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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of report: June 24, 1997
(Date of earliest event reported)
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
CALIFORNIA COMMISSION FILE: 95-4200409
(State or other jurisdiction 0-18266 (I.R.S. Employer Identification No.)
of incorporation or
organization)
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10900 WILSHIRE BOULEVARD, 15TH FLOOR
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices, including zip code)
(310) 824-9990
(Registrant's phone number, including area code)
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ITEM 5. OTHER EVENTS
As previously disclosed in prior filings with the Securities
and Exchange Commission (the "Commission"), Falcon Classic Cable Income
Properties, L.P. (the "Partnership" or "Falcon Classic") may, in the sole
discretion of its General Partner, sell individual cable systems and may also
sell all or substantially all of the Partnership's assets to the General Partner
or its affiliates, which include Falcon Holding Group, L.P. ("FHGLP"). Any such
sale would be subject to certain terms and conditions set forth in Falcon
Classic's Agreement of Limited Partnership (the "Partnership Agreement") and
summarized below and in prior filings with the Commission. The Partnership has
stated in its prior filings with the Commission that the General Partner and its
affiliates (which include FHGLP and its subsidiaries) may consider and otherwise
investigate the exercise of the purchase rights (the "Purchase Right") provided
to them under the Partnership Agreement from time to time at their discretion.
The Partnership Agreement provides that any sale of
Partnership assets to the General Partner or any of its affiliates must be made
in cash pursuant to the "Appraisal Process." "Appraisal Process" is defined in
the Partnership Agreement as an appraisal undertaken by three independent
nationally recognized experts in the cable television field to determine the
fair market value of the cable systems to be appraised. One such appraiser must
be appointed by the General Partner, one by the Partnership's Conflicts
Committee and the third by the first two appraisers acting jointly. The
Partnership Agreement specifies that the Conflicts Committee be comprised of the
independent members of the Advisory Committee (i.e., the members of the Advisory
Committee that are not affiliates of, or otherwise have certain material
business or professional relationships with, the General Partner or its
affiliates). The appraised value pursuant to the Appraisal Process will be
deemed to be the median of the three appraised values and, if any appraised
value is expressed as a range, then in calculating the median, the mean amount
of the range of such appraised value shall be used. No appraisals arising in
affiliated transactions may be conducted at the Partnership's expense.
Appraisers selected pursuant to the Appraisal Process may not have any interest
in, nor any material business or professional relationship with, the
Partnership, the General Partner or any of its affiliates. For the purposes of
determining whether or not the business or professional relationship or joint
investment is material, the gross revenue derived by the appraiser from the
Partnership, the General Partner or any affiliate shall not exceed 5% of the
annual gross revenue derived by the appraiser from all sources. Except under
certain circumstances, sales of assets by the Partnership to the General Partner
or its affiliates prior to January 1, 1997 would have required an affirmative
vote of a majority of limited partner interests outstanding and not owned by the
General Partner or its affiliates. No such vote is required or will be sought
thereafter. Although the General Partner is not required to purchase the
Partnership's cable systems, it or one of its affiliates may determine to do so
subject to the foregoing restrictions. Limited partners will not be entitled to
share in any profits of the General Partner or its affiliates from the operation
or sale of any cable systems subsequent to the sale of such cable systems to the
General Partner or any affiliate.
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As previously disclosed, the Partnership has commenced the
Appraisal Process resulting in three appraisals of the Partnership's Systems
(the "Appraisals"). The three appraisers were selected as follows: (i) the
Conflicts Committee selected Arthur Andersen LLP; (ii) the General Partner
selected Kane Reece Associates, Inc.; and (iii) those two firms selected
Communications Equity Associates (the "Appraisers"). Pursuant to the Partnership
Agreement, the sole obligation of the Conflicts Committee in connection with the
Appraisal Process was to select one of the three Appraisers. Also as previously
disclosed, the Appraisers have reported their results as follows ($ in
thousands):
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Communications Equity
Kane Reece Arthur Associates, Inc.
Associates, Inc. Andersen LLP (MEDIAN)
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Redmond, OR $ 7,680 $ 5,882 $ 6,200
Burke County, NC 20,570 17,685 19,000
Somerset, KY 33,590 30,277 31,000
Centreville, MD 23,980 20,445 23,000
California City, CA 3,500 2,791 2,800
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$ 82,000
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As noted above, the Appraisal Process dictates that the
"appraised value" of a cable television system to be appraised (a "System")
shall be the median Appraisal for such System.
The Appraisals, by their respective terms, are based upon
numerous sources of information including data supplied by the General Partner,
which included certain projections regarding 1997 operating results for the
Partnership prepared in the ordinary course of its business. The Partnership
does not as a matter of course make public any forecasts as to its future
financial performance. THE PROJECTIONS WERE PREPARED SOLELY FOR INTERNAL USE AND
NOT WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES
OF THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS AND WERE NOT PREPARED WITH THE ASSISTANCE OF, OR REVIEWED
BY, INDEPENDENT ACCOUNTANTS. SUCH PROJECTIONS WERE PROVIDED TO THE APPRAISERS
SOLELY FOR THE PURPOSES OF THEIR APPRAISALS. NONE OF THE GENERAL PARTNER, THE
PARTNERSHIP, ANY AFFILIATE OR ANY PARTY TO WHOM THE PROJECTIONS WERE PROVIDED
ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR
COMPLETENESS OF THE PROJECTIONS. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THE
PROJECTIONS ARE BASED ON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESSES OF
THE PARTNERSHIP, INDUSTRY PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS
AND OTHER MATTERS WHICH ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE PARTNERSHIP'S CONTROL, AND,
THEREFORE, SUCH PROJECTIONS ARE INHERENTLY IMPRECISE AND THERE CAN BE NO
ASSURANCE THAT THEY WILL BE REALIZED. ALSO, ACTUAL FUTURE RESULTS
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MAY VARY MATERIALLY FROM THOSE SHOWN IN THE PROJECTIONS. THE PARTNERSHIP IS NOT
UNDER ANY OBLIGATION TO UPDATE THE PROJECTIONS AT ANY FUTURE TIME.
Each of the Appraisers is a nationally recognized cable system
appraisal firm and is continually engaged in the valuation of cable systems.
Each of the Appraisers, other than Arthur Andersen LLP, has from time to time
provided valuation services to the Partnership and its affiliates for which they
have received customary compensation. The full text of the Appraisals have been
filed as Exhibits 10.30 through 10.32 to the Partnership's Annual Report on Form
10-K for the year ended December 31, 1996 and limited partners are urged to
review such materials carefully.
By letter dated June 24, 1997, the General Partner has advised
the Partnership that it intends to exercise its Purchase Right to acquire all of
the Partnership's Systems pursuant to the Appraisal Process for cash
consideration equal to the median Appraised Value ($82.0 million). The General
Partner further advised the Partnership that, as permitted by the Partnership
Agreement, it intends that the Systems be acquired (the "Sale") by certain
affiliates of the General Partner (the "Purchasers"). On June 27, 1997, the
General Partner caused the Partnership to enter into an Asset Purchase Agreement
with the Purchasers, which is attached hereto as Exhibit 1 and is incorporated
herein by reference, and the parties have begun to seek the necessary regulatory
and other consents.
The consummation of the Sale will be conditioned upon the
receipt of the necessary regulatory approvals, including those required pursuant
to certain cable television system franchises, federal communications law and
the Hart-Scott-Rodino Antitrust Improvements Act of 1976. There can be no
assurance that the receipt of such approvals will occur in a timely manner, if
at all.
The Partnership Agreement provides that the Partnership shall
be dissolved upon the occurrence of the sale or distribution of all or
substantially all of the assets of the Company, which will occur upon
consummation of the Sale. The Partnership Agreement also provides that upon the
dissolution of the Partnership, the General Partner shall take such actions as
are necessary for the winding up of the affairs of the Partnership and the
distribution of its assets to the partners pursuant to the provisions of the
Partnership Agreement. Accordingly, following the consummation of the Sale, the
General Partner will wind-up the affairs of the Partnership in accordance with
the terms of the Partnership Agreement, including the liquidation of the assets
of the Partnership, the discharge of all of the liabilities of the Partnership,
and the distribution of the remaining assets of the Partnership to its partners
as appropriate.
Based upon the aggregate of the median Appraisals of the
Partnership's cable Systems (the "Aggregate Appraised Valuation") and assuming a
hypothetical liquidation of the Partnership on March 31, 1997 involving the sale
of those Systems on that date for an amount equal to the Aggregate Appraised
Valuation ($82.0 million), the estimated cash distribution to unitholders would
have been approximately $867 per limited partnership unit (the "Hypothetical
Estimated Per Unit Distribution") (based upon 71,879 units outstanding). This
Hypothetical Estimated Per Unit Distribution was calculated assuming net
liabilities on the balance sheet of
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the Partnership, net of current assets ("Net Liabilities"), of approximately
$19.0 million (as of March 31, 1997), including the Partnership's outstanding
bank indebtedness of $23.3 million as of March 31, 1997. As with other
liabilities, the Partnership's bank indebtedness must be repaid prior to the
payment of any liquidating distribution to the partners. Such Hypothetical
Estimated Per Unit Distribution also assumes that the Net Liabilities as of
March 31, 1997 represent the only payments, other than certain reserved
expenses, that would have been required to be made by the Partnership prior to
the distribution of cash to the unitholders. Accordingly, the Hypothetical
Estimated Per Unit Distribution is presented for illustrative purposes only and
does not necessarily represent amounts the Partnership could have distributed to
unitholders on March 31, 1997 or any date thereafter. The actual distribution
will vary depending on, among other things, the date of the actual dissolution
and related distribution to unitholders.
Although the foregoing reflects activities which the General
Partner and certain of its affiliates are currently pursuing with respect to the
Partnership, the foregoing is subject to change at any time. Accordingly, there
can be no assurance that the Sale of the Systems of the Partnership in
accordance with the rights of the General Partner and its affiliates under the
terms of the Partnership Agreement as described above or otherwise will be
successfully consummated. For additional information on the terms of the
Partnership Agreement and the Appraisal Process, see "Item 1 -- Business --
Recent Developments" and Item 13 -- "Certain Relationships and Related
Transactions" in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996 and the full text of the Partnership Agreement filed as
Exhibit 3.2 and the full text of the Appraisals filed as Exhibits 10.30 through
10.32 thereto. In addition, the Partnership has previously filed Current Reports
on Form 8-K related to the Appraisal Process dated August 27, 1996, October 17,
1996 and February 6, 1997.
FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE MADE PURSUANT TO
THE SAFE HARBOR PROVISIONS OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. INVESTORS ARE CAUTIONED THAT SUCH FORWARD-LOOKING STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES INCLUDING, WITHOUT LIMITATION, THE EFFECTS OF
LEGISLATIVE AND REGULATORY CHANGES; THE POTENTIAL OF INCREASED LEVELS OF
COMPETITION FOR THE PARTNERSHIP; TECHNOLOGICAL CHANGES; THE PARTNERSHIP'S
DEPENDENCE UPON THIRD-PARTY PROGRAMMING; THE EXERCISE OF THE PURCHASE RIGHT AS
DESCRIBED ABOVE; THE ABSENCE OF UNITHOLDER PARTICIPATION IN THE GOVERNANCE AND
MANAGEMENT OF THE PARTNERSHIP; LIMITATIONS ON BORROWINGS BY THE PARTNERSHIP
CONTAINED IN THE PARTNERSHIP AGREEMENT; THE MANAGEMENT FEES PAYABLE TO THE
GENERAL PARTNER; THE EXONERATION AND INDEMNIFICATION PROVISIONS CONTAINED IN THE
PARTNERSHIP AGREEMENT RELATING TO THE GENERAL PARTNER AND OTHER; POTENTIAL
CONFLICTS OF INTEREST INVOLVING THE GENERAL PARTNER AND ITS AFFILIATES; THE
POTENTIAL LIABILITY OF UNITHOLDERS TO CREDITORS OF THE PARTNERSHIP TO THE EXTENT
OF ANY DISTRIBUTION MADE TO SUCH UNITHOLDER IF, IMMEDIATELY AFTER SUCH
DISTRIBUTION (WHETHER OR NOT THE PARTNERSHIP CONTINUES TO EXIST), THE REMAINING
ASSETS OF THE PARTNERSHIP ARE NOT SUFFICIENT TO PAY ITS THEN OUTSTANDING
LIABILITIES OF THE PARTNERSHIP; AND OTHER RISKS DETAILED FROM TIME TO TIME IN
THE PARTNERSHIP'S ANNUAL REPORT ON FORM 10-K AND OTHER PERIODIC REPORTS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(i) Exhibits
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Exhibit No. Description
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1 Asset Purchase Agreement, dated as of June 27, 1997, among the
Partnership and the Purchasers.
2 Form of letter from the General Partner to the limited partners
regarding the Sale.
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* * * *
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
a California limited partnership
By: Falcon Classic Cable Investors, L.P.
General Partner
By: Falcon Holding Group, L.P.
General Partner
By: Falcon Holding Group, Inc.
General Partner
Date: June 30, 1997. By: /s/ MICHAEL K. MENEREY
-----------------------------
Name: Michael K. Menerey
Title: Chief Financial Officer
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INDEX TO EXHIBITS
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Exhibit No. Description
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1 Asset Purchase Agreement, dated as of June 27, 1997, among the
Partnership and the Purchasers.
2 Form of letter from the General Partner to the limited partners
regarding the Sale.
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ASSET PURCHASE AGREEMENT
by and among
FALCON COMMUNITY CABLE, L.P.,
a Delaware limited partnership,
FALCON CABLE MEDIA,
a California limited partnership,
FALCON CABLE SYSTEMS COMPANY II, L.P.,
a California limited partnership
and
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.,
a California limited partnership,
Dated as of June 27, 1997
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 27, 1997 (this
"Agreement") by and among Falcon Classic Cable Income Properties, L.P., a
California limited partnership ("FCCI"), Falcon Community Cable, L.P., a
Delaware limited partnership ("Community Cable"), Falcon Cable Media, a
California limited partnership ("Cable Media"), and Falcon Cable Systems Company
II, L.P., a California limited partnership ("Cable Systems II") (Community
Cable, Cable Media and Cable Systems II are collectively referred to herein as
the "Purchasers" and each a "Purchaser").
RECITALS
A. Falcon Classic Cable Investors, L.P., a California
limited partnership (the "General Partner"), is the general partner of FCCI.
B. Pursuant to Section 4.9 of the Amended and Restated
Agreement of Limited Partnership of FCCI, dated as of May 15, 1989 (the
"Partnership Agreement") (capitalized terms used in this Agreement and not
otherwise defined herein shall have the meaning ascribed thereto in the
Partnership Agreement), the General Partner may cause the sale of all or
substantially all of the Cable Systems to the General Partner or to any
Affiliate of the General Partner for cash at the median of three independent
appraised values of fair market value pursuant to the Appraisal Process (the
"Appraised Value").
C. Falcon Holding Group, L.P., a Delaware limited
partnership ("FHGLP"), (i) is the general partner of the General Partner, (ii)
is a general partner of Community Cable, (iii) is a general partner of Cable
Media, and (iv) is a general partner of Cable Systems II.
D. As a result of the relationships described in the
foregoing recitals, the Purchasers are Affiliates of the General Partner.
E. Pursuant to an Assignment of Right to Purchase, dated
as of the date hereof, among the General Partner and each of the Purchasers, the
General Partner has assigned to the Purchasers the right to purchase all of the
Cable Systems of FCCI at their Appraised Value.
F. The Purchasers desire to purchase all of the Cable
Systems of FCCI at their Appraised Value and the General Partner desires to
cause FCCI to sell all of the Cable Systems of FCCI to the Purchasers at their
Appraised Value in accordance with Section 4.9 of the Partnership Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good
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and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINED TERMS. The following terms, as used in
this Agreement, shall have the following meanings (and such meanings shall be
equally applicable to both the singular and plural forms of the terms defined
herein):
"Bill of Sale" shall mean such bills of sale, instruments of
conveyance and assignment and assumption as may be necessary to effect the Sale
of the Cable Systems.
"Cable Systems" shall mean, collectively, all right, title and
interest of FCCI in all assets, rights, privileges, interests, claims and
properties, whether tangible or intangible, owned, used or held by FCCI for use
in connection with the provision of cable television services and, if required
by the context, the five specific Cable Systems owned and operated by FCCI in
Redmond, Oregon (the "Redmond Cable System"), Burke County, North Carolina (the
"Burke County Cable System"), Somerset, Kentucky (the "Somerset Cable System"),
Centreville, Maryland (the "Centreville Cable System"), and California City,
California (the "California City Cable System").
"Cable System Contracts" shall mean all contracts, purchase
orders and other agreements of FCCI to the extent relating to the construction,
operation or maintenance of the Cable Systems. Cable System Contracts shall not
include any Local Authorization or FCC License.
"Closing" shall mean the consummation of the Sale.
"Communications Act" shall mean the Communications Act of
1934, as amended.
"FCC" shall mean the Federal Communications Commission.
"FCC Consents" shall mean consents of the FCC to the transfer
of the FCC Licenses to the Purchasers in connection with the Sale.
"FCC Licenses" shall mean the licenses and permits of the FCC
held by FCCI in connection with the operation of the Cable Systems.
"Franchise Areas" shall mean the areas in which FCCI is
authorized to provide cable television service under the Local Authorizations
and the areas served by any of the Cable Systems in which FCCI provides cable
television service without a Local Authorization.
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"Governmental Authority" shall mean any federal, state,
municipal or local governmental authority or political subdivision thereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Legal Requirement" shall mean the requirements of any law,
ordinance, statute, rule, regulation, code, order, judgment, decree, injunction,
franchise, determination, approval, permit, license, authorization or other
requirement of any Governmental Authority.
"Lien" shall mean, with respect to any asset, any mortgage,
lien, pledge, charge, security interest, adverse claim or encumbrance of any
kind in respect of such asset.
"Local Authority" shall mean any Governmental Authority having
jurisdiction to grant a cable television franchise with respect to all or a
portion of any Cable System.
"Local Authority Consent" shall mean any approval,
authorization or consent of a Local Authority necessary for a change in control
of a Local Authorization or otherwise in connection with the consummation of the
Sale.
"Local Authorizations" shall mean all authorizations,
approvals, franchises, licenses and permits of Local Authorities granted to the
Partnership which permit the operation of the Cable Systems as amended, modified
or supplemented.
"Material Adverse Effect" shall mean a material adverse effect
on the business, financial condition, results of operations or prospects of the
business of FCCI or any of the Cable Systems.
"Permitted Liens" shall mean (i) Liens for Taxes not yet due
and payable; (ii) any carrier's, warehousemen's, mechanic's, materialmen's,
repairmen's, employees' or other like Lien arising in the ordinary course of
business; (iii) easements, rights-of-way, restrictions, encroachments and other
similar encumbrances which do not materially interfere with the use of the Cable
Systems as presently used; and (iv) rights of first refusal in favor of, and
restrictions imposed by, Governmental Authorities.
"Person" shall mean and include an individual, a corporation,
a partnership (general, limited or limited liability), a joint venture, a
limited liability company, an association, a trust or any other organization or
entity, including a Governmental Authority.
"Purchase Price" shall mean $82,000,000 in the aggregate,
allocated among the Cable Systems as provided in Schedule 2.1.
"Right of First Refusal" shall mean any right of first refusal
of a Local Authority in regard to or arising as a result of the Sale.
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"Taxes" shall mean all taxes, fees, duties, imposts, levies,
withholdings, tax deficiencies, assessments, and charges, including, without
limitation, all net income, gross income, gross receipts, sales, use,
value-added, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, estimated, severance, stamp, occupation, property
or other taxes and customs duties of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts relating
thereto, imposed by any Governmental Authority (domestic or foreign).
"Unapproved FCC Assets" shall mean all equipment relating to
Unapproved FCC Licenses.
"Unapproved FCC License" shall mean an FCC License as to which
all FCC Consents have not been obtained or do not remain in full force and
effect immediately prior to the Closing Date.
"Unapproved Franchise Areas" shall mean Franchise Areas
covered by Unapproved Local Authorizations.
"Unapproved Franchise Assets" shall mean, with respect to all
Unapproved Franchise Areas, all Unapproved Local Authorizations and all related
real property and equipment.
"Unapproved Local Authorizations" shall mean a Local
Authorization (other than Right of First Refusal Local Authorizations) as to
which all Local Authority Consents have not been obtained or do not remain in
full force and effect immediately prior to the Closing Date.
ARTICLE II.
PURCHASE AND SALE
SECTION 2.1. PURCHASE AND SALE.
(a) Subject to the satisfaction or waiver in writing of the
conditions set forth herein and to the other terms, conditions and provisions
hereof, on a date as soon as practicable following the satisfaction or waiver of
the conditions set forth herein (the "Closing Date"), FCCI shall execute and
deliver to each Purchaser a Bill of Sale pursuant to which FCCI shall sell,
convey, assign, transfer and deliver to the Purchasers, and the Purchasers shall
purchase, acquire, accept and pay for, all of FCCI's right, title and interest
in all Cable Systems owned by FCCI, including, subject to Section 2.2, FCCI's
rights under the Cable System Contracts and each Purchaser shall execute and
deliver a Bill of Sale and thereby assume and agree to perform in accordance
with their terms the Cable System Contracts, FCC Licenses and Local
Authorizations (the "Sale"). Schedule 2.1 hereto sets forth the Cable Systems of
FCCI to be purchased by each respective Purchaser and the portion of the
Purchase Price to be paid by each such Purchaser.
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(b) At the Closing, the Purchasers shall, severally but not
jointly, deliver to FCCI the Purchase Price related to the respective Cable
Systems to be purchased by them in immediately available funds (by wire transfer
to an account designated in writing by FCCI prior to the Closing Date).
SECTION 2.2. LACK OF CONSENTS. If the Sale requires the
consent of another Person under any Cable System Contract and such consent has
not been obtained prior to the Closing Date or does not remain in full force and
effect at the Closing Date, such failure to obtain such consent or failure of
such consent to be in full force and effect shall not itself constitute a breach
of any provision hereof. FCCI shall, with respect to each such Cable System
Contract, use its reasonable commercial efforts (at the expense of the Purchaser
of such Cable System Contract and at no out-of-pocket expense to FCCI, but
without such Purchaser being required to provide any consideration therefor) to:
(i) keep each such Cable System Contract in effect and obtain such consent; (ii)
provide to the appropriate Purchaser the benefits of each such Cable System
Contract through subcontract or otherwise; (iii) cooperate in any reasonable
arrangement designed to provide such benefits to such Purchaser; and (iv)
enforce, at the request and sole expense of the appropriate Purchaser, any
rights of such Purchaser included in the Cable Systems under or with respect to
any such Cable System Contract against all other Persons (including termination
of the foregoing in accordance with the terms thereof upon the election of such
Purchaser), in each case of clauses (i)-(iv) to the extent that any Purchaser
performs all obligations of FCCI under such Cable System Contract. If all such
consents under any such Cable System Contract are obtained after the Closing
Date, FCCI shall promptly assign such Cable System Contract to the appropriate
Purchaser and such Purchaser shall assume all obligations under such Cable
System Contract with respect to periods following such assignment, in each case
without the payment of additional consideration by any Purchaser or FCCI.
SECTION 2.3. LACK OF REGULATORY APPROVALS.
(a) If immediately prior to the Closing Date any Local
Authority Consent or FCC Consent has not been obtained or does not remain in
full force and effect immediately prior to the Closing Date, such failure to
obtain such Local Authority Consent or FCC Consent or such failure of such Local
Authority Consents or FCC Consent to be in full force and effect shall not
itself constitute a breach of any provision hereof.
(b) If at any time following the Closing Date, FCCI is able to
transfer to the appropriate Purchaser (or a designee of such Purchaser) an
Unapproved Local Authorization or an Unapproved FCC License, FCCI shall promptly
transfer to such Purchaser (or such designee of such Purchaser) such Unapproved
Local Authorization and all related Unapproved Franchise Assets and such
Unapproved FCC License and all related Unapproved FCC Assets, as the case may
be. Such Purchaser (or such designee of such Purchaser), as the case may be,
shall assume, pay, perform and discharge the obligations arising after the
Closing Date under or in respect of any such Unapproved Local Authorization or
Unapproved FCC License so transferred.
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SECTION 2.4. RECEIPT OF CONSENTS. It is the intent of the
parties that the arrangements described in Sections 2.2 and 2.3 continue for the
shortest possible time, and to this end they agree to use reasonable commercial
efforts to obtain all consents (including Local Authority Consents) to the Sale
referred to in said Sections as promptly as practicable following the Closing
Date. FHGLP shall coordinate the efforts to obtain such consents, and the
Purchasers shall be responsible for all costs, expenses, liabilities,
obligations and burdens with respect to such consents (allocated to the
appropriate Cable System).
SECTION 2.5. NO ASSUMPTION OF LIABILITIES. FCCI shall retain,
shall continue to be responsible after the Closing for, shall pay, perform and
discharge, and shall indemnify and hold the Purchasers and each of their
Affiliates harmless from and against, all liabilities and obligations (whether
incurred, accrued, arising or known prior to, at or after the Closing, whether
or not known, suspected, asserted or claimed at the Closing or at any time
theretofore or thereafter, whether or not reflected or provided for, or required
to be reflected or provided for, in any balance sheet of FCCI and whether fixed,
liquidated, unliquidated, absolute, contingent or otherwise) which relate to or
arise out of the business, assets or operations of FCCI as heretofore, currently
or hereafter conducted through the Closing Date, any of the Cable Systems or the
past operation, condition or use of any of the Cable Systems, including those
related to: (i) product liability; (ii) general tort liability; (iii) any other
activity undertaken by FCCI or relating to any of the Cable Systems; or (iv) any
obligation or liability of FCCI to any of its partners or in respect of any
management fee or sales fee; other, however, than obligations under the Cable
System Contracts, FCC Licenses and Local Authorizations specifically assumed by
a Purchaser.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF FCCI
FCCI represents and warrants to the Purchasers that:
SECTION 3.1. EXISTENCE AND POWER. FCCI (i) is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of California, (ii) is authorized to transact business and is in
good standing in each state in which its ownership of assets or conduct of
business requires such qualification, and (iii) has all partnership powers
required to carry on its business as conducted on the date hereof, with such
exceptions to clauses (i), (ii) and (iii) as would not have a Material Adverse
Effect or materially and adversely affect the ability of any Purchaser to
consummate the Sale.
SECTION 3.2. AUTHORIZATION. FCCI has the partnership power to
own and operate the Cable Systems. FCCI has the partnership power to enter into
this Agreement and to consummate the Sale. The execution and delivery by FCCI of
this Agreement and the consummation by FCCI of the Sale has been duly authorized
by all necessary partnership action.
6
<PAGE> 8
SECTION 3.3. GOVERNMENTAL AUTHORIZATION. The execution and
delivery of this Agreement by FCCI, and the performance by FCCI of this
Agreement, and the consummation by FCCI of the Sale, require no material action
by or in respect of, or material filing with, any Governmental Authority other
than compliance with any applicable requirements of the HSR Act, and the Local
Authorizations.
SECTION 3.4. CONSENTS. Except as set out in Schedule 3.4, no
material consent by any Person under any Cable System Contract is required or
necessary for the execution and delivery of this Agreement by FCCI, or the
performance by FCCI of this Agreement, or the consummation of the Sale
contemplated to be consummated by it pursuant hereto, except as would not have a
Material Adverse Effect.
SECTION 3.5. NON-CONTRAVENTION.
(a) The execution, delivery and performance of this Agreement
by FCCI, and the consummation by FCCI of the Sale, do not and on or before the
Closing Date will not, (x) contravene the Partnership Agreement or (y) subject
to obtaining the consents described in Section 3.3 and subject to obtaining,
taking or making the actions and filings described in Schedule 3.4, result in
the imposition of any Lien upon any assets of FCCI pursuant to, or constitute a
breach or default (including any event that, with the passage of time or giving
of notice, or both, would become a breach or default) under or give rise to a
right of termination, cancellation, first refusal or acceleration under any
applicable Legal Requirement or any judgment, injunction, order, decree,
contract, license, lease, indenture, mortgage, loan agreement, note or other
agreement or instrument as to which FCCI is a party or by which any of its
properties may be bound, the effect of which would be to materially impair the
ability of FCCI to perform its obligations under this Agreement.
(b) FCCI is not in breach or default (including any event
that, with the passage of time or giving of notice, or both, would become a
breach or default) under any Cable System Contract or contract by which any of
its assets may be bound, the effect of which would be to impair the ability of
FCCI in any material respect to operate any Cable System as presently operated.
SECTION 3.6. BINDING EFFECT. This Agreement has been duly
executed and delivered by FCCI, and when executed by the parties hereto, this
Agreement constitutes a valid and binding obligation of FCCI, enforceable
against FCCI in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies.
SECTION 3.7. SYSTEMS; AUTHORIZATIONS; LICENSES.
(a) Each Local Authorization (x) is in all material respects
validly held by FCCI in accordance with and as required by the terms thereof and
according to all material applicable Legal Requirements and (y) is in all
material respects in full force and effect and has not been revoked or canceled
and FCCI is in material compliance therewith. To the
7
<PAGE> 9
knowledge of FCCI; no proceeding to revoke, cancel or modify in any manner any
such Local Authorization has been initiated or threatened in writing.
(b) Each FCC License (x) is in all material respects validly
held by FCCI in accordance with and as required by the terms thereof and
according to all material applicable Legal Requirements and (y) is in all
material respects in full force and effect and has not been revoked or canceled
and FCCI is in material compliance therewith. To the knowledge of FCCI, no
proceeding to revoke, cancel or modify in any manner any such FCC License has
been initiated or threatened in writing.
SECTION 3.8. ASSETS. FCCI has good and marketable title to,
or a valid leasehold or license interest in, all assets purported to be owned,
leased or licensed by FCCI which constitute the Cable Systems, free and clear of
all Liens other than Permitted Liens and other than any Liens which shall be
fully satisfied, discharged and released effective as of the Closing. Each Bill
of Sale is sufficient to transfer to the identified Purchaser good and, subject
to Permitted Liens, marketable title to the Cable Systems to be acquired by such
Purchaser as set forth on Schedule 2.1.
SECTION 3.9. INTELLECTUAL PROPERTY. To the knowledge of FCCI,
the conduct of its business does not infringe upon the patents, trademarks,
trade names or other intellectual property rights of any Person, with such
exceptions as would not result in a Material Adverse Effect.
SECTION 3.10. CABLE SYSTEM CONTRACTS.
(a) FCCI is not in material default or breach of any Cable
System Contract and, to the knowledge of FCCI, (i) there exists no state of
facts which after notice or lapse of time or both would constitute such a
material default or breach and (ii) no other party to such Cable System Contract
is in default or breach thereunder.
(b) The real property and personal property which are the
subject of leases that constitute Cable System Contracts are currently used in
the construction, operation or maintenance of the FCCI business.
SECTION 3.11. LITIGATION. There are no actions, suits or
proceedings pending and, to the knowledge of FCCI, there are no claims,
grievances, governmental investigations, actions, suits or proceedings
threatened, against or affecting FCCI with respect to its business at law or in
equity or before or by any Governmental Authority, or before or by an arbitrator
or arbitration board which would have a Material Adverse Effect or materially
delay the Closing. Except as set out in Schedule 3.11, there are no judgments,
decrees or orders outstanding against FCCI with respect to its business or any
of the Cable Systems or the Sale.
SECTION 3.12. COMPLIANCE WITH LEGAL REQUIREMENTS. (i) FCCI
is in compliance with all applicable Legal Requirements and (ii) FCCI's business
is being conducted in compliance with all applicable Legal Requirements, with
such exceptions to
8
<PAGE> 10
clauses (i) and (ii) as would not have a Material Adverse Effect or materially
delay the Closing.
SECTION 3.13. REPORTS AND FINANCIAL STATEMENTS. FCCI has
filed all reports required to be filed with the Securities Exchange Commission
("SEC") since January 1, 1994 (collectively, the "FCCI SEC Reports"), and has
previously furnished or made available to the Purchasers true and complete
copies of all the FCCI SEC Reports. None of the FCCI SEC Reports, as of their
respective dates (as amended through the date hereof), contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the balance
sheets (including the related notes) included in the FCCI SEC Reports presents
fairly, in all material respects, the consolidated financial position of FCCI as
of the respective dates thereof, and the other related statements (including the
related notes) included therein present fairly, in all material respects, the
results of operations and the changes in financial position of FCCI for the
respective periods or as of the respective dates set forth therein, all in
conformity with generally accepted accounting principles consistently applied
during the periods involved, except as otherwise noted therein and subject, in
the case of the unaudited interim financial statements, to normal year-end
adjustments and any other adjustments described therein. All of the FCCI SEC
Reports, as of their respective dates (as amended through the date hereof),
complied in all material respects with the requirements of the Securities
Exchange Act of 1934 and the applicable rules and regulations thereunder.
SECTION 3.14. FINDERS' FEES. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of FCCI who might be entitled to any fee or commission from
FCCI or any Purchaser in connection with the execution, delivery or performance
of this Agreement or the Sale.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
The Purchasers, severally and not jointly, represent and
warrant to FCCI that:
SECTION 4.1. EXISTENCE AND POWER. Each Purchaser, except
Community Cable, is a limited partnership duly organized, validly existing and
in good standing under the laws of the State of California. Community Cable is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware.
SECTION 4.2. AUTHORIZATION. Each Purchaser has the
partnership power to enter into this Agreement and to consummate the acquisition
of the Cable System(s) to be acquired by it in the Sale. The execution and
delivery by each Purchaser of this Agreement and the consummation by each
Purchaser of the Sale has been duly authorized by all necessary partnership
action.
9
<PAGE> 11
SECTION 4.3. GOVERNMENTAL AUTHORIZATION. The execution and
delivery of this Agreement by each Purchaser, and the performance by each
Purchaser of this Agreement, and the consummation by each Purchaser of the
acquisition of the Cable System(s) to be acquired by it in the Sale, require no
material action by or in respect of, or material filing with, any Governmental
Authority other than compliance with any applicable requirements of the HSR Act,
and the Local Authorizations.
SECTION 4.4. NON-CONTRAVENTION. The execution, delivery and
performance of this Agreement by each Purchaser, and the consummation by each
Purchaser of the acquisition of the Cable System(s) to be acquired by it in the
Sale, do not or on or before the Closing Date will not, (a) contravene the
partnership agreement of any Purchaser or (b) subject to obtaining the consents
described in Schedule 4.4 constitute a breach or default (including any event
that, with the passage of time or giving of notice, or both, would become a
breach or default) under or give rise to a right of termination, cancellation,
first refusal or acceleration under any applicable material Legal Requirement or
any material judgment, injunction, order, decree, contract, license, lease,
indenture, mortgage, loan agreement, note or other agreement or instrument as to
which any Purchaser is a party or by which any of its properties may be bound,
the effect of which would be to materially impair the ability of any Purchaser
to perform its obligations under this Agreement.
SECTION 4.5. BINDING EFFECT. This Agreement has been duly
executed and delivered by each Purchaser, and when executed by the parties
hereto, this Agreement constitutes a valid and binding obligation of each
Purchaser, enforceable against each Purchaser in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable remedies.
SECTION 4.6. LITIGATION. There are no actions, suits or
proceedings pending and, to the knowledge of any Purchaser, there are no claims,
grievances, governmental investigations, actions, suits or proceedings
threatened, against or affecting any Purchaser at law or in equity or before or
by any Governmental Authority, or before or by an arbitrator or arbitration
board which would materially delay the Closing. There are no judgments, decrees
or orders outstanding against any Purchaser with respect to the Sale.
SECTION 4.7. COMPLIANCE WITH LEGAL REQUIREMENTS. Each
Purchaser is in compliance with all applicable Legal Requirements, except as
would not materially delay the Closing.
SECTION 4.8. QUALIFICATION OF PURCHASERS. Each Purchaser is
and pending Closing will be legally, technically, financially and otherwise
qualified under the Communications Act to acquire and operate the Cable Systems.
To the knowledge of the Purchasers, there are no facts or proceedings which
would reasonably be expected to disqualify any Purchaser under the
Communications Act from acquiring or operating the Cable Systems or would cause
the FCC to not approve the transfer of control of the FCC Licenses to the
applicable Purchasers. No Purchaser has any knowledge of any fact or
circumstance relating to any Purchaser or any of their Affiliates that would
reasonably be
10
<PAGE> 12
expected to (i) cause the filing of any material objection to the FCC
application for transfer of control of the FCC Licenses as provided for in this
Agreement, or (ii) cause the FCC to deny the FCC application for transfer of
control of the FCC Licenses as provided for in this Agreement, or (iii) lead to
a delay in the processing of the FCC application for transfer of control of the
FCC Licenses as provided for in this Agreement. No waiver of any FCC rule or
policy is necessary to be obtained by any Purchaser and/or Affiliates thereof
for the grant of the FCC Consents as provided for in this Agreement, nor will
processing pursuant to any exception to a rule of general applicability be
requested or required in connection with the consummation by any Purchaser of
the transactions contemplated hereby.
SECTION 4.9. FINDERS' FEES. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of any Purchaser who might be entitled to any fee or commission
from any Purchaser in connection with the execution, delivery or performance of
this Agreement or the Sale.
ARTICLE V.
CONDITIONS
SECTION 5.1. MUTUAL CONDITIONS. The obligations of FCCI on
the one hand and the Purchasers on the other to take the actions required to be
taken by them pursuant to Article II shall be subject to the satisfaction of
each of the following conditions, each of which may be waived by FCCI or the
Purchasers:
(a) Any applicable waiting period (and any extension thereof)
under the HSR Act shall have expired or been terminated without the commencement
or threat of any litigation by a Governmental Authority of competent
jurisdiction to restrain the consummation of the Sale contemplated by this
Agreement in any material respect.
(b) No order, stay, judgment or decree shall have been issued
by any court and be in effect restraining or prohibiting the consummation of the
Sale in any material respect.
(c) All consents required to be obtained in connection with
the Sale shall have been obtained and remain in full force and effect.
SECTION 5.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
(a) The obligations of FCCI to take the actions required to be
taken by it pursuant to Article II shall be subject to the satisfaction of the
following condition, which may be waived by FCCI: the representations and
warranties of each of the Purchasers set forth in Article IV shall be true and
correct as of the date of this Agreement and as of the Closing except as would
not have a Material Adverse Effect on the ability of any Purchaser to consummate
the transactions contemplated hereby.
11
<PAGE> 13
(b) The obligations of each Purchaser to take the actions
required to be taken by it pursuant to Article II shall be subject to the
satisfaction of the following condition, which may be waived by the Purchasers:
the representations and warranties of FCCI set forth in Article III shall be
true and correct as of the date of this Agreement and as of the Closing except
as would not have a Material Adverse Effect on (i) the ability of any Purchaser
to consummate the transactions contemplated hereby or (ii) the business,
operations, financial condition or results of operation of FCCI.
SECTION 5.3. ADDITIONAL CONDITION TO THE OBLIGATIONS OF THE
PURCHASERS. The obligations of the Purchasers to take the action required to be
taken by them pursuant to Article II shall be subject to the receipt by each
Purchaser of financing in an amount necessary to satisfy each Purchaser's
obligations under Article II and the performance by each other Purchaser of its
obligations hereunder.
ARTICLE VI.
COVENANTS
SECTION 6.1. PRESERVATION OF BUSINESS. Except as contemplated
by this Agreement, FCCI will use its best efforts to preserve its business
organization intact, to keep available to the Purchasers the services of its
present employees, and to preserve for the Purchasers the goodwill of the
suppliers, customers and others having business relations with FCCI.
SECTION 6.2. CONSUMMATION OF THE SALE. Each of the parties
hereto agrees that it shall, prior to, on and after the Closing, take or cause
to be taken and cause their respective affiliates to take or cause to be taken
such actions, and execute, deliver and file or cause to be executed, delivered
and filed, such certificates, documents and instruments, and obtain such
consents, as may be necessary or reasonably requested in connection with the
consummation of the Sale contemplated by this Agreement or in order to fully
effectuate the purposes, terms and conditions of this Agreement.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1. TERMINATION. This Agreement may be terminated at
any time prior to the Closing by FCCI or any Purchaser if the Sale shall not
have been consummated on or before December 31, 1997, unless the failure to
consummate the Sale is the result of a willful and material breach of this
Agreement by the party seeking to terminate this Agreement; provided, however,
that the December 31, 1997 termination date shall be extended to March 31, 1998
if (i) all conditions to the Closing have been satisfied on or before December
31, 1997 except the receipt of one or more required Local Authority
12
<PAGE> 14
Consents and (ii) the General Partner, in its reasonable judgment, believes that
the pending Local Authority Consents are likely to be obtained on or before
March 31, 1998.
SECTION 7.2. EXPENSES. Except as expressly set forth herein,
the fees and expenses (including the fees of any lawyers, accountants,
investment bankers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby whether or not the Sale is
consummated will be borne by the party incurring such expenses. Any expenses of
the Purchasers generally will be paid by each Purchaser on a pro rata basis by
the Purchasers (based on the relative purchase price as allocated on Schedule
2.1). Any charges, taxes, user fees or other similar costs or expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be allocated among the parties in a manner that is customary for agreements of
this type.
SECTION 7.3. HEADINGS. The section headings herein are for
convenience of reference only, do not constitute part of this Agreement and will
not be deemed to limit or otherwise affect any of the provisions hereof.
References to Sections, Schedules and Exhibits, unless otherwise indicated, are
references to Sections, Schedules and Exhibits hereof.
SECTION 7.4. ASSIGNMENT. This Agreement and all provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors, however, neither this Agreement nor any right,
interest, or obligation hereunder may be assigned by FCCI (other than by
operation of law) without the prior written consent of each Purchaser, and any
such assignment or purported assignment without such consent shall be void.
SECTION 7.5. ENTIRE AGREEMENT. This Agreement embody the
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings with respect thereto.
SECTION 7.6. AMENDMENT; WAIVER.
(a) This Agreement may only be amended or modified in writing
signed by the party against whom enforcement of any such amendment or
modification is sought.
(b) Any party hereto may, by an instrument in writing, waive
compliance with any term or provision of this Agreement on the part of such
other party hereto. The waiver by any party hereto of a breach of any term or
provision of this Agreement will not be construed as a waiver of any subsequent
breach.
SECTION 7.7. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which will be considered one and the same
agreement and each of which will be deemed an original. All signatures need not
be on one counterpart.
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<PAGE> 15
SECTION 7.8. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED
BY THE LAWS OF THE STATE OF CALIFORNIA (REGARDLESS OF THE LAWS THAT MIGHT BE
APPLICABLE UNDER PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS, INCLUDING
BUT NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND PERFORMANCE.
SECTION 7.9. SEVERABILITY. If any one or more of the
provisions of this Agreement is held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining provisions of this
Agreement will not be affected thereby, and FCCI and the Purchasers will use
their reasonable efforts to substitute one or more valid, legal and enforceable
provisions which insofar as practicable implement the purposes and intent
hereof. To the extent permitted by applicable law, each party waives any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect.
SECTION 7.10. THIRD PERSON BENEFICIARIES. This Agreement is
not intended and shall not be construed to confer upon any Person (other than
FCCI and the Purchasers) any rights or remedies whatsoever.
SECTION 7.11. SPECIFIC PERFORMANCE. The Purchasers and FCCI
recognize that any breach of any covenant or agreement contained in this
Agreement may give rise to irreparable harm for which money damages would not be
an adequate remedy, and accordingly agree that, in addition to other remedies,
any non-breaching party will be entitled to enforce the agreements and covenants
contained herein of the Purchasers and FCCI, as the case may be, by a decree of
specific performance without the necessity of proving the inadequacy as a remedy
of money damages.
(SIGNATURE PAGE FOLLOWS)
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
FALCON CLASSIC CABLE INCOME
PROPERTIES, L.P., A CALIFORNIA
LIMITED PARTNERSHIP
By: Falcon Classic Cable Investors,
L.P., General Partner
By: Falcon Holding Group, L.P.,
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: MICHAEL K. MENEREY
---------------------------
Name: Michael K. Menerey
Title: Secretary and Chief
Financial Officer
FALCON COMMUNITY CABLE, L.P.,
A DELAWARE LIMITED
PARTNERSHIP
By: Falcon Holding Group, L.P.,
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: MICHAEL K. MENEREY
---------------------------
Name: Michael K. Menerey
Title: Secretary and Chief
Financial Officer
15
<PAGE> 17
FALCON CABLE MEDIA, A
CALIFORNIA LIMITED PARTNERSHIP
By: Falcon Holding Group, L.P.,
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: MICHAEL K. MENEREY
---------------------------
Name: Michael K. Menerey
Title: Secretary and Chief
Financial Officer
FALCON CABLE SYSTEMS
COMPANY II, L.P., A CALIFORNIA
LIMITED PARTNERSHIP
By: Falcon Holding Group, L.P.,
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: MICHAEL K. MENEREY
---------------------------
Name: Michael K. Menerey
Title: Secretary and Chief
Financial Officer
16
<PAGE> 18
SCHEDULE 2.1
ALLOCATION OF PURCHASE PRICE AND CABLE SYSTEMS ACQUIRED
<TABLE>
<CAPTION>
Purchaser Cable System Purchase Price
--------- ------------ --------------
<S> <C> <C>
Falcon Community Cable Redmond, Oregon $ 6,200,000
Falcon Cable Media Burke County, North $19,000,000
Carolina
Falcon Community Cable Somerset, Kentucky $31,000,000
Falcon Cable Media Centreville, Maryland $23,000,000
Falcon Cable Systems
Company II, L.P. California City, California $ 2,800,000
-----------
TOTAL $82,000,000
===========
</TABLE>
Sched. 2.1 -- 1
<PAGE> 19
SCHEDULE 3.4
CONSENTS REQUIRED UNDER CABLE SYSTEM CONTRACTS
<TABLE>
<CAPTION>
GOVERNMENTAL AUTHORITIES
CABLE SYSTEM REQUIRED TO CONSENT
------------ ------------------------
<S> <C>
Burke County, NC Burke County, NC
Connelly Springs, NC
Drexel, NC
Glen Alpine, NC
Rutherford College, NC
Valdese, NC
California City, CA California City, CA
Centreville, MD Barclay, MD
Betterton, MD
Centreville, MD
Chestertown, MD
Church Hill, MD
Kent County, MD
Millington, MD
Oxford, MD
Queen Anne's County, MD
Queenstown, MD
Rock Hall, MD
St. Michaels, MD
Sudlersville, MD
Talbot County, MD
Templeville, MD
Trappe, MD
Redmond, OR Redmond, OR
Somerset, KY Adair County, KY
Burnside, KY
Columbia, KY
Eubank, KY
Ferguson, KY
Laurel County, KY
Lincoln County (Eubank), KY
Lincoln County (McKinney), KY
Pulaski Co. (Burnside), KY
Pulaski Co. (North), KY
Science Hill, KY
Somerset, KY
</TABLE>
Sched. 3.4 -- 1
<PAGE> 20
SCHEDULE 4.4
PURCHASER CONSENTS
1. Consent from the FHGLP bank group.
2. Consent from the Board of Representatives and partners of FHGLP
pursuant to its Third Amended and Restated Agreement of Limited
Partnership.
Sched. 4.4 -- 1
<PAGE> 1
June 24, 1997
Dear Limited Partner:
As has been described to you in our previous reports, the partnership
agreement for Falcon Classic Cable Income Properties, L.P. (the "Partnership")
includes a provision permitting the general partner or its affiliates to acquire
the Partnership's cable systems for an appraised value to be determined pursuant
to an "appraisal process." The appraisal process contemplates appraisals by
three nationally recognized appraisers, one selected by the independent members
of our Advisory Committee, one selected by the general partner and one selected
by those two appraisers. Accordingly, Arthur Andersen LLP, Kane Reece
Associates, Inc. and Communications Equity Associates, Inc. were retained to
conduct independent appraisals of the Partnership's cable television systems.
The partnership agreement provides that "appraised value" shall be the median of
the three appraisals.
The results of the appraisals established a median value of $82,000,000
for the Partnership's assets. The full text of these appraisals were all
provided as exhibits to our 1996 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission.
The purpose of our letter is to advise you of the decision of the
general partner and its affiliates to exercise their purchase rights to acquire
the Partnership's cable systems pursuant to the terms of the partnership
agreement. Consistent with the appraisal process, the purchase price will be
$82,000,000 in cash. The Partnership and the acquiring entities today entered
into an Asset Purchase Agreement and have commenced the process of obtaining the
necessary regulatory and other related approvals to complete the transaction.
Closing of the transaction is subject to the receipt of required consents and
approvals, satisfactory financing arrangements and similar matters and,
accordingly, there can be no assurance that the sale will take place unless and
until those conditions are satisfied.
Assuming the closing takes place, the partnership agreement requires
that the Partnership will be dissolved. The partnership agreement also provides
that upon the dissolution of the Partnership, the general partner will take such
actions as are necessary for the winding up of the affairs of the Partnership
and the distribution of its assets to the partners pursuant to the provisions of
the Partnership Agreement after providing for all outstanding debt and other
liabilities. Accordingly, following the consummation of the contemplated sale,
the general partner will wind-up the affairs of the Partnership in accordance
with the terms of the Partnership Agreement, and pay a liquidating distribution
of the remaining funds to the unitholders in termination of their partnership
interests.
<PAGE> 2
Limited Partners
Re: Falcon Classic
June 24, 1997
Page 2 of 2
Based on the appraised value of $82,000,000, and assuming a
hypothetical liquidation of the Partnership had taken place on March 31, 1997,
the estimated cash distribution to unitholders would have been approximately
$867 per unit (the "Hypothetical Estimated Per Unit Distribution") (based upon
71,879 Units outstanding). The Hypothetical Estimated Per Unit Distribution was
calculated assuming net liabilities on the balance sheet of the Partnership,
excluding property, plant and equipment and intangible assets ("Net
Liabilities") of approximately $19,000,000 (as of March 31, 1997), represented
the only payments, other than certain reserved expenses, that would have been
required to be made by the Partnership prior to the distribution of cash to
unitholders. The Hypothetical Estimated Per Unit Distribution is presented for
illustrative purposes only and does not necessarily represent amounts the
Partnership could have distributed to unitholders on March 31, 1997 or any date
thereafter. The actual distribution will vary depending on, among other things,
the date of the actual dissolution and related distribution to the unitholders.
While we recognize that the estimated distribution is slightly less
than the original issue price of the Units of $1,000 each, every partner who
acquired Units in the original offering will realize a profit on their
investment after considering distributions paid (which vary from $328 to $412
per Unit, depending on the date of purchase).
We are optimistic that this sale can be completed during 1997, subject
to any unforeseen regulatory delays. As the process develops, we will keep you
apprised of its status. Further, should you desire additional information, we
urge you to review our Annual Report on Form 10-K for the year ended December
31, 1996 and our Current Reports on Form 8-K dated August 27, 1996, October 17,
1996, February 6, 1997 and June 24, 1997. To obtain a copy or should you have
any questions, please contact our investor relations department at (800)
433-4287.
Thank you for your continued support.
cc: Account Representatives
2
