUSTMENTS. The sale price to be paid to the
joint venture is subject to customary working capital closing
adjustments. In addition, the joint venture was assigned a
prescribed target number of 2,648 subscribers at closing, and any
shortfall in that target number at closing will result in the sale
price being reduced by $1,400 per shortfall subscriber. At October
31, 2002, the Cumberland system had approximately 2,438 basic
subscribers. Also, the sale price will be reduced by $25,000 for
every full percentage point decrease in expanded basic subscriber
penetration between March 31, 2002 and the closing date. At March
31, 2002, expanded basic subscriber penetration was 86.21%. In
addition, at closing, Cumberland will deposit $250,000 of the
purchase price in escrow to provide funds for the payment of any
indemnification to which Cumberland may be entitled arising after
the closing when claims exceed $150,000. Total indemnification
claims may not exceed $1,000,000. Accordingly, the joint venture
will not receive the full purchase price at closing. For more
information, please see "Special Factors -- The Cumberland Purchase
Agreement" on pages 36-42.
CLOSING CONDITIONS. The closing of the Cumberland Sale is
subject to several conditions any or all of which may be waived,
which include:
o each representation and warranty made by the
joint venture in the asset purchase agreement
with Cumberland shall have been true and correct
as of the date made and as of the closing date;
o the joint venture shall have performed and complied
in all material respects with all covenants made by
it;
o the joint venture shall have obtained the
required Material Consents and Required Consents,
as those terms are respectively defined in the
asset purchase agreement with Cumberland;
- 6 -
o no judgment, decree, order or other legal
prohibition having the force of law shall be in
effect on the closing date that would prevent or
make unlawful the closing;
o the joint venture shall have furnished to
Cumberland certain required certificates, bills
of sale, assignments, assumptions, consents and
other agreements;
o the joint venture shall have obtained any and all
necessary partner consents, which includes the
consent of limited partners of Enstar 5A;
o there shall have been no material adverse change
in the business, financial condition or prospects
of the Cumberland system since the date of the
asset purchase agreement with Cumberland;
o the joint venture shall have satisfied various
other operational obligations on or before the
closing date with respect to the Cumberland
system; and
o other closing conditions that are customary in the
industry.
o THE MISSOURI SALE. The terms and conditions of the Missouri Sale
are summarized below. The Missouri Sale will be accounted for using the
purchase method of accounting. For more information, please see "Special
Factors -- The Telecommunications Purchase Agreement" on pages 42-48.
THE SALE PRICE. Telecommunications will acquire the cable
television assets of ten partnerships managed by the corporate
general partner, of which the Missouri system is a part.
Telecommunications will pay a total purchase price of approximately
$15,291,209 (subject to closing sale price adjustments, an escrow
for indemnity claims and customary closing conditions) for all of
the cable television assets, with approximately $502,800 to be paid
to the joint venture for the Missouri system, subject to closing
sale price adjustments, an escrow for indemnity claims and
customary closing conditions. The allocation of the aggregate
purchase price to the Missouri system was determined from the bid
received from Telecommunications for the Missouri system, based on
a sale price of $599 per subscriber.
SALE PRICE ADJUSTMENTS. The sale price to be paid to the
joint venture is subject to customary working capital closing
adjustments. In addition, Telecommunications assigned a prescribed
target number of subscribers at closing for the Missouri system.
This target number was 839, and any shortfall in that target number
for the Missouri system will result in the sale price being reduced
by $599 per shortfall subscriber. At October 31, 2002, the Missouri
system had approximately 825 basic subscribers. In addition,
Telecommunications will deposit $500,000 of the purchase price in
escrow to provide funds for the payment of any indemnification to
which Telecommunications may be entitled arising after the closing
when claims exceed $100,000, $24,580 of which will be the joint
venture's portion of the purchase price placed in escrow. Total
indemnification claims may not exceed $1,600,000. Accordingly, the
joint venture will not receive the full purchase price at closing.
For more information, please see "Special Factors -- The
Telecommunications Purchase Agreement" on pages 42-48.
- 7 -
CLOSING CONDITIONS. The closing of the Missouri Sale is
subject to several conditions any or all of which may be waived, which include:
o each representation and warranty made by the
sellers in the asset purchase agreement with
Telecommunications shall have been materially
true and correct as of the date made and the
closing date;
o the sellers shall have performed and complied with
all covenants made by them;
o the sellers shall have obtained the required
Material Consents, as that term is defined in the
asset purchase agreement with Telecommunications;
o no judgment, decree, order or other legal
prohibition having the force of law shall be in
effect on the closing date that would prevent or
make the closing unlawful;
o each of the sellers shall have furnished to
Telecommunications certain required certificates,
bills of sale, assignments, assumptions, consents
and other agreements;
o each of the sellers shall have obtained any and all
necessary partner consents, which includes the
consent of limited partners of Enstar 5A; and
o there shall have been no material adverse changes
in the business, financial condition or prospects
of the systems since the date of the asset
purchase agreement with Telecommunications.
o DISSOLUTION AND LIQUIDATION OF THE JOINT VENTURE. Under the
Liquidation Plan, the joint venture will dissolve and, as part of the
winding-up process of the joint venture, Enstar 5B and Enstar 5A, as the
general partners of the joint venture, will sell or otherwise dispose of any
remaining assets of the joint venture, and pay off the joint venture's debts
and obligations, including paying or providing for the payment of the
expenses of the Access Sale, the Cumberland Sale and the Missouri Sale. As
part of the dissolution, the general partners of the joint venture will
cause the joint venture to make one or more liquidating distributions to
themselves of the partnership's remaining assets, in accordance with the
partnership agreement. We currently estimate that pre-tax liquidating
distributions from the Access Sale, the Cumberland Sale and the Missouri
Sale to Enstar 5B, as a general partner of the joint venture, will total
approximately $7,313,850, after estimated closing adjustments and closing
and liquidation expenses. Enstar 5A, as the other 50% general partner of the
joint venture, will receive an equal liquidating distribution. For more
information, please see "Special Factors -- Liquidation of the Joint
Venture" on page 51.
o DISSOLUTION AND LIQUIDATION OF ENSTAR 5B. Upon termination of
the joint venture, Enstar 5B will dissolve, liquidate and terminate. As part
of the dissolution and termination, Enstar 5B will pay its remaining debts
and obligations. The corporate general partner will make one or more
liquidating distributions to itself, the individual general partner and the
unitholders of the partnership's remaining assets, in accordance with the
partnership agreement. We currently estimate that pre-tax liquidating
distributions to the unitholders in respect of the Access Sale, the
Cumberland Sale and the Missouri Sale will total approximately $119 per
unit, after estimated closing adjustments, taxes and closing and liquidation
expenses. The corporate general partner and the individual general partner
will collectively receive a liquidating distribution of approximately
$71,745 in the aggregate in respect of the Access Sale, the Cumberland Sale
and the Missouri Sale.
- 8 -
We presently expect that the Access Sale will close on or before
March 31, 2003, that the Cumberland Sale will close on or before February
28, 2003 and that the Missouri Sale will close on or before June 30, 2003.
The joint venture will not be terminated until after the Missouri Sale. We
anticipate making the initial liquidating distribution approximately 90 days
after the closing of the Access Sale and the Cumberland Sale. We also expect
that after required closing adjustments are completed and escrow proceeds
are released (which we expect to occur approximately 13 months after the
closing of the Missouri Sale), final liquidating distributions would be made
of any remaining funds. For more information, please see "Special Factors --
Use of Proceeds and Cash Distributions" on pages 48-50, and "-- Liquidation
of Enstar 5B" on pages 51-52.
o DETERMINATION OF THE SALE PRICES. During the more than two-year
period during which we sought purchasers for the system we ultimately
concluded that Access, Cumberland and Telecommunications offered the best
available transactions to sell the system. The offers of each of these three
buyers were obtained through a broadly based solicitation process, in which
an experienced cable television industry broker marketed the Enstar systems
and the cable television systems of the other affiliated limited
partnerships to what we and the other Filing Persons believe was fairly
representative of the universe of possible purchasers. The process was also
confidential: neither the broker, Access, Cumberland, Telecommunications nor
any other bidder knew the prices or other terms of the other bidders'
offers, and the corporate general partner of Enstar 5B did not know the
contents of any bid, until all the bids were received and the deadline for
the submission of bids had passed. We and the other Filing Persons believe
that this process acted as a comprehensive "market check" that enabled the
general partner to objectively determine the present range of market values
for the system and obtain what the corporate general partner and the other
Filing Persons believe to be the best transactions currently available in
the market.
Based on the foregoing, we and the other Filing Persons have
concluded that approval of the Liquidation Plan is in the best interests of
Enstar 5B and the unitholders. For more information, please see "Special
Factors--Background, Purpose and Reasons for the Access Sale, the Cumberland
Sale and the Missouri Sale" on pages 18-20, "-- Best Available Transaction"
on pages 23-27 and "-- Recommendation of the Corporate General Partner and
other Filing Persons" on pages 28-29.
o REQUIRED VOTE. The Liquidation Plan must be approved by the
holders of a majority of the units outstanding on the Record Date ( ,
-------
2002). None of the unitholders is an affiliate of Enstar 5B, the corporate
general partner, any other Filing Person or an affiliate of any of them. In
addition, the partnership agreement of the joint venture requires the
approval of both of its general partners, Enstar 5B and Enstar 5A, in order
for the Access Sale, the Cumberland Sale, the Missouri Sale and the Joint
Venture Liquidation to occur. Therefore, the Liquidation Plan will not
become effective unless the Access Sale, the Cumberland Sale, the Missouri
Sale and the Joint Venture Liquidation also are approved by a
majority-in-interest of the limited partners of Enstar 5A. For more
information, please see "Voting Procedures" on pages 62-63.
o VOTING PROCEDURES. Please see "Voting Procedures" on pages 62-63
for instructions on how and when to return your consent card, voting deadlines
and changing your vote.
- 9 -
QUESTIONS AND ANSWERS ABOUT THE LIQUIDATION PLAN
Q: WHY IS THE SALE OF THE ENSTAR SYSTEM BEING PROPOSED?
A: We believe that now is the appropriate time, and it is in the best
interests of the unitholders, to sell the system and liquidate Enstar 5B
because:
o the system continues to face significant competition from direct
broadcast satellite ("DBS") operators;
o we estimate that upgrading the system would cost approximately
$20.6 million to $24.8 million in order to offer services
comparable to those offered by competing DBS operators, which we
believe cannot be viably supported by the partnership's potential
revenues and operating income;
o we believe that if the system is not upgraded to be competitive
with DBS operators, the joint venture will continue to lose
subscribers and revenues and the operating income of the joint
venture will continue to decline, as will the system's market
value; and
o we believe that the available alternatives to the Liquidation Plan
are not prudent. For more information, please see "Special
Factors--Background, Purpose and Reasons for the Access Sale, the
Cumberland Sale and the Missouri Sale" on pages 18-20; "--Best
Available Transaction" on pages 23-27; "--Recommendation of the
Corporate General Partner and the other Filing Persons" on pages
28-29; and "--Consequences of Failure to Approve the Liquidation
Plan" on pages 50-51.
Q: HOW WAS THE ENSTAR SYSTEM MARKETED?
A: The system originally was marketed on a combined basis with the cable
television systems of 13 other affiliated Enstar partnerships. The bidding
process for the system was conducted by Daniels & Associates, L.P., a
prominent business broker with extensive expertise in the cable and
telecommunications industry. The broker marketed the partnership's cable
television systems, as well as the cable systems of the other affiliated
Enstar partnerships, to third parties whom Daniel & Associates, L.P.
identified as being likely to have an interest in acquiring the systems.
Ultimately, this process, which took over two years, resulted in our
conclusion that Access, Cumberland and Telecommunications offered the best
available transaction for the sale of the joint venture's system. For more
information, please see "Special Factors--Background, Purpose and Reasons
for the Access Sale, the Cumberland Sale and the Missouri Sale" on pages
18-20.
Q: WHY ARE WE PROPOSING THAT THE JOINT VENTURE DISSOLVE?
A: Access, Cumberland and Telecommunications have agreed to purchase
separate portions of the system which collectively consist of all of the
joint venture's cable television system assets. Consequently, after the
Access Sale, the Cumberland Sale and the Missouri Sale, the joint venture
will have no cable television system assets. The joint venture will no
longer be able to fulfill its partnership purpose, which is to own and
operate cable television systems. Therefore, the joint venture will dissolve
after completing the Access Sale, the Cumberland Sale and the Missouri Sale,
paying its debts and distributing the balance of the proceeds to its general
partners. For more information, please see "--Liquidation of the Joint
Venture" on page 51.
- 10 -
Q: WHY IS ENSTAR 5B DISSOLVING?
A: All of the cable television assets of Enstar 5B are owned through the
joint venture. As part of the Liquidation Plan, the joint venture will
dispose of its assets, dissolve and terminate and make liquidating
distributions to Enstar 5B and Enstar 5A, the general partners of the joint
venture. Consequently, after the dissolution and winding up of the joint
venture, Enstar 5B will not have any cable television system assets, and
will no longer be able to fulfill its partnership purpose, which is to own
and operate cable television systems. Therefore, Enstar 5B will dissolve
after completing the termination of the joint venture, paying its debts and
distributing remaining assets to its partners. For more information, please
see "Special Factors--Liquidation of Enstar 5B" on pages 51-52.
Q: WHAT WILL I RECEIVE AS A RESULT OF THE LIQUIDATION PLAN?
A: You will receive one or more distributions of your share of Enstar
5B's allocable share of the distributions made by the joint venture from the
net sale proceeds, which we presently estimate will total approximately $119
per unit in respect of the Access Sale, the Cumberland Sale and the Missouri
Sale, after estimated adjustments and expenses. The units were initially
issued at a price of $250 per unit and, since such initial issuance, Enstar
5B has made aggregate cash distributions to the unitholders of $31.42 per
unit. For more information, please see "Special Factors--Use of Proceeds and
Cash Distributions" on pages 48-50.
Q: WHAT WILL MY TOTAL DISTRIBUTIONS BE IF THE LIQUIDATION PLAN IS NOT
COMPLETED?
A: If the Liquidation Plan is not completed, the partnership will
re-examine its ability to pay distributions on a quarterly basis. We cannot
assure you that future distributions will be made, or if made, when or in
what amounts. Apart from the general requirement that cash distributions be
made from available cash flow, after expenses, there are no restrictions on
the partnership's current or future ability to make distributions. No
quarterly distributions have been made since 1990. For more information,
please see "Special Factors -- Consequences of Failure to Approve the
Liquidation Plan" on pages 50-51 and "--Effects of the Transaction -- on the
Joint Venture" on page 22.
Q: WHAT BENEFITS WILL ENSTAR COMMUNICATIONS, THE CORPORATE GENERAL
PARTNER, RECEIVE IF THE LIQUIDATION PLAN IS COMPLETED?
A: If the Liquidation Plan is completed, Enstar Communications and the
individual general partner will receive distributions of their allocable
share of the net proceeds thereof. We presently estimate the proceeds of the
Access Sale, the Cumberland Sale and the Missouri Sale will total
approximately $11,148,400 in the aggregate. We will receive approximately
$650,200 in repayment of deferred management fees owed to us and our
affiliates by Enstar 5B. In addition, we will receive approximately
$1,283,900 in repayment of other obligations owed to us by Enstar 5B. For
more information, please see "Special Factors -- Use of Proceeds and Cash
Distributions" on pages 48-50 and "-- Conflicts of Interest" on page 30.
Q: WHAT ARE THE DISADVANTAGES TO ENSTAR 5B, THE UNITHOLDERS AND THE
GENERAL PARTNERS OF COMPLETING THE LIQUIDATION PLAN?
A: The primary disadvantage to Enstar 5B, the unitholders, the corporate
general partner and the individual general partner is that they will not
benefit from possible improvements in economic and market conditions, if
any, which might produce increased revenues and operating income for the
joint venture and possibly increase the sale price of the system in the
future. This risk exists regardless of whether the
- 11 -
system is sold to Access, Cumberland or Telecommunications, or to another
party. For more information, please see "Special Factors -- Disadvantages of
the Liquidation Plan" on page 50, "-- Effects of the Transaction -- On
Enstar 5B" on pages 21-22, and "-- Effects of the Transaction -- On the
Unitholders" on page 22.
Q: WHAT ARE THE CONSEQUENCES TO ENSTAR 5B, THE UNITHOLDERS AND THE
GENERAL PARTNERS IF THE LIQUIDATION PLAN IS NOT CONSUMMATED?
A: If the Liquidation Plan is not completed, Enstar 5B will continue
to own and operate, through its interest in the joint venture, the entire
system for an indefinite period of time. We cannot assure you that Enstar 5B
ever will be in a position to make any further distributions to the
unitholders. Further, if the Liquidation Plan is not approved, we believe
the system will continue to face significant competition, and will lose
subscribers at an accelerated rate. In our view, unless the joint venture
makes substantial investments, at an estimated cost of approximately $20.6
million to $24.8 million, to upgrade the system's plant in order to deploy
broadband technology, the system will not be able to offer the quality and
quantity of services that will be needed for the joint venture to compete in
its markets. Further, we believe that even if those investments were made,
the joint venture would not be able to continue to operate profitably or to
recoup those costs within the remaining terms of its key existing
franchises, which could be lost at any time. The inability of the joint
venture to operate profitably would prevent Enstar 5B from continuing its
operations. We also cannot assure you that a future sale of the system would
be on terms equal to or more favorable than those offered by Access,
Cumberland and Telecommunications. For more information, please see "Special
Factors -- Consequences of Failure to Approve the Liquidation Plan" on pages
50-51; "-- Effects of the Transaction -- On Enstar 5B" on pages 21-22; and
"-- Effects of the Transaction -- On the Unitholders" on pages 21-22.
Q: WHEN DO YOU EXPECT THE LIQUIDATION PLAN TO BE COMPLETED?
A: We are working towards completing the Access Sale, the Cumberland Sale,
the Missouri Sale and the other components of the Liquidation Plan as
quickly as possible. The partnership agreement of the joint venture requires
the approval of both general partners, Enstar 5B and Enstar 5A, in order for
the Access Sale, the Cumberland Sale, the Missouri Sale and the Joint
Venture Liquidation to occur. Therefore, the Liquidation Plan cannot be
completed unless those transactions also are approved by a
majority-in-interest of the limited partners of Enstar 5A. We are in the
process of seeking the approval of a majority-in-interest of the limited
partners of Enstar 5A. Although we cannot predict exactly when these
approvals will be received, we hope to complete the Access Sale, the
Cumberland Sale, the Missouri Sale and the Liquidation Plan on or before
June 30, 2003. For more information, please see "Special Factors -- The
Access Purchase Agreement" on pages 31-36, "--The Cumberland Purchase
Agreement" on pages 36-42, "--The Telecommunications Purchase Agreement" on
pages 42-48 and "Approval of the Liquidation Plan by Enstar 5A" on page 51.
Q: WILL I OWE ANY FEDERAL INCOME TAXES AS A RESULT OF THE LIQUIDATION
PLAN?
A: In general, you will recognize a gain or loss for federal income tax
purposes as a result of the Liquidation Plan. TAX MATTERS ARE VERY
COMPLICATED AND THE TAX CONSEQUENCES TO YOU OF THE LIQUIDATION PLAN MAY
DEPEND ON THE FACTS OF YOUR SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISOR
TO UNDERSTAND FULLY BOTH THE FEDERAL AND STATE TAX CONSEQUENCES TO YOU OF
THE LIQUIDATION PLAN. For more information, please see "Special Factors --
Federal Income Tax Consequences of the Liquidation Plan" on pages 52-54.
- 12 -
Q: WHAT DO I DO TO VOTE MY ENSTAR 5B UNITS?
A: In order to vote your units either to approve, disapprove or abstain
from the Liquidation Plan, you must mark the appropriate box on the enclosed
consent card, sign and date the consent card and return it in the enclosed
self-addressed envelope to the soliciting agent, D.F. King & Co., Inc.,
77 Water Street, New York, New York 10005. If you sign and send the consent
card, but do not indicate your vote as to the Liquidation Plan, your consent
card will be treated as voting to APPROVE the Liquidation Plan. If you vote
to ABSTAIN as to the Liquidation Plan, the effect will be the same as if you
voted to DISAPPROVE the Liquidation Plan. If you fail to send in your
consent card, the effect will be the same as if you voted to DISAPPROVE the
Liquidation Plan. Your consent card must be received by the soliciting agent
before 5:00 p.m., New York City time, on the earlier of (1) the date on
which the consents of the holders of a majority of the units entitled to
consent are received by us or the soliciting agent; or (2) _________, 2002
(or, if we extend the Solicitation Period, at any time before 5:00 p.m., New
York City time, on the expiration date of the extended Solicitation Period).
Q: MAY I CHANGE MY VOTE AFTER I MAIL MY UNITHOLDER CONSENT CARD?
A: Yes. You may change your vote at any time before 5:00 p.m., New York
City time, on the earlier of (1) the date on which the consents of the holders
of a majority of the units entitled to consent are received by us or the
soliciting agent; or (2) , 2002 (or, if the Solicitation Period is
----------
extended by the general partner, at any time before 5:00 p.m., New York City
time, on the expiration date of the extended Solicitation Period). You can
change your vote in one of two ways. First, you can send a written notice
dated later than your consent card stating that you would like to revoke or
change your vote. Second, you can complete and submit a new consent card
dated later than your original consent card. If you choose either of these
two methods, you must submit your notice of revocation or new consent card
to the soliciting agent, D.F. King & Co., Inc., 77 Water Street, New York,
New York 10005. If you instructed a broker to vote your units, you must
follow your broker's directions for changing those instructions. TO BE
EFFECTIVE, YOUR NOTICE OF REVOCATION OR NEW CONSENT CARD MUST BE RECEIVED
BEFORE THE END OF THE SOLICITATION PERIOD OR EXTENDED SOLICITATION PERIOD,
AS THE CASE MAY BE.
Q: DO UNITHOLDERS HAVE APPRAISAL OR OTHER SIMILAR RIGHTS?
A: Under the partnership agreement and applicable state law, unitholders
are not entitled to dissenters' appraisal or other similar rights that, if they
were available, would allow unitholders who dissent from the Liquidation
Plan to receive payments of the appraised value of their units in lieu of
the liquidating distributions. We presently estimate that liquidating
distributions will aggregate approximately $119 per unit in respect of the
Access Sale, Cumberland Sale and the Missouri Sale, after estimated closing
adjustments and expenses, taxes and liquidation expenses. For more
information, please see "Special Factors -- No Appraisal Rights" on page 54.
- 13 -
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the Liquidation Plan, you should
contact:
Enstar Income/Growth Program Five-B, L.P.
c/o Enstar Communications Corporation
12405 Powerscourt Drive
St. Louis, Missouri 63131
Attention: Partnership Relations
Telephone: (314) 543-2389
If you would like additional copies of this consent solicitation
statement, or a copy of the asset purchase agreements with Access,
Cumberland or Telecommunications, or if you have questions about how to
complete and return your consent card, you should contact:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 207-2014
- 14 -
OWNERSHIP STRUCTURE CHART
The following diagram illustrates the ownership structure of the
joint venture, Enstar 5B, Enstar Communications and the other Filing
Persons. For more information, please see "Identity and Background of
Certain Persons," on pages 56-62.
----------------------------
Charter Communications, Inc.
----------------------------
|
|
|
------------------------------
Charter Communications Holding
Company, LLC
------------------------------
|
|
|
------------------- --------------------- -------------------
Limited Partners of Enstar Communications Limited Partners of
Enstar 5B Corporation Enstar 5A
------------------- --------------------- -------------------
| / \ |
| / \ |
| / \ |
99% 1/2% 1/2% 99%
Limited General General Limited
Partner Partner Partner Partner
Interest* Interest* Interest* Interest*
| / \ |
| / \ |
| / \ |
- -------------------- -------------------- --------------------
Enstar Income/Growth --------Robert T. Graff, Jr.-------- Enstar Income/Growth
Program Five-B, L.P. -------------------- Program Five-A, L.P.
- -------------------- --------------------
\ /
\ 1/2% 1/2% /
\ General General /
\ Partner Partner /
\ Interest* Interest*/
\ /
\ /
50% \ / 50%
General \ / General
Partner \ / Partner
Interest \ / Interest
---------------------------------
Enstar Cable of Cumberland Valley
---------------------------------
<FN>
- -------------
* Earnings and losses have been allocated 99% to the limited partners and
1% to the general partners of Enstar 5B and Enstar 5A. The general
partners of Enstar 5B and Enstar 5A do not own units of partnership
interests in Enstar 5B or Enstar 5A, respectively, but rather hold a
profits interest in the income, losses and distributions of the
partnership.
- 15 -
SELECTED FINANCIAL INFORMATION
The following table presents selected financial information for the
partnership and the joint venture at the dates and for the periods
indicated. The financial information as of December 31, 1997, 1998, 1999,
2000 and 2001 and for the years then ended was derived from the audited
financial statements of the partnership and the joint venture, as
applicable. The unaudited selected financial information of the partnership
and the joint venture as of and for the nine months then ended September 30,
2002 reflects all adjustments which are, in the opinion of management,
necessary for a fair presentation and of a normal recurring nature. Results
for the nine months ended September 30, 2002 do not necessarily indicate
results to be expected for the entire year. You should read this financial
information in conjunction with the financial statements of the partnership
and the joint venture, and the related notes, and "Management's Discussion
and Analysis or Plan of Operation," included in Enstar 5B's Annual Report on
Form 10-K for the year ended December 31, 2001 and Quarterly Report on Form
10-Q for the quarter ended September 30, 2002, filed with the Securities and
Exchange Commission.
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
Nine Months
Ended Year Ended December 31,
September -----------------------------------------------------------------------------
30, 2002 2001 2000 1999 1998 1997
----------- ---------- ---------- ---------- --------- ----------
(Unaudited)
STATEMENT OF
OPERATIONS DATA:
Operating expenses $ 48,300 $ 61,000 $ 102,400 $ 41,600 $ 23,300 $ 29,900
Interest expense -- -- -- 200 2,500 2,900
Equity in net income
(loss) of joint
venture 153,200 62,200 285,600 199,200 272,000 (41,100)
Net income (loss) 104,900 1,200 183,200 157,400 246,200 (73,900)
Net income (loss) per
unit of limited
partnership interest $ 1.74 $ 0.02 $ 3.03 $ 2.60 $ 4.07 $ (1.22)
OTHER OPERATING DATA:
Net cash used in
operating activities $ (18,500) $ (3,500) $ (14,700) $ (44,900) $ (31,700) $ (31,100)
Net cash from
financing activities 75,000 -- -- 64,000 28,500 30,000
BALANCE SHEET DATA
(AT PERIOD END):
Total assets $5,085,200 $4,950,500 $4,891,800 $4,620,900 $4,446,600 $4,226,300
General Partners'
deficit 75,000 76,000 76,000 77,800 79,400 81,900
Limited Partners'
capital 4,979,400 4,875,500 4,874,300 4,692,900 4,537,100 4,293,400
- 16 -
ENSTAR CABLE OF CUMBERLAND VALLEY
Nine Months
Ended Year Ended December 31,
September -----------------------------------------------------------------------------
30, 2002 2001 2000 1999 1998 1997
----------- ---------- ---------- ---------- --------- ----------
(Unaudited)
STATEMENT OF
OPERATIONS DATA:
Revenues $ 4,779,700 $ 6,587,400 $ 6,539,500 $ 6,780,200 $ 7,075,400 $ 7,217,900
Operating expenses 3,213,200 4,583,700 4,116,600 4,413,500 4,018,600 4,127,100
Depreciation and
amortization 1,307,800 1,897,200 1,841,400 1,824,500 2,085,200 2,672,700
Operating income 258,700 106,500 581,500 542,200 971,600 418,100
Interest income 47,800 90,200 43,900 37,600 45,300 78,300
Interest expense -- 3,400 45,200 181,400 257,300 578,600
Casualty loss -- -- -- -- 215,600 --
Other expense -- 68,900 9,000 -- -- --
Net income 306,500 124,400 571,200 398,400 544,000 (82,200)
Distributions paid
to venturers -- -- -- 128,000 57,000 60,000
OTHER OPERATING DATA:
Net cash from
operating activities $ 2,710,000 $ 2,924,500 $ 1,820,100 $ 2,162,800 $ 2,890,500 $ 2,939,300
Net cash used in
investing activities (1,772,700) (856,600) (567,800) (570,100) (1,794,300) (622,200)
Net cash used in
financing activities (150,100) -- -- (1,128,000) (1,661,800) (3,661,000)
EBITDA (1)
(unaudited) 1,566,500 1,934,800 2,413,900 2,366,700 3,056,800 3,090,800
EBITDA as a percentage
of revenues
(unaudited) 32.8% 29.4% 36.9% 34.9% 43.2% 42.8%
Total debt to EBITDA
(unaudited) -- -- -- -- 0.3x 0.8x
Capital expenditures 1,770,200 818,400 547,600 558,600 1,768,700 610,800
BALANCE SHEET DATA (AT
PERIOD END)
Total assets $12,596,100 $11,317,400 $10,655,600 $10,521,800 $11,229,800 $12,392,100
Total debt -- -- -- -- 1,000,000 2,600,000
Venturers' capital 10,055,300 9,898,800 9,774,400 9,203,200 8,932,800 8,445,800
<FN>
- -------------
(1) EBITDA represents earnings before interest, income taxes, depreciation
and amortization. EBITDA is presented because it is widely accepted
financial indicator of a cable company's ability to service
indebtedness. However, EBITDA should not be considered as an
alternative to income from operations or to cash flows from operating,
investing or financing activities, as determined in accordance with
generally accepted accounting principles (GAAP). EBITDA should also not
be construed as an indication of a company's operating performance or
as a measure of liquidity. In addition, because EBITDA may not be
calculated consistently by all companies, the presentation here in may
not be comparable to other similarly titled measures of other
companies. Management's discretionary use of funds depicted by EBITDA
may be limited by working capital, debt service and capital expenditure
requirements and by restrictions related to legal requirements,
commitments and uncertainties.
- 17 -
SPECIAL FACTORS
GENERAL
Enstar 5B was formed in September 1986 to acquire, construct,
improve, develop and operate cable television systems in various rural
locations in the United States. The partnership was formed with an initial
capital contribution of $1,100 comprising $1,000 from the corporate general
partner and $100 from the initial limited partner. Sale of interests in the
partnership began in January 1987, and the initial closing took place in
August 1987. Limited partnership units were sold at a price of $250 per
unit. The partnership continued to raise capital until $15,000,000 (the
offering maximum) was raised in December 1987. In November 1999, the
corporate general partner became an indirect controlled subsidiary of
Charter Communications, Inc., the nation's fourth largest cable operator,
serving approximately 6.7 million subscribers. The corporate general partner
is responsible for the day-to-day management of Enstar 5B and its
operations.
Through the joint venture, Enstar 5B is currently engaged in the
ownership and operation of cable television systems serving an aggregate of
approximately 13,300 basic subscribers at September 30, 2002 in and around
the communities of Monticello, Whitley City, Liberty, Cumberland,
Greensburg, Williamsburg, Hustonville/Moreland and Russell Springs,
Kentucky, Jellico, Tennessee and Pomme de Terre, Missouri.
All of Enstar 5B's cable television business operations are
conducted through the partnership's participation as a co-general partner
with a 50% ownership interest in the joint venture. The other general
partner in the joint venture, Enstar 5A, also is a limited partnership
sponsored by the corporate general partner. Limited partnership units of
Enstar 5A were sold simultaneously with the offering of units in the
partnership, raising capital of $15,000,000 (the offering maximum) in July
1987. The joint venture was formed in order to enable each of its partners
to participate in the acquisition and ownership of a more diverse pool of
systems by combining certain of its financial resources.
BACKGROUND, PURPOSE AND REASONS FOR THE ACCESS SALE, THE CUMBERLAND SALE AND
THE MISSOURI SALE
PURPOSE
Enstar 5B's and the corporate general partner's purpose in
proposing the Liquidation Plan is to avoid (1) the likelihood that unless
substantial and highly costly technological improvements and upgrades are
made to the system's plant, the joint venture will be unable to compete
effectively in its market and will continue to lose subscribers to its
direct broadcast satellite, or DBS, competitors; (2) the likelihood that if
the joint venture were to make the significant expenditures needed to
compete effectively with DBS providers, its future revenues would not be
sufficient to allow the joint venture to continue to operate profitably; and
(3) the risk that the joint venture might not have sufficient subscriber
loyalty to retain (let alone expand) its subscriber base in the face of the
existing and expected future competition -- in particular DBS.
REASONS
We believe that the capital expenditures for upgrades to the
system's plant that would be necessary to enable the joint venture to retain
subscribers and offer services comparable or superior to those now offered
by its competitors would prevent the joint venture -- as a small, rural,
"stand-alone," cable system -- from operating profitably, under its
franchises that cover the largest numbers of subscribers (namely, in
- 18 -
its McCreary County, Monticello and Wayne County, Kentucky franchises, which
are currently expired, and its Whitley County, Kentucky service area, for
which no franchise was issued). The communities with expired franchise
agreements require additional programming in order to renew the expired
franchises, which can only be provided by upgrading the systems. Our
inability to upgrade these systems due to financial constraints impedes our
ability to renew these franchises. Although we continue to operate under the
expired franchise agreements in these communities, we could lose these
franchises at any time.
The joint venture's system faces significant competition from DBS
operators. In the geographic areas served by the system, these competing DBS
operators currently offer, on an all-digital basis, more programming
channels, features and services than does the partnership's system. The
system has steadily lost subscribers over the past several years, declining
from approximately 17,000 basic subscribers at December 31, 1997, to
approximately 13,300 basic subscribers at September 30, 2002, which we
believe is largely attributable to competition from DBS. The DBS operators
with which Enstar 5B competes offer over 200 channels of digital
programming. In contrast, the Enstar system currently offers only 36 to 40
channels of analog programming.
As we have experienced, and as is widely recognized in the cable
and telecommunications industry, customers increasingly are purchasing high
quality video programming, high-speed Internet access and, in some markets,
telephone service as bundled services from a single provider. This trend is
being driven by rapid advances in so-called "broadband" technology, which
generally refers to the capacity of the cable infrastructure to deliver
video, voice and high-speed data transmission. These recent advances in
broadband technology enable traditional cable television providers, as well
as DBS operators, telephone and other utilities, and emerging wireline and
wireless competitors, to provide a single source of digital and interactive
video programming on hundreds of channels, Internet access and telephone
service.
DBS operators, which often can provide over 200 digital programming
channels and are now acquiring two-way capability, are in our view the most
formidable competitors to traditional cable operators, and in particular, to
Enstar 5B. For video services, DBS has existed as an alternative to cable
television for many years and, unlike providers of certain other emerging
technologies, has become a viable and successful competitor to cable
nationwide. The National Cable and Telecommunications Association reported
that in March 2001, approximately 23% of multichannel video subscribers
obtained service from a source other than a traditional cable operator, and
that nearly 18% of those subscribers obtained service from DBS operators.
DBS's market share is attributable to a number of factors. For
example, because satellite transmission is digital, DBS has always offered
digital programming, with picture and sound quality superior to analog cable
service, and far more channels than cable. Traditional cable operators, in
contrast, have typically needed to upgrade or rebuild their systems, often
at substantial cost, in order to add the bandwidth necessary to carry
digital and interactive programming. Also, according to the Federal
Communications Commission, former drawbacks to DBS are being remedied. For
example, DBS operators now transmit local broadcast stations, which in the
past were not available through DBS. Additionally, in an effort to compete
with cable, DBS operators have generally decreased their once high equipment
and installation charges, and monthly DBS subscription rates are typically
lower than cable rates.
For these reasons, and particularly the fact that local DBS
operators offer more services than does Enstar 5B's system, we expect that
the system will continue to face significant competition from DBS, and may
continue to lose customers. Moreover, we do not expect Enstar 5B's
competitive position to improve, particularly since we estimate the cost of
upgrading the system to two-way capability in order to be able to offer
high-speed internet service or video services comparable to those available
from DBS would be
- 19 -
approximately $20.6 million (for an upgrade to 550 megahertz (MHz) capacity)
to $24.8 million (for an upgrade to 870 MHz capacity).
ALTERNATIVES TO LIQUIDATION PLAN NOT PRUDENT
In addition to the Liquidation Plan, the corporate general partner
considered the following alternatives when reaching its conclusion that the
Liquidation Plan would be in the unitholders' best interest:
CONTINUATION OF THE OWNERSHIP AND OPERATION OF ENSTAR 5B, THE JOINT
VENTURE AND OF THE SYSTEM. This alternative is being made available to the
unitholders through this consent solicitation statement. If the unitholders
desire to continue the partnership's ownership and the corporate general
partner's operation of the joint venture and the system they may vote to
"disapprove" the Liquidation Plan. In our view, the continued ownership and
operation of the system could be on either of two bases: (a) the continued
operation of the system in its present condition, in which case, for the
reasons discussed above, we do not believe the joint venture would be able
to compete with DBS and other more technologically advanced providers and,
accordingly, would continue to lose subscribers; or (b) the investment of
between approximately $20.6 million to $24.8 million for the system upgrades
we estimate would be necessary for the partnership to offer services
comparable to those of its DBS and other significant competitors. However,
as noted above, based on our projections, and even after taking into account
the additional services the system could offer as a result of undertaking
those upgrades and thereby obtaining two-way transmission capability (such
as interactive programming and high-speed Internet access), the joint
venture would not generate sufficient revenues to both make these additional
investments and continue to operate profitably. This is largely due to the
joint venture's relatively small and declining customer base and the lack of
population density in its service area, which limits the potential for
customer growth even if enhanced services are offered. In short, we do not
believe that the partnership would recoup these costs within the lives of
its key franchises, which we could lose at any time as franchises agreements
expire and communities explore new alternatives to provide their residents
with advanced services. We cannot guarantee you that these or any of the
joint venture's existing franchises will be renewed. If the joint venture
were to make these substantial investments, which we do not believe could be
financed by operating revenues or by third party sources on a basis
favorable to the joint venture and its partners, the partnership would
likely cease to operate at a profit.
SALE OF THE ENSTAR SYSTEM TO ANOTHER THIRD PARTY. Based on the
other bids received in the "auction" for the system, the corporate general
partner has concluded that the proposed sales to Access, Cumberland and
Telecommunications represent the best transactions obtainable presently and,
in all likelihood, for the foreseeable future. For this reason, it is the
corporate general partner's belief that a sale of the system to another
third party would almost certainly be at a lower total price than offered by
Access, Cumberland and Telecommunications and, therefore, in light of the
offers by Access, Cumberland and Telecommunications, not financially
advantageous to the unitholders. See "--Best Available Transaction--Sale
Process" on pages 23-25.
Accordingly, in view of the sale prices offered by Access,
Cumberland and Telecommunications and the liquidating distributions that we
expect to result from the Liquidation Plan, we believe that the alternatives
to the Liquidation Plan are not prudent, and that consenting to the
Liquidation Plan would be more favorable to the unitholders than would be
investing in substantial upgrades to the system, continuing to operate the
system in its present condition or selling the system to another third
party.
- 20 -
ABILITY TO SELL UNITS
The units are not listed on any national securities exchange, nor
are they quoted on any inter-dealer quotation system, and there is no
established trading market for them. Because of this, the liquidity of a
unitholder's investment in Enstar 5B has been severely limited. Approving
the Liquidation Plan will permit us to make distributions to the unitholders
that we believe could not otherwise be made. If the Liquidation Plan is
approved, we expect that the liquidating distributions will aggregate
approximately $119 per unit in respect of the Access Sale, the Cumberland
Sale and the Missouri Sale, after estimated closing adjustments, taxes and
closing and liquidation expenses.
EFFECTS OF THE TRANSACTION
ON ENSTAR 5B
The completion of the Liquidation Plan will, after repayment of
Enstar 5B's debts and obligations, result in the distribution of the
partnership's remaining net assets to the unitholders and the general
partners ratably in proportion to their respective percentage interests in
the partnership, and, thereafter, the winding-up and legal dissolution of
Enstar 5B. Consequently, the unitholders' equity interest in Enstar 5B will
have been extinguished in exchange for the liquidating distributions, and
Enstar 5B will thereafter not be a reporting company under the Securities
Exchange Act of 1934, as amended. This means, among other things, that
Enstar 5B will no longer file, and the unitholders will no longer receive
annual reports on Form 10-K, quarterly reports on Form 10-Q or corresponding
reports on Form 8-K. As shown in the following table, these filings have
cost the partnership an average of $40,700 per year.
1999 2000 2001 TOTAL
---- ---- ---- -----
Audit Fees..................................... $27,700 $49,700 $24,700 $102,100
Printing and Proxy Solicitation Fees........... 6,700 6,700 6,700 20,000
------- ------- ------- --------
Total.......................................... $34,400 $56,400 $31,400 $122,200
Average over 3 years........................... $ 40,700
For more information, please see "Liquidation Plan Summary -- Dissolution
and Liquidation of Enstar 5B" on pages 8-9; "Questions and Answers About the
Liquidation Plan -- Why is Enstar 5B Dissolving?" on page 11; "-- What Will
I Receive as a Result of the Liquidation Plan?" on page 11; "-- What are the
Disadvantages to Enstar 5B, the Unitholders and the General Partners of
Completing the Liquidation Plan?" on pages 11-12; "-- What are the
Consequences to Enstar 5B, the Unitholders and the General Partners if the
Liquidation Plan is Not Consummated?" on page 12; "Selected Financial
Information" on pages 16-17; "Special Factors -- Use of Proceeds and Cash
Distributions" on pages 48-51; "-- Disadvantages of the Liquidation Plan" on
page 50; "-- Consequences of Failure to Approve the Liquidation Plan" on
pages 50-51; and "-- Liquidation of Enstar 5B" on pages 51-52.
The disadvantages to Enstar 5B of completing these transactions
will be as set forth under "Questions and Answers About the Liquidation Plan
- -- What are the Disadvantages to Enstar 5B, the Unitholders and the General
Partners of Completing the Liquidation Plan?" on page 11; and "Special
Factors -- Disadvantages of the Liquidation Plan" on page 50.
If these transactions are not completed, the effects on Enstar 5B
will be as set forth under "Special Factors -- Consequences of Failure to
Approve the Liquidation Plan" on pages 50-51; and "Questions and
- 21 -
Answers About the Liquidation Plan -- What are the Consequences to Enstar
5B, the Unitholders and the General Partners if the Liquidation Plan is Not
Consummated?" on page 12.
ON THE UNITHOLDERS
The effects on the unitholders of completing the Liquidation Plan
will be the receipt, upon completion of the Liquidation Plan, of liquidating
distributions totaling approximately $119 per unit in respect of the Access
Sale, the Cumberland Sale and the Missouri Sale, before applicable taxes.
Completion of the Liquidation Plan will, therefore, extinguish the
unitholders' interest in the partnership and the system. Depending upon
their individual circumstances, unitholders may owe federal and/or state
income taxes in respect of those distributions. For more information, please
see "-- Federal Income Tax Consequences of the Liquidation Plan" on pages
52-54.
The disadvantages to the unitholders of completing the Liquidation
Plan are discussed under "-- Disadvantages of the Liquidation Plan" on page
50.
The effects on the unitholders of not completing the Liquidation
Plan are discussed under "Questions and Answers About the Liquidation Plan
- -- What are the Consequences to Enstar 5B, the Unitholders and the General
Partners if the Liquidation Plan is Not Consummated?" on page 12; and
"Special Factors -- Consequences of Failure to Approve the Liquidation Plan"
on pages 50-51.
ON THE JOINT VENTURE
The completion of the Liquidation Plan will, after repayment of the
joint venture's debts and obligations, result in the distribution of the
partnership's remaining net assets equally to Enstar 5B and Enstar 5A, as
the general partners, and, thereafter, the winding-up and legal dissolution
of the joint venture. Consequently, the equity interest in the joint venture
held by Enstar 5B will have been extinguished in exchange for the
liquidating distributions, and its interest in the joint venture, Enstar
5B's principal asset, will be reduced to cash.
For more information, please see "Liquidation Plan Summary --
Dissolution and Liquidation of the Joint Venture" on page 8; "Questions and
Answers About the Liquidation Plan -- Why is the Joint Venture Dissolving?"
on page 11; "-- What Will I Receive as a Result of the Liquidation Plan?" on
page 11; "-- What are the Disadvantages to Enstar 5B, the Unitholders and
the General Partners of Completing the Liquidation Plan?" on pages 11-12;
"-- What are the Consequences to Enstar 5B, the Unitholders and the General
Partners if the Liquidation Plan is Not Consummated?" on page 12; "Selected
Financial Information" on pages 16-17; "Special Factors -- Use of Proceeds
and Cash Distributions" on pages 48-50; "-- Disadvantages of the Liquidation
Plan" on page 50; "-- Consequences of Failure to Approve the Liquidation
Plan" on pages 50-51; and "-- Liquidation of the Joint Venture" on page 51.
The disadvantages to Enstar 5B of completing these transactions
will be as set forth under "Questions and Answers About the Liquidation Plan
- -- What are the Disadvantages to Enstar 5B, the Unitholders and the General
Partners of Completing the Liquidation Plan?" on pages 11-12; and "Special
Factors -- Disadvantages of the Liquidation Plan" on page 50.
If these transactions are not completed, the effects on Enstar 5B
will be as set forth under "Special Factors -- Consequences of Failure to
Approve the Liquidation Plan" on pages 50-51; and "Questions and Answers
About the Liquidation Plan -- What are the Consequences to Enstar 5B, the
Unitholders and the General Partners if the Liquidation Plan is Not
Consummated?" on page 12.
- 22 -
ON THE GENERAL PARTNER
The principal advantages to the corporate general partner of
completing the Access Sale, the Cumberland Sale, the Missouri Sale and the
Liquidation Plan are its receipt of an estimated liquidating distribution of
approximately $71,745 in respect of the Access Sale, the Cumberland Sale and
the Missouri Sale, and avoiding the risks of continued operation of the
system and managerial responsibility for (1) the estimated investment of
$20.6 million to $24.8 million for required comprehensive system upgrades to
address competitive disadvantages of the current system, including the need
to obtain the financing that would be required, (2) coping with the
uncertainty of whether such comprehensive upgrades would improve the
system's competitiveness or operating performance, (3) responding to
increasing competition from technologically advanced competitors, (4)
addressing the uncertain effects of future legislation and regulations, and
(5) responding to continuing rate pressure from DBS operators.
The principal disadvantages to the corporate general partner of
completing the Access Sale, the Cumberland Sale, the Missouri Sale and the
Liquidation Plan are the incurring of the above risks as well as the
disadvantages discussed under "-- Disadvantages of the Liquidation Plan" on
page 50.
BEST AVAILABLE TRANSACTION
SALE PROCESS
We and the other Filing Persons believe that the process through
which offers were solicited for the Enstar system acted as a comprehensive
"market check" with respect to the sale price and other terms offered. A
"market check" is a process through which a seller of assets or equity
interests canvasses or otherwise probes the field of prospective purchasers
for the purpose of soliciting and obtaining the highest available purchase
price and most favorable terms then obtainable from a willing purchaser.
In December 1999, the corporate general partner entered into an
agreement with Daniels & Associates, L.P. ("Daniels" or the "broker"), a
prominent business broker with extensive expertise in the cable and
telecommunications industry, to market the partnership's cable television
systems, as well as the cable systems of 13 other affiliated Enstar
partnerships, to third parties. Over a period of nine months, the broker
solicited offers to purchase the joint venture's cable television systems
along with the systems of those other affiliated partnerships. Based on its
knowledge of the telecommunications industry, cable and telecommunications
companies, and its knowledge and experience of those companies' strategic
plans and interests, during this period Daniels contacted 45 prospective
purchasers that it believed represented virtually all the parties which then
would both be potentially interested in such an acquisition and financially
capable of completing it, and, based on their responses to those contacts,
sent written evaluation materials to 21 of them.
Four parties conducted due diligence, resulting in an offer from an
affiliate of Mediacom Communications Corporation to purchase certain of the
cable systems of nine of those affiliated partnerships, including the Enstar
system. Under this original offer, Mediacom would have paid to the joint
venture a sale price of approximately $27.7 million, subject to various
closing and other adjustments. This was a price of $1,900 per subscriber,
based on the number of subscribers served by the system at that time.
However, in June 2000, after several weeks of negotiations and
additional due diligence, but before a definitive purchase agreement had
been signed, Mediacom orally made a revised offer that substantially reduced
the sale price. In response, Daniels again requested written offers from all
parties it was aware remained interested in acquiring the systems. Only
Mediacom and an affiliate of Gans Multimedia Partnership (none of which are
affiliates of any of the Filing Persons) submitted written offers in
response
- 23 -
to that request. Mediacom's offered sale price, though higher than
its oral offer, was substantially lower than its original offer, and the
portion of the aggregate sale price payable to the joint venture would have
been reduced to approximately $21.8 million, all of which would have been
allocable to the joint venture's system. The Gans affiliate, however,
submitted a written bid of approximately $101,000,000 for the cable systems
of all fourteen Enstar partnerships, of which approximately $25.5 million
would have been payable to the joint venture for the system -- substantially
higher than Mediacom's revised written offer. The Gans bid also contained
terms that the corporate general partner believed were, overall, more
favorable to the unitholders and more conducive to completing the
transaction than were the terms of Mediacom's offer. No other party bid on
the systems at that time, and the parties other than Mediacom that had
originally submitted bids had by then withdrawn their bids.
In late July 2000, after commencing to negotiate a purchase
agreement with Gans, the corporate general partner was notified that the
broker's New York City office had in the past and currently was representing
Gans Multimedia Partnership, the proposed buyer's parent company, in certain
equity and mergers and acquisitions financing matters. When the corporate
general partner was notified of this potential conflict of interest, it
promptly advised all bidders for the systems, who were allowed to withdraw
or re-bid. Only Gans re-bid at that time, resubmitting its original bid.
Subsequently, in August 2000, Gans, the joint venture and the other
affiliated sellers entered into a purchase agreement, under which the
portion of the purchase price allocated to the joint venture for the system
was approximately $25.5 million, or approximately $2,000 per subscriber.
In February 2001, the corporate general partner and Gans began
negotiating an amendment to the Gans purchase agreement that the parties
believed was necessary in order for all parties to satisfy their respective
closing conditions. However, in April 2001, following a series of
discussions and meetings, negotiations between the general partner and Gans
reached an impasse, which caused them to determine that they would not be
able to agree on those amendments. As a result of this, and of Gans'
inability to arrange sufficient financing to close the acquisition, the
parties agreed to terminate the purchase agreement.
The broker then continued to market the joint venture's and the
other affiliated partnerships' cable systems, contacting approximately 23
prospective purchasers (based on Daniels' and the corporate general
partner's knowledge of the industry) and sending evaluation materials to
approximately 8 of them. The broker solicited offers through a bid process.
As a result of this process, none of the bidders knew the contents or amount
of any other bid. This process produced Access, Cumberland and
Telecommunications as the parties that offered the best transactions for the
sale of the joint venture's system.
We negotiated with Access, Cumberland and Telecommunications for
the sale of the Enstar system on an arm's-length basis. The joint venture
entered into asset purchase agreements with Access, Cumberland and
Telecommunications for the sale of portions of the joint venture's assets.
The asset purchase agreement with Access, dated as of September 30, 2002,
covers the sale to Access of those portions of the system located in
Monticello, Whitley City, Liberty, Cumberland, Greensburg, Williamsburg,
Hustonville/Moreland, Kentucky and Jellico, Tennessee, for an aggregate sale
price of $6,938,400, subject to closing sale price adjustments, an escrow
for indemnity claims and transaction costs. The asset purchase agreement
with Cumberland, dated as of October 8, 2002, covers the sale to Cumberland
of those portions of the system located in Russell Springs, Jamestown and
Russell County, Kentucky, for an aggregate sale price of $3,707,200, subject
to closing sale price adjustments, an escrow for indemnity claims and
transaction costs. The asset purchase agreement with Telecommunications,
dated as of November 8, 2002, covers the sale to Telecommunications of cable
television systems owned by 12 different limited partnerships managed by the
corporate general partner, including that portion of the Enstar system
located in Pomme de Terre, Missouri. Telecommunications will purchase the
portion of the Enstar
- 24 -
system located in Pomme de Terre, Missouri for a sale price of $502,800,
subject to closing sale price adjustments, an escrow for indemnity claims
and transaction costs. The sale prices offered by Access, Cumberland and
Telecommunications for the system represent $650, $1,400 and $599 per
subscriber, respectively. Collectively, we estimate that the Access Sale,
the Cumberland Sale and the Telecommunications Sale will produce $11,148,400
in cash for the joint venture at closing (subject to the escrows and closing
adjustments).
The market for cable television systems peaked in 2000, and has
been on a steady decline since that point. This is best evidenced by the
significant slide in the value of publicly traded cable stocks that have
declined 21% to 99% from August 2000 to November 2002. This decline in value
was due to a number of factors, including a decline in the overall stock
market, increased competition from DBS operators and the resulting decrease
in the number of cable subscribers, a tightened market for debt for cable
television acquisitions, the accounting scandal at cable operator Adelphia
Communications Corporation, and poorer than expecting operating results from
a number of the public cable companies.
These issues affected all cable television operators and, in
particular, operators of rural cable systems due to increased competition
from DBS, as evidenced by the loss of significant numbers of subscribers,
and thus the loss of revenues and operating cash flow. Two of the largest
operators of rural cable systems, publicly traded Classic Cable and
privately held Galaxy Telecom, filed for Chapter 11 bankruptcy protection in
late 2001.
We and the other Filing Persons believe that the "auction" process
conducted by Daniels and described above constituted a comprehensive, active
"market check" with respect to the sale price and other terms of the sale of
the Enstar system. The broker contacted the parties that it believed
constituted virtually all prospective purchasers of those cable systems and
required all interested parties to submit bids, without knowing the
identities of the other bidders or the terms of the other bids. This process
enabled the broker to canvass a representative universe consisting of a
large number of actual, prospective buyers and to objectively determine the
range of current market values of the systems, as given by willing
purchasers. In fact, we and the other Filing Persons believe that the
"auction" process conducted by the broker is the most effective and accurate
means for ensuring that the agreements with Access, Cumberland and
Telecommunications are the highest prices and represent the best
transactions currently available in the market from a willing buyer.
CONSENT PROCEDURES AND PROCEDURAL SAFEGUARDS
The Liquidation Plan can take place only if it is consented to by a
majority-in-interest of the unitholders, none of whom is an affiliate of
Enstar 5B, the corporate general partner, the individual general partner,
Access, Cumberland, Telecommunications or any of the other Filing Persons.
If a majority-in-interest of the unitholders vote to disapprove the
Liquidation Plan (either affirmatively, by failing to vote, or by voting to
"abstain"), the Liquidation Plan will not be consummated.
The corporate general partner did not retain an unaffiliated
representative to act on behalf of the unitholders in negotiating the
purchase agreements with Access, Cumberland or Telecommunications. However,
all three purchase agreements were negotiated by the corporate general
partner on an arm's-length basis with three unaffiliated prospective
purchasers.
- 25 -
DETERMINATION OF THE SALE PRICE
o GENERAL. The offers by Access, Cumberland and Telecommunications
of a combined sale price of approximately $11,148,400, in cash, for the Enstar
system were the best offers received in respect of the system in the most
recent bid solicitation.
The valuation of a cable television system for purposes of a sale
is a highly subjective process, but the sale price will ultimately reflect
the future value the purchaser expects to receive from operating the system,
offset by future expenditures expected to be required for the systems to
remain technologically current and to satisfy franchising authorities.
Numerous factors affect this valuation, the most important among them being
the physical condition and technical capability of the system; the presence
or absence of competitors; the density of households and growth potential of
the customer base; and the length of the remaining terms of local franchises
and the likelihood that, upon expiration, the franchises will be renewed or
extended. Based on our business experience in the cable television industry,
we and the other Filing Persons believe that when the Enstar system is
measured against these factors, the sale prices offered by Access,
Cumberland and Telecommunications, both individually and on a combined
basis, are commercially reasonable for small systems with demographics and
technological capabilities comparable to the Enstar system.
o CURRENT MARKET PRICES AND UNSOLICITED OFFERS FOR UNITS. Neither
the corporate general partner nor the other Filing Persons based its conclusion
that the sale prices offered by Access, Cumberland and Telecommunications
for the Enstar system are the best transactions available to the
unaffiliated unitholders on a comparison of either the sale prices or the
anticipated liquidating distributions to historical or current market prices
for units, or to recent unsolicited offers for units. This is principally
because neither the general partner nor any of the other Filing Persons
believe that the available, published data on secondary market sales of
units, or most recent unsolicited, third-party offers for units, provide a
reliable or appropriate basis for valuing the system.
First, there is not and has not been an established market for the
units, either on a national securities exchange, an inter-dealer quotation
system, over-the-counter or otherwise. Trades in the units have been limited
to sporadic transactions in an unregulated, informal secondary market. It is
not known whether these trades have been on a fully arm's-length basis,
whether the buyers and sellers have each had access to all material
information regarding the partnership, its financial condition, the value of
its assets and its prospects for the future, or whether such trades have
fairly reflected the then-current market value of Enstar 5B and joint
venture's assets.
Second, recent unsolicited offers to purchase units have been made
only by a few institutional holders whose intention is believed by the
corporate general partner and the other Filing Persons to be to purchase
units at a significant discount with a view toward selling them (or their
asset equivalent) at a substantially higher price in a subsequent sale or
liquidation of the partnership. In light of this, neither the corporate
general partner nor any of the other Filing Persons is of the view that the
prices offered by these potential buyers of units are fairly indicative of
any accurate valuation of the system or appropriate to any evaluation of the
sale prices offered for the Enstar system.
o APPRAISALS AND OPINIONS. We did not obtain any appraisals, reports
or opinions regarding the procedural or substantive fairness to the unitholders
of the sale prices offered by Access, Cumberland and Telecommunications for
the system or the other terms of the Access Sale, the Cumberland Sale or the
Missouri Sale. We and the other Filing Persons believe that the process
through which offers were solicited for the system, together with the facts
that the purchase agreements were negotiated on an arm's-length basis with
two unaffiliated prospective purchasers; the bids offered by Access,
Cumberland and
- 26 -
Telecommunications were the best bids received for the system during the
most recent bidding process; provide a sufficient basis for the corporate
general partner's and the other Filings Persons' beliefs that the Access
Sale, the Cumberland Sale and the Missouri Sale, are the best transactions
available to the unitholders.
o DISCOUNTED CASH FLOW VALUE; GOING CONCERN VALUE. Neither the
general partner nor any of the other Filing Persons evaluated either the
sale price offered by Access, Cumberland or Telecommunications, or the
anticipated liquidating distributions, on a discounted cash flow or "going
concern" basis, because current market conditions, including the competition
faced by the joint venture and trends in the telecommunications industry
generally, are likely to have a substantial adverse effect on the joint
venture's ability to maintain its current revenue levels and profitability
for the foreseeable future. For this reason, we and the other Filing Persons
concluded that valuations that assume a continued, longer term viability or
cash flow stream may not be especially predictive with respect to the joint
venture and Enstar 5B. As a result, the general partner and the other Filing
Persons do not believe that a discounted cash flow or "going concern"
valuation of Enstar 5B and the joint venture provide an appropriate basis
against which to compare the sale prices offered by Access and Cumberland.
o OTHER FACTORS. In addition to being, in our opinion, the buyers
making the best offers and the best resulting transactions for the sale of
the system, the terms proposed by Access, Cumberland and Telecommunications
were, in the corporate general partner's and the other Filing Persons'
opinion, favorable, overall, to the unitholders. Specifically, as set forth
in the purchase agreements with Access, Cumberland and Telecommunications:
o there is no financing contingency that would make either
Access's, Cumberland's or Telecommunications' obligations
contingent upon obtaining adequate financing to complete
the purchase;
o Access's and Cumberland's obligations to close are not
contingent upon their being satisfied with the results of
a continuing due diligence review of the system (although
Telecommunications' obligations are contingent on
satisfactory completion of its due diligence
investigation); and
o Access's, Cumberland's and Telecommunications' obligations
to close are not contingent upon the joint venture
obtaining at its own expense a Phase I environmental
assessment report confirming that the owned or leased real
property included in the assets to be sold to each of
Access, Cumberland or Telecommunications, respectively, is
free of hazardous materials and contaminants.
Given the current competitive environment in which the system
operates; the fact that costly upgrades are required in order for the joint
venture to be able to compete with DBS operators, which currently offer more
services than does the joint venture and to which the joint venture
historically has lost significant numbers of customers; and the financial
risks involved in making the substantial capital investments we believe will
be necessary to address those challenges, the corporate general partner and
the other Filing Persons concluded that the Liquidation Plan (and the
estimated aggregate liquidating distribution of $119 per unit in respect of
the Access Sale, the Cumberland Sale and the Missouri Sale) is in the best
interests of Enstar 5B and the unitholders.
- 27 -
RECOMMENDATION OF THE CORPORATE GENERAL PARTNER AND OTHER FILING PERSONS
The corporate general partner and the other Filing Persons each
believe that the advantages exceed any disadvantages of consummating the
Liquidation Plan at this time. Accordingly, the corporate general partner
and the other Filing Persons each recommends that the unitholders approve
the Liquidation Plan.
In making this recommendation, the Filing Persons considered the
following material factors:
o If the Liquidation Plan is approved, the joint venture will
be able to consummate the Access Sale, the Cumberland Sale
and the Missouri Sale for an amount that the corporate
general partner and the other Filing Persons believe
represents the best available transaction for sale of the
assets of the joint venture and upon terms that the general
partner and the other Filing Persons believe will entail
favorable transaction costs and permit an efficient
consummation of the sale. The sales price offered by Access
of $6,938,400 for the Access system, the sales price
offered by Cumberland of $3,707,200 for the Cumberland
system and the sales price offered by Telecommunications of
$502,800 for the Missouri system ultimately represent the
best proposals for the system resulting from the offering
process. Collectively, the Access Sale, the Cumberland Sale
and the Missouri Sale will have an aggregate sales price of
$11,148,400 in cash for the joint venture, subject to
escrows aggregating $357,732 for indemnity claims and closing
adjustments.
o The sale prices were determined through an "auction" process
conducted by an independent broker and effected a
comprehensive "market check," which supports the general
partner's and the other Filing Persons' belief that the
aggregate price offered by Access, Cumberland and
Telecommunications, collectively and on an individual basis,
represents the highest available purchase price for the
relevant portions of the Enstar system. The broker, which
specializes in the cable television industry, contacted
virtually every known prospective buyer of the partnership's
system. None of the bidders knew the sale prices or other
terms of the other bids until all of the bids were received
and opened.
o The purchase agreements with Access, Cumberland and
Telecommunications contain closing conditions that are
standard in the industry and were negotiated on an
arm's-length basis. Neither Access's nor Cumberland's
obligations under either purchase agreement are contingent
upon obtaining financing or conducting a satisfactory due
diligence review.
o By selling these portions of its system now, the joint
venture and Enstar 5B would significantly reduce the risks
inherent in the ownership of cable television systems,
particularly small cable systems, including, among other
things, the increasing number of entities that provide high
quality video programming, Internet and telephony services,
particularly DBS operators; the uncertainty of the future
effects of legislative and regulatory changes; the rapid
technological developments in the cable television and
telecommunications industry, which are pressuring cable
operators to upgrade their systems and increase their
service offerings; the financial difficulties inherent in
small cable television systems acquiring the technological
infrastructure needed to compete with "broadband" providers
of multiple television, Internet and telephony services;
increasing costs of obtaining quality programming; and the
competitive pressure to maintain rates at a level
competitive with DBS operators.
- 28 -
o Because there is no established trading market for the
units, the unitholders' ability to sell their units has
been and for the foreseeable future will be limited to
sporadic sales within an informal secondary market.
o In order for the Liquidation Plan to be authorized and
completed, the holders of a majority of the units (none of
whom are affiliates of Enstar 5B, the general partners of
the partnership or any of the other Filing Persons) must
first approve the Liquidation Plan. In addition, the
Access Sale, the Cumberland Sale, the Missouri Sale and
the Joint Venture Liquidation must be approved by a
majority-in-interest of the limited partners of Enstar 5A.
o There exists the risk that by selling these portions of the
system now, the joint venture, Enstar 5B and the unitholders
would not benefit from any increased revenues that might
result from an upgrade of the system, or from possible
further improvements in economic and market conditions that
might increase the sale price of the system. However,
neither we nor any of the other Filing Persons believe
that a sufficient increase in revenues is likely to result
from upgrades, or that in its present condition, the
system's sale value is likely to increase. Accordingly, in
our and the other Filing Persons' views these potential
risks are outweighed by the potential benefits to be
realized from the Liquidation Plan.
After considering the factors discussed in this section, we and the
other Filing Persons have determined that the Access Sale, the Cumberland
Sale, the Missouri Sale and the Liquidation Plan are the best transactions
available to the unitholders, and have determined that approval of the
Liquidation Plan would serve the best interests of the unitholders by
maximizing the proceeds from a disposition of the system and, consequently,
the per-unit liquidating distributions to Enstar 5B's unitholders.
The information and factors discussed above were considered
collectively by the general partner and the other Filing Persons in
connection with their reviews of the Access Sale, the Cumberland Sale, the
Missouri Sale and the Liquidation Plan. Although they did not find it
practicable to, and did not, quantify or otherwise assign relative weights
to the specific factors considered in reaching the above determination,
added weight was accorded to the following factors: the fact that Access's
offer, Cumberland's offer and Telecommunications' offer resulted from an
"auction" process, which we believe acted as a comprehensive "market check"
to ensure that the highest available price was obtained; the fact that
Access, Cumberland and Telecommunications are third party buyers
unaffiliated with Enstar 5B, the joint venture or any partners, allowing the
parties to negotiate on an arm's-length basis; and the fact that each
purchase agreement contains closing conditions and seller's representations
and warranties that are standard in the industry and were negotiated on an
arm's-length basis with unaffiliated buyers (including the fact that the
obligations of Access, Cumberland and Telecommunications under their
respective purchase agreement are not contingent upon obtaining adequate
financing or upon Access or Cumberland conducting a satisfactory due
diligence investigation of the system).
To the knowledge of the corporate general partner, no executive
officer, director or affiliate of Enstar 5B, the general partners of Enstar
5B, the joint venture or any other Filing Person, and no executive officer,
director or affiliate of any of them, holds or beneficially owns any units,
and none of such persons has made a recommendation either in support of or
opposed to the Access Sale, the Cumberland Sale, the Missouri Sale or the
Liquidation Plan, other than as set forth in this consent solicitation
statement. The corporate general partner's board of directors consists of
only one member, who approved the Liquidation Plan and is recommending the
Liquidation Plan to the unitholders.
- 29 -
RELATED PARTY TRANSACTIONS
Enstar 5B has a management and service agreement (the "Management
Agreement") with Enstar Cable Corporation ("Enstar Cable"), a wholly-owned
subsidiary of the corporate general partner, for a monthly management fee of
5% of gross revenues from the operations of Enstar 5B. No management fees
were paid by Enstar 5B during 2002 and 2001.
Enstar Cable has entered into an identical agreement with the joint
venture, except that the joint venture pays Enstar Cable a 4% management
fee. The joint venture's management fee expense approximated $63,100 and
$66,700 for the three months ended September 30, 2002 and 2001,
respectively, and $191,200 and $198,100 for the nine months ended September
30, 2002 and 2001, respectively. In addition, the joint venture also is
required to distribute to the corporate general partner an amount equal to
1% of the joint venture's gross revenues. The joint venture's management fee
expense to the corporate general partner approximated $15,800 and $16,700
during the three months ended September 30, 2002 and 2001, respectively, and
$47,800 and $49,500 during the nine months ended September 30, 2002 and
2001, respectively. No management fee is payable to Enstar Cable by Enstar
5B in respect of any amounts received by Enstar 5B from the joint venture.
In addition to the monthly management fee, Enstar 5B reimburses
Enstar Cable for direct expenses incurred on behalf of the partnership, and
for the partnership's allocable share of operational costs associated with
services provided by Enstar Cable. Additionally, Charter Communications
Holding Company, LLC, a direct parent of the corporate general partner, and
its affiliates (collectively, "Charter") provide other management and
operational services for Enstar 5B and the joint venture. These expenses are
charged to the properties served based primarily on the partnership's or
joint venture's allocable share of operational costs associated with the
services provided. Enstar 5B and the joint venture reimburse the affiliates
for the partnership's and the joint venture's allocable share of the
affiliates' costs. The total amount charged to the joint venture for these
costs approximated $169,200 and $176,300 for the three months ended
September 30, 2002 and 2001, respectively, and $528,400 and $689,000 for the
nine months ended September 30, 2002 and 2001, respectively.
All programming services are purchased through Charter. Charter
charges the joint venture for these costs based on an allocation of its
costs. The joint venture incurred programming fee expense of $313,300 and
$327,000 for the three months ended September 30, 2002 and 2001,
respectively, and $943,900 and $972,500 for the nine months ended September
30, 2002 and 2001, respectively. Programming fees are included in service
costs in the accompanying condensed statements of operations.
All amounts owed to the corporate general partner and affiliates
are non-interest bearing.
CONFLICTS OF INTEREST
Upon completing the Access Sale, the Cumberland Sale and the
Missouri Sale, accrued deferred management fees (which were $650,200 as of
September 30, 2002) will be paid to the corporate general partner by the
joint venture. In addition, the corporate general partner will receive
approximately $1,283,900 in repayment of other obligations owed to it by the
joint venture. However, for the reasons discussed under "Best Available
Transaction -- Consent Procedures and Procedural Safeguards" on page 25,
Enstar Communications and the other Filing Persons believe that the terms of
the Access Sale, the Cumberland Sale, the Missouri Sale and the Liquidation
Plan are the best transactions available to the unitholders.
- 30 -
THE ACCESS PURCHASE AGREEMENT
The joint venture and Access have entered into an Asset Purchase
Agreement (the "Access Purchase Agreement") which provides for the sale of
certain of the assets used or usable by the joint venture in connection with
the operation of the cable television system owned and operated by the joint
venture serving its franchise areas in and around the communities of
Monticello, Whitley City, Liberty, Cumberland, Greensburg, Williamsburg, and
Hustonville/Moreland, Kentucky and Jellico, Tennessee, as further described
in the Access Purchase Agreement (the "Access Assets").
THE FOLLOWING IS A SUMMARY OF THE ACCESS PURCHASE AGREEMENT. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ACCESS PURCHASE
AGREEMENT. COPIES OF THE ACCESS PURCHASE AGREEMENT ARE AVAILABLE UPON
REQUEST FROM THE SOLICITING AGENT, D.F. KING & CO., INC., AT (800) 207-2014.
PURCHASE PRICE AND ADJUSTMENTS
Under the Access Purchase Agreement, Access will acquire the Access
Assets from the joint venture for a purchase price of approximately
$6,938,400 (subject to closing sale price adjustments, an escrow for
indemnity claims and customary closing conditions), to be paid in
immediately available funds.
The purchase price will be subject to adjustments at closing, and
again post-closing if need be, to reflect or take account of, among other
things, (a) the allocation to the joint venture of all revenues, refunds,
costs, expenses and liabilities attributable to the operation of the cable
system prior to the closing date, and to Access after the closing date, as
the case may be, and (b) a number of subscribers below the prescribed target
of 10,659 subscribers. Any shortfall in that target number at closing will
result in the sale price being reduced by $650 per subscriber. As of October
31, 2002, that portion of the system to be sold to Access under the Access
Purchase Agreement had approximately 9,850 subscribers.
Concurrent with the execution of the Access Purchase Agreement, the
joint venture and Access will execute an escrow agreement whereby Access
will deposit $208,152 (the "Access Deposit Amount") with an escrow agent to
secure Access's performance and obligations under the Access Purchase
Agreement prior to Closing. At Closing, the joint venture and Access will
cause the escrow agent to deliver to the joint venture the Access Deposit
Amount and all interest and earnings accrued thereon, which amount shall be
credited against the purchase price. In addition, at Closing, Access will
deposit $208,152 of the purchase price in escrow for a period of six months
after Closing to provide funds for the payment of any indemnification to
which Access may be entitled under the Access Purchase Agreement.
REPRESENTATIONS AND WARRANTIES
The Access Purchase Agreement contains representations and
warranties of the joint venture that are customary in the industry. In
summary, the joint venture represents and warrants to Access that:
o it is a general partnership which was properly formed and is in
good standing under the laws of the State of Georgia, with full
power and authority to carry on its business in the manner in which
it is now carried on;
o Enstar 5B and Enstar 5A are equal partners of the joint venture,
and are both limited partnerships which were properly formed and
are in good standing under the laws of the State of Georgia, with
full power and authority to carry on each respective business in
the manner in which it is now carried on;
- 31 -
o Enstar Communications, as the sole general partner of both Enstar
5B and Enstar 5A, was properly formed and is in good standing under
the laws of the State of Georgia, with full power and authority to
carry on its business in the manner in which it is now carried on;
o Subject to obtaining requisite partner consents, it has the full
legal capacity and right to execute, deliver and perform the Access
Purchase Agreement, and that the Access Purchase Agreement has been
duly executed and delivered by it and is binding on it;
o Enstar 5B, Enstar 5A and Enstar Communications each have full legal
capacity and right to execute the Access Purchase Agreement;
o the consummation of the sale of the Access Assets will not violate
its partnership agreement or any statutory or regulatory
requirement or contractual obligation applicable to it or the
Access Assets;
o except for those consents set forth in the disclosure schedules to
the Access Purchase Agreement, there are no approvals, consents or
authorizations required by any person or government authority for
the consummation of the sale of the Access Assets contemplated by
the Access Purchase Agreement;
o it has delivered true and correct copies of its financial
statements, and that they are in accordance with its books and
records and have been prepared in accordance with GAAP;
o since November 12, 1999, it has operated the system in the ordinary
course of business;
o the disclosure schedules to the Access Purchase Agreement list all
parcels of real property owned by the joint venture and used in the
operation of the cable system, all leases under which the joint
venture is lessee, and all easements, licenses, rights to access,
rights-of-way and other real property interests owned by the joint
venture or used in the operation of the cable system;
o it owns and has good title to all personal property included in
the Access Assets;
o subject to certain exceptions, the disclosure schedules to the
Access Purchase Agreement list all leases, agreements and rights
with respect to personal property under which the joint venture is
lessee;
o each governmental authorization required to operate the cable
system is in full force and effect, and a written request for
renewal has been filed with respect to any required franchise
related agreements expiring within 30 months of the Access Purchase
Agreement;
o except as disclosed in the disclosure schedules to the Access
Purchase Agreement, it is not a party to or bound by any contracts
or agreements;
o it has delivered all agreements with respect to the Access Assets
relating to the use of any public utility facilities, the use of
any microwave or satellite transmission facilities, or the sale of
cablecast time to third parties;
o each station carried by its cable system is carried pursuant to a
retransmission consent agreement, "must carry" election or other
programming agreement;
- 32 -
o it has filed with the Copyright Office all required statements of
account and paid all royalty fees payable with respect to its cable
system;
o it is in full compliance with all requirements of the Communications
Act of 1934, as amended, and with the Federal Communications
Commission;
o except as disclosed in the disclosure schedules to the Access
Purchase Agreement, there is no litigation or similar proceeding or
any order, complaint, judgment or decree pending (or to its
knowledge, threatened) that would interfere with its ability to
complete the sale of Access Assets contemplated by the Access
Purchase Agreement;
o it has not received any notice of any claim by any governmental
authority, and has no knowledge that the cable system has not been
or is not in compliance with any legal requirement applicable to
the cable system;
o except as disclosed in the disclosure schedules to the Access
Purchase Agreement, there are no employee plans or compensation
arrangements that will affect the benefits of employees or former
employees of the cable system, and each employee plan and
compensation arrangement has been established and operated in
accordance with ERISA, the Internal Revenue Code and all other
applicable legal requirements;
o it is a party to a collective bargaining agreement which has been
disclosed to Access and a copy of the agreement has been delivered
to Access;
o there currently are no unfair labor practice charges or complaints,
grievances or arbitration proceedings pending in any tribunal
involving any of its employees or arising out of any collective
bargaining agreement;
o except as set forth on the disclosure schedules to the Access
Purchase Agreement, its operations with respect to the cable system
have complied with all environmental laws;
o the disclosure schedules to the Access Purchase Agreement list all
franchise, construction, fidelity, performance and other bonds,
guaranties in lieu of bonds and letters of credit posted by the
joint venture in connection with the cable system;
o the disclosure schedules to the Access Purchase Agreement list the
total number of subscribers served by the cable system, the
bandwidth capacity specified in MHz, the channel lineup and rate
card, and the plant miles; and
o except for Daniels & Associates, Inc., it has not dealt with any
broker or finder in connection with the transactions contemplated
by the Access Purchase Agreement.
Access made certain representations and warranties to the joint
venture comparable to certain of those made by the joint venture summarized
above.
- 33 -
CONDITIONS PRECEDENT
Under the Access Purchase Agreement, Access's obligations to
acquire the Access Assets are subject to the following conditions precedent,
any or all of which may be waived by Access:
o each representation and warranty made by the joint venture in the
Access Purchase Agreement shall have been true and correct as of
the date made and as of the closing date;
o the joint venture shall have performed and complied with all
covenants made by it;
o the joint venture shall have obtained the required number of
Material Consents and Required Consents, as those terms are
respectively defined in the Access Purchase Agreement;
o no judgment, decree, order or other legal prohibition having the
force of law shall be in effect on the closing date that would
prevent or make unlawful the closing;
o the joint venture shall have furnished to Access certain required
certificates, bills of sale, assignments, assumptions, consents,
opinions and other agreements;
o the joint venture shall have obtained any and all necessary partner
consents; and
o there shall have been no material adverse changes in the business,
financial condition or prospects of the Access Assets or the cable
system since the date of the Access Purchase Agreement.
The joint venture's obligations to sell the Access Assets are
subject to conditions precedent comparable to those of Access, any or all of
which may be waived by the joint venture.
INDEMNIFICATION
Access has agreed that following the closing it will indemnify the
joint venture for claims that arise out of or are related to (a) breaches of
any representation or warranty of Access set forth in the Access Purchase
Agreement, or failure to perform or comply with the covenants or obligations
of Access set forth in the Access Purchase Agreement, or (b) the assertion
of any claim against the joint venture by any person or governmental
authority arising out of the operation of the Access Assets after the
closing date.
The joint venture has agreed that following the closing it will
indemnify Access for claims that arise out of or are related to (a) breaches
of any representation or warranty of the joint venture set forth in the
Access Purchase Agreement, or failure to perform or comply with the
covenants or obligations of the joint venture set forth in the Access
Purchase Agreement, (b) liabilities accruing on or prior to the closing
date, except those assumed by Access, or (c) liabilities of the joint
venture not assumed by Access under the Access Purchase Agreement.
In order to provide funds for the payment of any indemnification to
which Access may be entitled, Access will deposit $208,152 of the total
purchase price in escrow. However, Access's rights with respect to
indemnification are not limited to the dollar amount held in escrow.
- 34 -
The following limitations apply to indemnification claims:
o subject to certain exceptions, the representations and warranties
made by both parties will survive the closing for a period of six
months. No claim for indemnification for breach of any
representation or warranty may be asserted by either party after
the expiration of the six-month period, provided that written
assertions of claims made in a timely manner will extend the
six-month indemnification period with respect to that particular
claim until the claim is conclusively resolved;
o claims for indemnification arising from the breach of any
representation or warranty will not take into account or be
qualified by any considerations of materiality or knowledge which
might be expressed in the representation or warranty;
o the amount of any indemnifiable claim will be reduced by the amount
of any insurance proceeds and tax benefits resulting to the party
being indemnified from the subject matter of the claim;
o neither party is required to indemnify the other party for claims
arising from the breach of any representation or warranty until the
aggregate amount of all such claims against the indemnifying party
exceeds $150,000, in which case the indemnifying party will be
liable for the total amount of all such claims starting from the
first dollar of loss or expense;
o subject to certain exceptions, the joint venture's aggregate
liability to Access for indemnification claims arising from the
breach of any of the joint venture's representations and warranties
are limited to losses or damages not exceeding $750,000; and
o Access's aggregate liability to the joint venture for
indemnification claims arising from the breach of any of Access's
representations and warranties are limited to losses and damages
not exceeding $750,000.
TERMINATION AND REIMBURSEMENT
The Access Purchase Agreement may be terminated prior to the
closing only in accordance with the following situations:
o at any time by mutual consent of the joint venture and Access;
o by either the joint venture or Access if the closing has not taken
place by March 31, 2003, other than by reason of a breach or
default of any of the covenants or agreements contained in the
Access Purchase Agreement by the party seeking to terminate;
provided that, the parties may mutually agree to extend such date
if as of such date the conditions to closing have not been
satisfied;
o by either the joint venture or Access if the other party is in
material breach of the Access Purchase Agreement and does not cure
the breach within 30 days;
o by either the joint venture or Access if the representations and
warranties of the other party are not true and correct in all
respects and such failure is not cured by the closing date; or
o by the joint venture if the requisite level of approval by the
limited partners of either Enstar 5B or Enstar 5A have not been
obtained.
- 35 -
SOURCE OF FUNDS
Access has represented and warranted that it has the financial
capability, including to obtain financing, necessary to complete the
purchase of the Access Assets under the Access Agreement.
CLOSING
The closing will take place at 9:00 a.m. on the last business day
of the calendar month after the satisfaction or waiver of all conditions
precedent to closing, as set forth in the Access Purchase Agreement, but no
later than March 31, 2003. We presently expect closing will occur on or
about March 31, 2003. The closing will occur at the offices of Charter
Communications, Inc., 12405 Powerscourt Drive, St. Louis, Missouri 63131.
THE CUMBERLAND PURCHASE AGREEMENT
The joint venture and Cumberland have entered into an Asset
Purchase Agreement (the "Cumberland Purchase Agreement") which provides for
the sale of certain of the assets used or usable by the joint venture in
connection with the operation of the cable television system owned and
operated by the joint venture serving its franchise areas in and around the
communities of Russell Springs, Jamestown and Russell County, Kentucky, as
further described in the Cumberland Purchase Agreement (the "Cumberland
Assets").
THE FOLLOWING IS A SUMMARY OF THE CUMBERLAND PURCHASE AGREEMENT. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CUMBERLAND PURCHASE
AGREEMENT. COPIES OF THE CUMBERLAND PURCHASE AGREEMENT ARE AVAILABLE UPON
REQUEST FROM THE SOLICITING AGENT, D.F. KING & CO., INC., AT (800) 207-2014.
PURCHASE PRICE AND ADJUSTMENTS
Under the Cumberland Purchase Agreement, Cumberland will acquire
the Cumberland Assets from the joint venture for a purchase price of
approximately $3,707,200 (subject to closing sale price adjustments, an
escrow for indemnity claims and customary closing conditions), to be paid in
immediately available funds.
The purchase price will be subject to adjustments at closing, and
again post-closing if need be, to reflect or take account of, among other
things, (a) the allocation to the joint venture of all revenues, refunds,
costs, expenses and liabilities attributable to the operation of the cable
system prior to the closing date, and to Cumberland after the closing date,
as the case may be, (b) a number of basic subscribers below the prescribed
target of 2,648 basic subscribers, and (c) a percentage-based decrease in
expanded basic subscriber penetration between March 31, 2002 and the closing
date. As of October 31, 2002, that portion of the system to be sold to
Cumberland under the Cumberland Purchase Agreement had 2,438 subscribers. If
as of the closing date the number of basic subscribers is less than 2,648,
then the purchase price will be reduced by $1,400 per subscriber. An
additional adjustment of $25,000 will be made to the purchase price for
every full percentage point that expanded basic subscriber penetration
declines from March 31, 2002 to the closing date. If the decline in expanded
basic subscriber penetration exceeds 1%, the reduction is calculated for
each .5% in excess of the first percentage point. As of March 31, 2002,
expanded basic subscriber penetration was 86.21%.
- 36 -
Concurrent with the execution of the Cumberland Purchase Agreement,
the joint venture and Cumberland will execute an escrow agreement whereby
Cumberland will deposit $125,000 (the "Cumberland Deposit Amount") with an
escrow agent to secure Cumberland's performance and obligations under the
Cumberland Purchase Agreement prior to Closing. At Closing, the joint
venture and Cumberland will cause the escrow agent to deliver to the joint
venture the Cumberland Deposit Amount and all interest and earnings accrued
thereon, which amount shall be credited against the purchase price. In
addition, at Closing, Cumberland will deposit $250,000 of the purchase price
in escrow until December 15, 2003 to provide funds for the payment of any
indemnification to which Cumberland may be entitled under the Cumberland
Purchase Agreement.
REPRESENTATIONS AND WARRANTIES
The Cumberland Purchase Agreement contains representations and
warranties of the joint venture that are customary in the industry. In
summary, the joint venture represents and warrants to Cumberland that:
o it is a general partnership which was properly formed and is in
good standing under the laws of the State of Georgia, with full
power and authority to carry on its business in the manner in which
it is now carried on;
o Enstar 5B and Enstar 5A are equal partners of the joint venture,
and are both limited partnerships which were properly formed and
are in good standing under the laws of the State of Georgia, with
full power and authority to carry on each respective business in
the manner in which it is now carried on;
o Enstar Communications, the sole general partner of both Enstar 5B
and Enstar 5A, was properly formed and is in good standing under
the laws of the State of Georgia, with full power and authority to
carry on its business in the manner in which it is now carried on;
o Subject to obtaining requisite partner consents, it has the full
legal capacity and right to execute, deliver and perform the
Cumberland Purchase Agreement, and that the Cumberland Purchase
Agreement has been duly executed and delivered by it and is binding
on it;
o Enstar 5B, Enstar 5A and Enstar Communications each have full legal
capacity and right to execute the Cumberland Purchase Agreement;
o the completion of the sale of the Cumberland Assets will not
violate its partnership agreement or any statutory or regulatory
requirement or contractual obligation applicable to it or the
Cumberland Assets;
o except for those consents set forth in the disclosure schedules to
the Cumberland Purchase Agreement, there are no approvals, consents
or authorizations required by any person or government authority
for the consummation of the sale of the Cumberland Assets
contemplated by the Cumberland Purchase Agreement;
o it has delivered true and correct copies of its financial
statements, and that they are in accordance with its books and
records and have been prepared in accordance with GAAP;
o since November 12, 1999, it has operated the system in the ordinary
course of business;
- 37 -
o the disclosure schedules to the Cumberland Purchase Agreement list
all parcels of real property owned by the joint venture and used in
the operation of the cable system, all leases under which the joint
venture is lessee, and all easements, licenses, rights to access,
rights-of-way and other real property interests owned by the joint
venture or used in the operation of the cable system;
o it owns and has good title to all personal property included in the
Cumberland Assets;
o subject to certain exceptions, the disclosure schedules to the
Cumberland Purchase Agreement list all leases, agreements and
rights with respect to personal property under which the joint
venture is lessee;
o it has delivered each governmental authorization required to
operate the cable system and there are no other oral or written
commitments by it to governmental agencies, and a written request
for renewal has been filed with respect to any required franchise
related agreements expiring within 30 months of the Cumberland
Purchase Agreement;
o except as disclosed in the disclosure schedules to the Cumberland
Purchase Agreement, it is not a party to or bound by any contracts
or agreements;
o it has delivered all agreements with respect to the Cumberland
Assets relating to the use of any public utility facilities, the
use of any microwave or satellite transmission facilities, or the
sale of cablecast time to third parties;
o each station carried by its cable system which has requested
carriage under a must carry election and qualifies is carried
pursuant to a retransmission consent agreement, "must carry"
election or other programming agreement;
o it has filed with the Copyright Office all required statements
of account and paid all royalty fees payable with respect to its
cable system;
o it is in full compliance with all requirements of the Communications
Act of 1934, as amended, and with the Federal Communications
Commission;
o except as disclosed in the disclosure schedules to the Cumberland
Purchase Agreement, there is no litigation or similar proceeding or
any order, complaint, judgment or decree pending (or to its
knowledge, threatened) that would interfere with its ability to
complete the sale of the Cumberland Assets contemplated by the
Cumberland Purchase Agreement;
o it has not received any notice of any claim by any governmental
authority, and has no knowledge that the cable system has not been
or is not in compliance with any legal requirement applicable to
the cable system;
o except as disclosed in the disclosure schedules to the Cumberland
Purchase Agreement, there are no employee plans or compensation
arrangements that will affect the benefits of employees or former
employees of the cable system, and each employee plan and
compensation arrangement has been established and operated in
accordance with ERISA, the Internal Revenue Code and all other
applicable legal requirements;
- 38 -
o it is a party to a collective bargaining agreement which has been
disclosed to Cumberland and a copy of the agreement has been
delivered to Cumberland;
o there are currently no unfair labor practice charges or complaints,
grievances or arbitration proceedings pending in any tribunal
involving any of its employees or arising out of any collective
bargaining agreement;
o except as set forth on the disclosure schedules to the Cumberland
Purchase Agreement, its operations with respect to the cable system
have complied with all environmental laws;
o the disclosure schedules to the Cumberland Purchase Agreement list
all franchise, construction, fidelity, performance and other bonds,
guaranties in lieu of bonds and letters of credit posted by the
joint venture in connection with the cable system;
o the disclosure schedules to the Cumberland Purchase Agreement list
the total number of subscribers served by the cable system, the
bandwidth capacity specified in MHz, the channel lineup and rate
card, and the plant miles; and
o except for Daniels & Associates, Inc., it has not dealt with any
broker or finder in connection with the transactions contemplated
by the Cumberland Purchase Agreement.
Cumberland made certain representations and warranties to the joint
venture comparable to certain of those made by the joint venture summarized
above.
CONDITIONS PRECEDENT
Under the Cumberland Purchase Agreement, Cumberland's obligations
to acquire the Cumberland Assets are subject to the following conditions
precedent, any or all of which may be waived by Cumberland:
o each representation and warranty made by the joint venture in the
Cumberland Purchase Agreement shall have been true and correct as
of the date made and as of the closing date;
o the joint venture shall have performed and complied with all covenants
made by it;
o the joint venture shall have obtained the required number of
Material Consents and Required Consents, as those terms are
respectively defined in the Cumberland Purchase Agreement;
o no judgment, decree, order or other legal prohibition having the
force of law shall be in effect on the closing date that would
prevent or make unlawful the closing;
o the joint venture shall have furnished to Cumberland certain
required certificates, bills of sale, assignments, assumptions,
consents, opinions and other agreements;
o the joint venture shall have obtained any and all necessary partner
consents;
o the joint venture shall have satisfied various other obligations on
or before the closing date with respect to the Cumberland Assets
and the cable system, including but not limited to (a) the
transfer to Cumberland of pole attachment agreements, real
property leases, and all licenses required to
- 39 -
operate the cable system, (b) the completion of certain
construction projects and land surveys, (c) the delivery to
Cumberland of the record layout of existing billing and subscriber
management software and related data, a reasonable number of spare
parts and test equipment used to maintain the cable system, (d)
the operation by the joint venture of the cable system in
compliance with copyright infringement laws, (e) the permission of
the joint venture to allow Cumberland to begin work on all
encroachment permits, (f) the continuation of services to the
joint venture's then current customers until such time as
Cumberland can transfer them to Cumberland's cable system, (g) the
entering into a master sales agreement with Cumberland which
covers the cable system, and (h) the timely filing of a statement
of account with the Copyright Office through December 31, 2002;
and
o there shall have been no material adverse changes in the business,
financial condition or prospects of the Cumberland Assets or the
cable system since the date of the Cumberland Purchase Agreement.
The joint venture's obligations to sell the Cumberland Assets are
subject to conditions precedent comparable to those of Cumberland, any or
all of which may be waived by the joint venture.
INDEMNIFICATION
Cumberland has agreed that following the closing it will indemnify
the joint venture for claims that arise out of or are related to (a)
breaches of any representation or warranty of Cumberland set forth in the
Cumberland Purchase Agreement, or failure to perform or comply with the
covenants or obligations of Cumberland set forth in the Cumberland Purchase
Agreement, or (b) the assertion of any claim against the joint venture by
any person or governmental authority arising out of the operation of the
Cumberland Assets after the closing date.
The joint venture has agreed that following the closing it will
indemnify Cumberland for claims that arise out of or are related to (a)
breaches of any representation or warranty of the joint venture set forth in
the Cumberland Purchase Agreement, or failure to perform or comply with the
covenants or obligations of the joint venture set forth in the Cumberland
Purchase Agreement, (b) liabilities accruing on or prior to the closing
date, except those for which an adjustment to the purchase price is made, or
(c) liabilities of the joint venture not assumed by Cumberland under the
Cumberland Purchase Agreement.
In order to provide funds for the payment of any indemnification to
which Cumberland may be entitled, Cumberland will deposit $250,000 of the
total purchase price in escrow. However, Cumberland's rights with respect to
indemnification are not limited to the dollar amount held in escrow.
The following limitations apply to indemnification claims:
o subject to certain exceptions, the representations and warranties
made by both parties will survive the closing until December 15,
2003. No claim for indemnification for breach of any representation
or warranty may be asserted by either party after December 15,
2003, provided that written assertions of claims made in a timely
manner will extend beyond December 15, 2003 with respect to that
particular claim until the claim is conclusively resolved;
o claims for indemnification arising from the breach of any
representation or warranty will not take into account or be
qualified by any considerations of materiality or knowledge which
might be expressed in the representation or warranty;
- 40 -
o the amount of any indemnifiable claim will be reduced by the amount
of any insurance proceeds and tax benefits resulting to the party
being indemnified from the subject matter of the claim;
o neither party is required to indemnify the other party for claims
arising from the breach of any representation or warranty until
the aggregate amount of all such claims against the indemnifying
party exceeds $150,000, in which case the indemnifying party will
be liable for the total amount of all such claims starting from
the first dollar of loss or expense; except that, the $150,000
threshold does not apply to certain claims by Cumberland against
the joint venture relating to certain permits of the joint
venture, claims arising from fines from local franchising
authorities, claims arising from fines or fees due to the U.S.
Copyright Office and fines for FCC regulatory violations, claims
related to governmental authorizations and ongoing litigation
against the joint venture as of closing, if any;
o subject to certain exceptions, the joint venture's aggregate
liability to Cumberland for indemnification claims arising from the
breach of any of the joint venture's representations and warranties
are limited to losses or damages not exceeding $1,000,000; and
o Cumberland's aggregate liability to the joint venture for
indemnification claims arising from the breach of any of
Cumberland's representations and warranties are limited to losses
and damages not exceeding $1,000,000.
TERMINATION AND REIMBURSEMENT
The Cumberland Purchase Agreement may be terminated prior to the
closing only in accordance with the following:
o at any time by mutual consent of the joint venture and Cumberland;
o by either the joint venture or Cumberland if the closing has not
taken place by February 28, 2003, other than by reason of a breach
or default of any of the covenants or agreements contained in the
Cumberland Purchase Agreement by the party seeking to terminate;
provided that, the parties may mutually agree to extend that date
if as of such date the conditions to closing have not been
satisfied;
o by either the joint venture or Cumberland if the other party is in
material breach of the Cumberland Purchase Agreement and does not
cure the breach within 30 days;
o by either the joint venture or Cumberland if the representations
and warranties of the other party are not true and correct in all
respects and such failure is not cured by the closing date; or
o by the joint venture if the requisite approvals of the Liquidation
Plan by the limited partners of either Enstar 5B or Enstar 5A have
not been obtained.
If the Cumberland Agreement is terminated in accordance with
certain of the methods listed above and specified in the Cumberland
Agreement, the joint venture must refund the Cumberland Deposit Amount, with
any accrued interest, to Cumberland.
- 41 -
SOURCE OF FUNDS
Cumberland has represented and warranted that it has the financial
capability, including to obtain financing, necessary to complete the
purchase of Cumberland Assets.
CLOSING
The closing will take place at 9:00 a.m. on the last business day
of the calendar month after the satisfaction or waiver of all conditions
precedent to closing, as set forth in the Cumberland Purchase Agreement, but
no later than February 28, 2003. We presently expect closing will occur on
or about February 28, 2003. The closing will occur at the offices of Charter
Communications, Inc., 12405 Powerscourt Drive, St. Louis, Missouri 63131.
THE TELECOMMUNICATIONS PURCHASE AGREEMENT
The joint venture and nine other general and limited partnerships
managed by the corporate general partner have entered into an Asset Purchase
Agreement with Telecommunications (the "Telecommunications Purchase
Agreement"). For purposes of this summary of the Telecommunications Purchase
Agreement, the joint venture and the other partnerships managed by the
corporate general partner will sometimes collectively be referred to as the
"Sellers." The Telecommunications Purchase Agreement covers the sale to
Telecommunications of certain of the assets used by the Sellers in
connection with the operation of multiple cable television systems located
in or around 14 cities in Kentucky, Tennessee, Missouri, Arkansas and North
Carolina (the "Telecommunications Assets"), including certain of the assets
of the joint venture in connection with the operation of the cable
television system serving the franchise area in and around the community of
Pomme de Terre, Missouri, as further described in the Telecommunications
Purchase Agreement (the "Missouri system").
THE FOLLOWING IS A SUMMARY OF THE TELECOMMUNICATIONS PURCHASE
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
TELECOMMUNICATIONS PURCHASE AGREEMENT. COPIES OF THE TELECOMMUNICATIONS
PURCHASE AGREEMENT ARE AVAILABLE UPON REQUEST FROM THE SOLICITING AGENT,
D.F. KING & CO., INC., AT (800) 207-2014.
PURCHASE PRICE AND ADJUSTMENTS
Under the Telecommunications Purchase Agreement, Telecommunications
will acquire the Telecommunications Assets from the Sellers for a total
purchase price of approximately $15,291,209 (subject to closing sale price
adjustments, an escrow for indemnity claims and customary closing
conditions), to be paid in immediately available funds, approximately
$502,800 of which is to be paid by Telecommunications to the joint venture
for the Missouri system. The allocation of the aggregate purchase price to
the Missouri system was determined from the bid received from
Telecommunications for the Missouri system, based on $599 per subscriber.
The purchase price will be subject to adjustments at closing, and
again post-closing if need be, to reflect or take account of, among other
things, (a) the allocation to the Sellers of all revenues, refunds, costs,
expenses and liabilities attributable to the operation of the cable systems
prior to the closing date, and to Telecommunications after the closing date,
as applicable, and (b) an average number of subscribers in Sellers' systems
below a prescribed target of subscribers for each system, including a
prescribed target for the Missouri system of 839 subscribers. As of October
31, 2002, the Missouri system had 825 subscribers.
- 42 -
The Sellers and Telecommunications also will execute an escrow
agreement whereby Telecommunications will deposit $500,000 (the
"Telecommunications Deposit Amount") with an escrow agent to secure
Telecommunications' performance and obligations under the Telecommunications
Purchase Agreement prior to Closing. The Telecommunications Deposit Amount
will be deposited as follows: $100,000 at the time of the completion of
final schedules and applicable exhibits to the Telecommunications Purchase
Agreement; $100,000 90 days after execution of the Telecommunications
Purchase Agreement; $150,000 upon approval of franchise transfers of certain
primary systems (which do not include the Missouri system); and $150,000
upon obtaining partner approval of the transfer of the primary systems. At
Closing, the Sellers and Telecommunications will cause the escrow agent to
deliver to the Sellers the Telecommunications Deposit Amount and all
interest and earnings accrued thereon, which amount shall be credited
against the purchase price.
In addition, at Closing, Sellers will deposit $500,000 of the
purchase price in escrow pursuant to an indemnity escrow agreement
("Indemnity Escrow Agreement") for a period of 13 months after Closing to
provide funds for the payment of any indemnification to which
Telecommunications may be entitled under the Telecommunications Purchase
Agreement, of which $24,580 will be the joint venture's portion of the
purchase price placed in escrow. The Telecommunications Purchase Agreement
provides that the Indemnity Escrow Agreement will limit payments out of
escrow to Telecommunications for indemnification from the joint venture to
the $24,580 deposited by the joint venture into escrow. Telecommunications'
rights for indemnification from the joint venture, however, are not limited
to the $24,580 held in escrow.
REPRESENTATIONS AND WARRANTIES
The Telecommunications Purchase Agreement contains representations
and warranties of the Sellers that are customary in the industry. In
summary, the joint venture individually (and not jointly with the other
Sellers) represents and warrants to Telecommunications that:
o the joint venture is a general partnership which was properly
formed and is in good standing under the laws of the State of
Georgia, with full power and authority to carry on its business in
the manner in which it is now carried on;
o Enstar 5B and Enstar 5A are equal partners of the joint venture,
and are both limited partnerships which were properly formed and
are in good standing under the laws of the State of Georgia, with
full power and authority to carry on each respective business in
the manner in which it is now carried on;
o Enstar Communications, as the general partner of both Enstar 5B and
Enstar 5A, was properly formed and is in good standing under the
laws of the State of Georgia, with full power and authority to
carry on its business in the manner in which it is now carried on;
o subject to obtaining requisite partner consents, the joint venture
has the full legal capacity and right to execute, deliver and
perform the Telecommunications Purchase Agreement, and the
Telecommunications Purchase Agreement has been duly executed and
delivered by the joint venture and is binding on the joint venture;
o the consummation of the sale of the Missouri system will not
violate the joint venture's partnership agreement or any statutory
or regulatory requirement or contractual obligation applicable to
the joint venture or the Missouri system;
- 43 -
o except for those consents set forth in the disclosure schedules to
the Telecommunications Purchase Agreement, there are no approvals,
consents or authorizations required by any person or government
authority for the consummation of the sale of the Missouri system
contemplated by the Telecommunications Purchase Agreement;
o the joint venture has delivered true and correct copies of its
financial statements, and they are in accordance with its books and
records and have been prepared in accordance with GAAP;
o since November 12, 1999, the joint venture has operated the Missouri
system in the ordinary course of business;
o the disclosure schedules to the Telecommunications Purchase
Agreement list all parcels of real property owned by the joint
venture and used in the operation of the Missouri system, all
leases under which the joint venture is lessee, and all easements,
licenses, rights to access, rights-of-way and other real property
interests owned by the joint venture or used in the operation of
its systems;
o the joint venture owns and has good title to all personal property
included in the Missouri system;
o subject to certain exceptions, the disclosure schedules to the
Telecommunications Purchase Agreement list all leases, agreements
and rights with respect to personal property under which the joint
venture is lessee;
o each governmental authorization required to operate the Missouri
system is in full force and effect, and a written request for
renewal has been filed with respect to any required franchise
related agreements expiring within 30 months of the
Telecommunications Purchase Agreement;
o except as disclosed in the disclosure schedules to the
Telecommunications Purchase Agreement, the joint venture is not a
party to or bound by any contracts or agreements;
o the joint venture has delivered to Telecommunications all
agreements with respect to the Missouri system relating to the use
of any public utility facilities, the use of any microwave or
satellite transmission facilities, or the sale of cablecast time to
third parties;
o each station carried by the Missouri system is carried pursuant to
a retransmission consent agreement, "must carry" election or other
programming agreement;
o the joint venture has filed with the Copyright Office all required
statements of account and paid all royalty fees payable with
respect to the Missouri system;
o the joint venture is in full compliance with all requirements
of the Communications Act of 1934, as amended, and with the
Federal Communications Commission;
o except as disclosed in the disclosure schedules to the
Telecommunications Purchase Agreement, there is no litigation or
similar proceeding or any order, complaint, judgment or decree
pending (or to its knowledge, threatened) that would interfere with
the joint venture's ability to complete the sale of the Missouri
system contemplated by the Telecommunications Purchase Agreement;
- 44 -
o the joint venture has not received any notice of any claim by any
governmental authority, and has no knowledge that the Missouri
system has not been or is not in compliance with any legal
requirement applicable to the Missouri system;
o except as disclosed in the disclosure schedules to the
Telecommunications Purchase Agreement, there are no employee plans
or compensation arrangements that will affect the benefits of
employees or former employees of the Missouri system, and each
employee plan and compensation arrangement has been established and
operated in accordance with ERISA, the Internal Revenue Code and
all other applicable legal requirements;
o the joint venture is not a party to a collective bargaining
agreement, it has not recognized any union or other collective
bargaining representative of any group of its employees, and no
union or other collective bargaining representative has been
certified as representing any of its employees;
o there are currently no unfair labor practice charges or complaints,
grievances or arbitration proceedings pending in any tribunal
involving any of the joint venture's employees or arising out of
any collective bargaining agreement;
o except as set forth on the disclosure schedules to the
Telecommunications Purchase Agreement, the joint venture's
operations with respect to the Missouri system have complied with
all environmental laws;
o the disclosure schedules to the Telecommunications Purchase
Agreement list all franchise, construction, fidelity, performance
and other bonds, guaranties in lieu of bonds and letters of credit
posted by the Sellers in connection with the cable systems;
o the disclosure schedules to the Telecommunications Purchase
Agreement list the total number of subscribers served by the
Missouri system, the bandwidth capacity specified in MHz, the
channel lineup and rate card, and the plant miles;
o except for Daniels & Associates, Inc., the joint venture has not
dealt with any broker or finder in connection with the transactions
contemplated by the Telecommunications Purchase Agreement;
o an affiliate of Sellers will enter into a master advertising sales
agreement with Telecommunications; and
o satisfactory completion by Telecommunications of its due diligence
investigation and audit of Sellers.
Telecommunications made to Seller corresponding representations and
warranties to the joint venture comparable to applicable representations and
warranties made by the joint venture summarized above.
- 45 -
CONDITIONS PRECEDENT
Under the Telecommunications Purchase Agreement, Telecommunications'
obligations to acquire the Telecommunications Assets are subject to the
following conditions precedent, any or all of which may be waived by
Telecommunications:
o each representation and warranty made by the Sellers in the
Telecommunications Purchase Agreement shall have been true and
correct as of the date made and as of the closing date;
o the Sellers shall have performed and complied with all covenants
made by them;
o the Sellers shall have obtained the required number of Material
Consents, as that term is defined in the Telecommunications Purchase
Agreement;
o no judgment, decree, order or other legal prohibition having the
force of law shall be in effect on the closing date that would
prevent or make unlawful the closing;
o the Sellers shall have furnished to Telecommunications certain
required certificates, bills of sale, assignments, assumptions,
consents and other agreements;
o the Sellers shall have obtained any and all necessary partner
consents; and
o there shall have been no material adverse change in the business,
financial condition or prospects of the Telecommunications Assets
or the related cable systems since the date of the
Telecommunications Purchase Agreement.
The Sellers' obligations to sell the Telecommunications Assets are
subject to conditions precedent comparable to those of Telecommunications,
any or all of which may be waived by the Sellers.
INDEMNIFICATION
Telecommunications has agreed that following the closing it will
indemnify the Sellers for claims that arise out of or are related to (a)
breaches of any representation or warranty of Telecommunications set forth
in the Telecommunications Purchase Agreement, or failure to perform or
comply with the covenants or obligations of Telecommunications set forth in
the Telecommunications Purchase Agreement, (b) the assertion of any claim
against the Sellers by any person or governmental authority arising out of
the operation of the Telecommunications Assets after the closing date, or
(c) any of the Assumed Liabilities.
The joint venture has agreed on its own behalf (and not jointly
with the other Sellers) that following the closing it will indemnify
Telecommunications for claims that arise out of or are related to (a)
breaches of any representation or warranty of the joint venture set forth in
the Telecommunications Purchase Agreement, or failure to perform or comply
with the covenants or obligations of the joint venture set forth in the
Telecommunications Purchase Agreement, or (b) liabilities of the joint
venture accruing on or prior to the closing date or arising from the
ownership and operation of the system prior to the closing date, except
those assumed by Telecommunications under the Telecommunications Purchase
Agreement.
In order to provide funds for the payment of any indemnification to
which Telecommunications may be entitled, Telecommunications will deposit
$500,000 of the total purchase price in escrow, of which $24,580 will be the
joint venture's portion of the purchase price placed in escrow. The
- 46 -
Telecommunications Purchase Agreement provides that the Indemnity Escrow
Agreement will limit payments out of escrow to Telecommunications for
indemnification from the joint venture to the $24,580 deposited by the joint
venture into escrow. However, Telecommunications' rights with respect to
indemnification are not limited to the dollar amount held in escrow.
The following limitations apply to indemnification claims:
o subject to certain exceptions, the representations and warranties
made by the parties will survive the closing for a period of 18
months. No claim for indemnification for breach of any
representation or warranty may be asserted by any party after the
expiration of the 18-month period, provided that written assertions
of claims made in a timely manner will extend the 18-month
indemnification period with respect to that particular claim until
the claim is conclusively resolved;
o claims for indemnification arising from the breach of any
representation or warranty will not take into account or be
qualified by any considerations of materiality or knowledge which
might be expressed in the representation or warranty;
o the amount of any indemnifiable claim will be reduced by the amount
of any insurance proceeds and tax benefits resulting to the party
being indemnified from the subject matter of the claim;
o Sellers are not required to indemnify Telecommunications for claims
arising from the breach of any representation or warranty until the
aggregate amount of all such claims exceeds $100,000, in which case
the Sellers responsible for the claims will be liable for the total
amount of all such claims starting from the first dollar of loss or
damage;
o subject to certain exceptions, the Sellers' joint aggregate
liability to Telecommunications for indemnification claims arising
from the breach of any of the Sellers' representations and
warranties are limited to losses or damages of $1,600,000; and
o Telecommunications is not required to indemnify a Seller for claims
arising from the breach of any representation or warranty until the
aggregate amount of all such claims against Telecommunications for
all Sellers exceeds $100,000, in which case Telecommunications will
be liable for the total amount of all such claims starting from the
first dollar of loss or damage.
TERMINATION AND REIMBURSEMENT
The Telecommunications Purchase Agreement may be terminated prior
to the closing only in accordance with the following situations:
o at any time by mutual consent of the Sellers and Telecommunications;
o by either the Sellers or Telecommunications if the closing has not
taken place by June 30, 2003, other than by reason of a breach or
default of any of the covenants or agreements contained in the
Telecommunications Purchase Agreement by the party seeking to
terminate; provided that, the parties may mutually agree to extend
such date if as of such date the conditions to closing have not
been satisfied;
o by either the Sellers or Telecommunications if the other party is
in material breach of the Telecommunications Purchase Agreement and
does not cure the breach within 30 days;
- 47 -
o by either the Sellers or Telecommunications if the representations
and warranties of the other party are not true and correct in all
respects and such failure is not cured by the closing date; or
o by the Sellers if the requisite partners' approval of the Sellers
has not been obtained.
SOURCE OF FUNDS
Telecommunications has represented and warranted that it has the
financial capability, including to obtain financing, necessary to consummate
the purchase of the Telecommunications Assets.
CLOSING
The closing will take place at 9:00 a.m. on the last business day
of the calendar month after the satisfaction or waiver of all conditions
precedent to closing, as set forth in the Telecommunications Purchase
Agreement, but no later than June 30, 2003. The Telecommunications Purchase
Agreement also allows for a partial closing if all of the conditions of the
Telecommunications Purchase Agreement have been satisfied or waived with
respect to certain primary cable television systems (which do not include
the Missouri system). At a partial closing, only the assets of those systems
for which conditions have been satisfied or waived will be sold to
Telecommunications (including the Missouri system if the conditions relating
to that system have been satisfied or waived). We presently expect closing
for the Missouri system will occur on or about June 30, 2003. The closing
will occur at the offices of Charter Communications, Inc.
DESCRIPTION OF ASSETS
The table below sets forth operating statistics for the Enstar
system as of September 30, 2002:
AVERAGE
PREMIUM MONTHLY
HOMES BASIC BASIC SERVICE PREMIUM REVENUE PER
SYSTEM PASSED(a) SUBSCRIBERS PENETRATION(b) UNITS(c) PENETRATION(d) SUBSCRIBER(e)
Monticello, KY 32,000 12,500 39.1% 1,900 16.3% $40.34
Pomme de Terre, MO 3,600 800 22.2% 100 12.5% $33.57
------ ------ ----- ----- ----- ------
Total 35,600 13,300 37.4% 2,000 15.0% $39.93
====== ====== ===== ===== ===== ======
<FN>
- -------------
(a) Homes passed refers to estimates by the joint venture of the
approximate number of dwelling units in a particular community that
can be connected to the cable systems without any further extension
of principal transmission lines. The estimates are based upon a
variety of sources, including billing records, house counts, city
directories and other local sources.
(b) Basic subscribers as a percentage of homes passed by cable.
(c) Premium service units include only single channel services offered
for a monthly fee per channel and do not include tiers of channels
offered as a package for a single monthly fee.
(d) Premium penetration represents premium service units as a
percentage of homes subscribing to cable service. A customer may
purchase more than one premium service, each of which is counted as
a separate premium service unit. This ratio may be greater than
100% if the average customer subscribes for more than one premium
service.
(e) Average monthly revenue per basic subscriber has been computed
based on revenue for the nine months ended September 30, 2002,
divided by nine months, divided by the actual number of basic
subscribers at September 30, 2002.
USE OF PROCEEDS AND CASH DISTRIBUTIONS
The following table sets forth the anticipated application of the
net proceeds from the Access Sale, the Cumberland Sale and the Missouri
Sale. The amount available for distribution to the unitholders
- 48 -
shown below assumes that all of the Enstar system is sold to Access,
Cumberland and Telecommunications for the prices, and subject to the other
terms and conditions, contained in the respective purchase agreements,
including estimated closing adjustments.
As promptly as practicable following the Access Sale, the
Cumberland Sale and the Missouri Sale, and calculation of all required sale
price adjustments, Enstar 5B and Enstar 5A, as the general partners of the
joint venture, will seek to discharge all of the liabilities of the joint
venture and distribute its remaining assets to themselves in accordance with
the partnership agreement of the joint venture. Thereafter, the corporate
general partner will cause Enstar 5B to discharge all of its liabilities and
distribute its remaining assets to itself, the individual general partner
and the unitholders in accordance with the limited partnership agreement of
Enstar 5B. The corporate general partner presently estimates that the
liquidating distributions to the unitholders from the proceeds of the Access
Sale, the Cumberland Sale and the Missouri Sale would total approximately
$119 per unit, after estimated closing adjustments and expenses, taxes and
liquidation expenses. This estimate is based on the assumed expenses shown
below, and also assumes a closing of the Access Sale and the Cumberland Sale
on or before December 31, 2002 and a closing of the Missouri Sale on or
before June 30, 2003. HOWEVER, WE CANNOT ASSURE YOU OF THE ACTUAL AMOUNTS
DISTRIBUTED, OR AS TO THE AMOUNTS SET FORTH BELOW. ACTUAL AMOUNTS MAY VARY
MATERIALLY FROM THESE ESTIMATES.
The distributions will be distributed in proportion to, and to the
extent of, the positive capital account balances of the partners.
USE OF PROCEEDS AND DISTRIBUTIONS OF THE JOINT VENTURE
Sale Proceeds................................................... $11,148,400
Less: Tennessee excise tax..................................... (57,000)
Less: closing expenses(1)...................................... (167,200)
Plus: working capital adjustment(2)............................ 4,353,700
Less: due to affiliates(3)..................................... (650,200)
-----------
Net distribution amount......................................... 14,627,700
Distribution to general partners(4)............................. 7,313,850
<FN>
- --------------
(1) The joint venture's expected expenses in connection with the
Liquidation Plan will be as follows:
Broker's fees..................................... $ 111,500
Filing fees and other miscellaneous expenses...... 55,700
-----------
$ 167,200
(2) The sale price is subject to adjustment pursuant to the purchase
agreements with Access, Cumberland and Telecommunications. This
adjustment is only an estimate and the adjustment actually made at
closing may be more or less than this amount.
(3) Represents deferred management fees due to the corporate general
partner.
(4) Enstar 5B and Enstar 5A will each receive $7,313,850, as co-general
partners of the joint venture.
- 49 -
USE OF PROCEEDS AND DISTRIBUTIONS OF ENSTAR 5B
Distributions from joint venture................................ $7,313,850
Less: expenses(1)............................................... (139,350)
----------
Net distribution amount......................................... 7,174,500
Less: Distribution to general partners(2)...................... 71,745
Distributions to unitholders.................................... 7,102,755
-----------
Estimated distributions to unitholders per unit................. $ 119
<FN>
- -------------
(1) Enstar 5B's expected expenses in connection with the
Liquidation Plan will be as follows:
Legal fees............................................. $ 50,000
Accounting fees........................................ 33,500
Solicitation expenses.................................. 4,250
Printing and mailing................................... 33,500
Filing fees and other miscellaneous expenses........... 18,100
----------
$ 139,350
(2) The general partners of the joint venture have a 1% interest in
partnership distributions until the amounts specified in the
partnership agreement (generally the limited partners' subscription
amount plus a specified return) are received by the limited
partners, after which the general partners have a 20% interest in
partnership distributions. Under the partnership agreement, the
general partners of the joint venture will receive an aggregate of
$71,745 of the estimated net distribution amount, which will be
shared equally by the corporate general partner and the individual
general partner.
DISADVANTAGES OF THE LIQUIDATION PLAN
The principal disadvantages that would result to the unitholders
and the general partners of Enstar 5B from completing the Liquidation Plan
are that by selling the system now, Enstar 5B would not benefit from any
increased revenues that might result from an upgrade of the system, or from
possible further improvements in economic and market conditions that might
increase the sale price of the system and, thereby, increase the system's
liquidation or going-concern value to the unitholders and the general
partners of Enstar 5B. However, we do not believe that significant increases
in revenues are likely to result from an upgrade, or that in its present
condition, the system's sale value is likely to increase. Accordingly, in
our view these potential risks are outweighed by the potential benefits to
be realized from the Liquidation Plan.
CONSEQUENCES OF FAILURE TO APPROVE THE LIQUIDATION PLAN
If the Access Sale, the Cumberland Sale, the Missouri Sale and the
Liquidation Plan are not completed, Enstar 5B will continue to own its
interest in the joint venture and the joint venture will continue to operate
the system for an indefinite period of time. If the Liquidation Plan is not
approved, we believe the joint venture will continue to face significant
competition from, and (without substantial technological upgrades) continue
to lose subscribers to DBS operators. In our view, unless the joint venture
upgrades the system to have two-way transmission capability, it will not be
able to offer internet and other interactive services comparable to those
offered by the DBS operators that currently compete
- 50 -
with the joint venture for video subscribers. Even if the joint venture were
to undertake such upgrades, we believe that their cost would prevent the
partnership from operating profitably for at least the duration of its
franchises that cover the largest number of subscribers (i.e., its McCreary
County, Monticello, Wayne County and Whitley County, Kentucky franchises).
Last, if the Access Sale, the Cumberland Sale and the Missouri Sale are not
approved, we expect to continue to seek buyers for the system from time to
time when, in our judgment, market conditions are favorable. Any such sale
might be on terms less favorable than the terms of the proposed Access Sale,
the Cumberland Sale or the Missouri Sale. Failure by the unitholders to
approve the Liquidation Plan will not affect their rights under the
partnership agreement of Enstar 5B.
APPROVAL OF THE LIQUIDATION PLAN BY ENSTAR 5A
Enstar 5B and Enstar 5A are co-partners in the joint venture. Under
the partnership agreement for the joint venture, all action to be taken by
the joint venture, including the sale of its assets, must be approved by
both Enstar 5B and Enstar 5A. As a result, the Access Sale, the Cumberland
Sale, the Missouri Sale and the Joint Venture Liquidation cannot occur
without the approval of Enstar 5A. Enstar 5A, a Georgia limited partnership,
has a corporate structure similar to Enstar 5B, including the same corporate
general partner. As with Enstar 5B, a majority-in-interest of Enstar 5A's
limited partners must give their approval of these transactions. The
corporate general partner plans to seek approval of Enstar 5A's limited
partners through a separate consent solicitation. As a result, if a
majority-in-interest of the limited partners of Enstar 5B approve the
Liquidation Plan but a majority-in-interest of the limited partners of
Enstar 5A do not approve the Access Sale, the Cumberland Sale, the Missouri
Sale and the Joint Venture Liquidation, then the Liquidation Plan cannot be
completed.
LIQUIDATION OF THE JOINT VENTURE
Access, Cumberland and Telecommunications will be purchasing all of
the joint venture's cable television system. Consequently, after the Access
Sale, the Cumberland Sale and the Missouri Sale, the joint venture will have
no cable television system assets. The joint venture will no longer be able
to fulfill its partnership purpose, which is to own and operate cable
television systems. Therefore, the joint venture will dissolve after
completing the Access Sale, the Cumberland Sale, and the Missouri Sale,
paying its debts and distributing the balance of the proceeds to its general
partners.
As soon as practicable following the closing of the Access Sale,
the Cumberland Sale and the Missouri Sale, Enstar 5B and Enstar 5A, as the
general partners of the joint venture, will cause the joint venture to: (a)
pay all costs associated with the Access Sale, the Cumberland Sale and the
Missouri Sale; (b) estimate and reserve for all such costs associated with
the Access Sale, the Cumberland Sale and the Missouri Sale for which
invoices have not yet been received; and (c) provide a further contingency
reserve for all other outstanding expenses and liabilities of the joint
venture. The general partners of the joint venture will cause the joint
venture to distribute the balance of the cash from the Access Sale, the
Cumberland Sale, the Missouri Sale and the liquidation of the joint
venture's other assets, to Enstar 5B and Enstar 5A as the partners.
LIQUIDATION OF ENSTAR 5B
All of the cable television assets of Enstar 5B are owned through
the joint venture. As part of the Liquidation Plan, the joint venture will
dispose of its assets, dissolve and terminate. Consequently, after the
dissolution of the joint venture, Enstar 5B will not have any operating
assets and will no longer be able to fulfill its partnership purpose, which
is to own and operate cable television systems.
- 51 -
We presently expect that the Access Sale will close on or before
March 31, 2003, that the Cumberland Sale will close on or before February
28, 2003 and that the Missouri Sale will close on or before June 30, 2003.
As soon as practicable following the closing of the Access Sale, the
Cumberland Sale and the Missouri Sale and dissolution of the joint venture,
the general partners, on behalf of Enstar 5B, will cause Enstar 5B to: (a)
pay all costs associated with the Liquidation Plan, including costs
associated with the solicitation of consents from the unitholders; (b)
estimate and reserve for all such costs associated with the Liquidation Plan
for which invoices have not yet been received; and (c) provide a further
contingency reserve for all other outstanding expenses and liabilities of
Enstar 5B. The general partner will cause Enstar 5B to distribute the
balance of the cash from the Liquidation Plan to the unitholders and the
general partners, as provided in the partnership agreement.
We anticipate making initial distributions to the unitholders
within 90 days after the closing of the Access Sale and the Cumberland Sale.
The remaining assets of Enstar 5B, and any remainder of the contingency
reserve, will be distributed to the unitholders and the general partners as
soon as practicable after the release of any remaining sales proceeds from
escrow. We estimate that this will occur approximately 13 months after the
close of the Missouri Sale. Enstar 5B will terminate and be dissolved upon
the disposition of all of its assets.
FEDERAL INCOME TAX CONSEQUENCES OF THE LIQUIDATION PLAN
GENERAL
The following discussion generally summarizes the federal income
tax consequences expected to arise from the consummation of the Liquidation
Plan. Further, it does not summarize state tax consequences of the
Liquidation Plan, which can vary from state to state. The tax information
included here was prepared from tax data compiled by the corporate general
partner in its role as Enstar 5B's tax administrator. The tax discussion
that follows is merely intended to inform unitholders of factual
information; it should not be considered tax advice and should not be relied
upon as such. This summary also is not intended to be and should not be
considered an opinion respecting the federal, state, local or foreign tax
consequences to a particular limited partner. DUE TO THE COMPLEXITY OF THE
TAX ISSUES INVOLVED, WE URGE THE UNITHOLDERS TO CONSULT WITH THEIR PERSONAL
TAX ADVISORS REGARDING THEIR INDIVIDUAL CIRCUMSTANCES AND THE TAX REPORTING
CONSEQUENCES OF THE TRANSACTION.
This summary is based upon the Internal Revenue Code of 1986, as
amended (which is also referred to as the Code); existing Final, temporary
and proposed Treasury regulations thereunder (which are also referred to as
the "Regulations"); published rulings and practices of the Internal Revenue
Service (which is also referred to as the "IRS"); and court decisions, each
as currently in effect. We cannot assure you that the IRS will agree with
the conclusions in this section or that future legislation or administrative
changes or court decisions will not significantly modify the federal income
tax law regarding the matters described herein, potentially with retroactive
effect. This interpretation also is subject to subsequent issuance of
Treasury regulations and procedures for federal income tax reporting.
This summary only addresses those unitholders who hold their units
as a capital asset and does not discuss all the federal income tax aspects
of the Liquidation Plan that may be relevant and material to a particular
unitholder in light of the unitholder's personal circumstances (including
the application of the alternative minimum tax), or to certain types of
unitholders who are subject to special treatment. For example, insurance
companies, S corporations, partnerships, pension and profit sharing plans,
tax-exempt organizations, non-U.S. taxpayers and others may be subject to
special rules not discussed below. This
- 52 -
summary also does not address other federal, state, local or foreign tax
consequences of consummation of the Liquidation Plan.
PARTNERSHIP STATUS
Under current law, a "partnership" is not a taxable entity and
incurs no federal income tax liability. Instead, each partner is required to
take into account in computing the partner's income tax liability that
partner's allocable share of the partnership's items of income, gain, loss,
deduction and credit. The distribution of cash attributable to partnership
income is generally not a separate taxable event. This tax treatment,
however, depends entirely upon the joint venture's classification as a
"partnership" and Enstar 5B's classification as a "partnership" (rather than
as an "association taxable as a corporation") for federal income tax
purposes. This summary assumes that the joint venture and the partnership
have been and will continue to be properly classified as a "partnership" for
federal income tax purposes. No opinion of counsel or of the joint venture's
and partnership's independent accountants or ruling from the IRS is
currently being sought with respect to this partnership status issue.
FEDERAL INCOME TAX CONSEQUENCES
o REALIZATION OF GAIN ON SALE OF ASSETS. Consummation of the
Liquidation Plan will cause the partnership to recognize gain for federal
income tax purposes. In general, that gain will equal the excess of the
"amount realized" over the joint venture's adjusted basis in the assets. The
corporate general partner anticipates that some or all of the recognized
gain will be taxable as ordinary income resulting from the recapture of
previously claimed deductions for depreciation and amortization under
section 1245 of the Code. The gain recognized by a limited partner may be
reduced by the limited partner's prior losses not deductible because of the
"passive activity loss" limitations under section 469 of the Code. For more
information please see the subsection entitled "Passive Activity Losses"
below.
o PASSIVE ACTIVITY LOSSES. Under section 469 of the Code,
non-corporate taxpayers, personal service corporations or other closely held
corporations generally can deduct "passive activity losses" in any year only
to the extent of its passive activity income for that year. Substantially
all post-1986 losses of unitholders from the partnership should be
considered passive activity losses. Thus, unitholders may have "suspended"
passive losses from the partnership (i.e., post-1986 net taxable losses in
excess of statutorily permitted "phase-in" amounts which have not been used
to offset income from other activities) which may be available to shelter
gain from the Liquidation Plan. Unitholders should consult their own tax
advisors regarding the effect that the passive activity loss rules will have
upon his or her tax situation.
o UNRELATED BUSINESS INCOME. For most tax-exempt unitholders, a
portion of the gain from the sale of the assets will be treated as unrelated
business income subject to tax under section 511 of the Code. Under section
514(a) of the Code, gain from the sale of "debt-financed property" is
treated as unrelated business income generally in an amount equal to a ratio
determined by comparing the property's debt to its cost basis. Additional
unrelated business income may result to a tax-exempt unitholder that
borrowed funds to purchase its units. Tax-exempt unitholders should consult
their own tax advisors regarding the unrelated trade or business income that
may result from the sale of the joint venture's system.
o FOREIGN INVESTORS. A unitholder who is a nonresident alien
individual, foreign corporation or other foreign person, is subject to a
withholding tax on that person's share of the gain recognized on the
Liquidation Plan, assuming the partnership is deemed to be engaged in a U.S.
trade or business and the partnership's taxable income is effectively
connected with the trade or business. The withholding rates are 38.6% for
unitholders other than corporate unitholders and 35% for corporate
unitholders. Amounts withheld will be remitted to the IRS and the foreign
person will receive a credit on such person's U.S.
- 53 -
income tax return filed for the amount of the tax withheld by the
partnership. The tax withheld will be treated as a distribution to the
foreign unitholder.
o COMPLETE LIQUIDATION. In general, upon complete liquidation of the
partnership, gain may be recognized by a unitholder upon receipt of a
liquidating distribution, but only to the extent any money (and certain
other property) received exceeds the adjusted basis of the unitholder's
units. In most cases, we anticipate that a unitholder's basis for his units
should exceed his liquidating distribution, primarily because the basis for
his units will be increased by his share of gain on the sale of the assets.
Thus, little or no additional gain should be recognized as a result of
receiving a liquidating distribution. However, this may not be true in all
cases, as some of the unitholders may recognize gain on the liquidation of
the partnership in addition to their share of gain realized by the
partnership on the sale of the joint venture's assets. Since any decrease in
a unitholder's share of partnership liabilities is deemed to be a
distribution of money, the amount of gain on a liquidation distribution may
exceed the actual distribution of money. Loss will generally be recognized
by a unitholder only if he receives no property other than money, and then
only to the extent the adjusted basis of his units exceed the sum of any
money received. However, the deductibility of capital losses is limited for
both corporate and non-corporate unitholders.
UNITHOLDERS ARE URGED TO CONSULT THEIR PERSONAL TAX ADVISORS FOR
ADVICE REGARDING THE FEDERAL INCOME TAX CONSEQUENCES TO THEM WITH RESPECT TO
THE LIQUIDATION PLAN, INCLUDING THE LIQUIDATION AND TERMINATION OF THE
PARTNERSHIP.
STATE TAX CONSEQUENCES
Many states impose income tax withholding requirements on
partnerships that have nonresident partners. These requirements are at the
partnership level and, therefore, do not reflect the actual tax profile of
the individual partner. Nonetheless, we urge the unitholders to consult
their personal tax advisors for advice regarding the application of the
information set forth herein to their individual circumstances, including
the state tax consequences to each of them on the consummation of the
Liquidation Plan and related distributions.
NO APPRAISAL RIGHTS
If the unitholders owning a majority of the units on the Record
Date vote in favor of the Liquidation Plan, that approval will bind all
unitholders. The partnership agreement of Enstar 5B and the Georgia Revised
Uniform Limited Partnership Act, under which Enstar 5B is governed, do not
give rights of appraisal or similar rights to unitholders who dissent from
the vote of the majority-in-interest in approving the Liquidation Plan.
Accordingly, dissenting unitholders do not have the right to have their
units appraised and to have a judicial determination of the fair value of
their units paid to them because they disapprove of the Liquidation Plan.
NO ESTABLISHED MARKET PRICES FOR PARTNERSHIP UNITS
No established market for the units of Enstar 5B was ever expected
to develop, and none has developed. Consequently, transactions in the units
have been limited and sporadic, and it is not known to what extent those
transactions have been on a fully arm's-length basis, as between willing
buyers and willing sellers.
- 54 -
The following table sets forth the high and low sales prices, known
to us, for Enstar 5B's units during the period January 1, 2000 through
September 30, 2002:
NUMBER
OF TOTAL UNITS
PERIOD HIGH LOW TRADES TRADED
- ------ ------------ ------------ ------------ -----------------
January-March 2000 $121.17 $ 80.00 33 1,257
April-June 2000 141.89 50.00 31 1,481
July-September 2000 115.01 50.00 23 1,157
October-December 2000 158.26 53.50 10 574
January-March 2001 145.00 62.50 37 1,061
April-June 2001 155.11 95.00 8 271
July-September 2001 145.00 75.00 6 703
October-December 2001 90.00 70.00 5 188
January-March 2002 130.00 104.00 8 805
April-June 2002 137.20 50.00 22 2,865
June-September 2002 141.00 80.00 3 94
DISTRIBUTIONS TO UNITHOLDERS
Since the inception of Enstar 5B, the partnership has made
aggregate cash distributions to its unitholders in the amount of
approximately $1.9 million or an aggregate of $31.42 per unit. These
distributions were made from the partnership's operating cash flow. However,
Enstar 5B has made no distributions to unitholders since 1990.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On November 22, 2002, there were 59,830 units issued and
outstanding and entitled to vote on matters upon which the unitholders may
vote or consent, which were held by 1,232 unitholders. None of the
affiliates of the corporate general partner, or any of the executive
officers or directors of the corporate general partner or any of its
affiliates, owns any of the units, nor has any of these persons engaged in
any transaction in the units during the 60-day period immediately preceding
the date hereof.
As of November 22, 2002, the following group of affiliated
unitholders beneficially owned, in the aggregate, 5% or more of the total
outstanding units. As of the date hereof, there is no other person known by
the partnership to own beneficially, or that may be deemed to own
beneficially, more than 5% of the units.
BENEFICIAL OWNERSHIP
-------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT PERCENT
- -------------------------------------- ---------- -----------
Everest Cable Investors LLC 3,573 5.97%
199 S. Los Robles Avenue Ste 440
Pasadena, California 91101
The corporate general partner is an indirect, wholly-owned subsidiary
of Charter Communications, Inc. Charter Communications, Inc., is
beneficially controlled by Paul G. Allen.
- 55 -
IDENTITY AND BACKGROUND OF CERTAIN PERSONS
ENSTAR COMMUNICATIONS CORPORATION
Enstar Communications is the corporate general partner of Enstar
5B. Enstar Communications is a Georgia corporation whose principal business
is to engage in the cable and telecommunications business, both as general
partner of 14 limited partnerships formed to own and operate cable
television systems, and through a wholly-owned operating subsidiary. As of
December 31, 2001, Enstar Communications managed cable television systems
serving approximately 74,000 basic subscribers. Enstar Communications has
caused Enstar 5B to pursue a process of liquidation because of difficulties
of profitably operating a rural system on a long-term basis. The address and
telephone number of Enstar Communications' principal executive offices is
12405 Powerscourt Drive, St. Louis, Missouri 63131; tel. (314) 965-0555.
Set forth below is certain general information about the Director
and the Executive Officers of Enstar Communications. Each of these
individuals holds the same positions as an executive officer of each of the
Filing Persons, except for Steven A. Schumm, who also serves as the sole
director of Enstar Communications. Information about the directors of
Charter Communications, Inc., is set forth under "Identity and Background of
Certain Persons -- Charter Communications, Inc." on pages 60-61.
The business address and telephone number of each of the following
individuals is 12405 Powerscourt Drive, St. Louis, Missouri; tel.: (314)
965-0555.
Name Age Position
Steven A. Schumm........... 50 Director, Executive Vice President and Assistant to the President
Carl E. Vogel.............. 44 President and Chief Executive Officer
David C. Andersen.......... 53 Senior Vice President - Communications
David G. Barford........... 43 Executive Vice President and Chief Operating Officer
J. Christian Fenger........ 47 Senior Vice President of Operations - Western Division
Eric A. Freesmeier......... 49 Senior Vice President - Administration
Kent D. Kalkwarf........... 42 Executive Vice President and Chief Financial Officer
Ralph G. Kelly............. 44 Senior Vice President - Treasurer
Paul Martin................ 41 Senior Vice President - Corporate Controller
David L. McCall............ 46 Senior Vice President of Operations - Eastern Division
Majid R. Mir............... 51 Senior Vice President - Telephony and Advanced Services
John C. Pietri............. 52 Senior Vice President - Engineering
- 56 -
Michael E. Riddle.......... 42 Senior Vice President and Chief Information Officer
Curtis S. Shaw............. 53 Senior Vice President, General Counsel and Secretary
William J. Shreffer........ 48 Senior Vice President of Operations - Midwest Division
Steven E. Silva............ 42 Executive Vice President - Corporate Development and Chief Technology Officer
Dianne Schneiderjohn....... 45 Senior Vice President - Marketing and Programming
STEVEN A. SCHUMM, Director, Executive Vice President and Assistant to
the President. Prior to joining Charter Investment, Inc. (also called
"Charter Investment") (a predecessor of, and currently an affiliate of,
Charter Communications, Inc., which is also referred to as Charter) in 1998,
Mr. Schumm was Managing Partner of the St. Louis office of Ernst & Young LLP
for 14 years. He had joined Ernst & Young in 1974. He served as one of 10
members of the firm's National Tax Committee. Mr. Schumm earned a B.S.
degree from Saint Louis University.
CARL E. VOGEL, President and Chief Executive Officer. Mr. Vogel has
held this position (and also has served as a director of Charter
Communications, Inc.) since October 2001. Mr. Vogel has more than 20 years
of experience in telecommunications and the subscription television
business. Prior to joining Charter, he was a Senior Vice President of
Liberty Media Corp., from November 1999 to October 2001, and the Chief
Executive Officer of Liberty Satellite and Technology, from April 2000 to
October 2001. Prior to joining Liberty, Mr. Vogel was an Executive Vice
President and the Chief Operating Officer of Field Operations for AT&T
Broadband and Internet Services, with responsibility for managing operations
of all of AT&T's cable broadband properties, from June 1999 to November
1999. From June 1998 until June 1999, Mr. Vogel served as Chief Executive
Officer of Primestar, Inc., a national provider of subscription television
services, and from 1997 to 1998, he served as Chief Executive Officer of
Star Choice Communications. From 1994 through 1997, Mr. Vogel served as the
President and Chief Operating Officer of EchoStar Communications. He began
his career at Jones Intercable in 1983. Mr. Vogel serves as a director of
On-Command Corporation. Mr. Vogel earned a B.S. degree in Finance and
accounting from St. Norbert College.
DAVID C. ANDERSEN, Senior Vice President - Communications. Prior to
joining Charter Communications, Inc., and Enstar Communications in May 2000,
Mr. Andersen served as Vice President of Communications for CNBC, the
worldwide cable and satellite business news network subsidiary of NBC, from
September 1999 to April 2000. He worked for Cox Communications, Inc. from
1982 to 1999, establishing their public relations department and advancing
to Vice President of Public Affairs. He held various positions in
communications with the General Motors Corporation from 1971 until 1982. Mr.
Andersen is a past recipient of the cable industry's highest honor - the
Vanguard Award. He serves on the board of KIDSNET, the educational
non-profit clearinghouse of children's programming, and is a former Chairman
of the National Captioning Institute's Cable Advisory Board.
DAVID G. BARFORD, Executive Vice President and Chief Operating Officer.
Mr. Barford was promoted to his current position in July 2000, having
previously served as Senior Vice President of Operations - Western Division
from June 1997 to July 2000. Prior to joining Charter Investment in 1995,
Mr. Barford held various senior marketing and operating roles during nine
years at Comcast Cable Communications, Inc. He received a B.A. degree from
California State University, Fullerton, and an M.B.A. degree from National
University. Mr. Barford is currently on paid administrative leave and Carl
Vogel has assumed Mr. Barford's responsibilities on an interim basis.
- 57 -
J. CHRISTIAN FENGER, Senior Vice President of Operations - Western
Division. Mr. Fenger was promoted to his current position in January 2002,
having served as Vice President and Senior Vice President of Operations for
the North Central Region since 1998. From 1992 until joining Charter in
1998, Mr. Fenger served as the Vice President of Operations for Marcus
Cable, and, prior to that, as Regional Manager of Simmons Cable TV since
1986. Mr. Fenger received his bachelor's degree and his master's degree in
communications management from Syracuse University's Newhouse School of
Public Communications.
ERIC A. FREESMEIER, Senior Vice President - Administration. From
1986 until joining Charter Investment in 1998, Mr. Freesmeier served in
various executive management positions at Edison Brothers Stores, Inc.
Earlier, he held management and executive positions at Montgomery Ward. Mr.
Freesmeier holds a bachelor's degree from the University of Iowa and a
master's degree from Northwestern University's Kellogg Graduate School of
Management.
THOMAS R. JOKERST, Senior Vice President - Advanced Technology
Development. Mr. Jokerst joined Charter Investment in 1994. Previously he
served as a vice president of Cable Television Laboratories and as a
regional director of engineering for Continental Cablevision. He is a
graduate of Ranken Technical Institute and of Southern Illinois University.
KENT D. KALKWARF, Executive Vice President and Chief Financial Officer.
Mr. Kalkwarf was promoted to the position of Executive Vice President in
July 2000, having previously served as Senior Vice President. Prior to
joining Charter Investment in 1995, Mr. Kalkwarf was employed for 13 years
by Arthur Anderson LLP, where he attained the position of senior tax
manager. He has extensive experience in cable, real estate, and
international tax issues. Mr. Kalkwarf has a B.S. degree from Illinois
Wesleyan University and is a certified public accountant.
RALPH G. KELLY, Senior Vice President - Treasurer. Prior to joining
Charter Investment in 1993, Mr. Kelly was controller and then treasurer of
Cencom Cable Associates between 1984 and 1992. He left Charter Investment in
1994 to become Chief Financial Officer of CableMaxx, Inc., and returned in
1996. Mr. Kelly received his bachelor's degree in accounting from the
University of Missouri - Columbia and his M.B.A. degree from Saint Louis
University. Mr. Kelly is a certified public accountant.
PAUL E. MARTIN, 41, Senior Vice President - Corporate Controller.
Prior to his promotion to his current position on April 22, 2002, Mr. Martin
was Vice President and Corporate Controller from March 2000 of Charter.
Prior to joining Charter in March 2000, Mr. Martin was Vice President and
Controller for Operations and Logistics for Fort James Corporation, a
manufacturer of paper products. From 1995 to February 1999, Mr. Martin was
Chief Financial Officer of Rawlings Sporting Goods Company, Inc. Mr. Martin
is a certified public accountant and was associated with Arthur Andersen LLP
for nine years. Mr. Martin received a B.S. degree in accounting from the
University of Missouri - St. Louis.
DAVID L. McCALL, Senior Vice President of Operations - Eastern
Division. Prior to joining Charter Investment in 1995, Mr. McCall was
associated with Crown Cable and its predecessor, Cencom Cable Associates,
Inc., from 1983 to 1994. Mr. McCall is a member of the Southern Cable
Association's Tower Club.
MAJID R. MIR, Senior Vice President - Telephony and Advanced
Services. Prior to joining Charter in April 2001, Mr. Mir worked with
GENUITY Networks, Inc. as Vice President, Metro Network Engineering in
Irving, Texas from June 2000 to April 2001. Prior to that, Mr. Mir worked
with GTE from 1979 to June 2000 in various capacities of increasing
responsibility, most recently as Assistant Vice President of Core Network
Engineering. Mr. Mir served as Director, Business Development for GTE, from
1996 to 1997. Mr. Mir earned a bachelor's of science degree in systems
science from the University
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of West Florida and holds a master's degree in business administration from
the University of South Florida.
JOHN C. PIETRI, Senior Vice President - Engineering. Prior to joining
Charter Investment in 1998, Mr. Pietri was with Marcus Cable for nine years,
most recently serving as Senior Vice President and Chief Technical Officer.
Earlier, he was in operations with West Marc Communications and Minnesota
Utility Contracting. Mr. Pietri attended the University of Wisconsin -
Oshkosh.
MICHAEL E. RIDDLE, Senior Vice President and Chief Information Officer.
Prior to joining Charter in December 1999, Mr. Riddle was Director, Applied
Technologies of Cox Communications for four years. Prior to that, he held
technical and management positions during 17 years at Southwestern Bell and
its subsidiaries. Mr. Riddle attended Fort Hays State University.
CURTIS S. SHAW, Senior Vice President, General Counsel and Secretary.
From 1988 until he joined Charter Investment in 1997, Mr. Shaw served as
corporate counsel to NYNEX. Since 1973, Mr. Shaw has practiced as a
corporate lawyer, specializing in mergers and acquisitions, joint ventures,
public offerings, financings, and federal securities and antitrust law. Mr.
Shaw received a B.A. degree from Trinity College and a J.D. degree from
Columbia University School of Law.
WILLIAM J. SHREFFER, Senior Vice President of Operations - Central
Division. Mr. Shreffer was promoted to his current position in January 2002,
having previously served as President of Operations for the Michigan region.
Prior to joining Charter in 1999, Mr. Shreffer acted as a Managing Director
of Cablevision. Between 1995 and 1999, he held various positions with
Century Communications, most recently as its Group Vice President. From 1985
to 1995, Mr. Shreffer acted as the Regional Controller for American Cable
Systems and, following the acquisition of American by Continental
Cablevision, as its General Manager in its Chicago region. Mr. Shreffer
holds degrees from Robert Morris College and Duquesne University and is
obtaining a master's degree in business from Lewis University in Chicago.
STEPHEN E. SILVA, Executive Vice President - Corporate Development and
Technology and Chief of Technology Officer. Mr. Silva joined Charter
Investment in 1995. Prior to this promotion to Executive Vice President and
Chief Technology Officer in October 2001, he was Senior Vice President -
Corporate Development and Technology since September 1999. Mr. Silva
previously served in various management positions at U.S. Computer Services,
Inc., a billing service provider specializing in the cable industry. He is a
member of the board of directors of Diva Systems Corporation.
DIANE SCHNEIDERJOHN, 45, Senior Vice President - Marketing and
Programming. Ms. Schneiderjohn joined Charter Communications, Inc. in April
2002. Ms. Schneiderjohn has extensive experience in key senior marketing and
programming roles in the subscription television business. Most recently,
Ms. Schneiderjohn was the Managing Partner for Carlsen Resources' Global
Media Division. From 1995-2000, Ms. Schneiderjohn was the Senior Vice
President for Turner International Asia Pacific, establishing its marketing
organization and advancing to oversee all aspects of distribution sales for
Turner products and networks, including CNN. Prior to Turner International,
Ms. Schneiderjohn spent nearly 12 years with Viacom's Cable Division, where
she served in a variety of marketing positions including Corporate Vice
President of Marketing, Programming and Sales. She has held positions on
numerous boards and advisory committees, including the national board of
Women in Cable and Telecommunications (WICT) and the national board of the
National Association of Minorities in Communications (NAMIC). Ms.
Schneiderjohn holds a B.S. degree from the University of California,
Berkeley.
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The business address and telephone number of each of the sole director
and each of the executive officers listed above are: 12405 Powerscourt
Drive, St. Louis, Missouri 63131, Telephone: (314) 965-0555.
ROBERT T. GRAFF
Robert T. Graff is the individual general partner of Enstar 5B. Mr.
Graff has been retired for more than the past ten years. Mr. Graff is a
citizen of the United States. Mr. Graff has not been actively involved in
the management of Enstar 5B.
CHARTER COMMUNICATIONS, INC.
Charter Communications, Inc. (also referred to as "Charter, Inc.")
is a publicly-traded Delaware corporation that, operating through its
subsidiaries, is the fourth largest operator of cable television systems in
the United States. It provides cable television and other telecommunications
services to approximately 7.0 million customers in 40 states. Since 1999,
Charter, Inc., through its subsidiaries, completed 18 cable system
acquisitions, which added approximately 4.7 million customers. Under
management agreements with Charter Communications Holding Company, LLC
("Holdco") and Charter Communications Operating, LLC ("Operating"), Charter,
Inc. is responsible for the management of Holdco, Operating and their
respective subsidiaries (which include all of the other Filing Persons) and
controls the affairs of each of them. Paul G. Allen controls approximately
93.5% of the voting power of Charter, Inc.
Listed below are the directors of Charter, Inc. Information about
Charter, Inc.'s executive officers is set forth under the heading "Identity
and Background of Certain Persons - Enstar Communications Corporation" on
pages 56-60.
The business address and telephone number of Charter, Inc. and each of
the following individuals is 12405 Powerscourt Drive, St. Louis, Missouri
63131; tel. (314) 965-0555.
PAUL G. ALLEN, 48, has been Chairman of the Board of Directors of
Charter since July 1999, and chairman of the board of directors of Charter
Investment since December 1998. Mr. Allen, a co-founder of Microsoft
Corporation, has been a private investor for more than five years, with
interests in over 140 companies, many of which contribute to the Wired
World(TM) vision that Charter shares. Mr. Allen's investments include Vulcan
Ventures Incorporated, Portland Trail Blazers NBA team, Seattle Seahawks NFL
franchise, Vulcan Programming, Inc. and Vulcan Cable III Inc., and he has
investments in USA Networks, Inc., TechTV, Inc., DreamWorks LLC, High Speed
Access Corp., Oxygen Media, LLC and Wink Communications, Inc. He is a
director of USA Networks, Inc., TechTV, Inc. and numerous privately held
companies.
CARL E. VOGEL, 44 (See "Identity and Background of Certain Persons
- - Enstar Communications Corporation" on pages 56-60).
MARC B. NATHANSON, 56, has been a director of Charter since January
2000. Mr. Nathanson is the chairman of Mapleton Investments LLC, an
investment vehicle formed in 1999. He also founded and served as chairman
and chief executive officer of Falcon Holding Group, Inc., a cable operator,
and its predecessors, from 1975 until 1999. He served as chairman and chief
executive officer of Enstar Communications Corporation from 1988 until
November 1999. Prior to 1975, Mr. Nathanson held executive positions with
Teleprompter Corporation, Warner Cable and Cypress Communications
Corporation. In 1995, he was appointed by the President of the United States
to, and since 1998 has served as chairman of, The Broadcasting Board of
Governors.
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RONALD L. NELSON, 49, has been a director of Charter since November
1999. Mr. Nelson is a founding member of DreamWorks LLC, where he has served
in executive management since 1994. Prior to that time, during his 15 years
at Paramount Communications Inc., he served in a variety of operating and
executive positions. He currently serves as a member of the board of
directors of Advanced Tissue Sciences, Inc. and Centre Pacific, L.L.C., a
registered investment advisor. Mr. Nelson has a B.S. degree from the
University of California at Berkeley and an M.B.A. degree from the
University of California at Los Angeles.
NANCY B. PERETSMAN, 47, has been a director of Charter since November
1999. Ms. Peretsman has been a managing director and executive vice
president of Allen & Company Incorporated, an investment bank unrelated to
Paul G. Allen, since 1995. From 1983 to 1995, she was an investment banker
at Salomon Brothers Inc., where she was a managing director since 1990. She
is a director of Priceline.com Incorporated and several privately held
companies. She has a B.A. degree from Princeton University and an M.P.P.M.
degree from Yale University.
WILLIAM D. SAVOY, 37, has been a director of Charter since July 1999
and a director of Charter Investment since December 1998. Since 1990, Mr.
Savoy has been an officer and a director of many affiliates of Mr. Allen,
including vice president and a director of Vulcan Ventures Incorporated,
president of Vulcan Northwest, Inc., and president and a director of Vulcan
Programming, Inc. and Vulcan Cable III Inc. Mr. Savoy also serves on the
advisory board of DreamWorks LLC and as a director of drugstore.com,
Peregrine Systems, Inc., RCN Corporation, Telescan, Inc., USA Networks,
Inc., TechTV, Inc. and Digeo Technology, Inc. Mr. Savoy holds a B.S. degree
in computer science, accounting and finance from Atlantic Union College.
JOHN H. TORY, 47, has been a director of Charter since December 2001.
Mr. Tory is the President and Chief Executive Officer of Rogers Cable Inc.,
Canada's largest broadband cable operator, and has held that position since
April 1999. From 1995 to 1999, Mr. Tory was President and Chief Executive
Officer of Rogers Media Inc., a broadcasting and publishing company. Prior
to joining Rogers, Mr. Tory was a managing partner and member of the
executive committee at Tory Tory DesLauriers & Binnington, one of Canada's
largest law firms. Mr. Tory serves on the board of a number of Canadian
companies, including Rogers Cable Inc., Rogers Media Inc., Cara Operations
Limited, Enbridge Consumers Gas and the Toronto Blue Jays Baseball Club. He
also served for nine years as the Chairman of the Canadian Football League,
including four years as League Commissioner. Mr. Tory was educated at
University of Toronto Schools, Trinity College (University of Toronto) and
Osgoode Hall Law School.
LARRY W. WANGBERG, 59, has been a director of Charter Communications,
Inc. since January 2002. Mr. Wangberg has served as Chairman, Chief
Executive Officer and a director of TechTV Inc., a cable television network,
since 1997. He recently announced his intention to step down as the chief
executive officer of TechTV Inc., but will remain in his current position
until a successor is named and afterward will continue to serve as a
director of TechTV Inc. Prior to joining TechTV Inc., Mr. Wangberg was
chairman and Chief Executive Officer of StarSight Telecast Inc., an
interactive navigation and program guide company which later merged with
Gemstar International, from 1994 to 1997. Mr. Wangberg was chairman and
Chief Executive Officer of Times Mirror Cable Television and senior vice
president of its corporate parent, Times Mirror Co., from 1983 to 1994. He
currently serves on the boards of TechTV Inc., Autodesk Inc., and ADC
Telecommunications. Mr. Wangberg holds a bachelor's degree in mechanical
engineering and a master's degree in industrial engineering, both from the
University of Minnesota.
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CHARTER COMMUNICATIONS HOLDING COMPANY, LLC
Charter Communications Holding Company, LLC ("Holdco") is a
Delaware limited liability company, and a direct subsidiary of Charter, Inc.
Holdco, through its subsidiaries (which include Enstar Communications
Corporation) owns and operates Charter Inc.'s cable television systems. The
business address and telephone number of Holdco's principal office is 12405
Powerscourt Drive, St. Louis, Missouri 63131; tel. (314) 965-0555.
VOTING PROCEDURES
The Liquidation Plan will not be carried out unless it is approved
by a majority-in-interest of the unitholders and by a majority-in-interest
of unitholders of Enstar 5A. A vote of the holders of a majority of the
units on the Record Date to approve the Liquidation Plan will bind all
unitholders as to the Liquidation Plan.
The close of business on , 2002, is the Record Date for
--------
determining the unitholders entitled to receive notice of the solicitation
of consents and to consent to the Liquidation Plan. Consents of the
unitholders will be solicited during the period, also referred to as the
"Solicitation Period," which begins on and will end at 5:00 p.m.,
---------
New York City time, on the earlier of (1) the date on which the consents of
the holders of a majority of the units entitled to consent are received by
us and/or the soliciting agent; or (2) , 2002 (or, if the
---------------
general partner extends the Solicitation Period, then at any time before
5:00 p.m., New York City time, on the expiration date of such extended
Solicitation Period). The enclosed consent card permits you to approve,
disapprove or abstain with respect to the Liquidation Plan. Please indicate
your approval, disapproval or abstention by marking and signing and dating
the enclosed consent card and returning it in the enclosed self-addressed
envelope to D.F. King & Co., Inc., 77 Water Street, New York, New York
10005, a company Enstar 5B has engaged to act as its soliciting agent. An
extension of the Solicitation Period will not impact the validity of
consents already received.
If you sign and send in the enclosed consent card and do not
indicate how you want to vote as to the Liquidation Plan, your consent card
will be treated as voting to APPROVE the Liquidation Plan. If you fail to
send in your consent card, it will have the same effect as a vote to
DISAPPROVE the Liquidation Plan. If you ABSTAIN as to the Liquidation Plan,
it will have the same effect as a vote to DISAPPROVE the Liquidation Plan.
You may change your vote at any time before 5:00 p.m., New York
City time, on the earlier of (1) the date on which the consents of the
holders of a majority of the units entitled to consent are received by us
and/or the soliciting agent; or (2) , 2002 (or, if the corporate
-----------
general partner extends the Solicitation Period, then at any time before
5:00 p.m., New York City time, on the expiration date of such extended
Solicitation Period). You can do this in one of two ways. First, you can
send a written notice dated later than your consent card stating that you
would like to revoke or change your vote. Second, you can complete and
submit a new consent card dated later than your original consent card. If
you choose either of these two methods, you must submit your notice of
revocation or new consent card to the soliciting agent. If you instructed a
broker to vote your units, you must follow your broker's directions for
changing those instructions. To be effective, your notice of revocation or
new consent card must be received before the end of the original
Solicitation Period, or extended Solicitation Period, as the case may be.
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On November 22, 2002, there were 59,830 outstanding units entitled
to vote on the Liquidation Plan, which were held by approximately 1,232
unitholders, none of whom are known to us to be an affiliate of the
partnership, the general partner, or of any affiliate of any of the other
Filing Persons.
AVAILABLE INFORMATION
This consent solicitation statement does not purport to be a
complete description of all agreements and matters relating to the condition
of Enstar 5B, its assets and the transactions described herein. With respect
to statements contained in this consent solicitation statement as to the
content of any contract or other document filed as an exhibit to Enstar 5B's
Annual Report on Form 10-K for the year ended December 31, 2001, Quarterly
Reports on Form 10-Q for the periods ended March 31, 2002, June 30, 2002 and
September 30, 2002 or a Current Report on Form 8-K, each such statement is
qualified in all respects by reference to such reports and the schedules
thereto, which may be obtained without charge upon written request to Enstar
5B. You also may obtain copies of the asset purchase agreements with Access,
Cumberland and Telecommunications that are described in this consent
solicitation statement, without charge, upon written request to Enstar 5B.
To make such a request, you should write to Enstar Communications
Corporation, 12405 Powerscourt Drive, St. Louis, Missouri 63131, Attention:
Partnership Relations; or call (314) 543-2389.
The mailing address and telephone number of Charter Communications,
Inc. and Enstar Communications Corporation are: 12405 Powerscourt Drive, St.
Louis, Missouri 63131, Telephone: (314) 965-0555.
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CONSENT SOLICITATION BY THE GENERAL PARTNER OF
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
CONSENT CARD
The undersigned record owner (the "Unitholder") of limited
partnership units (the "Units") of Enstar Income/Growth Program Five-B,
L.P., a Georgia limited partnership, (the "Partnership"), hereby specifies
that all of the Units of the Partnership that the Unitholder is entitled to
vote shall be voted as follows:
AS SET FORTH IN THE CONSENT SOLICITATION STATEMENT, IN EACH CASE
APPROVAL SHALL BE DEEMED TO INCLUDE SUCH NON-MATERIAL MODIFICATIONS AS
ENSTAR COMMUNICATIONS CORPORATION, AS A GENERAL PARTNER OF THE PARTNERSHIP
(THE "GENERAL PARTNER"), MAY IN ITS SOLE DISCRETION DETERMINE. IF NO
SPECIFICATION IS MADE WITH RESPECT TO THE VOTING ON THE FOLLOWING
LIQUIDATION PLAN, THIS CONSENT CARD WILL BE TREATED AS VOTING TO APPROVE THE
LIQUIDATION PLAN.
The General Partner has recommended the adoption of a plan of
liquidation with respect to the Partnership (the "Liquidation Plan") which
would authorize:
(1) Enstar Cable of Cumberland Valley, a Georgia general
partnership co-owned by the Partnership (the "Joint Venture"), to sell those
portions of its cable television system assets located in and around the
communities of Monticello, Whitley City, Liberty, Cumberland, Greensburg,
Williamsburg, Hustonville/Moreland, Kentucky and Jellico, Tennessee to
Access Cable Television, Inc. a Kentucky corporation, under the Asset
Purchase Agreement between the Partnership as Seller, and Access Cable
Television, Inc., as Buyer, dated as of September 30, 2002 (the "Access
Sale");
(2) the Joint Venture to sell those portions of its cable
television systems owned by the Joint Venture, located in and around the
community of Russell Springs, Jamestown and Russell County, Kentucky, to
Cumberland Cellular, Inc. a Kentucky corporation, under the Asset Purchase
Agreement between the Partnership as Seller, and Cumberland Cellular, Inc.
as Buyer, dated as of October 8, 2002 (the "Cumberland Sale");
(3) the Joint Venture to sell those portions of its cable
television systems owned by the Joint Venture, located in and around the
community of Pomme de Terre, Missouri, to Telecommunications Management,
LLC, a Missouri limited liability company, under the Asset Purchase
Agreement between the Partnership and certain other partnerships as Sellers,
and Telecommunications Management, LLC as Buyer, dated as of November 8,
2002 (the "Missouri Sale");
(4) As soon as practicable after the consummation of the Access
Sale, the Cumberland Sale and Missouri Sale, to dissolve, terminate and
liquidate the Joint Venture through one or more liquidating distributions to
the Partnership and the other general partner of the Joint Venture, after
the sale of the Partnership's remaining assets, payment of the Joint
Venture's debts and obligations and paying or providing for the payment of
the expenses of the Access Sale, the Cumberland Sale and the Missouri Sale,
in accordance with the partnership agreement of the Joint Venture (the
"Joint Venture Liquidation"); and
(5) As soon as practicable after the completion of the Joint
Venture Liquidation, to dissolve, terminate and liquidate the Partnership
through one or more liquidating distributions to the limited partners and
general partners of the Partnership's remaining assets after payment of the
Partnership's debts and obligations, in accordance with the partnership
agreement of the Partnership, with the General Partner, or such party as
designated by the General Partner, acting as the liquidating trustee.
APPROVE DISAPPROVE ABSTAIN
[ ] [ ] [ ]
(please date and sign on the other side)
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The undersigned hereby acknowledges receipt of the consent
solicitation statement.
The undersigned hereby revokes any prior authorization to vote the
Units of the Partnership heretofore given by the undersigned to any person.
Dated , 2002
-----------------
(Unitholder's Signature)
------------------------
(Unitholder's Signature)
------------------------
Please date and sign exactly as name appears on this consent card,
and promptly return in the enclosed envelope. When signing as guardian,
executor, administrator, attorney, trustee, custodian, or in any other
similar capacity, please give full title. If a corporation, sign in full
corporate name by president or other authorized officer, giving title and
affixing corporate seal. If a partnership or limited liability company, sign
in the partnership/limited liability company name, as the case may be, by a
duly authorized person. In the case of joint ownership, each joint owner
must sign.
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