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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): December 31, 1997
Falcon Classic Cable Income Properties, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
California 000-18266 95-4200409
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
10900 Wilshire Blvd., 15th Floor, Los Angeles, California 90024
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (310) 824-9990
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ITEM 5. OTHER EVENTS.
As previously reported in a Form 8-K dated June 30, 1997, pursuant to
the Partnership Agreement, on June 27, 1997, Falcon Classic Cable Income
Properties, L.P. (the "Registrant") entered into an Asset Purchase Agreement
(the "Asset Purchase Agreement") with three affiliates of the Registrant's
general partner to sell substantially all of the Registrant's assets for
$82,000,000 in cash. The purchase price represented the median appraised value
of the assets.
As previously reported in a Form 8-K dated October 2, 1997, on or about
September 2, 1997, Paul J. Isaac, a Unitholder of the Registrant, purporting to
act on behalf of himself and other similarly situated Unitholders, filed a
putative class action suit in Los Angeles County Superior Court against the
Registrant, its general partner and certain of its directors and officers
alleging "Breach of Fiduciary Duty, Breach of Contract, [and] Breach of the
Implied Covenant of Good Faith and Fair Dealing" in connection with the pending
sale of the Registrant's assets pursuant to the terms of the Asset Purchase
Agreement (the "Lawsuit"). The Lawsuit is entitled Paul J. Isaac et al. v.
Falcon Classic Cable Income Properties, L.P., Falcon Classic Cable Investors,
L.P., Falcon Holding Group, L.P., Marc B. Nathanson, Frank J. Intiso, and Does
1-100, inclusive., Case No. BC177205, and is currently pending in Los Angeles
County Superior Court.
The Registrant has maintained and continues to maintain that the Lawsuit
lacks merit, and that the defendants, and each of them, are without fault,
wrongdoing, or liability in relation to the acts and conduct alleged in the
Lawsuit.
Effective as of December 31, 1997, the parties reached an agreement (the
"Settlement Agreement") resolving and settling the Lawsuit.
Subject to various conditions, including Court approval and sufficient
Unitholder participation, of which there can be no assurance, and subject to
various deductions, including Class Counsel's court approved attorneys' fees and
expenses and the cost of notification and administration, and in exchange for a
complete dismissal of the Lawsuit with prejudice and releases, and without
admitting or conceding any liability or wrongdoing whatsoever, the defendants
have agreed to establish a settlement fund in the amount of $1,250,000 (the
"Principal") plus simple interest accruing thereon, at the rate of 10% per
annum, beginning January 1, 1998 and terminating upon payment of the Principal
into the settlement fund, payable to members of the settlement class, defined as
Unitholders as of June 30, 1997, the date of the Registrant's announcement of
the pending sale of the Registrant's assets. The defendants have also agreed to
pay to the Unitholders, in addition to the purchase price specified in the Asset
Purchase Agreement, interest on the net purchase price at the rate of 10% per
annum for the period beginning January 1, 1998 and terminating upon payment of
the purchase price. In addition, the defendants have agreed, subject to the
terms and conditions of the Asset Purchase Agreement, to cause the completion of
the acquisition of the four cable systems owned by the Registrant for which
Local Authority Consents (as that term is defined in the Asset Purchase
Agreement) have
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been obtained, regardless of whether Local Authority Consents are obtained for
the transfer of the Somerset, Kentucky cable system ("Somerset"). The
Registrant's inability to secure Local Authority Consent for Somerset could have
afforded a basis for terminating the entire transaction. Defendants also have
agreed, subject to the terms and conditions of the Asset Purchase Agreement, to
cause the completion of the acquisition of Somerset if Local Authority Consents
for that transfer are procured, and to extend the time for receiving such
consents.
The foregoing is a summary of the terms of the Settlement Agreement and
is qualified in its entirety by reference to the full text of the Settlement
Agreement, which is attached hereto as Exhibit 5.1 and is incorporated herein by
this reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(i) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
5.1 Stipulation of Settlement, dated as of December 31, 1997
</TABLE>
* * * *
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.
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: /s/ Michael K. Menerey
---------------------------------
Michael K. Menerey
Chief Financial Officer
Date: January 12, 1998
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<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit Description Page
- ------- ----------- ------------
<S> <C> <C>
5.1 Stipulation of 5
Settlement dated
December 31, 1997
</TABLE>
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EXHIBIT 5.1
Robert C. Schubert (State Bar No. 62684)
Juden Justice Reed (State Bar No. 153748)
Two Embarcadero Center
Suite 1050
San Francisco, California 94111
Telephone: (415) 788-4220
Attorneys for Plaintiff
and the Settlement Class
IRELL & MANELLA LLP
Richard H. Borow, P.C. (State Bar No. 38429)
David Siegel (State Bar No. 101355)
Seth E. Pierce (State Bar No. 186576)
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Telephone: (310) 277-1010
Attorneys for Defendants Falcon
Classic Cable Income
Properties, L.P., Falcon
Classic Cable Investors, L.P.,
Falcon Holding Group, L.P.,
Marc B. Nathanson, and Frank J. Intiso
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
PAUL J. ISAAC, Individually and On Behalf of)) CASE NO. BC177205
All Others Similarly Situated, ))
)) CLASS ACTION
Plaintiff, ))
))
v. ))
STIPULATION OF SETTLEMENT
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.,
FALCON CLASSIC CABLE INVESTORS, L.P., FALCON
HOLDING GROUP, L.P., MARC B. NATHANSON, FRANK
J. INTISO, and DOES 1-100, INCLUSIVE,
Defendants.
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This Stipulation of Settlement (the "Stipulation"), dated as of December
31, 1997, is made and entered into by and among the following parties (as
further defined in Section VI.1 hereof): (i) the Representative Plaintiff, on
behalf of himself and each Member of the Settlement Class, by and through their
counsel of record; (ii) the Defendants, by and through their counsel of record;
and (iii) the Purchasers, by and through their respective undersigned counsel.
This Stipulation is intended by the Settling Parties (as defined below)(1) to
fully, finally and forever resolve, discharge and settle the Released Claims,
upon and subject to the terms and conditions stated herein.
I. The Litigation
On or about September 2, 1997, a class action complaint (the
"Complaint") was filed in Los Angeles County Superior Court on behalf of all
Persons owning units of Falcon Classic Cable Income Properties, L.P. The
Complaint alleged causes of action for Breach of Fiduciary Duty, Breach of
Contract, and Breach of the Implied Covenant of Good Faith and Fair Dealing in
connection with the sale of the Cable Systems owned by Falcon Classic Cable
Income Properties, L.P. to the Purchasers. The Complaint named as defendants the
following persons and entities: Falcon Classic Cable Income Properties, L.P.,
Falcon Classic Cable Investors, L.P., Falcon Holding Group, L.P., Marc B.
Nathanson, and Frank J. Intiso.
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(1) Except where indicated to the contrary, all initially capitalized terms
are defined in Section VI.1.
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II. Pre-Trial Proceedings and Discovery in the Litigation
Class Counsel has conducted discovery and investigation during the
prosecution of the Litigation. This discovery and investigation has included,
inter alia, (i) inspection of documents produced by Defendants in response to
requests served by Class Counsel; (ii) consultations with experts; (iii)
meetings with and interviews of various Defendants and their representatives;
(iv) review of Falcon's public filings, annual reports, and other public
statements; (v) review and analysis of the appraisals involved in the
Litigation; and (vi) research of the applicable law with respect to the claims
asserted in the Complaint and the potential defenses thereto. In addition, prior
to submission of this Stipulation to the Court, Class Counsel will conduct such
further factual and legal investigation as it deems appropriate under the
circumstances, and, based thereon, shall have the rights set forth in
Paragraph 8.8 (below).
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III. Defendants' Position
The Defendants have denied and continue to deny each and every claim and
contention alleged in the Litigation. The Defendants have denied and continue to
deny all charges of wrongdoing or liability against them arising out of any of
the conduct, statements, acts or omissions alleged, or that could have been
alleged, in the Litigation. Each of the Defendants has further asserted and
continues to assert that, at all times, they, and each of them, acted in good
faith and in a manner reasonably believed by them to be in compliance with any
and all applicable duties and obligations. There has been no adverse
determination by any court against any of the Defendants as to the merits of any
of the claims asserted by the Representative Plaintiff.
Nonetheless, without any admission or finding of wrongdoing, the
Defendants have concluded that the further conduct of the Litigation would be
protracted and expensive, and that it is desirable that the Litigation be fully
and finally settled in the manner and upon the terms and conditions set forth in
this Stipulation. Such a resolution will limit further expense, inconvenience,
and distraction, will dispose of burdensome and protracted litigation, and will
permit the operation of the Defendants' business without further distraction and
diversion of the Defendants' executive personnel. Furthermore, such a resolution
appears to Defendants to be in the best interests of the Falcon Unitholders and
the Settlement Class as it, among other things, will increase the certainty of
the Completion and Consummation of the sale of four of Falcon's Cable Systems at
a price enhanced by interest at the favorable rate of 10% per annum (a result
not present in the Asset Purchase Agreement prior to
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modification) while expediting the distribution of the proceeds therefrom.
Moreover, the terms of the settlement provide for the creation of a Settlement
Fund of up to $1,250,000.00 plus accrued interest thereon at the favorable rate
of 10% per annum. In reaching their decision to settle on these terms, the
Defendants have also taken into consideration the uncertainty and risks inherent
in any litigation, especially in complex cases such as this Litigation.
IV. The Representative Plaintiff's Position
Class Counsel and the Representative Plaintiff recognize and acknowledge
the expense and length of the proceedings necessary to prosecute the Litigation
through trial and any subsequent or interlocutory appeals. Class Counsel and the
Representative Plaintiff have also taken into account the uncertain outcome and
risk, as well as the difficulties and delays attendant to any litigation,
especially complex actions such as this Litigation. Class Counsel and the
Representative Plaintiff believe that the settlement set forth in this
Stipulation confers substantial benefits upon the Falcon Unitholders, the
Settlement Class and each of the Settlement Class Members. Based on their
evaluation, Class Counsel and the Representative Plaintiff have determined that
the settlement set forth in this Stipulation is in the best interests of the
Settlement Class.
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V. Summary of Terms
In exchange for dismissing the Litigation with prejudice and releasing
the Defendants and their Related Parties as to the Released Claims, and subject
to Court approval and certain conditions which may affect the total amount of
Accrued Interest, the Defendants will cause to be transferred $1,250,000.00 plus
Accrued Interest to a Settlement Fund for distribution to the Settlement Class
Members, after certain deductions such as the costs of notice and Class
Counsel's Court awarded fees and costs, upon Completion and Consummation of the
sales of Falcon's Cable Systems; said amount reducible by the Somerset Holdback
(as defined below) if Falcon is unable to Complete and Consummate the sale of
Somerset to Falcon Community pursuant to the terms and conditions of the Asset
Purchase Agreement, as modified herein. In addition, the Defendants have agreed
to cause to be transferred Accrued Interest on the Net Purchase Price of
Falcon's Cable Systems to Falcon for distribution to the Falcon Unitholders;
said amount reducible by the portion of Accrued Interest attributable to the
Somerset Holdback if Falcon is unable to Complete and Consummate the sale of
Somerset as indicated above. In addition, the Purchasers have agreed to Complete
and Consummate their respective purchases of Burke, California City,
Centreville, and Redmond, on or before March 31, 1998, but in no event earlier
than March 3, 1998, regardless of whether Falcon Community is able or willing to
Complete and Consummate the purchase of Somerset at the relevant time.
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VI. Terms of Stipulation and Agreement of Settlement
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the
Settling Parties, by and through their respective counsel or attorneys of
record, that, subject to the approval of the Court, the Litigation and the
Released Claims shall be finally and fully compromised, settled and released,
and the Complaint and Litigation shall be dismissed on the merits with prejudice
as to all of the Defendants and each of their Related Parties, upon and subject
to the following terms and conditions:
I. Definitions
As used in the Stipulation the following terms shall have the following
meanings:
1.1 "Accrued Interest" means the amount of simple interest accruing, at
the rate of 10% per annum based on a 365 day year and the actual days elapsed,
on any applicable principal, during the period beginning January 1, 1998 and
terminating upon Completion and Consummation of the purchase to which it is
applicable.
1.2 "Additional Payments" is defined at Paragraph 2.9.
1.3 "Advisory Committee" shall have the same meaning as that term has in
the Partnership Agreement
1.4 "Appraisal Process" shall have the same meaning as that term has in
the Partnership Agreement.
1.5 "Appraisers" means Arthur Anderson LLP, Communication Equity
Associates, Inc., Kane Reece Associates, Inc., and each and all of their
respective predecessors, successors, parents, officers, directors, employees,
partners, members, subsidiaries, divisions, and related or affiliated entities.
1.6 "Asset Purchase Agreement" means the Asset Purchase Agreement, dated
as of June 27, 1997, by and among Falcon Community
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Cable, L.P., Falcon Cable Media, Falcon Cable Systems Company II, L.P., and
Falcon Classic Cable Income Properties, L.P.
1.7 "Burke" means all right, title and interest to all assets, rights,
privileges, interests, claims and properties, whether tangible or intangible,
owned, used or held by Falcon for use in connection with the provision of cable
television services in Burke County, North Carolina that are a subject of the
Asset Purchase Agreement.
1.8 "Cable Systems" means Burke, California City, Centreville, Somerset,
and Redmond.
1.9 "California City" means all right, title and interest to all assets,
rights, privileges, interests, claims and properties, whether tangible or
intangible, owned, used or held by Falcon for use in connection with the
provision of cable television services in California City, California that are a
subject of the Asset Purchase Agreement.
1.10 "Centreville" means all right, title and interest to all assets,
rights, privileges, interests, claims and properties, whether tangible or
intangible, owned, used or held by Falcon for use in connection with the
provision of cable television services in Centreville, Maryland that are a
subject of the Asset Purchase Agreement.
1.11 "Class Counsel" means counsel for the Representative Plaintiff and
the Settlement Class in this Litigation: Schubert & Reed LLP, Robert C.
Schubert, Esq. and Juden Justice Reed, Esq., Two Embarcadero Center, Suite 1050,
San Francisco, California, 94111, Telephone No. (415) 788-4220.
1.12 "Closing" means the payment to Falcon of the Purchase Price.
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1.13 A sale is "Completed and Consummated" at Closing.
1.14 "Complaint" is defined in ss.I.
1.15 "Conflicts Committee" shall have the same meaning as that term has
in the Partnership Agreement.
1.16 "Court" means the Superior Court of the State of California in and
for the County of Los Angeles.
1.17 "Defendants" means Falcon, Falcon Investors, Falcon Holding, Marc
B. Nathanson, and Frank J. Intiso.
1.18 "Defendants' Counsel" means Defendants' counsel in this Litigation:
Irell & Manella LLP, Richard H. Borow, Esq., P.C., David Siegel, Esq., and Seth
E. Pierce, Esq., 1800 Avenue of the Stars, Suite 900, Los Angeles, California,
90067, Telephone No. (310) 277-1010.
1.19 "Distribution Process" means: the process for ultimate distribution
by Falcon to Falcon Unitholders pursuant to the Partnership Agreement of the Net
Purchase Price, plus Accrued Interest thereon, to be paid to Falcon as provided
in this Stipulation and the Asset Purchase Agreement.
1.20 "Effective Date" means the first date by which all of the events
and conditions specified in Paragraph 8.1 of this Stipulation have occurred.
1.21 "Falcon" means Falcon Classic Cable Income Properties, L.P.
1.22 "Falcon Cable II" means Falcon Cable Systems Company II, L.P.
1.23 "Falcon Community" means Falcon Community Cable, L.P.
1.24 "Falcon Investors" means Falcon Classic Cable Investors, L.P.
1.25 "Falcon Holding" means Falcon Holding Group, L.P.
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1.26 "Falcon Limited Partnership Units" or "Falcon Units" means units of
limited partnership interest in Falcon Classic Cable Income Properties, L.P.,
offered by Falcon pursuant to a prospectus dated as of May 15, 1989.
1.27 "Falcon Media" means Falcon Cable Media.
1.28 "Falcon Unitholders" means every Person owning one or more Falcon
Units (including partial Falcon Units) as of the date of receipt by Falcon of
funds for distribution in connection with the sale of Cable Systems.
1.29 "Final" means: (i) the date of final affirmance on any appeal of
the Judgment, the expiration of the time for a petition for a writ of review or
mandate (collectively, "Writ") to review the Judgment or any part of the
Judgment, or, if a Writ is granted, the date of final affirmance of the Judgment
following review pursuant to that grant; or (ii) the date of final dismissal of
any appeal from the Judgment or the final dismissal of any proceeding on Writ to
review the Judgment; or (iii) if no appeal is filed, sixty (60) days after entry
of the Judgment or, if the date for taking an appeal or seeking review shall be
extended beyond this time by order of the Court, by operation of law or
otherwise, the date of expiration of any extension if any appeal or Writ is not
sought. Any proceeding or order, or any appeal or petition for a Writ,
pertaining solely to any Fee and Expense Application, shall not in any way delay
or preclude the Judgment from becoming final.
1.30 "Gemisys" means Gemisys, the independent registrar and transfer
agent for Falcon, located at 7103 South Revere Parkway, Englewood, Colorado
80112.
1.31 "Individual Defendants" means, as the context requires, either or
both Marc B. Nathanson and Frank J. Intiso.
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1.32 "Judgment" means the judgment to be rendered by the Court,
substantially in the form attached hereto as Exhibit "B".
1.33 "Litigation" means the Los Angeles County Superior Court case
entitled Paul J. Isaac et al. v. Falcon Classic Cable Income Properties, L.P. et
al., Case No. BC177205.
1.34 "Local Authority Consents" shall have the same meaning as that term
has in the Asset Purchase Agreement.
1.35 "Net Purchase Price" means the aggregate Purchase Price for all
five Cable Systems less all applicable adjustments, allocations, and reductions
pursuant to the Partnership Agreement.
1.36 "Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of Falcon Classic Cable Income Properties, L.P., dated as of
May 15, 1989, as amended.
1.37 "Person" means an individual, corporation, partnership, limited
partnership, limited liability company, association, joint stock company,
estate, legal representative, trust, unincorporated association, government or
any political subdivision or agency thereof, and any business or legal entity,
and their spouses, heirs, predecessors, successors, representatives, or
assignees.
1.38 "Preliminary Approval" means the Court's preliminary approval of
the terms of settlement as just, fair, adequate, and reasonable to the Members
of the Settlement Class, and the Court's approval of the form and manner of
giving notice, as described more fully in Paragraphs 4.1 - 4.2, below.
1.39 "Purchase Price" means the price stated in the Asset Purchase
Agreement for each individual Cable System.
1.40 "Purchasers" means Falcon Community, Falcon Media, and Falcon Cable
II. "Purchaser" means, as the context requires, whichever of the Purchasers is
indicated by the Asset Purchase
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Agreement as the purchaser of a particular Cable System from Falcon.
1.41 "Redmond" means all right, title and interest to all assets,
rights, privileges, interests, claims and properties, whether tangible or
intangible, owned, used or held by Falcon for use in connection with the
provision of cable television services in Redmond, Oregon that are a subject of
the Asset Purchase Agreement.
1.42 "Related Parties" means each of a Person's past or present
directors, officers, employees, partners, members, principals, agents, Advisory
Committee members, Conflicts Committee members, underwriters, issuers, insurers,
co-insurers, reinsurers, controlling shareholders, attorneys, accountants,
auditors, banks or investment bankers, appraisers (including the Appraisers
where applicable), advisors, personal or legal representatives, predecessors,
successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses,
subrogees, heirs, associates, related or affiliated entities, acting in their
respective capacities as such, any entity in which a Person has a controlling
interest, any members of their immediate families, any trust of which any
Defendant is the settlor or which is for the benefit of any Defendant and/or
member(s) of his or her family, or any trust for which any Defendant acts as
Trustee. However, Related Parties shall not include any broker or investment or
financial advisor of a Settlement Class Member acting in their capacity as such.
1.43 "Released Claims" means and includes any and all claims or causes
of action, including Unknown Claims (as defined below) related thereto, that
have been or could have been asserted by the Representative Plaintiff or the
Settlement Class Members, or any of
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them, on behalf of themselves or derivatively on behalf of Falcon, against the
Released Persons, or any of them, based in any way upon or related in any way to
the Settlement Class Members' purchase or sale of Falcon Units, the conduct of
the Appraisal Process with respect to the Cable Systems, or any public
statements made by or on behalf of Falcon in respect thereof, the sale of
Falcon's Cable Systems pursuant to the Asset Purchase Agreement, the
distribution of the net proceeds received by Falcon from the sale of the Cable
Systems, or any and all facts, transactions, events, occurrences, acts,
disclosures, statements, omissions, or failures to act which were or could have
been alleged in the Litigation under federal law, state law, or common law.
Provided however, that nothing herein shall be deemed or construed to release
any claims asserted in the First Consolidated Amended Class Action Complaint
filed in In re Dean Witter Partnership Litigation, Consolidated Civil Action No.
14816 (Delaware Chancery Court, New Castle County) (the "DW Litigation") as
against any of the defendants named in the DW Litigation.
1.44 "Released Persons" means the Defendants, the Purchasers, the
Appraisers, and each and all of their Related Parties.
1.45 "Representative Plaintiff" means Paul J. Isaac.
1.46 "Settlement Class" means all Persons owning Falcon Units as of June
30, 1997 and their successors-in-interest. Excluded from the class are
Defendants, members of the immediate family of any Individual Defendant, any
entity in which any Defendant has or had a controlling interest, and the legal
representatives, heirs, successors, or assigns of any such excluded person or
entity. Also excluded from the Settlement Class are those persons who timely and
validly request exclusion from the Settlement Class pursuant to the
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"Notice of Pendency and Settlement of Class Action" to be sent to the Settlement
Class Members.
1.47 "Settlement Class Member" or "Member of the Settlement Class" means
a Person who falls within the definition of the Settlement Class.
1.48 "Settlement Fund Distribution Agent" means Class Counsel or its
designated agent.
1.49 "Settlement Fund" means the grand total of Settlement Payments
actually transferred pursuant to Paragraph 2.6 and delivered to the Settlement
Fund Distribution Agent.
1.50 "Settlement Hearing" means the hearing, on a date to be determined
by the Court, at which the Court approves or rejects the Stipulation of
Settlement.
1.51 "Settlement Payments" is defined in Paragraph 2.6.
1.52 "Settling Parties" means, collectively, Defendants, all Members of
the Settlement Class (including the Representative Plaintiff), and the
Purchasers.
1.53 "Somerset" means all right, title and interest to all assets,
rights, privileges, interests, claims and properties, whether tangible or
intangible, owned, used or held by Falcon for use in connection with the
provision of cable television services in Somerset, Kentucky that are a subject
of the Asset Purchase Agreement.
1.54 "Somerset Deadline" is defined in Paragraph 2.3.
1.55 "Somerset Holdback" means 37.8% of the Net Purchase Price and the
Settlement Payments, as appropriate, plus Accrued Interest thereon, as
applicable.
1.56 "Unknown Claims" means any claims which a Person does not know or
suspect to exist in his, her, or its favor at the time
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of release, as against any Person released by this settlement, which, if known
to him, her or it, might have affected his, her or its decision to settle or the
terms of any settlement, or might have affected his, her or its decision not to
object to the settlement at issue. With respect to any and all such claims, upon
the Effective Date, each releasing party and each of its respective Related
Parties shall be deemed to have, and by operation of the Judgment shall have,
expressly waived and relinquished, to the fullest extent permitted by law, the
provisions, rights, and benefits of ss.1542 of the California Civil Code
("ss.1542"), which provides:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
Upon the Effective Date, each releasing party and each of its respective Related
Parties shall be deemed to have, and by operation of the Judgment shall have,
waived any and all provisions, rights and benefits conferred by any law of the
United States or any state or territory of the United States, or principle of
common law, which is similar, comparable or equivalent to ss.1542. A releasing
party or any of its Related Parties may hereafter discover facts in addition to
or different from those which he, she or it now knows or believes to be true
with respect to the subject matter of such claims, but, upon the Effective Date,
each releasing party and each of its Related Parties shall be deemed to have,
and by operation of the Judgment shall have, fully, finally, and forever settled
and released any and all such claims, known or unknown, suspected or
unsuspected, contingent or hidden, which now
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exist, or heretofore have existed upon any theory of law or equity now existing
or coming into existence in the future, including, but not limited to, conduct
which is negligent, intentional, with or without malice, or a breach of any
duty, law or rule, without regard to the subsequent discovery or existence of
such different or additional facts.
2. The Settlement
2.1 Subject to Court approval and continued satisfaction of the
conditions precedent provided for in the Asset Purchase Agreement, as modified
herein, on or before March 31, 1998, but in no event earlier than March 3, 1998,
the respective Purchasers shall Complete and Consummate their purchases of
Burke, Centreville, California City and Redmond, regardless of whether Local
Authority Consents for the sale of Somerset have been obtained. Defendants and
Purchasers represent as of the date of this Stipulation that all conditions
precedent provided for in the Asset Purchase Agreement (with the exception of
conditions related to the purchase and sale of Somerset) have been or would be
met. Defendants and Purchasers agree to continue to use reasonable best efforts
to maintain the satisfaction of those conditions and to Complete and Consummate
their respective purchases and sales as indicated above. Purchasers will
Complete and Consummate their respective purchases of Burke, Centreville,
California City, and Redmond irrespective of any appeal of the Judgment.
2.2 Falcon shall operate each of the Cable Systems in the ordinary
course of business until each of the respective Purchasers either exercises its
right to terminate the purchase (if applicable) or Completes and Consummates the
purchase, whichever comes first.
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2.3 If all of the necessary Local Authority Consents are obtained for
Somerset on or before September 30, 1998 (the "Somerset Deadline"), and subject
to Court approval and satisfaction of the conditions precedent provided for in
the Asset Purchase Agreement (as modified herein) and irrespective of any appeal
of the Judgment, Falcon Community shall Complete and Consummate its purchase of
Somerset as soon as reasonably practicable after obtaining such consents.
2.4 Defendants and Falcon Community shall use reasonable best efforts to
satisfy all of the conditions precedent to Falcon Community's Somerset purchase
obligation (including obtaining the necessary Local Authority Consents). If
Falcon is unable to obtain all of the necessary Local Authority Consents for
Somerset on or before September 30, 1998, the sale of Somerset to Falcon
Community shall be cancelled without liability to any party.
2.5 Notwithstanding anything in this Stipulation to the contrary, Falcon
Community, in its sole and absolute discretion, may waive any condition
precedent to its obligation to purchase Somerset.
2.6 Creation of the Settlement Fund Subject to Court approval of this
Stipulation and the conditions described herein, up to $1,250,000.00 plus
Accrued Interest on the principal amount actually transferred, will be
transferred to the Settlement Fund as follows:
(a) When the sale of the Cable Systems other than Somerset is
Completed and Consummated pursuant to the terms and conditions of the Asset
Purchase Agreement, as modified herein, the Defendants will cause $777,500.00
and Accrued Interest thereon to be transferred to the Settlement Fund
Distribution Agent within
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five (5) business days of Completion and Consummation.
(b) When, if at all, the sale of Somerset is Completed and
Consummated pursuant to the terms and conditions of the Asset Purchase
Agreement, as modified herein, Defendants will cause $472,500.00 and Accrued
Interest thereon to be transferred to the Settlement Fund Distribution Agent
within five (5) business days of Completion and Consummation (the "Somerset
Settlement Payment").
(c) The Somerset Settlement Payment collectively with the payment
described in Paragraph 2.6(a) above, shall constitute the "Settlement Payments."
2.7 The Settlement Fund Distribution Agent shall invest the Settlement
Fund and hold it in trust pursuant to the terms and conditions described in
Exhibit "C". The Settlement Fund Distribution Agent shall not disburse the
Settlement Fund except as provided in this Stipulation, or with the written
agreement of Defendants' Counsel and Class Counsel.
2.8 All funds constituting the Settlement Fund shall be deemed and
considered to be in custodia legis of the Court, and shall remain subject to the
jurisdiction of the Court, until such time as such funds shall be distributed
pursuant to the Stipulation and/or further order(s) of the Court.
2.9 Additional Payments Subject to Court approval of this Stipulation
and the conditions described herein, Purchasers have agreed to pay, in further
consideration of the settlement provided herein, the Accrued Interest on the Net
Purchase Price to Falcon for distribution pursuant to the Distribution Process,
after certain deductions such as the costs of notice and Class Counsel's Court
awarded fees and costs as provided for in Paragraph 6, as follows:
(a) When the sale of the Cable Systems other than
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Somerset is Completed and Consummated pursuant to the terms and conditions of
the Asset Purchase Agreement, as modified herein, the Purchasers will transfer
(in addition to the Purchase Price provided in the Asset Purchase Agreement
attributable to such Cable Systems) the Accrued Interest on the Net Purchase
Price, less the Somerset Holdback, to Falcon for distribution pursuant to the
Distribution Process.
(b) When, if at all, the sale of Somerset is Completed and
Consummated pursuant to the terms and conditions of the Asset Purchase
Agreement, as modified herein, Falcon Community shall transfer (in addition to
the Purchase Price provided in the Asset Purchase Agreement) Accrued Interest on
the Somerset Holdback for distribution pursuant to the Distribution Process (the
"Somerset Additional Payment").
(c) The Accrued Interest on the Net Purchase Price shall
constitute the "Additional Payments."
3. Class Notice
3.1 Subject to recoupment as provided in Paragraph 6 below, Defendants
shall cause to be advanced the reasonable and necessary costs of providing
notice to the Settlement Class, locating Settlement Class Members, and
reimbursing nominees and broker-dealers for the costs associated with providing
notice to such Persons.
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4. Notice Order and Settlement Hearing
4.1 On or before January 12, 1998 (unless such time is extended by the
written agreement of Class Counsel and Defendants' Counsel), the Settling
Parties shall submit the Stipulation together with its Exhibits to the Court and
shall jointly apply for entry of an order (the "Notice Order"), substantially in
the form of Exhibit "A" hereto, requesting, inter alia, approval for the mailing
to the Settlement Class of a settlement notice, substantially in the form of
Exhibit "A-1" hereto, which shall include the general terms of the settlement
agreement set forth in this Stipulation, the general terms of the Fee and
Expense Application (as set forth in Paragraph 7.1, below), and the time and
place of the Settlement Hearing. The Settling Parties shall also request that
after notice is given, the Court hold the Settlement Hearing and (a) approve the
settlement of the Litigation as set forth herein; (b) find the settlement to be
in good faith in accordance with the terms and provisions of ss.877.6 of the
California Code of Civil Procedure ("877.6"); (c) impose a bar to all claims for
contribution and indemnification however denominated, to the maximum extent
allowed by 877.6 and decisional law thereunder; (d) enter the Judgment. At or
after the Settlement Hearing, Class Counsel shall also request that the Court
approve the Fee and Expense Application.
4.2 The Notice Order shall specifically include provisions that, among
other things, will:
(a) Preliminarily certify the Settlement Class;
(b) Preliminarily approve the Stipulation and the settlement set
forth herein as being just, fair, reasonable, and adequate to the Settlement
Class Members;
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(c) Approve the form of Notice of Pendency and Settlement of
Class Action ("Notice"), substantially in the form of Exhibit "A-1" hereto, for
mailing to all Settlement Class Members;
(d) Approve a summary notice of the proposed settlement for
publication (the "Summary Notice"), substantially in the form of Exhibit "A-2"
hereto;
(e) Direct Defendants to direct Gemisys to mail or cause to be
mailed by first class mail, on or before the date specified in the Notice Order,
the Notice to those Settlement Class Members who can be identified through
reasonable effort;
(f) Request that nominees or broker-dealers who purchased Falcon
Units for others or in street names send the Notice to all beneficial owners of
such securities promptly after receipt thereof or send by facsimile a list of
the names and addresses of such beneficial owners to Gemisys (Attention: Diana
Wiegand) within five (5) business days of receipt thereof, in which event
Gemisys shall promptly mail the Notice to such beneficial owners. In
communicating this request, the nominees and/or broker-dealers shall be advised
that their reasonable out-of-pocket cost of providing the Notice to such
beneficial owners will be reimbursed and Defendants will cause such
reimbursement to occur.
(g) Direct Defendants to cause the Summary Notice to be published
once in the national edition of The Wall Street Journal on or before the date
specified in the Notice Order;
(h) Provide that Persons who wish to exclude themselves from the
Settlement Class must do so in accordance with the instructions set forth in the
Notice;
(i) Find that the notice given pursuant to subparagraphs (e) -
(g) above, constitutes the best notice
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practicable under the circumstances, including individual notice to all Persons
in the Settlement Class who can be identified with reasonable effort, and
constitutes valid, due and sufficient notice to all Persons in the Settlement
Class, complying fully with the requirements of California law and any other
applicable law including the due process clause of the Constitution of the
United States;
(j) Provide that pending final determination of whether the
settlement contained in the Stipulation should be approved, neither the
Representative Plaintiff, nor any member of the Settlement Class, either
directly, representatively or in any other capacity, whether or not such Person
has appeared in the Litigation, shall commence or prosecute any action or
proceeding in any court or tribunal asserting any of the Released Claims against
any of the Released Persons (including, but not limited to, Arthur Anderson LLP,
Kane Reece Associates, Inc., Communications Equity Associates, Inc., and each of
their respective Related Parties);
(k) Provide that any Member of the Settlement Class who does not
properly and timely request exclusion from the Settlement Class, pursuant to the
terms and conditions set forth in the Notice, shall be bound by this Stipulation
and by any and all judgments or orders, including, but not limited to, the
Judgment, entered or approved by the Court, whether favorable or unfavorable to
the Settlement Class, and any releases given pursuant thereto;
(l) Schedule the Settlement Hearing to consider and determine
whether the proposed settlement, as stated herein, should be approved as just,
fair, reasonable and adequate and whether the Judgment should be entered;
(m) Provide that at or after the Settlement Hearing, if
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Class Counsel has made a Fee and Expense Application, the Court shall determine
whether and in what amount attorneys' fees and reimbursement of costs and
expenses should be awarded to Class Counsel and enter an order thereon;
(n) Provide that any objections to (i) the proposed settlement
contained in the Stipulation; (ii) entry of the Judgment approving the
settlement; or (iii) the Fee and Expense Application, shall be heard and any
papers submitted in support of said objections shall be received and considered
by the Court only if, on or before a date to be specified in the Notice Order,
Persons making objections shall file and serve notice of their intention to
appear (which shall set forth briefly each objection and the basis therefor) and
copies of any papers in support of their position as set forth in the Notice
Order;
(o) Provide that, upon the occurrence of the Effective Date, any
and all Settlement Class Members and each of their respective Related Parties
shall be barred from asserting any Released Claims (including Unknown Claims)
against any of the Released Persons, and any and all Settlement Class Members
and each of their respective Related Parties shall be conclusively deemed to
have released, and shall therefore be barred from asserting, any and all
Released Claims (including Unknown Claims) against any of the Released Persons;
(p) Provide that, upon the occurrence of the Effective Date, each
of the Defendants and each of their respective Related Parties shall be barred
from, and shall be conclusively deemed to have released and shall therefore be
barred from, asserting any claims (including Unknown Claims related thereto)
based upon, arising out of, relating to, or in connection with the institution,
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prosecution, assertion, settlement or resolution of the Litigation, including
the settlement set forth in the Stipulation, except for the right to enforce the
terms of this Stipulation, against the Representative Plaintiff, Members of the
Settlement Class, Class Counsel, and each of their respective Related Parties;
and
(q) Provide that the Settlement Hearing may, from time to time
and without further notice to the Settlement Class, be continued or adjourned by
order of the Court.
5. Releases
5.1 Upon the Effective Date, each of the Settlement Class Members and
each of their respective Related Parties shall hereby be deemed to have, and by
operation of the Judgment shall have, fully, finally, and forever released,
relinquished, and discharged all Released Claims (including Unknown Claims but
excluding claims based upon compliance with this Stipulation) against the
Released Persons (including, but not limited to, Arthur Anderson LLP,
Communication Equity Associates, Inc., Kane Reece Associates, Inc., and each of
their respective Related Parties).
5.2 Each Settlement Class Member is deemed to have warranted that he,
she, or it has not assigned or transferred any of the Released Claims against
any of the Released Persons.
5.3 Upon the Effective Date, Falcon and each of its Related Parties
shall be deemed to have, and by operation of the Judgment shall have, fully,
finally, and forever released, relinquished and discharged all of the other
Defendants and each of their Related Parties from all claims (including Unknown
Claims related thereto), arising out of, relating to, or in connection with the
operation of Falcon, including, but not limited to, the sale of the Falcon Cable
Systems, claims for contribution and/or indemnity, and claims that
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are implied or express, contractual or otherwise.
5.4 Upon the Effective Date, each of the Defendants and each of their
respective Related Parties shall be deemed to have, and by operation of the
Judgment shall have, fully, finally, and forever released, relinquished and
discharged each and all of the Members of the Settlement Class (including the
Representative Plaintiff) and each of their respective Related Parties, from all
claims (including Unknown Claims related thereto), based on, arising out of,
relating to, or in connection with the institution, prosecution, assertion,
settlement or resolution of the Litigation, including the settlement set forth
in the Stipulation, except for the right to enforce the terms of this
Stipulation.
6. Supervision and Administration of the Distribution Process and
the Settlement Fund
6.1 Class Counsel's Court awarded fees and expenses, if any and subject
to the terms of Paragraph 7 hereof, the Representative Plaintiff's incentive
award, if any, and the costs of notice shall be paid or reimbursed sixty (60)
percent from the Additional Payments and forty (40) percent from the Settlement
Fund. The balance of the Additional Payments (the "Net Additional Payments") and
Settlement Fund (the "Net Settlement Fund") shall be distributed pursuant to
Paragraphs 6.2 and 6.3, respectively.
6.2 Subject to the supervision and direction of the Court, Falcon, or
its authorized agent, shall, pursuant to Paragraph 6.1 and the Distribution
Process, calculate and distribute the Net Additional Payments.
6.3 The Settlement Fund Distribution Agent, acting on behalf of the
Settlement Class, and subject to the supervision and direction of the Court,
shall, pursuant to Paragraphs 6.1 and 6.4, calculate
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each Settlement Class Member's proportional share of the Net Settlement Fund,
and shall oversee distribution of the Net Settlement Fund.
6.4 Subject to the approval and further order(s) of the Court, upon the
Effective Date, the funds constituting the Net Settlement Fund shall be
distributed to Settlement Class Members in the proportion each Settlement Class
Member's Falcon Units bears to the aggregate number of Falcon Units owned by the
Settlement Class as a whole as of June 30, 1997.
6.5 In the event that the Stipulation is not approved by the Court or
the settlement set forth in the Stipulation is terminated or fails to become
effective in accordance with its terms, the Settlement Fund Distribution Agent
shall return the Settlement Fund with all interest earned and accrued thereon,
less notice expenses actually paid (but including Court awarded attorneys' fees,
costs, and expenses pursuant to Paragraph 7.5), to the Defendants within five
(5) business days of receiving confirmation thereof from Defendants' Counsel or
a court of competent jurisdiction.
6.6 No Falcon Unitholder or Settlement Class Member shall have any claim
against Falcon, the Representative Plaintiff, Class Counsel, Defendants'
Counsel, the Settlement Fund Distribution Agent or any claims administrator or
other agent designated by Falcon or the Settlement Fund Distribution Agent,
based on distributions made substantially in accordance with this Stipulation
and the settlement contained herein, or any further orders of the Court.
6.7 Notwithstanding anything in this Stipulation to the contrary, 37.8%
of the cost of notice that Defendants caused to be advanced shall not be
reimbursed pursuant to Paragraph 6.1, unless and
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until, Falcon Community Completes and Consummates the purchase of Somerset
pursuant to the terms and conditions of the Asset Purchase Agreement, as
modified herein.
7. Class Counsel's Attorneys' Fees and Reimbursement of Expenses
7.1 Class Counsel may submit, at any time following submission of
this Stipulation, an application or applications for distributions to Class
Counsel and the Representative Plaintiff, as appropriate (the "Fee and Expense
Application"), for: (i) an award of attorneys' fees; (ii) reimbursement of
actual expenses and costs, including the fees of any experts or consultants
incurred in connection with prosecuting the Litigation; and (iii) an incentive
award for the Representative Plaintiff not to exceed $50,000.00. Class Counsel
reserves the right to make additional applications for fees and expenses
incurred.
7.2 Nothing in this Stipulation shall be construed to provide the
Defendants with standing to challenge or question any Fee and Expense
Application by, or any fee and expense award to, Class Counsel or the
Representative Plaintiff. In addition, Defendants agree not to object or take
any position with regard to Class Counsel's Fee and Expense Application.
7.3 Class Counsel shall be entitled (pursuant to Paragraph 6.1) to
receive the payment of attorney's fees and costs in the full amount approved by
the Court (subject to any conditions imposed by the Court's order) within five
(5) business days after entry of any Court order(s) approving such fees and
costs and approving the settlement set forth herein, whether or not objections
to the amount of fees or costs are lodged with the Court or any appeal is
pending, subject to written assurances and security satisfactory to
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Defendants as to repayment thereof by Class Counsel in the event of a reduction
or reversal of the fees and costs awarded after appeal.
7.4 The procedure for and the allowance or disallowance by the Court of
any Fee and Expense Application are not part of the settlement set forth in this
Stipulation, and are to be considered by the Court separately from the Court's
consideration of the fairness, reasonableness and adequacy of the settlement set
forth in this Stipulation. Further, any order or proceedings relating to the Fee
and Expense Application (including the application for an incentive award for
the Representative Plaintiff), or any appeal from any order relating thereto or
reversal or modification thereof, shall not operate to terminate or cancel the
Stipulation, or affect or delay the finality of the Judgment approving the
Stipulation and the settlement of the Litigation set forth herein.
7.5 In the event that the Order providing for Class Counsel's fees and
expenses is reversed or modified on appeal or the Judgment does not become
Final, and in the further event that Class Counsel's fees and expenses have been
paid to any extent, then Class Counsel shall, within five (5) business days of
receiving notice of the modification or reversal from Defendants' counsel or
from a court of appropriate jurisdiction, refund to the Settlement Fund and
Falcon, as appropriate, the fees, expenses, and costs previously paid to Class
Counsel, plus simple interest thereon at the rate of 5% per annum, in an amount
consistent with such reversal or modification. As a condition of receiving such
fees and expenses, Class Counsel, on behalf of himself and each Partner and/or
shareholder of his law firm, agrees that Class Counsel, his partners, and/or
shareholders shall be subject to the jurisdiction of the Court for purposes of
enforcing this paragraph
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of the Stipulation.
7.6 Notwithstanding anything in this Stipulation to the contrary, any
award of fees and expenses to Class Counsel recoverable from the Additional
Payments and attributable to Somerset, shall not be disbursed to Class Counsel
and the Representative Plaintiff unless and until, Falcon Community Completes
and Consummates its purchase of Somerset pursuant to the terms and conditions of
the Asset Purchase Agreement, as modified herein.
8. Conditions of Settlement, Effect of Disapproval, Cancellation or
Termination
8.1 The Effective Date of this Stipulation shall be conditioned on
the occurrence of all of the following events:
(a) The Court has entered the Notice Order, as required by
Paragraph 4, above;
(b) The Court has entered the Judgment, substantially in the form
of Exhibit "B" (including the findings and Order necessary under ss.877.6); and
(c) The Judgment has become Final.
8.2 If all of the conditions specified in Paragraph 8.1 are not met,
then the settlement shall be cancelled and terminated unless Class Counsel and
Defendants' Counsel mutually agree in writing to proceed with the Stipulation.
8.3 In the event that the Stipulation is not approved by the Court or
the settlement set forth in the Stipulation is terminated or fails to become
effective in accordance with its terms, the Settling Parties shall be, without
prejudice, restored to their respective positions in the Litigation.
8.4 Notwithstanding Paragraph 8.3, in the event that the Stipulation
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is not approved by the Court or the settlement set forth in the Stipulation is
terminated or fails to become effective in accordance with its terms, the
Representative Plaintiff and the Defendants, through their respective counsel,
shall, within two weeks of such termination or cancellation, jointly request a
status conference with the Court to be held on the Court's first available date.
At such status conference, the Representative Plaintiff and the Defendants shall
ask the Court's assistance in scheduling continued proceedings in the Litigation
as between them. Pending such status conference or the expiration of sixty (60)
days from this joint request for a status conference, whichever occurs first,
neither Representative Plaintiff nor the Defendants shall file or serve any
further motions or discovery requests on each other in connection with this
Litigation nor shall an answer or other response to the Complaint or any
discovery response be due by Representative Plaintiff or Defendants.
8.5 In the event that the Stipulation is not approved by the Court or
the settlement set forth in the Stipulation is terminated or fails to become
effective in accordance with its terms, the terms and provisions of the
Stipulation, with the exception of Paragraphs 1, 2.1, 2.3 through 2.5,
inclusive, 8.2 through 8.5, inclusive, 9.2, 9.4, 9.6, and 9.8 through 9.16,
inclusive, herein, shall have no further force and effect with respect to the
Settling Parties and shall not be used in this Litigation or in any other
proceeding for any purpose and any Judgment or Order entered by the Court in
accordance with the terms of the Stipulation shall be treated as vacated, nunc
pro tunc.
8.6 No order of the Court or modification or reversal on appeal of any
order of the Court concerning the attorneys' fees,
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costs, and expenses awarded by the Court to the Class Counsel or the incentive
award granted to the Representative Plaintiff shall constitute grounds for
cancellation or termination of the Stipulation.
8.7 Defendants shall have the option to withdraw from this settlement
and to render this settlement null and void with respect to the Litigation in
the event that Persons who otherwise would be Members of the Settlement Class
elect to exclude themselves from, or opt-out of, the Settlement Class to a
degree and in a manner specified in a separate stipulation establishing the
grounds for withdrawal from the settlement (the "Separate Stipulation") (not to
be filed with the Court except under the circumstances described therein).
8.8 The Representative Plaintiff and Class Counsel shall utilize the
period from execution of this Stipulation through January 12, 1998 to complete
their factual and legal investigation of the claims asserted in the Complaint,
and Defendants shall continue to reasonably cooperate with said investigation
and with reasonable requests for documents and interviews of Falcon personnel.
Representative Plaintiff and Class Counsel shall have the option to withdraw
from this settlement and to render it null and void in the event that their
investigation, as described above, discloses material facts concerning the
condition or financial performance of the Cable Systems as of December 18, 1997,
which render representations made by Defendants as of that date concerning those
Cable Systems materially untrue.
8.9 Defendants shall have the option to withdraw from this settlement
and to render this settlement null and void in the event that Court approval is
not obtained on or before May 5, 1998.
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9. Miscellaneous Provisions
9.1 Unless otherwise indicated, all time periods and deadlines expire at
5:00 p.m. (Pacific Daylight or Standard Time, as appropriate) on the date
indicated.
9.2 To the extent any provision of this Stipulation or of the Judgment
is inconsistent with or varies in any way the terms and conditions of the Asset
Purchase Agreement, the Asset Purchase Agreement is hereby amended to the same
effect, nunc pro tunc.
9.3 The Settling Parties (a) acknowledge that it is their intent to
consummate this agreement; and (b) agree to cooperate to the extent necessary to
effectuate and implement all terms and conditions of the Stipulation and to
exercise their best efforts to accomplish the foregoing terms and conditions of
the Stipulation.
9.4 Neither the Stipulation nor the settlement, nor any act performed or
document executed pursuant to or in furtherance of the Stipulation or the
settlement: (i) is or may be deemed to be or may be used as an admission of, or
evidence of, the validity of any Released Claim, or of any wrongdoing or
liability of the Defendants, their Related Parties, or any Person; or (ii) is or
may be deemed to be or may be used as an admission of, or evidence of, any fault
or omission on the part of any of the Defendants, their Related Parties, or any
Person in any civil, criminal or administrative proceeding in any court,
administrative agency or other tribunal, other than in such proceedings as may
be necessary to consummate or enforce the Stipulation, the settlement or the
Judgment, except that the Defendants and/or their Related Parties may file the
Stipulation and/or the Judgment in any action that may be brought against them
(including, but not limited to, this or related Litigation) in order to support
a defense or counterclaim
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based on principles of res judicata, collateral estoppel, release, good faith
settlement, judgment bar or reduction or any other theory of claim preclusion or
issue preclusion or similar defense or counterclaim.
9.5 The Defendants have denied and continue to deny each and all of the
claims alleged in the Litigation. Defendants contend that they had good defenses
to the claims asserted against them in the Litigation, that they engaged in no
wrongdoing, and that they believe they would have prevailed at trial.
Notwithstanding the preceding, Defendants agree not to assert that the
Litigation was commenced or prosecuted in bad faith.
9.6 The Settling Parties and their counsel, and each of them, agree, to
the extent permitted by law, that all agreements made during the course of the
Litigation relating to the confidentiality of information shall survive this
Stipulation. To that end, when the Judgment becomes Final, Class Counsel agrees
to return or destroy all originals and all copies of documents which have been
provided by Defendants' Counsel to the Class Counsel in connection with this
Litigation.
9.7 All of the Exhibits to the Stipulation are material and integral
parts hereof and are fully incorporated herein by this reference.
9.8 The Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Settling Parties or their respective
successors-in-interest.
9.9 The Purchasers are parties to this Stipulation only to the extent
germane.
9.10 The Stipulation and the Exhibits attached hereto, and the Separate
Stipulation, constitute the entire agreement among the
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Settling Parties, and no representations, warranties, or inducements have been
made to any party concerning the Stipulation, its Exhibits, or the Separate
Stipulation, other than the representations, warranties, and covenants contained
and memorialized in such documents.
9.11 Class Counsel, on behalf of the Settlement Class, is expressly
authorized by the Representative Plaintiff to take all appropriate action
required or permitted to be taken by the Settlement Class pursuant to the
Stipulation to effectuate its terms and also is expressly authorized to enter
into any modifications or amendments to the Stipulation on behalf of the
Settlement Class which Class Counsel deems appropriate.
9.12 Each counsel or other Person executing the Stipulation or any of
its Exhibits on behalf of any party hereto hereby warrants that such person has
the full authority to do so.
9.13 The Stipulation may be executed in one or more counterparts. All
executed counterparts and each of them shall be deemed to be one and the same
instrument. Counsel for the parties to the Stipulation shall exchange among
themselves original signed counterparts and a complete set of original executed
counterparts shall be filed with the Court.
9.14 The Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the parties hereto.
9.15 The Court shall retain jurisdiction with respect to implementation
and enforcement of the terms of the Stipulation, and all parties hereto submit
to the jurisdiction of the Court for purposes of implementing and enforcing the
settlement embodied in the Stipulation.
9.16 The Stipulation and the Exhibits hereto shall be
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considered to have been negotiated, executed and delivered, and to be wholly
performed, in the State of California, and the rights and obligations of the
parties to the Stipulation shall be construed and enforced in accordance with,
and governed by, the internal, substantive laws of the State of California
without giving effect to that State's choice of law principles
IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be
executed, by their duly authorized attorneys and/or officers, as of December 31,
1997.
IT IS SO STIPULATED.
SCHUBERT & REED LLP
Robert C. Schubert
Juden Justice Reed
By: /s/ Juden Justice Reed
-------------------------------
Juden Justice Reed
Attorneys for Plaintiff and the
Settlement Class
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<PAGE> 36
IRELL & MANELLA LLP
Richard H. Borow, P.C.
David Siegel
Seth E. Pierce
By: /s/ Richard H. Borow
-------------------------------
Richard H. Borow, P.C.
Attorneys for Defendants Falcon
Classic Cable Income Properties,
L.P., Falcon Classic Cable
Investors, L.P., Falcon Holding
Group, L.P., Marc B. Nathanson,
and Frank J. Intiso
Stanley S. Itskowitch, Esq.
By: /s/ Stanley S. Itskowitch
-------------------------------
Stanley S. Itskowitch
Executive Vice President and
General Counsel for Purchasers
Falcon Cable Systems Company II,
L.P.; Falcon Community Cable,
L.P.; Falcon Cable Media, L.P.
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<PAGE> 37
SCHUBERT & REED LLP
Robert C. Schubert (State Bar No. 62684)
Juden Justice Reed (State Bar No. 153748)
Two Embarcadero Center
Suite 1050
San Francisco, California 94111
Telephone: (415) 788-4220
Attorneys for Plaintiff
and the Settlement Class
IRELL & MANELLA LLP
Richard H. Borow, P.C. (State Bar No. 38429)
David Siegel (State Bar No. 101355)
Seth E. Pierce (State Bar No. 186576)
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Telephone: (310) 277-1010
Attorneys for Defendants Falcon
Classic Cable Income
Properties, L.P., Falcon
Classic Cable Investors, L.P.,
Falcon Holding Group, L.P.,
Marc B. Nathanson, and Frank J. Intiso
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
PAUL J. ISAAC, Individually and )) CASE NO. BC177205
On Behalf of All Others ))
Similarly Situated, )) CLASS ACTION
))
Plaintiff, ))
)) [PROPOSED]
)) SETTLEMENT NOTICE ORDER
v.
FALCON CLASSIC CABLE INCOME
PROPERTIES, L.P., FALCON CLASSIC
CABLE INVESTORS, L.P., FALCON
HOLDING GROUP, L.P., MARC B.
NATHANSON, FRANK J. INTISO, and
DOES 1-100, INCLUSIVE,
Defendants.
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<PAGE> 38
WHEREAS, a putative class action, entitled Paul J. Isaac et al. v.
Falcon Classic Cable Income Properties, L.P., et al., Case No. BC177205, is
pending before the Court (the "Litigation"); and
WHEREAS, the Representative Plaintiff, on behalf of himself and the
Settlement Class ("Plaintiffs"), and Defendants Falcon Classic Cable Income
Properties, L.P., Falcon Classic Cable Investors, L.P., Falcon Holding Group,
L.P., Marc B. Nathanson, and Frank J. Intiso (the "Defendants") have applied to
this Court for an Order approving the settlement of the Litigation in accordance
with the Stipulation of Settlement, dated as of December 31, 1997 (the
"Stipulation"), which, together with the exhibits annexed thereto, sets forth
the terms and conditions (i) of the proposed settlement and (ii) for the
dismissal of the Complaint and the Litigation with prejudice on the merits as
against the Defendants;
WHEREAS, this Court has read and considered the Stipulation and the
exhibits annexed thereto; and
WHEREAS, the Stipulation provides for the preliminary certification of a
settlement class for purposes of the settlement, and good cause appearing
therefor;
NOW, THEREFORE, IT IS HEREBY ORDERED that:
1. This Order (the "Notice Order") hereby incorporates by reference the
definitions in the Stipulation, and all terms used herein shall have the same
meanings as set forth in the Stipulation
2. The Court hereby preliminarily approves the Stipulation and the
settlement described therein as being just, fair, reasonable, and adequate to
the Settlement Class.
3. Solely for purposes of the Stipulation and the settlement described
therein, the Settlement Class means all
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Persons owning Falcon Units as of June 30, 1997 and their
successors-in-interest. Excluded from the class are Defendants, members of the
immediate family of any Individual Defendant, any entity in which any Defendant
has or had a controlling interest, and the legal representatives, heirs,
successors, or assigns of any such excluded person or entity. Also excluded from
the Settlement Class are those persons who timely and validly request exclusion
from the Settlement Class pursuant to the Notice of Pendency and Settlement of
Class Action to be sent to the Settlement Class and all current Falcon
Unitholders.
4. The Court hereby approves, as to form and content, the Notice of
Pendency and Settlement of Class Action (the "Notice") and the Summary Notice
for Publication (the "Summary Notice") annexed hereto as Exhibits A-1 and A-2,
respectively, and incorporated herein by this reference. The Court finds that
the publication, mailing, and distribution of the Notice and Summary Notice
substantially in the manner and form set forth in Paragraphs 6 - 7 of this
Notice Order meets the requirements of California law and due process, is the
best notice practicable under the circumstances, and shall constitute due and
sufficient notice to all Persons entitled thereto.
5. The Stipulation, and the settlement contained therein, reflects a
compromise and settlement of disputed claims and is not in any respect any
admission or concession by the Defendants, nor is this Notice Order a finding,
of the validity of any claims in the Litigation. Further, neither this Notice
Order, the Stipulation, any future Judgment, nor any document referred to
therein, nor any action taken to execute or carry out the Stipulation or this
Notice Order, nor any future Judgment, may be
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construed as or used as an admission by or against the Defendants, their Related
Parties, or any Person, of any fault, wrongdoing or liability whatsoever. This
Notice Order, the Stipulation, and any future Judgment, any documents referred
to therein, the fact of execution of the Stipulation and any action taken to
carry out the Stipulation, this Notice Order, or any future Judgment shall not
be offered or received in evidence in any action or proceeding against any of
the Defendants or their Related Parties in any court, administrative agency or
other tribunal for any purpose whatsoever other than to enforce the provisions
of this Notice Order, the Stipulation, any future Judgment or any related
agreement or release; except that the Defendants and/or their Related Parties
may file the Stipulation, this Notice Order, and any future Judgment in any
action that may be brought against them (including, but not limited to, this or
related Litigation) as evidence of the settlement or to support a defense or
counterclaim based on principles of res judicata, collateral estoppel, release,
good faith settlement, judgment bar or reduction or any other theory of claim
preclusion or issue preclusion or similar defense.
6. Defendants are hereby empowered to supervise and administer the
notice procedure, as set forth below:
(a) Defendants shall direct Gemisys to mail or cause to be
mailed, on or before January 16, 1998, copies of the Notice, substantially in
the form annexed hereto as Exhibit A-1, to all Settlement Class Members and
current Falcon Unitholders who can be identified with reasonable effort.
(b) On or before January 19, 1998, Defendants shall cause the
Summary Notice, substantially in the form annexed hereto as Exhibit A-2, to be
published once in the national edition of The
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Wall Street Journal.
(c) Five (5) days prior to the Settlement Hearing provided for in
Paragraph 18 of this Notice Order, Defendants shall serve and file with the
Court, by declaration, proof of such publication and mailing.
7. Nominees or broker-dealers who purchased Falcon Units for others
or in street names are hereby requested to send the Notice to all beneficial
owners of such securities promptly after receipt thereof, or send by facsimile a
list of the names and addresses of such beneficial owners to Gemisys (Attention:
Diana Wiegand) within five (5) business days of receipt thereof, in which event
Gemisys shall promptly mail the Notice to such beneficial owners. Nominees
and/or broker-dealers are hereby advised that their reasonable out-of-pocket
costs incurred in providing said notice to such beneficial owners will be
reimbursed at the behest of the Defendants, and Defendants shall cause such
reimbursement to occur.
8. Settlement Class Members who do not properly and timely request
exclusion from the Settlement Class shall be bound by the Stipulation and all
determinations and judgments in the Litigation concerning the settlement,
whether favorable or unfavorable, and any releases given pursuant thereto.
9. Settlement Class Members who wish to exclude themselves from the
Settlement Class must do so by causing their written request for exclusion to be
actually received in accordance with the Notice, not later than 5:00 p.m.,
Pacific Standard Time, February 20, 1998.
10. Defendants shall have the option to terminate the Stipulation and
withdraw from the settlement if the grounds for
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withdrawal specified in Paragraph 8.7 of the Stipulation are satisfied.
Defendants may withdraw from the Stipulation based on these grounds only if a
written notice of the termination of the settlement is filed with the Court and
served on Class Counsel no later than March 2, 1998.
11. Defendants' Counsel or Class Counsel may contact any Person
requesting exclusion or such Person's counsel to discuss their request.
12. If any Person who has requested exclusion from the Settlement Class
elects to rescind the request, that Person's request for exclusion shall be null
and void provided that that Person communicates his, her, or its decision to
Defendant's Counsel and/or Class Counsel at or before the Settlement Hearing.
13. Upon the Effective Date, each of the Settlement Class Members and
each of their respective Related Parties shall be deemed to have, and by
operation of the Judgment shall have, fully, finally, and forever released,
relinquished, and discharged all Released Claims (including Unknown Claims but
excluding claims based upon compliance with the Stipulation) against the
Released Persons (including, but not limited to, Arthur Anderson LLP,
Communication Equity Associates, Inc., Kane Reece Associates, Inc., and each of
their respective Related Parties).
14. Upon the Effective Date, Falcon and each of its Related Parties
shall be deemed to have, and by operation of the Judgment shall have, fully,
finally, and forever released, relinquished and discharged all of the other
Defendants and each of their Related Parties from all claims (including Unknown
Claims related thereto), arising out of, relating to, or in connection with the
operation of Falcon, including, but not limited to, the sale of the Falcon Cable
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Systems, claims for contribution and/or indemnity, and claims that are implied
or express, contractual or otherwise.
15. Upon the Effective Date, each of the Defendants and each of their
respective Related Parties shall be deemed to have, and by operation of the
Judgment shall have, fully, finally, and forever released, relinquished and
discharged each and all of the Class Members (including the Representative
Plaintiff) and each of their respective Related Parties, from all claims
(including Unknown Claims related thereto), based on, arising out of, relating
to, or in connection with the institution, prosecution, assertion, settlement or
resolution of the Litigation, including the Settlement set forth in the
Stipulation, except for the right to enforce the terms of the Stipulation.
16. All reasonable costs incurred in identifying and notifying
Settlement Class Members, as well as administering the Settlement Fund, shall be
paid as set forth in the Stipulation.
17. At least seven (7) days before the Settlement Hearing provided for
in Paragraph 18, Class Counsel shall serve on Defendants' Counsel and file with
the Court its Fee and Expense Application, if any. Class Counsel shall be
entitled to submit additional Fee and Expense Applications in the future,
regardless of whether it submits an Application at the Settlement Hearing. At
least five (5) days before the Settlement Hearing provided for in Paragraph 18,
Class Counsel and Defendants' Counsel shall file a joint motion requesting
approval of the Settlement.
18. A Settlement Hearing shall be held before the Honorable Bruce
Mitchell, Judge Pro Tem of the Superior Court, on March 3, 1998 at __:__ __.m.
at the Los Angeles County Courthouse, 111 North Hill Street, Los Angeles,
California 90012, to determine whether
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the proposed settlement, on the terms and conditions provided for in the
Stipulation, is just, fair, reasonable, and adequate to the Settlement Class and
should be approved by the Court; and whether the stipulated Judgment as to each
of the Defendants should be entered herein. At the Settlement Hearing or such
subsequent hearing as the Court may order, the Court shall determine the amount
of fees and/or expenses that should be awarded to Class Counsel.
19. Any Settlement Class Member or other legally interested Person may
appear and show cause, if he, she, or it has any reason, why the proposed
settlement of the Litigation embodied in the Stipulation should or should not be
approved as just, fair, reasonable, and adequate and entered into in good faith,
why the Judgment should or should not be entered thereon, or why attorneys' fees
and/or costs and expenses and any Representative Plaintiff incentive award
should or should not be reimbursed or paid in the amount requested to Class
Counsel or the Representative Plaintiff, respectively; provided, however, that
no Settlement Class Member or other interested Person shall be heard or entitled
to contest the approval of the terms and conditions of the proposed settlement,
or, if approved, the Judgment to be entered thereon approving the same, or the
awarding of attorneys' fees and/or costs and expenses, or the awarding of any
incentive award for the Representative Plaintiff, or the reimbursement of
Settlement Class notification expenses, unless on or before February 20, 1998,
that Person's written objections and copies of any papers and briefs in support
of their position are filed with the Court and received by Class Counsel and
Defendants' Counsel. Any Settlement Class Member or other Person who does not
make his, her, or its objections in the
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manner provided for herein shall be deemed to have waived such objection and
shall forever be foreclosed from making any objection to the fairness or
adequacy of the proposed settlement as incorporated in the Stipulation, the
award of attorneys' fees and/or costs and expenses to Class Counsel, the award
of an incentive fee to the Representative Plaintiff or the reimbursement of
notification expenses, unless otherwise ordered by the Court.
20. The Court reserves the right to continue or adjourn the date of the
Settlement Hearing and any adjournments thereof without further notice to the
members of the Class, and retains jurisdiction to consider all further
applications arising out of or connected with the proposed settlement.
21. Pending final determination as to whether the settlement contained
in the Stipulation should be approved, the Representative Plaintiff and all
Settlement Class Members, whether directly, representatively, or in any other
capacity, whether or not such persons have appeared in the Litigation, shall not
institute or prosecute any Released Claims against the Defendants or their
Related Parties (including, but not limited to, Arthur Anderson LLP, Kane Reece
Associates, Inc., and Communications Equity Associates, Inc. and each of their
respective Related Parties).
22. In the event the Effective Date does not occur, or the Stipulation
terminates, or is cancelled, or does not become effective for any reason, this
Notice Order, except for Paragraph 5, shall be rendered null and void and shall
be vacated, nunc pro tunc, and the Settling Parties shall revert to their
respective positions in the Litigation as of December 31, 1997. In such event,
the terms and provisions of the Stipulation, with the exception of Paragraphs 1,
2.1, 2.3 through 2.5, inclusive, 8.2 through 8.5, inclusive, 9.2, 9.4,
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9.6, and 9.8 through 9.16, inclusive, of the Stipulation, shall have no further
force and effect with respect to the Settling Parties and shall not be used in
this Litigation or in any other proceeding for any purpose.
Dated: January __, 1998 ______________________________________
Bruce Mitchell
Judge Pro Tem of the Superior Court
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SCHUBERT & REED LLP
Robert C. Schubert (State Bar No. 62684)
Juden Justice Reed (State Bar No. 153748)
Two Embarcadero Center, Suite 1050
San Francisco, California 94111
Telephone: (415) 788-4220
Attorneys for Plaintiff
and the Settlement Class
IRELL & MANELLA LLP
Richard H. Borow, P.C. (State Bar No. 38429)
David Siegel (State Bar No. 101355)
Seth E. Pierce (State Bar No. 186576)
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Telephone: (310) 277-1010
Attorneys for Defendants Falcon
Classic Cable Income Properties, L.P.,
Falcon Classic Cable Investors, L.P.,
Falcon Holding Group, L.P.,
Marc B. Nathanson and Frank J. Intiso
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
<TABLE>
<S> <C>
PAUL J. ISAAC, Individually and On Behalf of All
Others Similarly Situated, No. BC177205
CLASS ACTION
Plaintiff,
NOTICE OF PENDENCY AND SETTLEMENT OF CLASS ACTION
vs.
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.,
FALCON CLASSIC CABLE INVESTORS,
L.P., FALCON HOLDING GROUP, L.P.
MARC B. NATHANSON, FRANK J. INTISO, and DOES
1-100, inclusive,
Defendants.
- --------------------------------------------------
</TABLE>
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<PAGE> 48
TO: ALL PERSONS OR ENTITIES OWNING UNITS OF LIMITED PARTNERSHIP INTEREST IN
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P. ("UNITS") AS OF JUNE 30,
1997, AND THEIR SUCCESSORS-IN-INTEREST. EXCLUDED ARE THE DEFENDANTS,
MEMBERS OF THE IMMEDIATE FAMILY OF ANY INDIVIDUAL DEFENDANT, ANY ENTITY
IN WHICH ANY DEFENDANT HAS OR HAD A CONTROLLING INTEREST, AND THE LEGAL
REPRESENTATIVES, HEIRS, SUCCESSORS, OR ASSIGNS OF ANY SUCH EXCLUDED
PERSON OR ENTITY. ALSO EXCLUDED FROM THE SETTLEMENT CLASS ARE THOSE
PERSONS OR ENTITIES THAT TIMELY AND VALIDLY REQUEST EXCLUSION FROM THE
SETTLEMENT CLASS PURSUANT TO THE PROVISIONS OF THIS NOTICE (HEREINAFTER,
THE "SETTLEMENT CLASS") AND ALL PERSONS OR ENTITIES WHO CURRENTLY OWN
UNITS.
YOU ARE HEREBY NOTIFIED THAT:
1. Your rights may be affected by the above-captioned lawsuit (the
"Class Action"), which is pending in the Superior Court of the State of
California in and for the County of Los Angeles (the "Court").
2. A proposed Settlement has been reached between (i) Paul J. Isaac,
(the "Representative Plaintiff"), on behalf of himself and each member of the
Settlement Class, by and through their counsel of record, Robert C. Schubert and
Juden Justice Reed of Schubert & Reed LLP ("Class Counsel"); (ii) Falcon Classic
Cable Income Properties, L.P.("Falcon"), Falcon Classic Cable Investors, L.P.,
Falcon Holding Group, L.P., Marc B. Nathanson and Frank J. Intiso (the
"Defendants"); and (iii) Falcon Community Cable, L.P., Falcon Cable Media and
Falcon Cable Systems Company II, L.P. (the "Purchasers"). The Purchasers are
affiliates of the Defendants that have contracted to purchase cable television
systems from
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Falcon. This sale of assets by Falcon is the subject of this lawsuit. The
Purchasers are not parties to this lawsuit. Nevertheless, as parties to the
Stipulation of Settlement (the "Stipulation"), the Purchasers are bound by the
terms and conditions of the Stipulation just as if they were parties to the
lawsuit. The proposed settlement has been granted preliminary approval by the
Court.
3. If you wish to object to or comment on the proposed settlement, or to
any portion thereof, or to Class Counsel's request for attorneys' fees or
reimbursement of expenses, you must do so by February 20, 1998, as instructed in
Section IV of this Notice.
4. A hearing on whether the proposed Settlement should be finally
approved, and whether Class Counsel's request for attorneys' fees and
reimbursement of expenses should be granted, and other matters, will be held on
March 3, 1998 at [hearing-time] at the Superior Court of California in and for
the County of Los Angeles, 111 North Hill Street, Los Angeles, California,
90012, before the Honorable Bruce Mitchell, Judge Pro Tem of the Superior Court.
I. NATURE AND STATUS OF THE LAWSUIT
5. On September 2, 1997, the Class Action was filed in Los Angeles
County Superior Court on behalf of all persons and entities, wherever located,
who held Units of Falcon, or their successors in interest, excluding the
defendants and their affiliates and related parties (the "Complaint"). The
Complaint alleged that the Defendants had caused damage to the Unitholders by
breaching fiduciary duties owed to the Unitholders, breaching
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Falcon's Partnership Agreement and breaching the implied covenant of good faith
and fair dealing implicit in the Falcon Partnership Agreement, in connection
with the sale of Falcon's assets to the Purchasers.
6. Specifically, in August 1996, pursuant to the Falcon Partnership
Agreement, the Defendants began exploring the possibility of purchasing five
cable television systems from Falcon. Towards that end, the Defendants initiated
the appraisal process called for in the Falcon Partnership Agreement, which
resulted in the selection of three appraisers, which delivered valuations as of
December 31, 1996. On June 27, 1997, Falcon executed an asset purchase agreement
(the "Asset Purchase Agreement") with the Purchasers with a price based on the
median appraised value as of December 31, 1996. The Complaint alleged that by
the time the Asset Purchase Agreement was executed in June 1997, the purchase
price was too low because the appraisals were outdated, and would become more
outdated by the time the asset sale actually closed.
7. As indicated above, the Falcon Partnership Agreement provides for the
sale of Falcon's assets to Falcon's General Partner or its affiliates, and
expressly provides a procedure for determining a sales price in connection with
such related party sales. Falcon and the other Defendants followed this
procedure in valuing the assets for purposes of the sale at issue. The Falcon
Partnership Agreement is silent, however, as to the period during which an
appraisal conducted pursuant to its terms shall remain valid, and is likewise
silent as to the timing of the closing once the option to purchase has been
exercised. It should be noted, however, that the closing of such a sale cannot
take place
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immediately upon the exercise of the option to purchase as, among other reasons,
approvals of the proposed sale must be obtained from local government bodies.
8. Defendants deny that they have committed breach of contract, breach
of fiduciary duty, or any other claim alleged in the complaint. They contend
that they complied fully with the appraisal procedure set forth in the
Partnership Agreement, and have every right to purchase Falcon's assets pursuant
to the Asset Purchase Agreement. They further contend that the assets they are
purchasing have not increased in value since the date of the appraisal.
9. On January __, 1998, the Court granted certification of the
Settlement Class. The Settlement Class is defined as follows:
All persons or entities owning units of limited partnership
interest in Falcon Classic Cable Income Properties, L.P., as of
June 30, 1997, and their successors-in-interest. Excluded from
the Settlement Class are the Defendants, members of the immediate
family of any Individual Defendant, any entity in which any
Defendant has or had a controlling interest, and the legal
representatives, heirs, successors, or assigns of any such
excluded person or entity. Also excluded from the Settlement
Class are those persons or entities that timely and validly
request exclusion from the Settlement Class pursuant to the
provisions of the "Notice Of Pendency And Settlement Of Class
Action" to be sent to the Settlement Class members.
10. On January __, 1998, the Court approved the mailing of this Notice
Of Pendency And Settlement Of Class Action. Members of the Settlement Class are
advised that they can be excluded from participation in the Settlement by
sending an exclusion request that is received on or before February 20, 1998. If
you request exclusion you will not be bound by the Judgment, BUT YOU WILL
FORFEIT YOU RIGHT TO RECEIVE ANY PORTION OF THE SETTLMENT FUND.
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11. Class Counsel and Defendants' Counsel have conducted substantial
factual and legal investigations during the pendency of the Class Action. These
investigations have included, among other things, (i) inspection of documents
produced by Defendants in response to requests served by Class Counsel, (ii)
consultations with experts, (iii) meetings with and interviews of various
Defendants and their representatives, (iv) review of Falcon's public filings,
annual reports, and other public statements, (v) review and analysis of the
appraisals involved in this litigation, (vi) review and analysis of the actual
condition and financial performance of the subject cable systems, and (vii)
research of the applicable law with respect to the claims asserted in the
Complaint and the potential defenses thereto.
12. The Defendants have denied, and continue to deny, each and every
claim and contention alleged in the Complaint. The Defendants have nonetheless
concluded that the further conduct of the Class Action would be protracted and
expensive, and that it is desirable that the Class Action be fully and finally
settled in the manner and upon the terms and conditions set forth in the
settlement. Such a resolution is of benefit to the Defendants as it will limit
further expense, inconvenience and distraction and will permit the Defendants to
proceed with their business plans. Such a resolution, moreover, appears to
Defendants to be in the best interests of the Unitholders and the Settlement
Class as it will increase the certainty of closing the proposed asset sale and
will provide additional compensation to both the current Unitholders and the
Settlement Class. Accordingly, the Defendants have determined that it is
desirable for the Class Action to be settled in the manner and upon the terms
and conditions set forth
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herein.
13. Class Counsel believe that the claims asserted in the Complaint have
merit. Class Counsel also recognize, however, that the Class Action has an
uncertain outcome, and that pursuing this litigation through trial involves both
substantial risk and inevitable delay. Based on their evaluation of the facts
and law, and a weighing of risks and benefits, Class Counsel have determined
that the settlement set forth in the Stipulation is in the best interests of the
Representative Plaintiff and the Settlement Class.
II. SUMMARY OF THE PROPOSED SETTLEMENT
14. The Representative Plaintiff, the Defendants and the Purchasers have
entered into a Stipulation of Settlement, dated as of December 31, 1997,
settling and resolving the claims of the Settlement Class against the Defendants
(the "Settlement Agreement"). The following is a summary of the principal terms
of the Settlement Agreement. The complete Settlement Agreement is on file with
the Court, and may be obtained by contacting Class Counsel at the address listed
in Section VII of this Notice.
15. (a) In complete settlement of all claims arising out of the
allegations of the Complaint, the Defendants and the Purchasers have agreed to
(i) commit, subject to Court approval and continued satisfaction of the closing
conditions, to the closing of the sale of four of Falcon's five cable systems on
or before March 31, 1998, comprising 62.2% of the total value of all five Falcon
systems, (ii) pay to the Unitholders upon closing 10% simple interest on the net
purchase price, less the percentage of the net purchase price attributable to
Somerset, as defined below,
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with interest to accrue beginning January 1, 1998, and (iii) create, upon
closing of the cable system sales, a Settlement Fund of $1,250,000.00, subject
to a $472,500.00 holdback (the "Somerset Holdback"), discussed below, which will
also bear 10% simple interest (also subject to the Somerset Holdback) accruing
from January 1, 1998, and terminating upon closing, payable to the members of
the Settlement Class, as set forth below.
(b) With respect to the fifth cable system, located in Somerset,
Kentucky ("Somerset"), comprising 37.8% of the total value of all five systems,
Defendants have committed to use their best efforts to obtain the required
approvals as soon as possible, and to close the Somerset sale as soon as
practicable once the required approvals have been obtained. Defendants have also
agreed to pay 10% simple interest on the net purchase price attributable to
Somerset at the time of the Somerset closing, with interest to accrue beginning
January 1, 1998. If and when the Somerset sale is consummated, Defendants will
also cause the $472,500.00 Somerset Holdback, plus accrued interest, to be paid
to the Settlement Fund.
16. Falcon will distribute the proceeds of system sales, plus the
accrued interest, to Falcon's Unitholders pursuant to the Falcon Partnership
Agreement. Class Counsel, or their designee, shall serve as the Settlement Fund
Distribution Agent, and pay the Settlement Funds to the Settlement Class members
pursuant to the Settlement Agreement, in the manner set forth below.
17. Defendants have the right to close the sales before March 31, 1998,
but in no event prior to March 3, 1998. With respect to Somerset, defendants are
obligated to close the transaction as soon as practicable once the required
local
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<PAGE> 55
approvals have been obtained, but if despite Defendants' best efforts the
local approvals have not been obtained by September 30, 1998, they will have no
obligation to close the Somerset transaction. With respect to the Settlement
Fund, Settlement Class members will receive their pro rata share of the fund
based on the number of Units of Falcon they owned as of June 30, 1997. The exact
amount of the Settlement Fund is subject to change depending upon several
factors, including the timing of the closing(s), the Somerset contingency and
Court approval.
18. The Falcon Partnership Agreement requires Falcon to distribute to
the Unitholders upon the sale of a cable system the sales price of that system,
less bank debt and certain other liabilities attributable to the Partnership
(the "Sale Proceeds"). Upon closing of the sale of each system, Falcon will pay
to its Unitholders, less sixty percent (60%) of the cost of Notice and
attorneys' fees and costs, the Sale Proceeds plus accrued interest on the net
purchase price attributable to the system sold. Defendants will transfer to the
Settlement Fund Distribution Agent the portion of the Settlement Fund
attributable to the system sold plus accrued interest for distribution to the
Settlement Class, less forty percent (40%) of the cost of Notice and attorneys'
fees and costs.
19. The Litigation Benefit: The proposed settlement, negotiated by the
Representative Plaintiff, Class Counsel, Defendants and their representatives,
offers significant improvements in the status quo to both Unitholders and
Settlement Class members:
A. As a result of the settlement, Settlement Class members are assured of
receiving, as a litigation benefit, a Settlement
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Fund of up to $1,250,000.00, bearing 10% simple interest on the amount
actually transferred, accruing from January 1, 1998 through closing.
B. By agreeing to the Settlement Agreement, Defendants and the Purchasers
have agreed to complete the sale of at least four of the five cable
systems. But for the Settlement, the Purchasers would not be committed
to buy any of the cable systems, because they had the right under the
Asset Purchase Agreement, with certain exceptions, to terminate the
entire transaction in the event required local approvals for the sale of
any single system were not obtained by December 31, 1997, or under
certain conditions by March 31, 1998. Required local approvals for the
sale of Somerset were not obtained by December 31, 1997, and there is no
assurance that such approval will be received by March 31, 1998. As a
result, but for the settlement, there was no assurance that any of the
cable systems would in fact have been sold.
C. As a result of the settlement, Unitholders are assured of receiving, as
a litigation benefit, 10% simple interest on the Sale Proceeds, accruing
January 1, 1998 through the date of closing, less the costs of
litigation, including the costs of this Notice and attorneys' fees and
costs. But for the Settlement, the Purchasers would not have been
obligated to pay any interest at all.
D. Monetary Recovery By Unitholders: The Total Purchase Price (the purchase
price of all five cable systems) is $82 million, per the Asset Purchase
Agreement. The Net Purchase Price (i.e., the Distributable Sale Proceeds
from the sale of all five systems, after payment of debt and other
adjustments) is
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estimated to be approximately $64 million. Because the
net purchase price is only an estimate and because the amount of
interest will vary depending on the exact date of closing of each of the
five systems, the total monetary benefit to the Unitholders and the
members of the Settlement Class cannot be stated exactly. The following
examples are provided for illustrative purposes only.
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<TABLE>
<S> <C> <C>
Example No. 1:
(Based on the sale of all systems closing March 31, 1998)
Settlement Fund $1,250,000
+ 10% Interest 1/1/98-3/31/98 $31,250
-----------
Benefit to Settlement Class $1,281,250
Est. Distributable Sales Proceeds $64,000,000
x 10% Interest 1/1/98-3/31/98 2.5%
-----------
Benefit to Unitholders $1,600,000
-----------
Total Estimated Benefit $2,881,250
===========
</TABLE>
<TABLE>
<S> <C> <C>
Example No. 2:
(Based on the sale of 4 systems closing March 31, 1998, and Somerset closing
September 30, 1998)
Settlement Fund $1,250,000
+ 10% Interest on 4 Systems 1/1/98-3/31/98 $19,438
+ 10% Interest on Somerset Holdback 1/1/98-9/30/98 $35,438
- ----------------------------------------------------------------------------------
Benefit to Settlement Class $1,304,876
Est. Distributable Sales Proceeds (4 Systems) 39,808,000
x 10% Interest 1/1/98-3/31/98 2.5%
-----------
$995,200
Est. Distributable Sales Proceeds (Somerset) 24,192,000
x 10% Interest 1/1/98-9/30/98 7.5%
- ---------------------------------------------------------------------------------
Benefit to Unitholders $1,814,400
------------
Total Estimated Benefit $4,114,476
===========
</TABLE>
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<PAGE> 59
<TABLE>
<S> <C> <C>
Example No. 3:
(Based on only 4 systems closing March 31, 1998, and assuming that Somerset
never closes)
Settlement Fund $777,500
+ 10% Interest on 4 Systems 1/1/98-3/31/98 $19,438
----------
Benefit to Settlement Class $796,938
Est. Distributable Sales Proceeds (4 Systems)
39,808,000
x 10% Interest 1/1/98-3/31/98 2.5%
-----------
Benefit to Unitholders $995,200
-----------
Total Estimated Benefit $1,792,138
===========
</TABLE>
These examples, which assume monetary benefits of between $1,792,138 and
$4,114,475, amount to a recovery ranging from approximately $25 to $57 per Unit,
based on 71,879 Units outstanding.
20. Pursuant to the Settlement Agreement, the Court will enter an order
that each and every claim of each and every member of the Settlement Class, the
Representative Plaintiff and their related parties, is fully, finally, and
forever conclusively released, relinquished and discharged as against Defendants
and their related parties, including the three appraisers who appraised the
cable systems pursuant to the Falcon Partnership Agreement: Arthur Andersen LLP,
Kane Reece Associates, Inc., and Communications Equity Associates, Inc.
21. If the Settlement is approved, those members of the Settlement Class
who do not file a request for exclusion will receive a distribution from the
Settlement Fund, in proportion to the number of Units they owned on June 30,
1997.
22. If the Settlement is approved, all claims by members of the
Settlement Class who do not seek to be excluded from the Settlement Class, will
be barred by the Judgment dismissing all claims against the Defendants and their
related parties (including
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<PAGE> 60
the appraisers) with prejudice, and such claims will be deemed to have been
released.
III. ATTORNEYS' FEES, LITIGATION AND NOTICE COSTS
AND COMPENSATION TO THE REPRESENTATIVE PLAINTIFF
23. All applications for recovery of attorneys' fees and litigation
costs incurred by the Representative Plaintiff and Class Counsel are subject to
Court approval. The Representative Plaintiff and Class Counsel have invested
substantial time, on a priority basis, to protect and prosecute the claims
asserted in this case. The Representative Plaintiff and Class Counsel have also
incurred out-of-pocket costs and expenses protecting and prosecuting the
Settlement Class claims, taking the risk that they might never be reimbursed for
those costs if the litigation proved unsuccessful.
24. In class actions, counsel who generate a monetary recovery for the
benefit of the class are entitled to an award of reasonable attorneys' fees. The
Representative Plaintiff and Class Counsel intend to submit an application or
applications for distributions to them from the Settlement Fund and the accrued
interest on the net purchase price for: (i) an award of attorneys' fees not to
exceed twenty-five percent (25%) of the Settlement Fund and the Accrued Interest
on the net purchase price; (ii) reimbursement of actual expenses, including the
fees of any experts or consultants, incurred in connection with prosecuting the
Class Action; and (iii) an incentive award payable to the Representative
Plaintiff not to exceed $50,000. Class Counsel reserves the right to make
further applications for fees and expenses as they deem appropriate. In
particular, Class Counsel
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<PAGE> 61
may apply to the Court for an award of reasonable attorneys' fees and
reimbursement of expenses in connection with the litigation benefit obtained
upon the closing of the Somerset transaction.
IV. HEARING ON THE PROPOSED SETTLEMENT
25. YOU ARE NOT REQUIRED TO ATTEND THE CLASS SETTLEMENT HEARING.
26. The hearing on the proposed settlement, the Representative
Plaintiff's request for an incentive award, Class Counsel's request for
attorneys' fees and the reimbursement of costs and expenses, will be held on
March ___, 1998 at [hearing-time], in the Courtroom of the Hon. Bruce Mitchell,
Judge Pro Tem, Superior Court of California in and for the County of Los
Angeles, 111 North Hill Street, Los Angeles, California, 90012. The Settlement
Hearing may be continued without further notice.
27. Any Settlement Class member who objects to the proposed settlement
or any part thereof and who wishes to appear and be heard at the Settlement
Hearing must file on or before February 20, 1998, with the Court, at 111 North
Hill Street, Los Angeles, California, 90012, written objections and copies of
any papers and briefs in support of their position with copies served upon and
actually received by Class Counsel and Defendants' Counsel no later than
February 20, 1998:
ROBERT C. SCHUBERT RICHARD H. BOROW, P.C.
JUDEN JUSTICE REED DAVID SIEGAL
SCHUBERT & REED LLP SETH PIERCE
Two Embarcadero Center IRELL & MANELLA LLP
Suite 1050 1800 Avenue of the Stars
San Francisco, CA 94111 Suite 900
(Class Counsel) Los Angeles, CA 90067-4276
(Counsel for Defendants)
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<PAGE> 62
28. If you wish to submit written comments on, or objections to, the
proposed settlement, the Representative Plaintiff's request for an incentive
award, or Class Counsel's request for attorneys' fees and reimbursement of costs
and expenses, you may do so provided that your comments, objections and any
materials which you wish the Court to consider are filed with the Clerk of the
Court at the address listed above no later than February 20, 1998, with copies
served upon and actually received by Class Counsel and Defendants' Counsel no
later than February 20, 1998. Comments or objections which are not filed by
February 20, 1998, or which have not been received by Class Counsel and
Defendants' Counsel by that date, will not be considered by the Court.
29. Any Settlement Class member who does not object in the manner
provided above shall be deemed to have waived such objection and shall forever
be foreclosed from objecting to the fairness or adequacy of the proposed
settlement, any incentive award to the Representative Plaintiff, or any award of
attorneys' fees or reimbursement of costs and expenses.
30. The presentation of objections at or before the settlement Hearing
does not constitute a request to be excluded from the settlement. In order to be
excluded from the Settlement, and not be bound by the Final Judgment, a Class
member must submit a valid and timely Exclusion Request as described in Section
VI of this Notice. IF YOU REQUEST EXCLUSION, YOU WILL FORFEIT YOUR RIGHT TO
RECEIVE ANY PROCEEDS FROM THE SETTLEMENT FUND.
V. AUTOMATIC DISTRIBUTION OF THE SALES PROCEEDS
AND THE SETTLEMENT FUND
31. Upon the closing of the sale of each of the five systems, Falcon
will distribute the total Distributable Sales
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<PAGE> 63
Proceeds of each such sale to the Unitholders in accordance with the provisions
of the Falcon Partnership Agreement.
32. Upon the closing of the sale of each of the five systems, the
portion of the Settlement Fund attributable to each system sold shall be paid to
the Settlement Fund Distribution Agent for distribution on the Effective Date
pro rata to the Settlement Class members.
33. IF THE SETTLEMENT IS APPROVED AND THE JUDGMENT BECOMES FINAL,
PAYMENT OF THESE AMOUNTS WILL BE AUTOMATIC. YOU DO NOT NEED TO FILE A CLAIM TO
RECEIVE PAYMENT OF THESE AMOUNTS.
VI. PROCEDURE FOR REQUESTING EXCLUSION FROM THE CLASS,
AND NOT PARTICIPATING IN THE SETTLEMENT
OR BEING BOUND BY ANY COURT JUDGMENTS
34. If you do not wish to be included in the Settlement Class and you do
not wish to participate in the proposed settlement described in this Notice, you
may request to be excluded. To do so, you must send a written request to be
excluded (the "Exclusion Request") which is received no later than February 20,
1998. You must set forth the name of this litigation (Isaac, et al., v. Falcon
Classic Cable Income Properties, L.P., et al., No. BC177205), your name, address
and telephone number, and the name and address of the record owner, if different
from your own. You must also set forth the total number of Falcon Units which
you held as of June 30, 1997. The Exclusion Request should be addressed as
follows:
Falcon Classic Cable Income Properties L.P.
C/o Gemisys, Attention: Diana Wiegand
7103 South Revere Parkway
Englewood, CO 80112
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<PAGE> 64
Copies of the request to be excluded must be sent to:
ROBERT C. SCHUBERT RICHARD H. BOROW, P.C.
JUDEN JUSTICE REED DAVID SIEGAL
SCHUBERT & REED LLP SETH PIERCE
Two Embarcadero Center IRELL & MANELLA LLP
Suite 1050 1800 Avenue of the Stars
San Francisco, CA 94111 Suite 900
(Class Counsel) Los Angeles, CA 90067-4276
(Counsel for Defendants)
DO NOT REQUEST EXCLUSION IF YOU WISH TO RECEIVE YOUR SHARE OF THE SETTLEMENT
FUND.
35. If you validly request exclusion from the Settlement Class, (a) you
will be excluded from the Settlement Class, (b) you will not share in the
Settlement Fund described herein, (c) you will not be bound by any judgment
entered in the litigation, (d) you will not be precluded from prosecuting an
individual claim, if timely, against any Defendant or their related parties,
including the appraisers, based on the matters alleged in the litigation.
36. If you do not request to be excluded from the Settlement Class, you
will automatically receive your share of the Settlement Fund and will be bound
by any and all determinations or judgments in the litigation in connection with
the settlement entered into or approved by the Court, whether favorable or
unfavorable to the Settlement Class, including all releases of claims.
37. Any person or entity which has requested exclusion from the
Settlement Class may elect to rescind that request, and that person or entity's
request for exclusion shall be null and void provided that he, she, or it
communicates his, her, or its decision to rescind to Defendant's Counsel and/or
Class Counsel at or before the Settlement Hearing.
VII. ADDITIONAL INFORMATION
38. The foregoing is only a summary of this case, the
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<PAGE> 65
Settlement, and the matters relating to them. For more detailed information, you
may review the complete Court files at the office of the Clerk of the Superior
Court of California in and for the County of Los Angeles, 111 North Hill Street,
Los Angeles, California, 90012, during its regular business hours. Alternatively
copies of the Complaint and the Settlement Agreement may be obtained upon
request to Class Counsel at the following address:
ROBERT C. SCHUBERT
JUDEN JUSTICE REED
SCHUBERT & REED LLP
Two Embarcadero Center
Suite 1050
San Francisco, CA 94111
Telephone: (415) 788-4220
39. Should you have any questions with respect to these matters, you
should direct them to Class Counsel, or if you choose, to your own attorney.
PLEASE DO NOT CONTACT THE COURT.
VIII. NOTICE TO BANKS, BROKERS AND OTHER NOMINEES
40. Banks, brokerage firms, institutions, and other persons or entities
who are nominees, who held Units of Falcon for the beneficial interest of other
persons or entities as of June 30, 1997 should (1) provide the transfer agent
(Gemisys) with the names and addresses of such beneficial purchasers within five
(5) days of receipt of this Notice, or (2) forward a copy of this Settlement
Notice to each such beneficial owner promptly after receipt thereof and provide
Gemisys with written confirmation that the notice has been so forwarded.
Defendants offer to advance the reasonable costs and expenses of complying with
this provision upon submission of appropriate documentation to Gemisys.
Additional copies of this Settlement Notice may be obtained from
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<PAGE> 66
Gemisys for forwarding to such beneficial owners. All such correspondence should
be addressed as follows:
Falcon Classic Cable Income Properties L.P.
C/o Gemisys, Attention: Diana Wiegand
7103 South Revere Parkway
Englewood, CO 80112
Telephone: (303) 705-6000
Fax: (303) 705-6171
DATED: January __, 1998 BY THE ORDER OF THE SUPERIOR COURT OF
CALIFORNIA IN AND FOR THE COUNTY OF LOS ANGELES
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<PAGE> 67
SCHUBERT & REED LLP
Robert C. Schubert (State Bar No. 62684)
Juden Justice Reed (State Bar No. 153748)
Two Embarcadero Center
Suite 1050
San Francisco, California 94111
Telephone: (415) 788-4220
Attorneys for Plaintiffs
and the Settlement Class
IRELL & MANELLA LLP
Richard H. Borow, P.C. (State Bar No. 38429)
David Siegel (State Bar No. 101355)
Seth E. Pierce (State Bar No. 186576)
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Telephone: (310) 277-1010
Attorneys for Defendants Falcon
Classic Cable Income
Properties, L.P., Falcon
Classic Cable Investors, L.P.,
Falcon Holding Group, L.P.,
Marc B. Nathanson, and Frank J. Intiso
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
PAUL J. ISAAC, Individually and On Behalf of )) CASE NO. BC177205
All Others Similarly Situated, ))
)) CLASS ACTION
Plaintiff, ))
)) SUMMARY NOTICE FOR PUBLICATION
v. ))
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.,
FALCON CLASSIC CABLE INVESTORS, L.P., FALCON
HOLDING GROUP, L.P., MARC B. NATHANSON, FRANK
J. INTISO, and DOES 1-100, INCLUSIVE,
Defendants.
- --------------------------------
<PAGE> 68
TO ALL PERSONS OWNING THE LIMITED PARTNERSHIP UNITS ("Units") OF FALCON
CLASSIC CABLE INCOME PROPERTIES, L.P. ("Falcon") AND ALL PERSONS OWNING UNITS OF
FALCON AS OF JUNE 30, 1997:
PLEASE BE ADVISED that on or about September 2, 1997, a class action
lawsuit was filed claiming that Falcon was selling its cable television systems
at an inadequate price.
YOU ARE HEREBY NOTIFIED that the Representative Plaintiff in the above
entitled litigation has entered into a settlement resolving all of the issues
raised in the above entitled litigation as to all of the listed defendants.
PLEASE BE ADVISED that your rights may be affected by the settlement of
this litigation. If you have not received a Notice of Pendency and Settlement of
Class Action, you may obtain a copy by contacting: Falcon Classic Cable Income
Properties L.P., c/o Gemisys, Attention: Diana Wiegand, 7103 South Revere
Parkway, Englewood, Colorado 80112, Telephone No. (303) 705-6000, Facsimile No.
(303) 705-6171. You may also contact Class Counsel: Robert C. Schubert, Esq. or
Juden Justice Reed, Esq., Schubert & Reed LLP, Two Embarcadero Center, Suite
1050, San Francisco, California 94111, Telephone No. (415) 788-4220, Facsimile
No. (415) 788-0161.
PLEASE DO NOT CONTACT THE COURT REGARDING THIS NOTICE.
Dated: January __, 1998 BY ORDER OF THE SUPERIOR COURT OF
THE STATE OF CALIFORNIA,
COUNTY OF LOS ANGELES
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<PAGE> 69
SCHUBERT & REED LLP
Robert C. Schubert (State Bar No. 62684)
Juden Justice Reed (State Bar No. 153748)
Two Embarcadero Center
Suite 1050
San Francisco, California 94111
Telephone: (415) 788-4220
Attorneys for Plaintiff
and the Settlement Class
IRELL & MANELLA LLP
Richard H. Borow, P.C. (State Bar No. 38429)
David Siegel (State Bar No. 101355)
Seth E. Pierce (State Bar No. 186576)
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Telephone: (310) 277-1010
Attorneys for Defendants Falcon Classic
Cable Income Properties, L.P., Falcon
Classic Cable Investors, L.P., Falcon
Holding Group, L.P., Marc B. Nathanson, and
Frank J. Intiso
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
PAUL J. ISAAC, Individually and On Behalf of ) CASE NO. BC177205
All Others Similarly Situated, )
) CLASS ACTION
Plaintiff, )
) [PROPOSED] JUDGMENT
v. )
)
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P., )
FALCON CLASSIC CABLE INVESTORS, L.P., FALCON )
HOLDING GROUP, L.P., MARC B. NATHANSON, FRANK )
J. INTISO, and DOES 1-100, INCLUSIVE, )
)
Defendants. )
- --------------------------------
<PAGE> 70
WHEREAS, on or about September 2, 1997, a class action lawsuit was
commenced in this Court on behalf of all Persons(2) owning units of Falcon
Classic Cable Income Properties, L.P., against Falcon Classic Cable Income
Properties, L.P., Falcon Classic Cable Investors, L.P., Falcon Holding Group,
L.P., Marc B. Nathanson, and Frank J. Intiso ("Defendants") alleging causes of
action for Breach of Fiduciary Duty, Breach of Contract, and Breach of the
Implied Covenant of Good Faith and Fair Dealing in connection with the sale of
the Cable Systems owned by Falcon Classic Cable Income Properties, L.P. to the
Purchasers (the "Litigation");
WHEREAS, the Defendants have denied any liability or wrongdoing;
WHEREAS, the Representative Plaintiff and the Settlement Class (the
"Plaintiffs," and together with the Defendants, the "Parties"), have executed
and filed a Stipulation of Settlement, dated as of December 31, 1997, providing
for the settlement of the Litigation subject to approval by this Court and entry
of this Judgment (the "Stipulation");
WHEREAS, the Court entered an Order thereon dated January __, 1998,
inter alia, (a) certifying a Settlement Class for purposes of implementing the
Stipulation; (b) directing that notice of the proposed settlement of the
Litigation be given to Members of the Settlement Class by first-class mail and
publication; and (c) scheduling a hearing to determine whether the proposed
settlement
- ----------
(2) Unless otherwise indicated, this preliminary statement incorporates by
reference the definitions in the Stipulation of Settlement, dated as of December
31, 1997, and all terms used herein shall have the same meanings as set forth in
the Stipulation of Settlement.
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<PAGE> 71
should be approved as just, fair, reasonable and adequate (the "Notice Order");
WHEREAS, in accordance with the Notice Order, and as evidenced by the
filing of declarations with this Court on February __, 1998, (a) the Notice was
caused to be mailed to the Members of the Settlement Class in a timely manner,
advising them of the pendency and proposed settlement of the Litigation and of
the opportunity to object to or opt-out of the settlement; and (b) the Summary
Notice was published on January __, 1998, in the national edition of The Wall
Street Journal;
WHEREAS, approval of the Stipulation will result in substantial savings
in time and money for the Court and the litigants, and will further the
interests of justice;
WHEREAS, the Stipulation is the product of good faith arms' length
negotiations between the Parties; and
WHEREAS, a hearing was held on March 3, 1998, at which all interested
Persons were given an opportunity to be heard; and the Court having read and
considered all submissions and all objections in connection with the proposed
settlement, and having reviewed and considered the files and records herein, and
good cause appearing therefor,
NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:
1. This Judgment ("Judgment") incorporates by reference the definitions
in the Stipulation, and all terms used herein shall have the same meanings as
set forth in the Stipulation
2. This Court has jurisdiction over the subject matter of the Litigation
and over all parties to the Litigation, including all Members of the Settlement
Class.
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<PAGE> 72
3. A Settlement Class, as defined in the Stipulation, is hereby
established in this action, pursuant to ss.382 of the California Code of Civil
Procedure, as modified by ss.15701 of the California Corporations Code. With
respect to the Settlement Class, while the issue of certification has not been
fully litigated, based on the Complaint and the evidence before the Court
(including the Stipulation) it appears that:
(a) Since this is a class action brought on behalf of limited
partners, numerosity is not required. In any event, there are more than 7,500
Falcon Unitholders, thus satisfying the numerosity requirement.
(b) There are questions of law and fact common to the class
which, as to the settlement and the underlying Litigation, predominate over
questions affecting only individual Members of the Settlement Class. All of the
claims averred in the Complaint are based on the Defendants' purported breach of
the Partnership Agreement or breach of fiduciary duties. These alleged breaches
are a prerequisite to any recovery by any and all Settlement Class Members. In
addition, all of the claims are based on the conduct of the Appraisal Process,
the adequacy of the actual price to be paid for the assets, and the timing of
the transaction. All of these issues are the same for each and every Member of
the Settlement Class.
(c) The claims of the Representative Plaintiff appear to be
typical of the claims of the Settlement Class and Class Counsel and the
Representative Plaintiff do not appear to have been unable to pursue any
available claims.
(d) In negotiating and entering into the Stipulation, and at all
other times during the pendency of this Litigation, the
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<PAGE> 73
Representative Plaintiff and Class Counsel have fairly and adequately
represented and protected the interests of the Settlement Class. Class Counsel
and the Representative Plaintiff conducted substantial investigation regarding
the claims before filing the Complaint. Following initiation of the Litigation,
Class Counsel and the Representative Plaintiff conducted substantial formal and
informal discovery and evidence gathering (including consultation with experts,
review of public filings, review of documents produced by Defendants; interviews
with key Falcon personnel, including one of the Individual Defendants; detailed
analysis of the appraisals; and legal research regarding the claims). In all
respects, Class Counsel's representation has been adequate and vigorous.
(e) A class action is superior to other available methods for the
fair and efficient adjudication of this Litigation and settlement. In the event
that this Judgment does not become final, Defendants shall have the right to
challenge class certification, with the Plaintiffs bearing the burden of proving
satisfaction of the statutory and common law prerequisites.
4. The notice provided to the Members of the Settlement Class --
direct mailings to all Falcon Unitholders as of June 30, 1997 and all current
Falcon Unitholders (_____ total mailings), publication of the Summary Notice in
the national edition of The Wall Street Journal, notice to nominees and
broker-dealers, including Dean Witter Reynolds, Inc. and Dean Witter, Discover &
Co., who purchased units on behalf of others, as evidenced by the declarations
on file with this Court, constitutes the best notice practicable under the
circumstances and includes individual notice
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<PAGE> 74
to all Members of the Settlement Class who could be identified with reasonable
effort. Said notice constitutes valid, due and sufficient notice to all Persons
in the Settlement Class, complying fully with the requirements of California law
and any other applicable law, including the due process clause of the
Constitution of the United States.
5. The settlement as set forth in the Stipulation is hereby approved in
all respects. This Court finds that the settlement is in all respects just,
fair, reasonable and adequate to the Falcon Unitholders and the Members of the
Settlement Class. This settlement confers substantial benefits on both current
and former Falcon Unitholders, without the risk and uncertainty of litigation.
In light of the defenses available to the Defendants, recovery without
settlement was far from certain. In contrast, the settlement provides certainty
of closing with respect to the Cable Systems other than Somerset and substantial
monetary compensation in addition to that provided in the Asset Purchase
Agreement. The settlement recognizes the distinction between the legal positions
of Persons holding claims as a result of Falcon's purported misconduct and those
entitled to receive the proceeds of the partnership's liquidation. This
carefully structured settlement represents a well balanced resolution of the two
groups' claims. In any event, there is substantial overlap between the two
groups as only _______ Falcon Units were sold between June 30, 1997 and
September 2, 1997.
6. The Persons identified in Exhibit 1 hereto (the "Opt-Outs") have
filed timely and valid requests for exclusion and are hereby excluded from the
Settlement Class. The Opt-Outs are not entitled to receive any portion of the
Settlement Fund. In
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<PAGE> 75
addition, the Opt-Outs are not bound by the Stipulation or by this Judgment of
dismissal. The Opt-Outs and any other excluded Persons may pursue their own
individual remedies, if any, against the Defendants, but are hereby enjoined and
restrained from filing or prosecuting any class action based on any of the
Released Claims. All Settlement Class Members are bound by this Judgment and the
Stipulation, including all releases provided for therein.
7. The Stipulation, and the settlement contained therein, reflects a
compromise and settlement of disputed claims and is not a finding on the merits,
nor an admission or concession by the Defendants, nor is this Judgment or any
other pleading in this matter, a finding of the validity of any claims in the
Litigation. Indeed, there has never been any adverse finding against any of the
Defendants on any of the merits. Further, neither this Judgment, the
Stipulation, nor any document referred to therein, nor any action taken to
execute or carry out the Stipulation or this Judgment, may be construed as, or
may be used as an admission by or against the Defendants, their Related Parties,
or any other Person, of any fault, wrongdoing or liability whatsoever. This
Judgment, the Stipulation, any documents referred to therein, the fact of
execution of the Stipulation, and any action taken to carry out the Stipulation
or this Judgment shall not be offered or received in evidence in any action or
proceeding against any of the Defendants or their Related Parties in any court,
administrative agency or other tribunal for any purpose whatsoever other than to
enforce the provisions of this Judgment, the Stipulation, or any related
agreement or release; except that the Defendants and/or their Related Parties
may file the Stipulation, the Judgment, and any documents referred to therein,
in any action
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<PAGE> 76
that may be brought against them (including, but not limited to, this or related
Litigation) as evidence of the settlement or to support a defense or
counterclaim based on principles of res judicata, collateral estoppel, release,
good faith settlement, judgment bar or reduction or any other theory of claim
preclusion or issue preclusion or similar defense.
8. This Court hereby dismisses on the merits, with prejudice, without
costs (except as otherwise provided in the Stipulation) the Complaint herein and
this Litigation in all respects including all Released Claims brought or which
might have been brought against the Defendants and their Related Parties.
9. This settlement is the product of substantial, good faith, arms'
length negotiations between Class Counsel and Defendants' Counsel, and is, in
all respects just, fair, reasonable and adequate to the Settlement Class
Members, and in good faith within the meaning of the principles of law as
enunciated by and decisions under California Code of Civil Procedure ss.877.6
and Tech-Bilt, Inc. v. Woodward-Clyde & Assoc., 38 Cal. 3d 488 (1985) and its
progeny. Among other things, this settlement was negotiated by competent counsel
experienced in complex litigation, there is no evidence of any collusion, fraud
or tortious conduct aimed at causing injury to the interests of any Person, the
settlement represents a good faith estimate of the Defendants' proportionate
liability, if any, the only insurance company issuing potentially applicable
policies has stated that it believes that no coverage is applicable, and the
various aspects of the settlement consideration are just, fair, reasonable, and
equitable under the circumstances.
10. Each and every Released Claim of each and every Member
-8-
<PAGE> 77
of the Settlement Class, the Representative Plaintiff and each of their
respective Related Parties, is hereby fully, finally, and forever released,
relinquished and discharged, and is hereby fully, finally, and forever
conclusively deemed to be released, relinquished and discharged, as against the
Defendants and each of their respective Related Parties (including, but not
limited to Arthur Anderson LLP, Kane Reece Associates, Inc., Communications
Equity Associates, Inc., and each of their respective Related Parties). The
Representative Plaintiff, the Members of the Settlement Class, each of their
respective Related Parties and all Persons in privity with them, and all Persons
acting in concert or participation with them, either directly, indirectly,
representatively or in any other capacity, are hereby forever barred, restrained
and enjoined from filing, prosecuting, pursuing, or litigating any of the
Released Claims against the Defendants and each of their respective Related
Parties in this or any other forum.
11. Falcon and each of its Related Parties shall be deemed to have
fully, finally, and forever released, relinquished and discharged all of the
other Defendants and each of their respective Related Parties from all claims
(including Unknown Claims related thereto), arising out of, relating to, or in
connection with the operation of Falcon, including, but not limited to, the sale
of Falcon's Cable Systems, claims for contribution and/or indemnity, and claims
that are implied or express, contractual or otherwise, other than claims based
upon compliance with the Stipulation (the "Falcon Released Claims"). Falcon and
each of its Related Parties, and all Persons in privity with them, and all
Persons acting in concert or participation with
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<PAGE> 78
them, either directly, indirectly, representatively or in any other
capacity, are hereby forever restrained and enjoined from prosecuting, pursuing,
or litigating any of the Falcon Released Claims against the Defendants and/or
each of their Related Parties in this or any other forum.
12. Each of the Defendants and each of their respective Related Parties
shall be deemed to have fully, finally, and forever released, relinquished and
discharged each and all of the Settlement Class Members (including the
Representative Plaintiff) and each of their respective Related Parties, from all
claims (including Unknown Claims related thereto), based on, arising out of,
relating to, or in connection with the institution, prosecution, assertion,
settlement or resolution of the Litigation, including the settlement set forth
in the Stipulation, except for the right to enforce the terms of the
Stipulation.
13. This Court reserves jurisdiction, without affecting the finality of
this Judgment, over: (a) implementation of this settlement and any award or
distribution of the Settlement Fund or Additional Payments; (b) hearing and
determining Class Counsel's Fee and Expense Application; (c) enforcing and
administering the Stipulation including any releases contained therein; and (d)
all other matters related or ancillary to the foregoing.
14. No Falcon Unitholder, Settlement Class Member, or their respective
Related Parties shall have any claim against Falcon, the Representative
Plaintiff, Class Counsel, Defendants' Counsel, the Settlement Fund Distribution
Agent, or any claims administrator or other agent designated by Falcon or the
Settlement Fund Distribution Agent, based on distributions made substantially in
accordance with the Stipulation and the
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<PAGE> 79
settlement contained therein, or any further orders of this Court.
15. A separate order shall be entered awarding attorneys' fees and
expenses and any incentive award for the Representative Plaintiff pursuant to
Class Counsel's Fee and Expense Application, if any. Any such order and/or any
appeal thereof shall not disturb or affect the finality or any of the terms of
this Judgment.
Dated: ___________, 1998 _______________________________________
Hon. Bruce Mitchell
Judge Pro Tem of the Superior Court
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EXHIBIT C
1. Following transfer of the Settlement Payments to the Settlement Fund
Distribution Agent, the Settlement Fund Distribution Agent shall invest the
Settlement Fund in short term treasury bills or money market funds backed by the
full faith and credit of the United States Government or fully insured by the
United States Government or an agency thereof and shall reinvest the proceeds of
these short term treasury bills or money market funds as they mature in similar
instruments at their then current market rates.
2. The Defendants and the Settlement Fund Distribution Agent agree to
treat the Settlement Fund as being at all times a "qualified settlement fund"
within the meaning of Treas. Reg. Section 1.468B-1.
3. For purposes of Section 468B of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, the "administrator" shall
be the Settlement Fund Distribution Agent. The Settlement Fund Distribution
Agent shall timely and properly file all informational and other tax returns
necessary or advisable with respect to the Settlement Fund (including without
limitation the returns described in Treas. Reg. Section 1.468B-2(k)). Such
returns shall be consistent with this Stipulation in all respects and in all
events shall reflect that all taxes (including any interest or penalties) on the
income earned by the Settlement Fund shall be paid out of the Settlement Fund as
provided in Paragraph 4 hereof.
4. All (a) taxes (including any interest or penalties) arising with
respect to the income earned by the Settlement Fund, including any taxes or tax
detriments that may be imposed upon the
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Defendants with respect to any income earned by the Settlement Fund for any
period during which the Settlement Fund does not qualify as a "qualified
settlement fund" for Federal or state income tax purposes ("Taxes") and (b)
expenses and costs incurred in connection with the operation and implementation
of this Settlement Fund (including, without limitation, expenses of tax
attorneys and/or accountants, mailing and distribution costs, and expenses
relating to filing (or failing to file) the returns described in Paragraph 3)
("Tax Expenses"), shall be paid out of the Settlement Fund; in all events the
Defendants, Defendants' Counsel, and each of their respective Related Parties
shall have no liability or responsibility for the Taxes or the Tax Expenses. The
Settlement Fund Distribution Agent shall indemnify and hold the Defendants,
Defendants' Counsel, and each of their respective Related Parties harmless for
Taxes and Tax Expenses (including, without limitation, taxes payable by reason
of any such indemnification). Further, Taxes and Tax Expenses shall be treated
as, and considered to be, a cost of administration of the Settlement Fund and
shall be timely paid by the Settlement Fund Distribution Agent out of the
Settlement Fund without prior order from the Court and the Settlement Fund
Distribution Agent shall be obligated (notwithstanding anything herein to the
contrary) to withhold from distribution to Settlement Class Members any funds
necessary to pay such amounts including the establishment of adequate reserves
for any Taxes and Tax Expenses (as well as any amounts that may be required to
be withheld under Treas. Reg. Section 1.468B-2(1)(2)); Defendants, Defendants'
Counsel, and each of their respective Related Parties are not responsible and
shall
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have no liability therefor. The parties hereto agree to cooperate with the
Settlement Fund Distribution Agent, each other, and their tax attorneys and
accountants to the extent reasonably necessary to carry out the provisions of
this settlement.
5. The Settlement Fund shall include any income earned thereon.
6. Defendants and Defendants' Counsel shall have no responsibility for,
interest in, or liability whatsoever with respect to the investment or
distribution of the Settlement Fund, the calculation of disbursements to
Settlement Class Members, or the payment or withholding of Taxes.
