AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION
ON JANUARY 21, 2003
PRELIMINARY CONSENT SOLICITATION STATEMENT
FILED ON SCHEDULE 14A
CONSENT SOLICITATION STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
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-A, 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.
| | 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:
(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):
(4) Proposed maximum aggregate value of transaction: $
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(5) Total fee paid:
|X| Fee paid previously with preliminary materials.
| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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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-A, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
, 2003
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Dear Limited Partner:
As a holder of limited partnership units ("units") of Enstar
Income/Growth Program Five-A, L.P. ("Enstar 5A"), you are being asked to vote
upon a plan of liquidation (the "Liquidation Plan") for Enstar 5A. Enstar 5A'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"). All holders of units in Enstar 5A ("unitholders")
are being asked to consent to the sale of all of the cable television systems of
the joint venture and to the subsequent liquidation and dissolution of Enstar
5A, which will result in each unitholder receiving approximately $119 per unit
in liquidating distributions. The units were originally issued at a price of
$250. Since the initial issuance of units, unitholders have received aggregate
cash distributions of approximately $31 per unit. We estimate that Enstar 5A and
the joint venture will incur approximately $139,350 and $224,200, respectively,
in fees, charges and other costs in connection with the Liquidation Plan. In
addition, we and our affiliates expect to receive approximately $650,200 in
repayment of deferred management fees and approximately $1,394,500 in repayment
of other obligations owed by the joint venture.
The Liquidation Plan will not be implemented unless it is approved by
unitholders holding a majority of the units. 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 and sets forth the basis
for our recommendation. The consent solicitation statement also describes in
detail the Liquidation Plan. If you have any questions, or need assistance in
completing and returning your consent card, please feel free to contact Enstar
5A'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, Attention: Partnership
Relations; telephone: (314) 543-2389.
Very truly yours,
Enstar Communications Corporation
Corporate General Partner
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
NOTICE OF CONSENT SOLICITATION
, 2003
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To the Limited Partners of Enstar Income/Growth Program Five-A, L.P.:
NOTICE IS HEREBY GIVEN to the holders (the "unitholders") of the
limited partnership units (the "units") of Enstar Income/Growth Program Five-A,
L.P., a Georgia limited partnership ("Enstar 5A"), that Enstar Communications
Corporation, a Georgia corporation and a general partner of Enstar 5A (the
"corporate general partner"), is soliciting written consents on behalf of Enstar
5A to approve a plan of liquidation (the "Liquidation Plan").
Enstar 5A 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 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 12,783 basic
subscribers as of December 31, 2002 (collectively, the "system"). Enstar 5A's
equal co-partner in the joint venture is Enstar Income/Growth Program Five-B,
L.P., a Georgia limited partnership ("Enstar 5B").
Under the Liquidation Plan, the joint venture will sell, in two
separate transactions, its cable television system assets to Access Cable
Television, Inc., a Kentucky corporation ("Access"), and Cumberland Cellular,
Inc., a Kentucky corporation ("Cumberland"), 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 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 5A,
in accordance with the partnership agreement of the joint venture (the
"Joint Venture Liquidation"); and
o the subsequent dissolution, termination and liquidation of Enstar 5A
through one or more liquidating distributions to the general partners
and the unitholders, in accordance with Enstar 5A's partnership
agreement (the "Enstar Liquidation").
The sale of the Pomme de Terre, Missouri system will occur in a
separate transaction that is not part of the Liquidation Plan submitted to the
unitholders. The Access Sale, the Cumberland Sale, the Joint Venture Liquidation
and the Enstar Liquidation are more fully described in this consent solicitation
statement under "Liquidation Plan Summary" on pages 3-6, "Questions and Answers
About the Liquidation Plan" on pages 7-8, "Special Factors" on pages 11-44 and
"Voting Procedures" on pages 50-51.
Enstar 5A 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 specified below is required in order to
adopt the Liquidation Plan, and will bind all of the unitholders. As of December
31, 2002, there were approximately 1,413 unitholders of Enstar 5A holding a
total of 59,766 units.
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 $5,000. All costs
associated with the solicitation will be paid by Enstar 5A.
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 York City time, on the
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earlier of (1) the date on which the consents of limited partners holding a
majority of the units entitled to consent and approving the Liquidation Plan are
received by the corporate general partner and/or the soliciting agent; or
(2) , 2002 (or, if the Solicitation Period is extended by the general
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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 and the Joint Venture Liquidation also are
approved by a majority-in-interest of the limited partners of Enstar 5B.
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.,
the 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. 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
disagree with any portion of Liquidation Plan, including the Access Sale, the
Cumberland Sale, the Joint Venture Liquidation or the Enstar Liquidation, then
you should vote to DISAPPROVE the entire 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 and approving the Liquidation Plan are
received by the corporate general partner and/or the soliciting agent; or
(2) , 2002 (or, if the corporate general partner extends the
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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.
This consent solicitation statement is being furnished to the
unitholders by the following entities, which are collectively called the
"participants:" Enstar 5A; the corporate general partner of Enstar 5A; Charter
Communications Holding Company, LLC ("Holdco"); and their ultimate parent,
Charter Communications, Inc. ("Charter, Inc."). You also may contact Enstar 5A
and the corporate general partner at their principal executive offices at 12405
Powerscourt Drive, St. Louis, Missouri 63131, Attention: Partnership Relations;
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 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
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
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CONSENT SOLICITATION STATEMENT
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This consent solicitation statement relates to the solicitation by
the corporate general partner of Enstar Income/Growth Program Five-A, L.P.
of the consent of the unitholders of Enstar 5A to a Liquidation Plan for
Enstar 5A and its 50%-owned joint venture. This consent solicitation
statement contains information about the Liquidation Plan that may be
important to your decision.
You should carefully read this entire document before you decide
whether to approve or disapprove the Plan of Liquidation.
This consent solicitation statement and the accompanying consent card
are first being mailed to the limited partners on or about , 2002.
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The date of this consent solicitation statement is , 2002.
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TABLE OF CONTENTS
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
LIQUIDATION PLAN SUMMARY................................................... 3
QUESTIONS AND ANSWERS ABOUT THE LIQUIDATION PLAN........................... 7
WHO CAN HELP ANSWER YOUR QUESTIONS......................................... 9
OWNERSHIP STRUCTURE CHART.................................................. 10
SPECIAL FACTORS............................................................ 11
General................................................................. 11
Background, Purpose and Reasons for the Access Sale, the Cumberland
Sale and the Missouri Sale........................................... 11
Alternatives to Liquidation Plan Not Prudent............................ 14
Ability to Sell Units................................................... 15
Effects of the Transaction.............................................. 15
Best Available Transaction.............................................. 16
Recommendation of the Corporate General Partner and Other Participants.. 25
Related Party Transactions.............................................. 27
Conflicts of Interest................................................... 28
The Access Purchase Agreement........................................... 28
The Cumberland Purchase Agreement....................................... 31
Description of Assets................................................... 35
Use of Proceeds and Cash Distributions.................................. 35
Disadvantages of the Liquidation Plan................................... 37
Consequences of Failure to Approve the Liquidation Plan................. 37
Effect of Termination of the Access Sale or the Cumberland Sale......... 38
Approval of the Liquidation Plan by Enstar 5B........................... 38
Sale of the Missouri System............................................. 39
Liquidation of the Joint Venture........................................ 39
Liquidation of Enstar 5A................................................ 40
Federal Income Tax Consequences of the Liquidation Plan................. 40
State Tax Consequences.................................................. 43
No Appraisal Rights..................................................... 43
NO ESTABLISHED MARKET PRICES FOR PARTNERSHIP UNITS......................... 44
DISTRIBUTIONS TO UNITHOLDERS............................................... 44
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF............................ 44
IDENTITY AND BACKGROUND OF CERTAIN PERSONS................................. 45
Enstar Communications Corporation....................................... 45
Robert T. Graff......................................................... 48
Charter Communications, Inc............................................. 49
Charter Communications Holding Company, LLC............................. 50
VOTING PROCEDURES.......................................................... 50
AVAILABLE INFORMATION...................................................... 51
INFORMATION INCORPORATED BY REFERENCE...................................... 52
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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 before you decide
whether to approve or disapprove the Plan of Liquidation.
o BACKGROUND. In 1999, the corporate general partner commenced a
process of seeking purchasers for all of the cable television systems of the
joint venture, as well as 13 other, affiliated partnership cable operators. This
effort was undertaken primarily because, based on its experience in the cable
television industry, the corporate general partner concluded that generally
applicable market conditions and competitive factors would increasingly make it
extremely difficult for smaller operators of rural cable systems, such as the
joint venture, to effectively compete and be financially successful.
Specifically, the system continues to face significant competition from direct
broadcast satellite ("DBS") operators. The corporate general partner believes
that the system must be upgraded in order for the system to maintain its
subscriber base and to be competitive with DBS. Upgrading the system would cost
an estimated $20.6 million to $24.8 million in order to offer services
comparable to DBS operators. The corporate general partner believes that this
investment cannot be viably supported by the partnership's potential revenues
and operating income. For more information, please see "Special
Factors--Background, Purpose and Reasons for the Access Sale, the Cumberland
Sale and the Missouri Sale" on pages 11-14.
o MARKETING THE SYSTEM. The bidding process for the system was
conducted by Daniels & Associates, L.P. ("Daniels"), a prominent business broker
with extensive expertise in the cable and telecommunications industry. Daniels
marketed the joint venture's cable television systems, as well as the cable
systems of the other affiliated Enstar partnerships, to third parties whom
Daniels identified as being likely to have an interest in acquiring the systems.
Ultimately, this process, which took over two years, resulted in the corporate
general partner's conclusion that Access and Cumberland offered the best
available transaction for the sale of the joint venture's system. For more
information, please see "Special Factors--Best Available Transaction" on
pages 16-24.
o SALE OF THE SYSTEM. The joint venture proposes to sell the system
as part of the Liquidation Plan in two transactions to Access and Cumberland.
The terms and conditions of each transaction are described below. For more
information, please see "Special Factors -- The Access Purchase Agreement" on
pages 28-31 and "-- The Cumberland Purchase Agreement" on pages 31-35.
THE ACCESS SALE. The sale price is 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. Adjustments to the sale price include
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. As December 31, 2002, there was a shortfall of
1,076 subscribers, which if the closing were held at that date would
reduce the purchase price by $699,400. 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 if claims exceed $150,000. Total indemnification may
not exceed $750,000.
THE CUMBERLAND SALE. The sale price is approximately
$3,707,200, subject to closing sale price adjustments, an escrow for
indemnity claims and customary closing conditions, in
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immediately available funds, for the Cumberland system. Adjustments to
the sale price include 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 December 31, 2002, the Cumberland
system had approximately 2,423 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%. As of December 31, 2002, there was a shortfall in
subscribers of 225 subscribers and basic subscriber penetration had
decreased by 4.23%. Accordingly, if the closing were held at that date
these purchase price adjustments would result in a decrease in purchase
price of $415,000.
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 if claims
exceed $150,000. Total indemnification may not exceed $1,000,000.
CLOSING CONDITIONS. The Access Sale and the Cumberland Sale
are each subject to several customary closing conditions, any or all of
which may be waived. These conditions include a requirement that the
joint venture shall have obtained certain material and required
consents, including necessary general and limited partner consents, and
there shall have been no material adverse change in the business,
financial condition or prospects of the system prior to closing.
EFFECT OF TERMINATION. Even if the Liquidation Plan is
approved by the unitholders, the Access Sale or the Cumberland Sale may
not occur because the terms of the asset purchase agreements allow the
agreements to be terminated prior to closing. If the Liquidation Plan
is approved by unitholders, but one of the asset purchase agreements
are terminated prior to closing, then the corporate general partner
intends to complete the transaction with the purchaser whose agreement
has not been terminated. The joint venture would continue to operate
that portion of the system that has not been sold and the corporate
general partner would continue to seek buyers for the remaining
portion. There can be no assurance that the joint venture could
profitably operate after such a sale where only a portion of the system
remains. For more information, please see "Special Factors--Effect of
Termination of the Access Sale or the Cumberland Sale " on page 38.
o THE MISSOURI SALE. Access and Cumberland will purchase all of the
joint venture's cable television system assets except for cable system assets in
Pomme de Terre, Missouri. The joint venture has entered into an asset purchase
agreement to sell the joint venture's remaining system in Pomme de Terre,
Missouri (the "Missouri Sale") to Telecommunications Management, LLC, a Missouri
limited liability company ("Telecommunications"). As of December 31, 2002, the
Pomme de Terre system had approximately 6% of the 12,783 total subscribers in
the joint venture's system. The limited partnership agreement for Enstar 5A
gives the general partners the authority to sell insubstantial portions of the
property and assets of Enstar 5A without unitholder approval. The corporate
general partner believes that the Pomme de Terre system is not a substantial
part of the joint venture's system and believes the sale to Telecommunications
to be in the best interests of Enstar 5A and the unitholders. Accordingly, the
corporate general partner intends to sell the Missouri system whether or not
unitholders approve the Liquidation Plan.
Telecommunications will acquire the Pomme de Terre system for a price
of approximately $502,800, subject to closing sale price adjustments, an
escrow for indemnity claims and customary closing conditions. In addition,
Telecommunications assigned a prescribed target number of 839 subscribers at
closing for the Missouri system. As of December 31, 2002, there was a shortfall
of 62 subscribers, which
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if the closing were held at that date would reduce the purchase price by
$37,138. For more information, please see "Special Factors--Sale of the Missouri
System" on page 39.
o DISSOLUTION AND LIQUIDATION OF THE JOINT VENTURE. Access, Cumberland
and Telecommunications will purchase all of the joint venture's cable television
system assets. The joint venture will therefore dissolve and liquidate after the
sale of the system. Under the Liquidation Plan, Enstar 5A and Enstar 5B, as the
general partners of the joint venture, will pay off the joint venture's debts
and obligations and 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.
The corporate general partner estimates that pre-tax liquidating
distributions from the Access Sale, the Cumberland Sale and the Missouri Sale to
Enstar 5A, as a general partner of the joint venture, will total approximately
$7,313,850, after estimated closing adjustments and closing and liquidation
expenses. Enstar 5B, as the other 50% general partner of the joint venture, will
receive an equal liquidating distribution. In addition, the corporate general
partner and its affiliates will receive approximately $650,200 in repayment of
deferred management fees, and approximately $1,283,900 in repayment of other
obligations, owed to the corporate general partner and its affiliates by the
joint venture. The corporate general partner estimates that the joint venture
will incur approximately $224,200 in fees, charges and other costs,
respectively, in connection with the Liquidation Plan. For more information,
please see "Special Factors -- Liquidation of the Joint Venture" on pages 39-40
and "-- Use of Proceeds and Cash Distributions" on pages 35-37.
o DISSOLUTION AND LIQUIDATION OF ENSTAR 5A. All of the cable television
assets of Enstar 5A are owned through the joint venture. Consequently, after the
dissolution and winding up of the joint venture, Enstar 5A will not have any
cable television system assets. Therefore, Enstar 5A will dissolve, liquidate
and terminate after termination of the joint venture. As part of the dissolution
and termination, Enstar 5A 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.
The corporate general partner currently estimates 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. In addition, the corporate general partner and its affiliates will receive
approximately $110,600 in repayment of deferred expenses owed to the corporate
general partner and its affiliates by Enstar 5A. The corporate general partner
estimates that Enstar 5A will incur approximately $139,350 in fees, charges and
other costs, respectively, in connection with the Liquidation Plan. For more
information, please see "Special Factors -- Use of Proceeds and Cash
Distributions" on pages 35-37, "-- Liquidation of Enstar 5A" on page 40 and
"-- Conflicts of Interest" on page 28.
o DETERMINATION OF THE SALE PRICES. During the more than two-year
period during which the corporate general partner sought purchasers for the
system, it 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
joint venture's system and the cable television systems of the other affiliated
limited partnerships to what the corporate general partner and the other
participants 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
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prices or other terms of the other bidders' offers, and the corporate general
partner of Enstar 5A did not know the contents of any bid, until all the bids
were received and the deadline for the submission of bids had passed. The
corporate general partner and the other participants believe that this process
acted as a "market check" that enabled the corporate general partner to
objectively determine from a representative universe of potential buyers the
present range of market values for the system and obtain what the corporate
general partner and the other participants believe to be the best transactions
currently available in the market.
Based on the foregoing, we and the other participants have concluded
that approval of the Liquidation Plan is in the best interests of Enstar 5A 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 11-14 and "-- Best Available Transaction" on pages 16-24.
o DISADVANTAGES OF THE LIQUIDATION PLAN. The primary disadvantage to
Enstar 5A, 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 system
is sold to Access or Cumberland, or to another party. For more information,
please see "Special Factors -- Disadvantages of the Liquidation Plan" on
page 37.
o FAILURE TO APPROVE THE LIQUIDATION PLAN. If the Liquidation Plan is
not approved, Enstar 5A will continue to own and operate, through its interest
in the joint venture, the system for an indefinite period of time. The corporate
general partner cannot assure you that Enstar 5A ever will be in a position to
make any further distributions to the unitholders. Further, if the Liquidation
Plan is not approved, the corporate general partner believes the system will
continue to face significant competition, and will lose subscribers at an
accelerated rate. The corporate general partner 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 and Cumberland. For more information, please see
"Special Factors -- Consequences of Failure to Approve the Liquidation Plan" on
pages 37-38.
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QUESTIONS AND ANSWERS ABOUT THE LIQUIDATION PLAN
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 5A's
allocable share of the distributions made by the joint venture from the net sale
proceeds. The corporate general partner presently estimates that liquidating
distributions to unitholders 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 initially were issued at a price of $250 per
unit and, since such initial issuance, Enstar 5A 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 35-37.
Q: WHAT WILL MY TOTAL DISTRIBUTIONS BE IF THE LIQUIDATION PLAN IS NOT
COMPLETED?
A: If the Liquidation Plan is not completed, Enstar 5A will re-examine its
ability to pay distributions on a quarterly basis. The corporate general partner
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 37-38 and "--Effects of the Transaction -- on the Joint Venture" on
page 16.
Q: WHEN DO YOU EXPECT THE LIQUIDATION PLAN TO BE COMPLETED?
A: The corporate general partner is working towards completing the Access Sale
and the Cumberland 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 5A and Enstar 5B, in order for the
Access Sale, the Cumberland 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
5B. The corporate general partner is in the process of seeking the approval of a
majority-in-interest of the limited partners of Enstar 5B.
The corporate general partner presently expects that the Access Sale
will close on or before March 31, 2003 and that the Cumberland Sale will close
on or before February 28, 2003. The corporate general partner anticipates making
initial liquidating distributions approximately 90 days after the closing of the
Access Sale and the Cumberland Sale. Final liquidating distributions would be
made of remaining funds after required closing adjustments are completed and
escrow proceeds are released, which is expected to occur approximately 13 months
after the closing of the Missouri Sale. For more information, please see
"Special Factors --Liquidation of the Joint Venture" on pages 39-40,
"--Liquidation of Enstar 5A" on page 40 and "Approval of the Liquidation Plan by
Enstar 5B" on page 38.
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 40-43.
- 7 -
Q: WHAT DO I DO TO VOTE MY ENSTAR 5A 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. If you disagree
with any portion of Liquidation Plan, including the Access Sale, the Cumberland
Sale, the Joint Venture Liquidation or the Enstar Liqudation, then you should
vote to DISAPPROVE the entire 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 and approving the Liquidation Plan are received by
the corporate general partner or the soliciting agent; or (2) , 2002
---------
(or, if the Solicitation Period is extended, 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 and approving the Liquidation Plan are
received by the corporate general partner 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. The corporate general partner presently estimates
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
pages 43-44.
- 8 -
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the Liquidation Plan, you should
contact:
Enstar Income/Growth Program Five-A, 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
- 9 -
OWNERSHIP STRUCTURE CHART
The following diagram illustrates the ownership structure of the joint
venture, Enstar 5A, the corporate general partner and the other participants.
For more information, please see "Identity and Background of Certain Persons,"
on pages 45-50.
----------------------------
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 5A and Enstar 5B. The general partners of
Enstar 5A and Enstar 5B do not own units of partnership interests in Enstar
5A or Enstar 5B, respectively, but rather hold a profits interest in the
income, losses and distributions of the partnerships.
- 10 -
SPECIAL FACTORS
GENERAL
Enstar 5A was formed in September 1986 to acquire, construct, improve,
develop and operate unspecified cable television systems in various rural
locations in the United States. Enstar 5A 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. Enstar 5A publicly offered units of
limited partnership interests beginning in January 1987, with an initial closing
in March 1987. Limited partnership units were sold at a price of $250 per unit.
Enstar 5A continued to raise capital until the offering maximum, $15.0 million,
was raised in July 1987.
In November 1999, Charter Communications, Inc. acquired the parent of
the corporate general partner. As a result, 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 5A and its operations.
Through the joint venture, Enstar 5A currently is engaged in the
ownership and operation of cable television systems which served an aggregate of
approximately 12,783 basic subscribers at December 31, 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 5A'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 5B, also is a limited partnership sponsored by the corporate
general partner. Enstar 5B publicly offered its limited partnership units
following Enstar 5A's offering of units, raising capital of $15.0 million, the
offering maximum, in December 1987. Enstar 5A and Enstar 5B were formed as
separate partnerships to provide capital for investment in a pool of unspecified
cable system assets. Around the time Enstar 5A and Enstar 5B completed their
public offerings, the corporate general partner evaluated the opportunities
available for those limited partnerships to acquire cable television systems.
Based on that evaluation, the corporate general partner determined to organize
the joint venture in order to enable each of its partners to participate in the
acquisition and ownership of a larger, more diverse pool of systems then either
could own individually by combining certain of their financial resources.
BACKGROUND, PURPOSE AND REASONS FOR THE ACCESS SALE, THE CUMBERLAND SALE AND THE
MISSOURI SALE
PURPOSE
Enstar 5A'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
- 11 -
alone expand, its subscriber base in the face of the existing and expected
future competition -- in particular DBS.
REASONS
The corporate general partner believes 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. These franchises
include 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 McCreary County franchise expired in March
1998, the Monticello franchise expired in November 1999 and the Wayne County
franchise expired in April 1998. The communities with expired franchise
agreements will likely require that the joint venture provide additional
programming in order to renew the expired franchises. This additional
programming only can be provided by upgrading the systems. The joint venture's
inability to upgrade these systems due to financial constraints impedes the
joint venture's ability to renew these franchises. Communities which issue
franchises may choose to terminate a franchise for a variety of reasons as
communities explore new alternatives to provide their residents with advanced
services. Although the joint venture continues to operate under the expired
franchise agreements in these communities, the franchisors could elect at any
time to prohibit the joint venture from continuing to operate the system in the
applicable areas.
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. As noted by the table
below, the system has steadily lost subscribers over the past several years. The
corporate general partner believes the decline largely has been attributable to
competition from DBS. The corporate general partner's belief that lost customers
have migrated to DBS systems is based on DBS's aggressive marketing for new
subscribers, the offering by DBS of expanded services, channels and content and
DBS's low cost pricing of its services, both in the system's franchise area and
industry-wide. The DBS operators with which Enstar 5A competes offer over 200
channels of digital programming. In contrast, the Enstar system currently offers
only 36 to 40 channels of analog programming. The following table sets forth the
number of basic subscribers of the system since 1995:
As of
December 31, No. of Subscribers
------------ ------------------
2002 12,783
2001 14,036
2000 15,454
1999 15,100
1998 16,200
1997 16,967
1996 23,946
1995 23,600
As the corporate general partner has 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
- 12 -
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 the corporate general
partner's view the most formidable competitors to traditional cable operators,
and in particular, to the joint venture. 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 always has offered digital
programming, with picture and sound quality superior to analog cable service,
and far more channels than cable. Traditional cable operators, in contrast,
typically have 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 the joint venture's system, the corporate general
partner expects that the system will continue to face significant competition
from DBS, and likely will continue to lose customers. Moreover, the corporate
general partner does not expect the joint venture's competitive position to
improve, particularly since the corporate general partner estimates that 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 approximately $20.6 million, for an upgrade to 550 megahertz (MHz)
capacity, to $24.8 million, for an upgrade to 870 MHz capacity. Upgrade costs
are calculated based on a formula dependent on costs for plant modification,
headend equipment, installation and the number of homes per mile.
The corporate general partner's belief that the joint venture's
revenues would not be sufficient to justify upgrades costing up to $24.8 million
is based on the fact that the low population density in the joint venture's
rural system, which spreads subscribers over a large service area, combined with
the increasing competition from DBS, limits the system's potential subscriber
base, even with a substantial upgrade providing expanded services and two-way
transmission capability. Potential revenues generated from the system's 12,783
basic subscribers generating average monthly revenue per subscriber of $39.93 as
of December 31, 2002 do not justify an investment in the system of $20.6 million
to $24.8 million, even with modest subscriber growth rates which might occur
after the upgrade. The corporate general partner does not believe that Enstar 5A
would recoup these costs by future revenue and subscriber growth and continue to
operate profitably.
The corporate general partner began evaluating strategies for
liquidating Enstar 5A in 1998, along with the cable television systems of 13
other affiliated Enstar partnerships. The strategies evaluated by the corporate
general partner included the potential sale of all or substantially all of the
cable television assets
- 13 -
and the subsequent liquidation of these partnerships. These partnerships
operated rural cable systems in Illinois, Missouri, Kentucky, North Carolina,
South Carolina, Tennessee, Alabama and Arkansas. These partnerships were facing
the same increased competition from local DBS operators offering more services
and channels, along with the need to perform costly upgrades. In May 1999,
Charter signed an agreement to acquire the parent of the corporate general
partner from Falcon Communications, L.P. Nevertheless, the corporate general
partner and Charter decided to continue to pursue the strategy for liquidating
the cable television assets of the joint venture, along with the cable
television assets of the other affiliated partnership cable operators.
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 5A, 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 or merely fail to vote to "approve" the
Liquidation Plan. The continued rationale for 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, the corporate general partner does 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) an
investment estimated by the corporate general partner to be between
approximately $20.6 million to $24.8 million for the system upgrades
necessary for Enstar 5A to offer services comparable to those of its DBS and
other significant competitors. However, as noted above, based on the
projections of the corporate general partner, 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 increases the cost
of a system upgrade and limits the potential for customer growth even if
enhanced services are offered. The joint venture's key franchises have
expired and not been renewed. Although the joint venture continues to
operate under the expired franchise agreements in these communities, the
franchisors could elect at any time to prohibit the joint venture from
continuing to operate the system in the applicable areas. The communities
with expired franchise agreements likely will require the joint venture to
provide additional programming in order to renew the expired franchises,
which can only be provided by upgrading the system. If the joint venture
were to make the capital expenditures necessary to obtain the franchise
renewals, the corporate general partner does not believe that Enstar 5A
would recoup these costs within the renewed lives of its key franchises.
Additionally, if the joint venture were to make these substantial
investments necessary to upgrade the system, which the corporate general
partner does not believe could be financed by operating revenues or by third
party sources on a basis favorable to the joint venture and its partners,
Enstar 5A 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 most recent phase of the "auction" for the system described
below, 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
- 14 -
total price than offered by Access, Cumberland and Telecommunications and,
therefore, in light of the offers by Access, Cumberland and Telecommunications,
less financially advantageous to the unitholders. See "--Best Available
Transaction--Sale Process" on pages 16-22.
Accordingly, in view of the sale prices offered by Access, Cumberland
and Telecommunications and the liquidating distributions that are expected to
result from the Liquidation Plan, the corporate general partner believes 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.
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 5A has been severely limited. Approving the Liquidation
Plan will permit distributions to be made to the unitholders that the corporate
general partner believes could not otherwise be made. If the Liquidation Plan is
approved, expected 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 5A
The completion of the Liquidation Plan will, after repayment of Enstar
5A'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 Enstar 5A, and,
thereafter, the winding-up and legal dissolution of Enstar 5A. Consequently, the
unitholders' equity interest in Enstar 5A will have been extinguished in
exchange for the liquidating distributions, and Enstar 5A will thereafter not be
a reporting company under the Securities Exchange Act of 1934, as amended. This
means, among other things, that Enstar 5A will no longer file, and the
unitholders will no longer receive annual reports on Form 10-K, quarterly
reports on Form 10-Q or current reports on Form 8-K. As shown in the following
table, these filings have cost Enstar 5A an average of $40,700 per year for the
past three years.
1999 2000 2001 TOTAL
---- ---- ---- -----
Audit fees....................... $27,700 $49,700 $24,700 $102,100
Filing fees...................... 6,700 6,700 6,700 20,000
------- ------- ----- --------
Total............................ $34,400 $56,400 $31,400 $122,200
Average over three years......... $40,700
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 which the corporate general partner estimates will total
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 Enstar 5A and the
system. Depending upon their individual circumstances,
- 15 -
unitholders may owe federal and/or state income taxes in respect of those
distributions. For more information on the effect of the Liquidation Plan,
please see "-- Federal Income Tax Consequences of the Liquidation Plan" on
pages 40-43, "-- Disadvantages of the Liquidation Plan" on page 37, and
"Special Factors -- Consequences of Failure to Approve the Liquidation Plan" on
pages 37-38.
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 5A and Enstar 5B, 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 5A will have been extinguished in exchange for the liquidating
distributions, and its interest in the joint venture, Enstar 5A's principal
asset, will be reduced to cash.
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. The corporate general partner and its affiliates also will receive
approximately $650,200 in repayment of deferred management fees and
approximately $1.3 million in repayment of accrued unpaid reimbursed expenses
owed to the corporate general partner and its affiliates by the joint venture.
In addition, the corporate general partner and its affiliates will receive
approximately $110,600 in repayment of accrued unpaid reimbursed expenses owed
to the corporate general partner and its affiliates by Enstar 5A. The corporate
general partner also will avoid the risks of continued operation of the system
and managerial responsibility for (1) the estimated investment of $20.6 million
to $24.8 million it estimates would be required for 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 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 37.
BEST AVAILABLE TRANSACTION
SALE PROCESS
The corporate general partner and the other participants believe that
the process by which offers were solicited for the Enstar system acted as a
"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 best available purchase price and terms
then obtainable from a willing purchaser.
o INITIAL PHASE OF THE SALE PROCESS. The corporate general partner
began evaluating strategies for liquidating Enstar 5A and other affiliated
Enstar partnerships in 1998, based on its belief that the market for cable
systems generally had improved and that it was an appropriate time to seek the
sale of the systems given that they were syndicated in the mid-1980s. The
strategies evaluated by the corporate general partner
- 16 -
included the potential sale of substantially all of Enstar 5A's assets to third
parties and the subsequent liquidation of Enstar 5A. In May 1999, Charter
Communications, Inc. ("Charter") signed an agreement to acquire the parent of
the corporate general partner from Falcon Communications, L.P. or Falcon
Communications, along with all of the cable television assets of Falcon
Communications. Nevertheless, the corporate general partner and Charter decided
to continue to pursue the strategy for liquidating the cable television assets
of the joint venture and the other affiliated partnership cable operators.
Charter acquired ownership of the corporate general partner in November 1999.
In December 1999, the corporate general partner engaged Daniels &
Associates, L.P. ("Daniels"), 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. These partnerships included:
Enstar Income Growth Program Six- L.P., Enstar Income Growth Program Six-B L.P.,
Enstar Income Program 1984-1 L.P., Enstar Income Program II-1, L.P., Enstar
Income Program, II-2 L.P., Enstar Income Program, IV-3 L.P., Enstar Cable of
Macoupin County, Enstar IV/PBD Systems Venture, Enstar VII, L.P., Enstar VIII,
L.P., Enstar IX, L.P., Enstar X, L.P. and Enstar XI, L.P. These partnerships
represent all cable systems of the Enstar affiliated partnerships. The following
table sets forth the partnerships and the states in which they directly or
indirectly owned cable systems as of December 1999:
Cable System Locations as of
Partnership December 1999
----------- ----------------------------
Enstar Cable of Cumberland Valley. . . . . . . . Kentucky, Tennessee and
Missouri
Enstar Income Program 1984-1, L.P. . . . . . . . North Carolina and Tennessee
Enstar Income Program II-1, L.P. . . . . . . . . Illinois
Enstar Income Program II-2, L.P. . . . . . . . . Illinois and Missouri
Enstar Cable of Macoupin County. . . . . . . . . Illinois
Enstar IV/PBD Systems Venture. . . . . . . . . . Illinois and Missouri
Enstar Income Program IV-3, L.P. . . . . . . . . Kentucky and Illinois
Enstar Income/Growth Program Six-A, L.P. . . . . Illinois and Tennessee
Enstar VII, L.P. . . . . . . . . . . . . . . . . South Carolina
Enstar VIII, L.P. . . . . . . . . . . . . . . . South Carolina
Enstar IX, L.P. . . . . . . . . . . . . . . . . Alabama
Enstar X, L.P. . . . . . . . . . . . . . . . . . Tennessee
Enstar XI, L.P. . . . . . . . . . . . . . . . . Arkansas
Over a period of nine months, Daniels 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 approximately 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.
Based on the responses to those contacts, Daniels sent written evaluation
materials to 21 of them.
The sales process was designed by Daniels and the participants to
encourage potential buyers to bid on one or a combination of individual cable
systems in which a potential buyer might be interested, or on a collective basis
for all of the systems. Based on its experience in the cable television
industry, the corporate general partner believes that a higher sale price for a
given system often can be obtained when
- 17 -
cable television systems are marketed as part of a larger, "bundled" package
than when marketed individually or in smaller units. The corporate general
partner believes this is particularly true where the cable systems serve small
town or rural areas with a relatively small number of subscribers per headend,
as is the case with the joint venture's and the other affiliated partnership's
cable systems. For example, a buyer may be able to achieve economies of scale by
acquiring a larger number of subscribers and, therefore, larger potential cash
flow, by incurring the same fixed costs it would incur in acquiring fewer
subscribers. In addition, a buyer that operates existing, adjacent systems, can
achieve further economies by integrating newly-acquired subscribers and cable
plant into its existing operations, thus reducing its per-subscriber operating
costs.
Five parties conducted due diligence with respect to the cable
television systems of all Enstar affiliated partnerships. This resulted in a
non-binding proposal from an affiliate of Mediacom Communications Corporation in
March 2000 to purchase certain of the cable systems of nine of those affiliated
partnerships, including the joint venture's system, for $117.8 million.
Mediacom's proposal was for all Enstar cable systems in Alabama, Arkansas,
Illinois, Kentucky and Missouri. Under this original proposal, Mediacom would
have paid to the joint venture a sale price of approximately $27.7 million with
respect those portions of the joint venture's system in Kentucky and Missouri,
subject to various closing and other adjustments. This was a price of $1,847 per
subscriber for the joint venture's, based on the number of subscribers served by
the system at that time.
In addition, in March 2000, an affiliate of Gans Multimedia Partnership
submitted a bid to acquire all Enstar systems in Tennessee, North Carolina and
South Carolina, but did not include any of the joint venture's system. Neither
Mediacom nor Gans are affiliated with Enstar 5A or any of the participants.
Three additional parties, Small Town Cable, Classic Communications and Suncast
Communications, also submitted bids, but could not demonstrate their ability to
obtain necessary financing.
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 its bid
price to $93.0 million. Mediacom lowered its offer after conducting due
diligence on all of the systems, citing higher than expected capital costs,
greater concern for competition in the franchise areas served by the Enstar
partnerships' systems and a general decline in the market for cable industry
sales prices, as reasons for reducing its bid.
In response, Daniels again requested written proposals from all parties
it was aware remained interested in acquiring the systems. Only Mediacom and
Gans submitted written offers in response to that request. Mediacom's offer of
$97.0 million related to the systems operated by Enstar partnerships in
Kentucky, Illinois, Missouri, Arkansas and Alabama. Mediacom's sale price,
though higher than its oral proposal, was substantially lower than its original
proposal for all of the systems in its bid. The portion of the aggregate sale
price payable to the joint venture would have been reduced to approximately
$24.2 million. The Gans affiliate, however, submitted a written bid of
approximately $101.0 million for the cable systems of all 14 Enstar
partnerships, of which approximately $23.1 million would have been payable to
the joint venture for the system. Both Mediacom and Gans communicated with their
offers that their bids were made on all the systems included in their bid and
were not made for individual systems. Following this process, and particularly
as the result of Mediacom's prior actions in lowering its bid, the corporate
general partner believed that Gans had submitted a more reliable bid and that it
was more likely that Gans would follow through to complete the transaction. No
other party bid on the systems at that time, and the other parties that
originally had submitted bids, Small Town Cable, Classic Communications, and
Suncast Communications, had by then withdrawn their bids.
- 18 -
In late July 2000, after commencing to negotiate a purchase agreement
with Gans, the corporate general partner was notified that Daniels'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 financing
and mergers and acquisitions 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. Gans re-bid at that
time, resubmitting its original bid. The corporate general partner also received
a bid from the City of Poplar Bluff for the system operated by an affiliated
partnership in that city.
Subsequently, in August 2000, Gans, the joint venture and the other
affiliated sellers entered into a definitive purchase agreement for all of the
systems operated by the affiliated partnerships for a total purchase price of
$105.5 million, under which the portion of the purchase price allocated to the
joint venture for the system was approximately $23.1 million, or approximately
$1,506 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. This amendment was necessary in order to amend a condition
in the purchase agreement which provided that grantors of cable franchises
covering at least 90% of the aggregate subscribers of all the sellers must have
consented to transfer those franchises to Gans prior to closing. It had become
apparent at that time that this condition could not be satisfied by the selling
partnerships because of the inability to obtain consent with respect to the
franchise in the City of Covington, Tennessee. In addition, Daniels was advised
that Gans could not obtain adequate financing for the transaction, even if the
requisite franchise consents could have been obtained.
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 the amendment.
As a result of this, and in view of the corporate general partner's
understanding of Gans's inability to arrange sufficient financing to close the
acquisition, the parties agreed to terminate the purchase agreement without
liability to either party.
o SUBSEQUENT PHASE OF THE SALE PROCESS. After the decision was made
to terminate the purchase agreement, the corporate general partner and the
participants determined to take the systems off the market. Following the
termination of the Gans purchase agreement, potential buyers who were aware
of the corporate general partner's interest in selling the systems as a
result of the previous efforts to market the systems, informally
communicated their interest in pursuing the purchase of the systems to
Daniels and the corporate general partner.
As a result of these informal inquiries, Daniels then commenced a
second phase of marketing the joint venture's and the other affiliated
partnerships' cable systems in May 2001, contacting approximately 23
prospective purchasers based on Daniels' and the corporate general partner's
knowledge of the industry and feedback that previously had been received.
These prospective purchasers included parties who had received marketing
materials during the first phase of marketing. Based on the responses
received, Daniels sent updated evaluation materials to approximately eight
of them. Daniels 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.
Bidders may, however, have been aware of the terms of Gans's prior bid for
the systems through public reports filed with the Securities and Exchange
Commission made by those Enstar affiliated partnerships subject to public
reporting requirements, including Enstar 5A. The corporate general partner
believed that the bidders would not have been aware of the terms of
Mediacom's prior bid, which had not been made public. Bidders were allowed
to conduct due diligence investigations of the systems prior to submitting
their bids.
- 19 -
This process produced bids in July 2001 for all of the systems located
in Illinois, which do not include any of the joint venture's systems. The bids
were from Charter Communications, Inc. and its affiliates ($63.0 million),
Mediacom ($50.4 million), Susquehanna Cable ($50.0 million), Boston Ventures
($37.8 million), Cascade Broadband ($32.0 million) and Sunrise Communications
($24.4 million).
The corporate general partner determined that the bid from Charter
Communications, Inc. and its affiliates, for those portions of the systems
located in Illinois, was the best transaction for the sale of the
partnerships' Illinois systems. This determination was based primarily on
the fact that Charter's bid was substantially higher in price than the other
bids. Charter did not submit a bid for any portion of the joint venture's
systems. Charter submitted its bid only for the Illinois systems based on
its evaluation of all of the systems and its determination that the Illinois
systems presented the best addition to its ongoing operations and business
strategy. The asset purchase agreement with Charter, dated as of August 29,
2001, was for $63.0 million and covered the sale to Charter of cable
television systems directly or indirectly owned by six different limited
partnerships managed by the corporate general partner, but did not include
any of the joint venture's system. The sale price offered by Charter for the
systems represented $2,258 per subscriber. This transaction closed in two
stages in April and September 2002.
This second phase of marketing also produced a variety of other bids
for other portions of the affiliated partnerships' systems. In July 2001, Time
Warner bid $500 per subscriber for certain of the Tennessee systems, which did
not include the joint venture's systems. The cities of Poplar Bluff,
Dexter/Bloomfield and Malden/Campbell bid $5.5 million, $3.6 million and $2.0
million, respectively, for the systems serving their cities. Two bids were
received in August 2001 for systems located in Dexter, Bloomfield, Malden and
Campbell, Missouri from Galaxy Cablevision and Capital Cable for $7.0 million
and $6.3 million, respectively.
In August 2001, Capital Cable submitted a bid for $32.8 million, or
$850 per subscriber, for those systems in Kentucky, Tennessee, Missouri,
Arkansas, South Carolina and North Carolina, which included the joint venture's
system. Capital Cable later resubmitted its bid for those systems, increasing
its bid to $1,000 per subscriber, but reducing its bid for the joint venture's
Pomme de Terre system to $500 per subscriber. Buford Media submitted a bid in
September 2001 for a range of prices from $31.3 million to $39.2 million, or
$800 to $1,000 per subscriber, for systems located in Kentucky, Tennessee,
Missouri, South Carolina, North Carolina and Arkansas, which included the joint
venture's system. TS Communications submitted a bid in September 2001 for $4.3
million for systems in Dexter and Bloomfield, Missouri and $1.7 million for
systems in Malden and Campbell, Missouri. TS Communications later revised its
bid in October 2001 to $4.0 million for the Dexter and Bloomfield, Missouri
systems and $1.6 million for the Malden and Campbell, Missouri systems. A bid
also was received in December 2001 from Cable South for $1.1 million for the
system serving Bolivar and Hardeman, Tennessee. Buford Media bid for all of the
systems in Kentucky and Tennessee in January 2002 for a total price of
approximately $17.3 million, or $850 per subscriber, which included the joint
venture's system except for Pomme de Terre, Missouri. These bidders submitted
their bids in different formats, on a state-wide or area-wide basis, and not per
partnership or per system. The bid prices apportioned to the joint venture's
system in the foregoing bids are based on allocations made by Daniels and the
corporate general partner.
Daniels continued marketing and providing updated information to
all interested parties for the cable television systems of the joint venture
and the other affiliated partnerships. In February 2002, Daniels received a
bid valued at $12.6 million from Roy Baker, an affiliate of Access, for all
of the joint venture's systems located in Kentucky. In May 2002, a bid was
received from Roy Baker and Cumberland for all of the Kentucky systems for a
price of $10.6 million. This reduction in bid price occurred as the result
of adding Cumberland as a bidder and as the result of continued subscriber
losses in the system.
- 20 -
In early June 2002, Daniels sent another request for bids to interested
parties. Buford Media bid $26.2 million for systems in Kentucky, Tennessee,
Missouri, North Carolina, South Carolina and Arkansas. This bid was $900 per
subscriber for the systems of the joint venture but did not include the Pomme de
Terre, Missouri system. Cable Direct, an affiliate of Telecommunications, bid
$25.2 million for systems in Kentucky, Tennessee and Missouri, including $905
per subscriber for the joint venture's system not including the Pomme de Terre
system. Cable Direct later agreed to purchase the Pomme de Terre system for $599
per subscriber. Capital Cable bid $26.9 million, or $749 per subscriber, for
systems in Kentucky, Tennessee, Missouri, North Carolina, South Carolina and
Arkansas, including the joint venture's system. A combined bid was submitted by
Roy Baker, Access Cable and Cumberland Cellular for $10.6 million for the joint
venture's Kentucky and Tennessee systems, or $650 per subscriber in Kentucky and
Tennessee, but $1,400 per subscriber in Russell Springs, Kentucky. TS
Communications submitted a bid of $6.3 million for the Missouri and Arkansas
systems, including $100,000 for the joint venture's Pomme de Terre system.
This process produced Access, Cumberland and Telecommunications as the
parties that offered the best transactions for the sale of the joint venture's
system. The prices submitted by Access, Cumberland and Telecommunications were
competitive with those submitted by other bidders. The bid submitted for Russell
Springs, Kentucky was the highest value for that portion of the system, and was
submitted by a company with a strong local presence in the Russell Springs
market, giving the corporate general partner a higher assurance of transferring
the franchise. In addition, Roy Baker had previously worked for five years as
general manager of Falcon Communications over operating regions which included
portions of the joint venture's system up until 1996. Roy Baker's and
Cumberland's bids were submitted as being contingent upon each other. Their bids
included closing conditions that were standard in the industry, with no
contingencies for obtaining financing. Capital Cable and Buford were unable to
confirm their financial ability to consummate the transactions. Overall, the
corporate general partner believed that Access, Cumberland and
Telecommunications had a higher likelihood of completing the transactions. No
other parties were interested in purchasing all of the joint venture's system.
The corporate general partner negotiated with Access, Cumberland and
Telecommunications for the sale of the Enstar system beginning in July 2002 on
an arm's-length basis. Access and Cumberland signed letters of intent in July
2002 to purchase all of the Kentucky systems. Cable Direct signed a letter of
intent to purchase the systems in Tennessee, Missouri, North Carolina, South
Carolina and Arkansas in September 2002. These negotiations resulting in the
joint venture's entering into asset purchase agreements with Access, Cumberland
and Telecommunications. There were no material changes to the asset purchase
agreements from the terms of the final bids received from Access, Cumberland and
Telecommunications.
The asset purchase agreement, dated as of September 30, 2002
with Access, covers the sale 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 $6.9 million, subject to closing sale price adjustments, an escrow for
indemnity claims and transaction costs. The asset purchase agreement, dated as
of October 8, 2002 with Cumberland, covers the sale of those portions of the
system located in Russell Springs, Jamestown and Russell County, Kentucky, for
an aggregate sale price of $3.7 million, subject to closing sale price
adjustments, an escrow for indemnity claims and transaction costs. The asset
purchase agreement, dated as of November 8, 2002 with Telecommunications, covers
the sale 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 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
- 21 -
Telecommunications for the system represent $650, $1,400 and $599 per
subscriber, respectively. Collectively, the corporate general partner estimates
that the Access Sale, the Cumberland Sale and the Missouri Sale will result in a
cash sale price of $11.1 million for the joint venture at closing, subject to
the escrows and closing adjustments. As of December 31, 2002, as a result of
subscriber shortfalls and decreased basic subscriber penetration, adjustments to
the purchase price under the Access Sale, the Cumberland Sale and the Missouri
Sale would amount to $1.2 million if closing had occurred at that time.
The general 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 decline in the value of publicly traded cable stocks of 21% to 99%
from August 2000 to November 2002. This reduction 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.
The corporate general partner and the other participants believe that
the entire "auction" process conducted by Daniels and described above
constituted an active "market check" with respect to the sale price and other
terms of the sale of the Enstar system. Daniels contacted the parties that it
believed constituted a representation sample of 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 Daniels 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, the corporate general partner and the other participants
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
5A, the corporate general partner, the individual general partner, Access,
Cumberland or any of the other participants. If a majority-in-interest of the
unitholders vote to disapprove the Liquidation Plan, the Liquidation Plan will
not be consummated. However, Enstar 5A intends to complete the Missouri Sale
whether or not the Liquidation Plan is approved by unitholders. Unitholder
approval of the Missouri Sale is not required and the corporate general partner
believes that completing the sale is in the best interests of Enstar 5A.
Unitholders can disapprove the Liquidation Plan by either voting to
"disapprove," by failing to vote, or by voting to "abstain."
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.
- 22 -
DETERMINATION OF THE SALE PRICES
o GENERAL. The offers by Access, Cumberland and Telecommunications of a
combined cash sale price of approximately $11.1 million for the joint venture's
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 ultimately will 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 the business experience of the participants in the cable television
industry, the corporate general partner and the other participants 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 participants 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 participants 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
Enstar 5A, 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 5A 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 participants to be to purchase units at a
significant discount to their actual value with a view toward selling them, or
their asset equivalent, at a substantially higher price in a subsequent sale or
liquidation of Enstar 5A. In light of this, neither the corporate general
partner nor any of the other participants 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. The corporate general partner did not obtain
any appraisals, reports or opinions regarding the procedural or substantive
fairness to the unitholders of the sale prices offered by Access and Cumberland
for the system or the other terms of the Access Sale and the Cumberland Sale.
The corporate general partner and the other participants 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
three unaffiliated prospective purchasers; and the bids offered by
- 23 -
Access and Cumberland 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 participants' beliefs that the Access Sale and the
Cumberland 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 participants 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.
The corporate general partner does not believe that basis is relevant because of
current market conditions, including the competition faced by the joint venture
and trends in the telecommunications industry generally, and the fact that a
significant number of the system's subscribers are in areas as to which the
joint venture is operating under franchises that are terminable at will by the
franchisors. These factors 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, the corporate general
partner and the other participants concluded that valuations that assume a
continued, longer term viability or cash flow stream would not reliably predict
the value of the joint venture and Enstar 5A.
o OTHER FACTORS. In addition to being, in the opinion of the corporate
general partner, 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 participants' 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 believed to be necessary to address those
challenges and the status of the joint venture's franchises, the corporate
general partner and the other participants concluded that the Liquidation Plan,
with its estimated aggregate liquidating distribution of $119 per unit, is in
the best interests of Enstar 5A and the unitholders.
- 24 -
RECOMMENDATION OF THE CORPORATE GENERAL PARTNER AND OTHER PARTICIPANTS
The corporate general partner and the other participants each believe
that the advantages exceed any disadvantages of consummating the Liquidation
Plan at this time. Accordingly, the corporate general partner and the other
participants each recommends that the unitholders approve the Liquidation Plan.
In making this recommendation, the participants considered the
following material factors:
o If the Liquidation Plan is approved, the joint venture will be able
to consummate the Access Sale and the Cumberland Sale for an
amount that the corporate general partner and the other
participants 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 participants believe will
entail favorable transaction costs and permit an efficient
consummation of the sale. The sales price offered by Access of
$6.9 million for the Access system, the sales price offered by
Cumberland of $3.7 million 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 cash sales price of $11.1 million for the joint
venture, subject to escrows aggregating $358,000 for indemnity
claims and closing adjustments.
o The sale prices were determined through an "auction" process
conducted by an independent broker and effected a "market check,"
which supports the general partner's and the other participants'
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 a broad sample of known
prospective buyers of the joint venture's system. The corporate
general partner believes that none of the bidders knew the sale
prices or other terms of the other bids until all of the bids were
received and opened. Although the sales prices offered by Access,
Cumberland and Telecommunications, which were received in the second
phase of bidding, are significantly lower than the sales prices
originally offered for the system by Gans and Mediacom in the first
phase of bidding, this decline was consistent with the general
decline in sales prices of cable television systems that has occurred
in the industry since 2000.
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 5A 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
- 25 -
costs of obtaining quality programming; the potential for
termination of the joint venture's franchises covering a significant
number of its subscribers; and the competitive pressure to maintain
rates at a level competitive with DBS operators.
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 must first approve the
Liquidation Plan. No unitholders are affiliated with Enstar 5A, the
general partners of the Enstar 5A or any of the other participants.
In addition, the Access Sale, the Cumberland Sale and the Joint
Venture Liquidation must be approved by a majority-in-interest of the
limited partners of Enstar 5B.
o There exists the risk that by selling these portions of the system
now, the joint venture, Enstar 5A 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 the corporate general partner nor any of the other
participants 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 the view
of the corporate general partner and the other participants', these
potential risks are outweighed by the potential benefits to be
realized from the Liquidation Plan.
o The corporate general partner did not retain an unaffiliated
representative to act on behalf of the unitholders in negotiating the
purchase agreements with Access or Cumberland. The corporate general
partner did not obtain any appraisals, reports or opinions regarding
the procedural or substantive fairness to the unitholders of the sale
prices offered by Access and Cumberland for the system or the other
terms of the Access Sale or the Cumberland Sale. The corporate
general partner and the other participants 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 three unaffiliated prospective purchasers, provide a
sufficient basis for the corporate general partner's and the other
participants' beliefs that the Access Sale and the Cumberland Sale
are the best transactions available to the unitholders.
After considering the factors discussed in this section, the corporate
general partner and the other participants have determined that the Access Sale,
the Cumberland 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 5A's unitholders.
The information and factors discussed above were considered
collectively by the corporate general partner and the other participants in
connection with their reviews of the Access Sale, the Cumberland 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 the
corporate general partner believes acted as a "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 5A, the
joint
- 26 -
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 and Cumberland 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 5A, the general partners of Enstar 5A,
the joint venture or any other participant, 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 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, Steven A. Schumm, who approved
the Liquidation Plan and is recommending the Liquidation Plan to the
unitholders.
Robert T. Graff, the individual general partner, is currently retired
and, although, he is aware of the Liquidation Plan, played no role in it. The
corporate general partner expects that Mr. Graff will consent, as general
partner, in connection with the Liquidation Plan.
RELATED PARTY TRANSACTIONS
Enstar 5A has a management and service agreement (the "Management
Agreement") with Enstar Cable Corporation ("Enstar Cable"), a wholly-owned
subsidiary of the corporate general partner. This Management Agreement provides
that Enstar 5A will pay to Enstar Cable a monthly management fee of 5% of gross
revenues from the operations of Enstar 5A. Enstar 5A had no gross revenues in
2002 and 2001. As a result, no management fees were paid by Enstar 5A during
2002 and 2001.
Enstar Cable also 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 $191,200 and
$198,100 for the nine months ended September 30, 2002 and 2001, respectively.
This amounts to $1.60 and $1.66 per unit in management fee expenses for the nine
months ended September 30, 2002 and 2001, respectively.
In addition, the joint venture is required to distribute a management
fee 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 $47,800 and $49,500 during the nine
months ended September 30, 2002 and 2001, respectively. This amounts to $0.40
and $0.41 per unit in respect of the joint venture's management fee to the
corporate general partner for the nine months ended September 30, 2002 and 2001,
respectively. No management fee is payable to Enstar Cable by Enstar 5A in
respect of any amounts received by Enstar 5A from the joint venture.
In addition to the monthly management fees, Enstar 5A reimburses Enstar
Cable for direct expenses incurred on behalf of Enstar 5A, and for Enstar 5A's
allocable share of operational costs associated with services provided by Enstar
Cable. The total amount charged to Enstar 5A approximated $48,800 and $50,700
for the nine months ended September 30, 2002 and 2001, respectively. This
amounts to $0.82 and $0.85 per unit of Enstar 5A for the nine months ended
September 30, 2002 and 2001, respectively.
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 5A and
the joint venture. These expenses are charged to the properties served based
- 27 -
primarily on the partnership's or joint venture's allocable share of operational
costs associated with the services provided. Enstar 5A 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 $528,400 and $689,000 for the nine months ended
September 30, 2002 and 2001, respectively. This amounts to $4.42 and $5.76 per
unit of Enstar 5A 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 $943,900 and $972,500 for the nine
months ended September 30, 2002 and 2001, respectively. This amounts to $7.90
and $8.14 per unit of Enstar 5A in programming fee expenses for the nine months
ended September 30, 2002 and 2001, respectively.
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 $1.3 million
in repayment of accrued unpaid reimbursed expenses owed to it by the joint
venture and approximately $110,600 in repayment of accrued unpaid reimbursed
expenses owed to it by Enstar 5A. However, for the reasons discussed under
"Best Available Transaction -- Consent Procedures and Procedural Safeguards" on
page 22, Enstar Communications and the other participants believe that the terms
of the Access Sale, the Cumberland Sale and the Liquidation Plan are the best
transactions available to the unitholders.
Following the closing of the Cumberland Sale, Charter, or one of
Charter's affiliates, will provide advertising sales services to Cumberland
pursuant to an advertising sales agreement. These advertising sales services
also may be provided to Access or Telecommunications upon their request after
closing of the Access Sale and the Missouri Sale, respectively. In addition,
Charter, or one of its affiliates, will provide satellite programming to
Cumberland for about 20 subscribers in that portion of the system purchased by
Cumberland until Cumberland elects to upgrade their services, or until December
15, 2003, whichever is earlier.
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 by the joint venture in that portion of the system
operating 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"). Access's address is 5215 south Hwy 27, Somerset, KY 42501,
Telephone: (606) 676-0610.
THE FOLLOWING IS A SUMMARY OF THE ACCESS PURCHASE AGREEMENT. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ACCESS PURCHASE
AGREEMENT. A COPY OF THE ACCESS PURCHASE AGREEMENT WAS FILED AS AN EXHIBIT TO
ENSTAR 5A'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30,
2002. COPIES OF THE ACCESS PURCHASE AGREEMENT ARE AVAILABLE UPON REQUEST,
WITHOUT CHARGE, FROM THE SOLICITING AGENT, D.F. KING & CO., INC., AT
(800) 207-2014.
- 28 -
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 $6.9
million, subject to closing sale price adjustments, an escrow for indemnity
claims and customary closing conditions.
The purchase price will be subject to adjustments that can reduce or
increase the purchase price at closing and following the closing. These
adjustments will be made to reflect or take account of, among other things:
o allocating to the joint venture all revenues, refunds, costs,
expenses and liabilities attributable to the operation of the cable
system prior to the closing date,
o allocating to Access all revenues, refunds, costs, expenses and
liabilities attributable to the operation of the cable system after
the closing date, and
o a number of subscribers below the prescribed target of 10,659
subscribers. If the number of subscribers falls below the target
number at closing, then the sale price will be reduced by $650 per
subscriber. As of December 31, 2002, that portion of the system to
be sold to Access under the Access Purchase Agreement had
approximately 9,583 subscribers. This results in a shortfall of
1,076 subscribers. If the closing had been held on December 31,
2002, this short fall in subscribers would reduce the purchase
price by $699,400.
Concurrent with the execution of the Access Purchase Agreement, the
joint venture and Access executed an escrow agreement. Under the escrow
agreement, Access deposited $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 accrued interest and earnings, which will 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. As such, the joint venture will not receive
the full purchase price at closing.
REPRESENTATIONS AND WARRANTIES
The Access Purchase Agreement contains representations and warranties
of the joint venture that are customary in the industry. As a condition to
closing, these representations must be true and correct as of the closing date.
These include representations that the joint venture has the capacity to enter
into the Access Purchase Agreement, the Access Purchase Agreement has been
properly authorized and all necessary consents and approvals have been obtained,
the joint venture has good title to its assets, the joint venture is in full
compliance with certain laws applicable to the cable industry and environmental
laws and other customary representations. Access made certain representations
and warranties to the joint venture comparable to certain of those made by the
joint venture.
CONDITIONS PRECEDENT
Under the Access Purchase Agreement, Access's obligations to acquire
the Access Assets are subject to certain customary conditions precedent. These
conditions, if not satisfied, can prevent the Access Sale from occurring. Any or
all of the conditions may be waived by Access. These conditions include a
requirement that the joint venture's representation and warranties are correct
as of closing, the
- 29 -
joint venture has obtained all material and required consents, no judgment or
order prohibits the closing and 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. In
addition, the closing is conditioned on the joint venture obtaining all
necessary partner consents. 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:
o its breach of any representations or warranties in the Access Purchase
Agreement,
o its failure to perform covenants or obligations in the Access Purchase
Agreement, and
o any person or governmental authority asserting any claim against the
joint venture 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:
o its breach of any representations or warranties in the Access Purchase
Agreement,
o its failure to perform covenants or obligations in the Access Purchase
Agreement,
o liabilities accruing on or prior to the closing date, except those
assumed by Access, or
o 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.
Certain limitations apply to indemnification claims, including the
following:
o subject to certain exceptions, the representations and warranties made
by both parties will survive the closing for a period of six months;
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 claims against the indemnifying party exceeds
$150,000, in which case the indemnifying party will be liable for the
total amount of all 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
- 30 -
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 the date if as of that 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 5A or Enstar 5B have not been obtained.
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. The corporate general partner presently expects 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 by the joint venture in that portion of the system
operating in and around the communities of Russell Springs, Jamestown and
Russell County, Kentucky, as further described in the Cumberland Purchase
Agreement (the "Cumberland Assets"). Cumberland's address is P.O. Box 80,
Jamestown, Kentucky 42629, Telephone: 270-343-3131.
THE FOLLOWING IS A SUMMARY OF THE CUMBERLAND PURCHASE AGREEMENT. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CUMBERLAND PURCHASE
AGREEMENT. A COPY OF THE
- 31 -
CUMBERLAND PURCHASE AGREEMENT WAS FILED AS AN EXHIBIT TO ENSTAR 5A'S QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002. COPIES OF THE
CUMBERLAND PURCHASE AGREEMENT ARE AVAILABLE UPON REQUEST, WITHOUT CHARGE, 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
$3.7 million, subject to closing sale price adjustments, an escrow for indemnity
claims and customary closing conditions.
The purchase price will be subject to adjustments that can reduce or
increase the purchase price at closing and following the closing. These
adjustments will be made to reflect or take account of, among other things:
o allocating to the joint venture all revenues, refunds, costs, expenses
and liabilities attributable to the operation of the cable system
prior to the closing date,
o allocating to Cumberland all revenues, refunds, costs, expenses and
liabilities attributable to the operation of the cable system after
the closing date,
o a number of subscribers below the prescribed target of 2,648
subscribers. If the number of subscribers falls below the target number
at closing, then the sale price will be reduced by $1,400 per
subscriber. As of December 31, 2002, that portion of the system to be
sold to Access under the Access Purchase Agreement had approximately
2,423 subscribers. This results in a shortfall of 225 subscribers. If
the closing had been held on December 31, 2002, this short fall in
subscribers would reduce the purchase price by $315,000, and
o a percentage-based decrease in expanded basic subscriber penetration
between March 31, 2002 and the closing date. 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 86.21% as of 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 December 31, 2002, expanded basic subscriber penetration was
81.96%, which is a decrease of 4.23% from basic subscriber penetration
as of March 31, 2002. If the closing had been held on December 31,
2002, this decrease in basic subscriber penetration would reduce the
purchase price by $100,000.
Concurrent with the execution of the Cumberland Purchase Agreement, the
joint venture and Cumberland executed an escrow agreement. Under the escrow
agreement, Cumberland deposited $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 accrued interest and earnings, which will 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. As such, the joint venture
will not receive the full purchase price at closing.
- 32 -
REPRESENTATIONS AND WARRANTIES
The Cumberland Purchase Agreement contains representations and
warranties of the joint venture that are customary in the industry. As a
condition to closing, these representations must be true and correct as of the
closing date. These include representations that the joint venture has the
capacity to enter into the Cumberland Purchase Agreement, the Cumberland
Purchase Agreement has been properly authorized and all necessary consents and
approvals have been obtained, the joint venture has good title to its assets,
the joint venture is in full compliance with certain laws applicable to the
cable industry and environmental laws and other customary representations.
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 certain customary conditions
precedent. These conditions, if not satisfied or waived, can prevent the
Cumberland Sale from occurring. Any or all of these conditions may be waived by
Cumberland. These conditions include a requirement that the joint venture's
representation and warranties are correct as of closing, the joint venture has
obtained all material and required consents, no judgment or order prohibits the
closing, there has been no material adverse changes in the business or prospects
of the Telecommunication Assets or the cable system since the date of the
Telecommunications Purchase Agreement and the joint venture shall have obtained
all partner consents. In addition, the joint venture must satisfy various other
obligations as a condition to closing, including the transfer of certain
contracts, completion of certain land surveys and land repairs, completion of
certain construction, and the continued delivery of certain other transaction
services on a temporary basis after the closing. In addition, affiliates of the
joint venture must enter into an advertising services agreement to provide
certain advertising services after the closing. 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:
o its breach of any representations or warranties in the Cumberland
Purchase Agreement,
o its failure to perform covenants or obligations in the Cumberland
Purchase Agreement, or
o any person or governmental authority asserting any claim against the
joint venture 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:
o its breach of any representations or warranties in the Cumberland
Purchase Agreement,
o its failure to perform covenants or obligations in the Cumberland
Purchase Agreement,
o liabilities accruing on or prior to the closing date, except those
assumed by Cumberland, or
- 33 -
o 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.
Certain limitations apply to indemnification claims, including the
following:
o subject to certain exceptions, the representations and warranties made
by both parties will survive the closing until December 15, 2003,
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, fines from local franchising authorities, fines or
fees due to the U.S. Copyright Office, fines for FCC regulatory
violations, governmental authorizations and ongoing litigation against
the joint venture as of closing,
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 that 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 5A or Enstar 5B have not been
obtained.
- 34 -
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.
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. The corporate general partner 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.
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)
KY and TN 32,000 12,500 39.1% 1,900 15.2% $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 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.
- 35 -
As promptly as practicable following the Access Sale, the Cumberland
Sale and the Missouri Sale, and calculation of all required sale price
adjustments, Enstar 5A and Enstar 5B, 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 5A 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 5A. 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, taxes and expenses and liquidation expenses. This estimate is based
on the assumed expenses shown below, and also assumes a closing of the Access
Sale on or before March 31, 2003, a closing of the Cumberland Sale on or before
February 28, 2003 and a closing of the Missouri Sale on or before June 30, 2003.
This table also does not reflect decreases to the purchase prices under the
Access Sale, the Cumberland Sale and the Missouri Sale which will result from
subscriber shortfalls and decreased basic subscriber penetration in the system.
If the closing had occurred as of December 31, 2002, these adjustments would
have amounted to $1.1 million.
HOWEVER, THE CORPORATE GENERAL PARTNER CANNOT ASSURE YOU OF THE ACTUAL
AMOUNTS DISTRIBUTED, OR AS TO THE AMOUNTS SET FORTH BELOW. ACTUAL AMOUNTS MAY
VARY MATERIALLY FROM THESE ESTIMATES.
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) This amount is calculated as follows:
Current assets....................................... $ 6,244,300
Current liabilities.................................. (606,700)
Due to affiliates.................................... (1,283,900)
-----------
4,353,700
The sale price is subject to adjustments 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 5A and Enstar 5B will each receive $7,313,850, as co-general
partners of the joint venture.
- 36 -
USE OF PROCEEDS AND DISTRIBUTIONS OF ENSTAR 5A
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 5A'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 5A from completing the Liquidation Plan are that
by selling the system now, Enstar 5A 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 5A.
However, the corporate general partner does 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,
the corporate general partner believes 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 and the Liquidation Plan are
not completed, Enstar 5A 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, the corporate general
partner believes the joint venture will continue to face significant competition
from, and (without substantial technological upgrades) continue to lose
subscribers to DBS operators. 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
- 37 -
comparable to those offered by the DBS operators that currently compete with the
joint venture for video subscribers. Even if the joint venture were to undertake
such upgrades, the corporate general partner believes that their cost would
prevent Enstar 5A from operating profitably for at least the duration of its
franchises that cover the largest number of subscribers. These franchises
include its McCreary County, Monticello, Wayne County and Whitley County,
Kentucky franchises. Last, if the Access Sale and the Cumberland Sale are not
approved, the corporate general partner expects to continue to seek buyers for
the system from time to time when, in the judgment of the corporate general
partner, market conditions are favorable. Any such sale might be on terms less
favorable than the terms of the proposed Access Sale and the Cumberland Sale.
Failure by the unitholders to approve the Liquidation Plan will not affect their
rights under the partnership agreement of Enstar 5A.
EFFECT OF TERMINATION OF THE ACCESS SALE OR THE CUMBERLAND SALE
Even if the Liquidation Plan is approved by the unitholders, the Access
Sale or the Cumberland Sale may not occur because the asset purchase agreements
may be terminated prior to closing. Each of the asset purchase agreements with
Access and Cumberland provide that the parties may terminate the agreements
prior to closing upon certain events. These events include: (1) the failure of
the parties to close the transactions by a certain outside closing date, which
for the Access Sale is March 31, 2003 and the Cumberland Sale is February 28,
2003, (2) a breach of the agreement by a party which is not cured within 30
days, (3) if the representations and warranties of a party fails to be true as
of the outside closing date, and (4) if a majority-in-interest of unitholders
disapprove the transaction or fail to approve the transaction by the end of the
consent solicitation period.
If the Liquidation Plan is approved by a majority-in-interest of the
unitholders, but either of the asset purchase agreements with Access or
Cumberland are terminated in accordance with their terms prior to closing, then
the corporate general partner intends to complete the transaction with the other
purchaser whose agreement has not been terminated. For example, if a
majority-in-interest of the unitholders approves the Liquidation Plan, but the
asset purchase agreement with Cumberland is terminated prior to closing in
accordance with its terms, then the joint venture will close the transaction
with Access and sell those portions of its system. Thereafter, under this
example, the joint venture would continue to operate that portion of the system
that would have been sold to Cumberland in the Cumberland Sale. There can be no
assurance that the joint venture could profitably operate after such a sale
where only a portion of the system remains. The corporate general partner would
thereafter continue to seek buyers for the remaining portion of the system to
complete the liquidation of the joint venture and Enstar 5A. Any future sale
might be on terms less favorable than the terms of the transactions currently
proposed.
APPROVAL OF THE LIQUIDATION PLAN BY ENSTAR 5B
Enstar 5A and Enstar 5B 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 5A
and Enstar 5B. As a result, the Access Sale and the Cumberland Sale and the
Joint Venture Liquidation cannot occur without the approval of Enstar 5B. Enstar
5B, a Georgia limited partnership, has a corporate structure similar to Enstar
5A, including the same corporate general partner. As with Enstar 5A, a
majority-in-interest of Enstar 5B's limited partners must give their approval of
these transactions. The corporate general partner plans to seek approval of
Enstar 5B's limited partners through a separate consent solicitation. As a
result, if a majority-in-interest of the limited partners of Enstar 5A approve
the Liquidation Plan but a majority-in-interest of the limited partners of
Enstar 5B do not approve the Access Sale, the Cumberland Sale and the Joint
Venture Liquidation, then the Liquidation Plan cannot be completed.
- 38 -
SALE OF THE MISSOURI SYSTEM
The joint venture has entered into an asset purchase agreement to sell
the joint venture's remaining system in Pomme de Terre, Missouri to
Telecommunications. The limited partnership agreement for Enstar 5A gives the
general partners the authority to sell or otherwise dispose of the property and
assets of Enstar 5A without unitholder approval. However, the prior consent of
unitholders holding a majority-in-interest of the outstanding units must approve
sales which involve all or substantially all of the property of Enstar 5A. As of
December 31, 2002, the Pomme de Terre system had 777 subscribers, which amounts
to approximately 6% of the 12,783 total subscribers in the joint venture's
system. The corporate general partner believes that the Pomme de Terre system is
not a substantial part of the joint venture's system and believes the sale to
Telecommunications to be in the best interests of Enstar 5A and the unitholders.
The corporate general partner intends to pursue the sale of the Pomme de Terre
system independent of the unitholders approval of the Liquidation Plan.
Under the asset purchase agreement with Telecommunications,
Telecommunications will acquire the cable television assets of ten partnerships
managed by the corporate general partner, of which the Missouri system is a
part. The sale price will be approximately $15.3 million for all of the cable
television system assets of the selling partnerships (the "sellers"), subject to
closing sale price adjustments, an escrow for indemnity claims and customary
closing conditions. In its bid for all of these systems, Telecommunications
allocated the total purchase price among each of the systems being sold, with
approximately $502,800 to be paid to the joint venture for its Missouri system.
The allocation of the aggregate purchase price to the Missouri system was based
on a sale price of $599 per subscriber.
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. As of December 31, 2002, there was a shortfall of 62 subscribers,
which if the closing were held at that date would reduce the purchase price by
$37,138. In addition, $24,580 of the purchase price will be placed in escrow for
any indemnification to which Telecommunications may be entitled from the joint
venture. Total indemnification claims against all sellers may not exceed
$1,600,000. Telecommunications' address is 110 North Main, Sikeston, MO 63801,
Telephone: 573-472-9500.
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 5A and Enstar 5B, 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
- 39 -
Cumberland Sale, the Missouri Sale and the liquidation of the joint venture's
other assets, to Enstar 5A and Enstar 5B as the partners.
LIQUIDATION OF ENSTAR 5A
All of the cable television assets of Enstar 5A 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 5A 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.
The corporate general partner presently expects 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. These dates are based on the outside closing dates agreed to by
the parties in the asset purchase agreements with Access, Cumberland and
Telecommunications. The asset purchase agreement with Telecommunications, which
was entered into by the joint venture approximately a month later than the
purchase agreements for the Access Sale and the Cumberland Sale, involves the
sale of systems by nine other affiliated partnerships. Each of these
partnerships and the joint venture must satisfy certain conditions, requiring a
closing for the Missouri Sale which is significantly later than the closing
dates for the Access Sale and the Cumberland Sale.
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 5A, will cause Enstar 5A 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 5A. The general partner will
cause Enstar 5A to distribute the balance of the cash from the Liquidation Plan
to the unitholders and the general partners, as provided in the partnership
agreement.
The corporate general partner anticipates 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 5A, 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. The corporate general partner estimates that this will
occur approximately 13 months after the close of the Missouri Sale. Enstar 5A
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 5A'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, UNITHOLDERS ARE URGED
TO CONSULT WITH THEIR PERSONAL TAX ADVISORS REGARDING THEIR INDIVIDUAL
CIRCUMSTANCES AND THE TAX REPORTING CONSEQUENCES OF THE LIQUIDATION PLAN.
- 40 -
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. The corporate general partner 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 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 5A'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
Enstar 5A 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 Enstar 5A 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.
As an example, the corporate general partner estimates that the amount
of gain that is allocable to an investor who purchased units for $250 per unit
at the time of the initial offering on the units by Enstar 5A (an "Original
Limited Partner") to be $71 per unit. The corporate general partner also
believes that this amount will be treated as ordinary income, resulting from the
recapture of previously claimed depreciation and amortization under Code Section
1245. The aggregate gain per unit may be reduced by the passive activity loss
carry forward of approximately $108 per unit (to the extent previously allocated
losses were not previously utilized by an Original Limited Partner). Therefore
the net gain will be reduced to zero, if
- 41 -
an Original Limited Partner has not previously utilized passive activity losses
allocated from the partnership.
For federal income tax purposes, upon consummation of the Liquidation
Plan and the resulting payment of the partnership's indebtedness, each limited
partner will be treated as being released from its allocable share of the
partnership's nonrecourse liabilities so satisfied (estimated to be $23 per
unit) and as receiving a deemed distribution equal to that amount. Each limited
partner will have to calculate his or her respective capital gain, if any,
realized upon the receipt of (1) the estimated $119 per unit cash distribution
from Enstar 5A upon consummation of the Liquidation Plan, and (2) the estimated
$23 per unit deemed distribution from Enstar 5A upon the payment of Enstar 5A's
nonrecourse liabilities. In order to make such determination, a limited partner
must calculate his or her tax basis in the units as of the end of the taxable
year in which the distributions occur.
A limited partner will realize a capital gain equal to the excess, if
any, of (1) the aggregate amount of the cash and deemed distributions received
by any limited partner upon the consummation of the Liquidation Plan and payment
of Enstar 5A's nonrecourse liabilities, respectively, over (2) the limited
partner's tax basis in his or her units. The corporate general partner estimates
that Original Limited Partners should not realize any capital gain as a result
of these distributions.
CERTAIN ASSUMPTIONS UNDERLYING THE ESTIMATED DISTRIBUTIONS PER UNIT AND
RELATING TO THE POTENTIAL FEDERAL TAX CONSEQUENCES OF THE LIQUIDATION PLAN TO AN
ORIGINAL LIMITED PARTNER ARE ILLUSTRATED IN THE FOLLOWING TABLES:
Per
Unit
-----
ESTIMATED TAX BASIS PER UNIT (PRE LIQUIDATION PLAN)
Initial capital contribution . . . . . . . . . . . . . . . . . . . $ 250
Estimated allocable share of partnership nonrecourse liabilities . 23
Cash distributions through December 31, 2002 . . . . . . . . . . . (33)
Estimated net income (loss) through December 31, 2002. . . . . . . (108)
-----
Estimated tax basis per unit prior to Liquidation Plan . . . . . . 132
ESTIMATED TAX BASIS PER UNIT (POST LIQUIDATION PLAN)
Estimated tax basis per unit . . . . . . . . . . . . . . . . . . . 132
Estimated section 1245 gain. . . . . . . . . . . . . . . . . . . . 71
Estimated section 1231 gain. . . . . . . . . . . . . . . . . . . . --
-----
Estimated tax basis per unit before distributions. . . . . . . . . 203
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . (119)
Deemed distribution . . . . . . . . . . . . . . . . . . . . . . . (23)
-----
Estimated tax basis per unit after distributions . . . . . . . . . $ 61
=====
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 Enstar 5A should be considered passive activity losses. Thus,
unitholders may have "suspended" passive losses from Enstar 5A (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.
- 42 -
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 Enstar 5A 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.
income tax return filed for the amount of the tax withheld by Enstar 5A. The tax
withheld will be treated as a distribution to the foreign unitholder.
o COMPLETE LIQUIDATION. In general, upon complete liquidation of Enstar
5A, 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, it
is anticipated 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 Enstar 5A in addition to
their share of gain realized by Enstar 5A 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, unitholders are urged 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 5A and the Georgia Revised Uniform Limited
Partnership Act, under which Enstar 5A 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
- 43 -
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 5A 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.
The following table sets forth the high and low sales prices, known
to the corporate general partner, for Enstar 5A's units during the period
January 1, 2000 through September 30, 2002:
NUMBER
OF TOTAL UNITS
PERIOD HIGH LOW TRADES TRADED
- ------ ---------- ---------- ---------- ---------------
January-March 2000 107.21 75.00 26 816
April-June 2000 125.89 50.00 37 1,017
July-September 2000 123.00 50.00 25 833
October-December 2000 146.00 80.50 48 1,960
January-March 2001 162.00 62.50 22 550
April-June 2001 157.00 100.00 5 125
July-September 2001 138.00 75.00 14 741
October-December 2001 145.00 70.00 15 559
January-March 2002 132.00 25.00 18 1,684
April-June 2002 135.60 25.00 21 2,043
June-September 2002 133.10 80.00 7 171
DISTRIBUTIONS TO UNITHOLDERS
Since the inception of Enstar 5A, it 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 Enstar 5A's
operating cash flow. However, Enstar 5A has made no distributions to unitholders
since 1990.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On December 31, 2002, there were 59,766 units issued and outstanding
and entitled to vote on matters upon which the unitholders may vote or consent,
which were held by 1,413 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 December 31, 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 Enstar 5A to own
beneficially, or that may be deemed to own beneficially, more than 5% of the
units.
- 44 -
BENEFICIAL OWNERSHIP
---------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT PERCENT
- ------------------------------------ ---------- -----------
Everest Cable Investors LLC 3,736 6.25%
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.
IDENTITY AND BACKGROUND OF CERTAIN PERSONS
ENSTAR COMMUNICATIONS CORPORATION
Enstar Communications is the corporate general partner of Enstar 5A.
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 5A 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 participants, 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 49-50.
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, Chief Administrative
Officer and Interim Chief Financial Officer
Carl E. Vogel........... 44 President and Chief Executive Officer
David C. Andersen....... 53 Senior Vice President - Communications
Margaret A. Bellville... 49 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
Ralph G. Kelly.......... 44 Senior Vice President - Treasurer
- 45 -
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
Michael E. Riddle....... 42 Senior Vice President and Chief Information Officer
Dianne Schneiderjohn... 45 Senior Vice President - Marketing and Programming
Curtis S. Shaw.......... 53 Senior Vice President, General Counsel and Secretary
Steven E. Silva......... 42 Executive Vice President - Corporate Development and
Chief Technology Officer
STEVEN A. SCHUMM, Director, Executive Vice President, Chief
Administrative Officer and Interim Chief Financial Officer. 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.
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MARGARET A. BELLVILLE, Executive Vice President and Chief Operating
Officer. Before joining Charter in December 2002, Ms. Bellville was President
and CEO of Incanta Inc., a technology-based streaming content company from 2001
to 2002. Prior to that, she worked for six years at Cox Communications, the
nation's fourth-largest cable television company. She joined Cox in 1995 as
Vice President of Operations and advanced to Executive Vice President of
Operations. Ms. Bellville joined Cox from Century Communications, where she
served as Senior Vice President of the company's southwest division. Before
that, Ms. Bellville served seven years with GTE Wireless in a variety of
management and executive-level roles. A graduate of the State University of
New York in Binghamton, Ms. Bellville is also a graduate of Harvard Business
School's Advanced Management Program. She currently serves on the Dan O'Brien
Youth Foundation Board, the Public Affairs committee for the NCTA, the CTAM
Board of Directors, and is a trustee and secretary for the industry association
Women in Cable and Telecommunications. Ms. Bellville is an inaugural fellow of
the Betsy Magness Leadership Institute and has been named "Woman of the Year"
by Women in Cable and Telecommunications in California.
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.
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, 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
- 47 -
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 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.
DIANE L. SCHNEIDERJOHN, Senior Vice President - Marketing and
Programming. Ms. Schneiderjohn joined Charter Communications, Inc. in April
2002. From 2000-2002, 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. 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.
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.
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.
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 5A.
Mr. Graff was involved in the formation of Enstar 5A and the other Enstar
affiliated partnerships in the late 1980's and continued his role as general
partner thereafter. In 1993, Falcon Communications bought Mr. Graff's general
partnership interests in some of those partnerships, which did not include
Enstar 5A. Mr. Graff has been retired for
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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 5A.
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 third largest operator of cable television systems in the United States.
It provides cable television and other telecommunications services to
approximately 6.7 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 participants, 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 45-48.
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
TechTV, Inc., DreamWorks LLC, High Speed Access Corp., Oxygen Media, LLC and
Wink Communications, Inc. He is a director of TechTV, Inc. and numerous
privately held companies.
CARL E. VOGEL, 44 (See "Identity and Background of Certain Persons --
Enstar Communications Corporation" on pages 45-48).
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.
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.
- 49 -
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, 38, 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 and president of
Vulcan, Inc., 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, RCN Corporation, Telescan, 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 served as Chairman, Chief Executive
Officer and a director of TechTV Inc., a cable television network, since 1997
until July 2002. 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.
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 5B. 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.
- 50 -
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 and approving the Liquidation Plan are
received by the corporate general partner 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 5A 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. If you disagree with
any portion of Liquidation Plan, including the Access Sale, the Cumberland Sale,
the Joint Venture Liquidation or the Enstar Liqudation, then you should vote to
DISAPPROVE the entire 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 and approving the Liquidation Plan are
received by the corporate general partner 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.
On December 31, 2002, there were 59,766 outstanding units entitled
to vote on the Liquidation Plan, which were held by approximately 1,413
unitholders, none of whom are known to the corporate general partner to be
an affiliate of the Enstar 5A, the corporate general partner, or of any
affiliate of any of the other participants.
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
5A, 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 5A'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 5A. You also may obtain copies of
the asset purchase agreements with Access,
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Cumberland and Telecommunications that are described in this consent
solicitation statement, without charge, upon written request to Enstar 5A. 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.
INFORMATION INCORPORATED BY REFERENCE
The Securities and Exchange Commission permits the participants to
incorporate by reference the information that Enstar 5A has filed with it. This
means that important information, not presented in this consent solicitation
statement, may be contained elsewhere. The documents listed below are
incorporated by reference:
o Our Annual Report on Form 10-K for the year ended December 31, 2001;
o Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 2002; and
o Our Current Reports on Form 8-K filed on June 14, 2002 and
October 8, 2002
Copies of the Annual Report on Form 10-K for the year ended December 31, 2001
and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
have been delivered with this consent solicitation. You may obtain an additional
copy of the Form 10-K or Form 10-Q, without charge, by making a written request
to Enstar Communications Corporation, 12405 Powerscourt Drive, St. Louis,
Missouri 63131, Attention: Partnership Relations or by calling (314) 543-2389.
- 52 -
CONSENT SOLICITATION BY THE GENERAL PARTNER OF
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
CONSENT CARD
The undersigned record owner (the "Unitholder") of limited partnership
units (the "Units") of Enstar Income/Growth Program Five-A, 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) As soon as practicable after the consummation of the Access Sale
and the Cumberland 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 and the
Cumberland Sale, in accordance with the partnership agreement of the Joint
Venture (the "Joint Venture Liquidation"); and
(4) 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 , 2003
----------------------
(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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