SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 29, 1996
Falcon Cable Systems Company, a California limited partnership
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of incorporation)
1-9332 95-4108170
(Commission File Number) (IRS Employer Identification No.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
(Address of principal executive offices) (Zip Code)
(310) 824-9990
(Registrant's Telephone Number)<PAGE>
ITEM 5. OTHER EVENTS.
In its Quarterly Report on Form 10-Q for the period end-
ing September 31, 1995, the Partnership provided the follow-
ing "Other Information":
The Partnership Agreement provides that the General
Partner shall use its best efforts to cause the Partner-
ship to sell all of the Partnership's cable systems be-
tween December 31, 1991 and December 31, 1996, the "ter-
mination date" of the Partnership. The Partnership has
stated in prior public reports and filings that, from
time to time, it may enter into discussions regarding
the sale of its cable systems to affiliates or other
parties.
In addition, the Partnership Agreement provides the
General Partner or its affiliates the right to purchase
for cash substantially all of the Partnership's cable
systems at any time after December 31, 1991 without so-
liciting unaffiliated purchasers. Pursuant to the Part-
nership Agreement, in the event the General Partner or
its affiliates exercise such right, the purchase price
will be determined solely by reference to an "appraised
value" determined pursuant to an appraisal process set
forth in the Partnership Agreement (the "Appraisal Pro-
cess"). The Partnership Agreement provides that the
"appraised value" shall be determined by the average of
three appraisal evaluations of the Partnership's cable
systems and provides that one appraiser is to be se-
lected by the General Partner; one appraiser is to be
selected by a majority vote of the independent members
of the Partnership's advisory committee; and one ap-
praiser is to be selected by the two appraisers already
so chosen. If any such appraisal is expressed as a
range, then in calculating the average, the minimum
amount of such appraisal shall be used. In the event of
a sale of a cable system, including a sale to the Gen-
eral Partner or its affiliates, the General Partner will
be entitled to a fee equal to 2 1/2% of gross proceeds
from the sale less any amounts paid as brokerage or
similar fees to third parties.
The Partnership has previously disclosed that the
General Partner or its affiliates may from time to time
explore the possibility of exercising such purchase
right. The General Partner, in its exploration of the
possibility of exercising such purchase right, has now
initiated the Appraisal Process by inviting the indepen-
dent members of the Partnership's advisory committee to
designate a nationally-recognized independent appraiser.
In conjunction with the initiation of the Appraisal
Process, certain affiliates (the "Affiliates") of the<PAGE>
Partnership and its General Partner, including Marc B.
Nathanson (the Chairman of the Board, Chief Executive
Officer, President and a director of Falcon Holding
Group, Inc., the General Partner's sole general partner)
have made a preliminary proposal (the "Proposal") to the
independent members of the Partnership's advisory com-
mittee with respect to an exchange transaction (the "Ex-
change"). Under the Proposal, the Exchange would take
place immediately prior to the exercise by the General
Partner or its affiliates of their right to purchase for
cash substantially all of the Partnership's cable sys-
tems remaining after giving effect to the Exchange. In
the Exchange, substantially all of the Falcon Units
owned by the Affiliates would be exchanged for a portion
(by value) of the Partnership's cable systems equal to
the proportion of total outstanding Units exchanged by
the Affiliates (the Affiliates would also relieve Falcon
of an equal proportion of its total debt).
Any decision of Falcon to pursue the Proposal, the
Exchange, or the sale of the cable systems of the Part-
nership in accordance with the rights of the General
Partner under the terms of the Partnership Agreement (as
described above) or otherwise, ultimately will be depen-
dent upon numerous factors including, without limita-
tion, (i) the receipt by the General Partner of an opin-
ion of a qualified appraiser or other financial advisor
selected by the independent members of the Partnership's
advisory committee as to, among other things, the fair-
ness of the Proposal as compared to a sale of all of the
Partnership's cable systems (without giving effect to
the Exchange) to the General Partner or its affiliates
in accordance with their rights under the Partnership
Agreement (as described above), or the conclusion on
another basis that such fairness was otherwise estab-
lished ; (ii) the availability of necessary equity and
debt financing on favorable terms; (iii) the relative
attractiveness of available alternative business and
investment opportunities; (iv) the regulatory environ-
ment for cable properties; (v) future developments re-
lating to the Partnership and the cable industry, gen-
eral economic conditions and other future developments.
If the Proposal is pursued and the Exchange is consum-
mated, the Affiliates expect that they would defer their
potential tax liability as compared to a liquidation of
the Partnership without effecting the Exchange.
Although the foregoing reflects activities which
the General Partner is currently exploring with the
Partnership and the Affiliates with respect to the Part-
nership, the foregoing is subject to change at any time.
Accordingly, there can be no assurance that the Pro-
posal, the Exchange, or the sale of the cable systems of
the Partnership in accordance with the rights of the
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General Partner and its affiliates under the terms of
the Partnership Agreement (as described above) or other-
wise will be pursued or, if pursued, when and if any of
them will be successfully consummated. For additional
information on the terms of the Partnership Agreement,
see "Item 1 --Business --Introduction" and Item 13 --
"Certain Relationships and Related Transactions -- Con-
flicts of Interest" in the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1994.
The Partnership has entered into a letter agreement, a
copy of which is filed as an exhibit hereto and incorporated
herein by reference, dated January 29, 1996, with a group of
holders of limited partnership interests in the Partnership
(the "Unofficial Unitholder Committee"), consisting of the
Baupost Group, Inc., Cumberland Associates, Harvest Capital,
L.P., and Tweedy, Browne Company L.P., and collectively hold-
ing approximately 1,339,000 Partnership Units (or approxi-
mately 21% of the outstanding Units).
As contemplated by the Partnership Agreement and the
Company's Quarterly Report on Form 10-Q for the period ending
September 31, 1995, the appraiser to be selected by the Gen-
eral Partner, the appraiser to be selected by a majority vote
of the independent members of the Partnership's advisory com-
mittee, and the appraiser to be selected by the two apprais-
ers so chosen, have each been selected and are currently un-
dertaking the appraisal contemplated by the Partnership
Agreement as described above. The three appraisers are, re-
spectively, Malarkey-Taylor Associates, Inc., Kane-Reece As-
sociates, Inc., and Waller Capital Corporation.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
1 Letter Agreement dated January 29, 1996, be-
tween the Unofficial Unitholder Committee and
the Partnership.
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SIGNATURE
Pursuant to the requirements of the Securities Ex-
change Act of 1934, the registrant has duly caused this re-
port to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: January 31, 1996
FALCON CABLE SYSTEMS COMPANY
By: Falcon Cable Investors Group
Managing General Partner
By: Falcon Holding Group, L.P.
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: /s/ Michael K. Menerey
___________________________
Michael K. Menerey, Secretary
and Chief Financial Officer<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
1 Letter Agreement dated
January 29, 1996, between
the Unofficial Unitholder
Committee and the Partner-
ship.
EXHIBIT 1
THE PROPOSED
UNOFFICIAL UNITHOLDER OVERSIGHT COMMITTEE
OF FALCON CABLE SYSTEMS COMPANY
c/o The Baupost Group, Inc.
44 Brattle Street
P.O. Box 389125
Cambridge, MA 02238-9125
January 29, 1996
CONFIDENTIAL
BY FACSIMILE/REGULAR MAIL
Falcon Cable Systems Company
10900 Wilshire Boulevard
Los Angeles, California 90024
Gentlemen:
Thank you for meeting with us on December 19, 1995 to
discuss preliminarily the concerns of certain holders ("Hold-
ers") of units of limited partnership interest ("Unitholders")
in Falcon Cable Systems Company (the "Partnership") regarding
certain transactions between the Partnership and its affiliates
proposed in connection with the scheduled termination of the
Partnership on December 31, 1996 (the "Termination). Following
our December 19, 1995 meeting and in anticipation of your
agreement set forth herein, the Holders identified on Annex A
hereto preliminarily have determined to form an unofficial
Unitholder oversight committee (the "Committee") in the near
future.
The purpose of this letter is to confirm with you
certain arrangements and matters which we discussed on December
19, 1995 and January 19, 1996. Specifically, you have agreed
as follows:
1. Counsel Fees. In connection with the Commit-
tee's proposed retention of Battle Fowler LLP regarding the
Termination, the Partnership shall pay for fifty percent (50%)
of the Committee's legal fees and disbursements, up to a maxi-
mum amount to be paid by the Partnership of $50,000.
The Partnership hereby agrees to provide to Battle
Fowler LLP a retainer of $50,000 (the "Retainer"), which Re-
tainer (i) shall be deposited and held in an interest bearing
trust account and (ii) shall be applied, from time to time,<PAGE>
against one-half of the fees and disbursements incurred by
Battle Fowler LLP in connection with the contemplated represen-
tation of the Committee, provided and to the extent such fees
and disbursements are approved in writing by an authorized rep-
resentative of the Committee for payment and release, and pro-
vided that an equal amount has been applied toward the payment
of such fees and disbursements from the Committee's own funds.
The Committee shall provide to the Partnership a copy of Battle
Fowler LLP's monthly statement for services rendered as soon as
practicable after the same is received and approved by the Com-
mittee for payment. Battle Fowler LLP has agreed to utilize
its established hourly rates generally used by that firm, con-
sistent with its customary billing practices, without "premium"
or other add-ons. The Partnership's obligation to provide
Battle Fowler LLP the Retainer is expressly conditioned on the
Committee providing Battle Fowler a retainer in an equal or
greater amount prior to or simultaneously with the Partnership.
The Committee and Battle Fowler LLP agree that no
portion of the Retainer shall at any time be drawn down or ap-
plied against services rendered specifically for the purpose of
commencing litigation or otherwise in connection with actual
litigation (litigation for purposes of this letter agreement
being understood to include, without limitation, the exercise
of any federal or state law rights or remedies that may be or
be alleged to be available to the Committee or any Unithold-
ers), against the Partnership or any of its affiliates. To the
extent the Committee explicitly threatens or commences litiga-
tion proceedings against the Partnership or any of its affili-
ates, or if the members of the Committee and their respective
affiliates cease to own in the aggregate at least 50% of the
number of Units set forth on Annex A, the Partnership shall
have the right to terminate this letter agreement, in which
event the Committee and Battle Fowler LLP agree to return
promptly to the Partnership any unused portion of the Retainer
as of such commencement date.
Any unused portion of the Partnership's Retainer af-
ter Battle Fowler LLP's services on behalf of the Committee are
concluded will be returned to the Partnership.
The parties hereto understand and agree that Battle
Fowler LLP was selected by the Committee to act on behalf of
the Committee and its members, and not by the Partnership or
any other person or entity, and notwithstanding the fact that
the Partnership is paying a portion of Battle Fowler's fees and
disbursements in accordance with the provisions of this Section
1, Battle Fowler LLP is not, is not authorized to be, and is
not purporting to be, an agent of the Partnership or any other
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person or entity, including Unitholders of the Partnership that
are not members of the Committee, for any purpose whatsoever.
2. Access to Information and Confidentiality. The
Partnership has agreed to provide to the Committee, from time
to time as requested by the Committee, reasonable access to
such documents and information as the Partnership deems appro-
private (including copies thereof), including, but not limited
to documents and other information provided to the appraisers
in the appraisal process ("Partnership Information"). In that
regard, the Committee, upon its formation, intends to provide
the Partnership with a preliminary document and information
request. The Partnership hereby agrees and acknowledges that
nothing herein shall be deemed a waiver or compromise of any
rights or privileges that may hereafter be asserted by the
Holders in their respective capacities as Unitholders or other-
wise, including, but not limited to, rights to the inspection
of the books and records of the Partnership, and the receipt of
a list of the Unitholders of the Partnership.
In consideration of, and as a condition to, furnish-
ing the Committee with Partnership Information, the Committee
agrees:
A. That any Partnership Information which is fur-
nished to the Committee, its members or their
respective employees, agents, advisors or repre-
sentatives (collectively, "Permitted Persons")
by or on behalf of the Partnership (collectively
referred to as the "Confidential Material"),
shall be treated by the Committee and the Per-
mitted Persons confidentially and in accordance
with the provisions of this letter agreement and
shall not be shown to or discussed with any
other person or entity. Each Permitted Person
to whom Confidential Information is disclosed by
the Committee will be advised of its confiden-
tial nature and the terms of this letter agree-
ment.
B. The term "Confidential Material" does not in-
clude any portion of the Partnership Information
which (i) was or becomes generally available to
the public other than as a result of a disclo-
sure by the Committee or a Permitted Person,
(ii) was or becomes available to the Committee
or a Permitted Person on a non-confidential ba-
sis from a source other than the Partnership or
its advisors, provided that such source is not
bound by a confidentiality agreement with or
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other obligation of secrecy to the Partnership
or another party, or (iii) was or becomes avail-
able to the Committee or a Permitted Person on a
non-confidential basis from the Partnership,
including pursuant to rights afforded to
Unitholders under the Partnership Agreement and/
or California law.
C. If (1) the Committee explicitly threatens or
commences any litigation proceedings against the
Partnership or any of its affiliates, (2) the
Partnership or its assets are liquidated or
sold, (3) the Committee disbands or otherwise
ceases to exist, or (4) this letter agreement is
terminated pursuant to its terms or the written
agreement of the Partnership and the Committee,
the Committee and the Permitted Persons (i)
shall promptly redeliver to the Partnership (or,
if the Partnership shall have been terminated or
otherwise cease to exist, its general partner)
all copies of all Confidential Material, (ii)
will not retain any copies of such material, and
(iii) agree to keep confidential the Confiden-
tial Material.
D. In the event that the Committee, any Committee
member, or any Permitted Person is requested or
required (by oral questions, interrogatories,
requests for information or documents, subpoena,
civil investigative demand or similar process)
to disclose any Confidential Material, the Com-
mittee will promptly notify the Partnership of
such request or requirement so that the Partner-
ship may seek an appropriate protective order or
waive compliance with the provisions of this
agreement, and/or take any other mutually agreed
action. If, in the absence of a protective or-
der or the receipt of a waiver hereunder, the
Committee or any Permitted Person is, in the
reasonable written opinion of such person's
counsel, compelled to disclose information or
else stand liable for contempt or suffer other
censure or significant penalty, such person may
disclose that portion of the requested informa-
tion which such person's counsel advises such
person in writing that such person is compelled
to disclose.
3. Securities Laws. The Committee acknowledges
that it and its members are subject to applicable federal law
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regarding the purchase and sale of securities when in posses-
sion of non-public material inside information with respect to
the issuer of such securities; that some or all of the Confi-
dential Information may constitute non-public material inside
information with respect to the Partnership; and that the Com-
mittee and its members shall be solely responsible for deter-
mining if such information is or is not non-public material
inside information with respect to the Partnership and for any
violation of law by it or them resulting from any transactions
effected by it or them then while in possession of such Confi-
dential Information.
4. Permitted Disclosure. The Committee and the
Partnership acknowledge that it may be necessary or desirable
for either the Committee and its affiliates, on the one hand,
or the Partnership and its affiliates, on the other hand, to
make public disclosure of the existence of this letter agree-
ment and its terms, and agree that (i) the existence of this
letter agreement and its terms shall not be deemed "Confiden-
tial Material" hereunder, and (ii) neither the Partnership nor
the Committee is obligated to keep the existence of this letter
agreement or its terms confidential, and may make public dis-
closure with respect thereto without the consent, approval or
review of the other party.
The agreements set forth in paragraph 2 and the ac-
knowledgments set forth in paragraph 3 of this letter agreement
shall survive the termination of this letter agreement, as will
Battle Fowler LLP's obligation to apply the Retainer only in
accordance with the terms hereof and to return any unused por-
tion of the Retainer.
5. Multiple Counterparts. This letter agreement
may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall
constitute one and the same instrument.
In closing, the Committee advises the Partnership
that it shall be an ad hoc committee whose constituents shall
include Committee members only. The Committee does not and
shall not, nor shall it be deemed or construed to, act for or
on behalf of any other person or entity, including Unitholders
of the Partnership that are not members of the Committee, for
any purpose whatsoever.
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If the foregoing correctly sets forth our understand-
ing, please sign and return to us the enclosed copy of this
letter and promptly forward the Partnership's $50,000 retainer
to Battle Fowler LLP, 75 East 55th Street, New York, New York
10022, attention: Charles H. Baker, Esq.
Sincerely,
UNOFFICIAL UNITHOLDER OVERSIGHT COM-
MITTEE OF FALCON CABLE SYSTEMS COMPANY
By: The Baupost Group, Inc.,
Committee Chair
By: /s/ Abner B. Kurtin
Name: Abner B. Kurtin
Title: Investment Analyst
AGREED TO AND ACCEPTED
as of January 29, 1996:
FALCON CABLE SYSTEMS COMPANY
By: Falcon Cable Investors Group
Managing General Partner
By: Falcon Holding Group, L.P.
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: /s/ Stanley S. Itskowitch
Name: Stanley S. Itskowitch
Title: Executive Vice President
ACKNOWLEDGED AND AGREED, with
respect to the second, third and
fourth paragraphs of Section 1 above:
BATTLE FOWLER LLP
By: /s/ C.H. Baker
Charles H. Baker
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Annex A
Proposed Holders/Committee Members*
No. of Units of the Partnership
Name Owned as of January 29, 1996**
The Baupost Group, Inc. 500,200
Cumberland Associates 378,900
Harvest Capital, L.P. 170,000
Tweedy, Browne Company L.P. 290,040
_____________________
* Nothing in this Annex A shall be deemed a representation
or warranty whatsoever as to the number of Units owned, of
record or beneficially, by any Committee member. The num-
ber of Units reflects determinations of beneficial owner-
ship which may change from time to time, depending on the
circumstances. The number of Units owned are as of the
date specified, and the Committee does not undertake, and
shall not be obligated, to update Unit ownership data at
any time hereafter.
** Unit amounts may include Units beneficially owned by af-
filiates or certain related persons.
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