<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission file number 33-60776
Falcon Holding Group, L.P.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 95-4408577
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(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 824-9990
----------------------------
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FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT.
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
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The Exhibit Index is located at Page E-1.
<PAGE> 2
PART I - FINANCIAL INFORMATION
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1995* 1996
------------- -------------
(unaudited)
(Dollars in Thousands)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 15,050 $ 15,876
Receivables:
Trade, less allowance of $830,000 and $754,000 for possible losses 7,378 9,855
Affiliates 10,023 6,755
Other assets 5,419 5,408
Cable materials, equipment and supplies 4,038 4,716
Investment in affiliated partnerships and other investments 11,934 11,305
Property, plant and equipment, less accumulated depreciation
and amortization of $186,274,000 and $214,241,000 228,249 304,800
Franchise cost, less accumulated amortization of
$149,105,000 and $164,683,000 221,057 265,114
Goodwill, less accumulated amortization of
$5,246,000 and $10,351,000 63,516 71,158
Customer lists and other intangible costs, less
accumulated amortization of $5,539,000 and $9,121,000 6,521 80,670
Deferred loan costs, less accumulated amortization
of $3,282,000 and $4,972,000 12,073 15,059
--------- ---------
$ 585,258 $ 790,716
========= =========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
LIABILITIES:
Notes payable $ 669,019 $ 900,989
Accounts payable 5,811 5,109
Accrued expenses and other 35,274 39,795
Customer deposits and prepayments 1,058 1,733
Deferred income taxes 9,085 7,140
Minority interest 227 202
Equity in losses of affiliated partnerships in excess of investment 4,563 3,451
--------- ---------
TOTAL LIABILITIES 725,037 958,419
--------- ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PARTNERS' EQUITY 271,902 271,902
--------- ---------
PARTNERS' DEFICIT:
General partner (12,091) (12,415)
Limited partners (399,423) (426,405)
Unrealized gain (loss) on available-for-sale securities (167) (785)
--------- ---------
TOTAL PARTNERS' DEFICIT (411,681) (439,605)
--------- ---------
$ 585,258 $ 790,716
========= =========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 3
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
----------------------------------
Three months ended
September 30,
----------------------------------
1995 1996
--------- -------
Restated
(Dollars in Thousands)
<S> <C> <C>
REVENUES $ 38,182 $ 59,428
-------- --------
OPERATING EXPENSES:
Service costs 10,411 17,649
General and administrative expenses 6,471 9,711
Depreciation and amortization 13,498 26,413
-------- --------
Total expenses 30,380 53,773
-------- --------
Operating Income 7,802 5,655
INTEREST EXPENSE, NET (13,553) (19,560)
OTHER INCOME (EXPENSE):
Other, net (25) (927)
Equity in net income (loss) of investee
limited partnerships (755) 68
-------- --------
NET LOSS $ (6,531) $(14,764)
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE> 4
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
-----------------------------------
Nine months ended
September 30,
-----------------------------------
1995 1996
-------- --------
Restated
(Dollars in Thousands)
<S> <C> <C>
REVENUES $112,789 $153,803
-------- --------
OPERATING EXPENSES:
Service costs 31,948 42,933
General and administrative expenses 20,950 26,058
Depreciation and amortization 40,593 66,602
-------- --------
Total expenses 93,491 135,593
-------- --------
Operating Income 19,298 18,210
INTEREST EXPENSE, NET (40,373) (50,983)
OTHER INCOME (EXPENSE):
Other, net 13,185 334
Equity in net income (loss) of investee
limited partnerships (3,024) 134
-------- --------
NET LOSS $(10,914) $(32,305)
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE> 5
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
------------------------------
Nine months ended
September 30,
------------------------------
1995 1996
-------- --------
(Dollars in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 30,153 $ 64,866
-------- --------
Cash flows from investing activities:
Acquisition of cable television systems - (247,397)
Capital expenditures (25,763) (35,380)
Increase in intangible assets (1,604) (3,904)
Proceeds from sale of system - 15,000
Proceeds from sale of property, plant and equipment 300 312
Distributions from investee limited partnerships 10 781
Sale of available-for-sale securities 13,490 -
Investments in affiliated partnerships and other investments (668) -
-------- --------
Net cash used in investing activities (14,235) (270,588)
-------- --------
Cash flows from financing activities:
Borrowings from notes payable 8,707 691,382
Repayment of debt (29,139) (485,158)
Deferred loan costs (1,465) (4,676)
Contributions from partners 260 5,000
Minority interest capital contributions 130 -
-------- --------
Net cash (used in) provided by financing activities (21,507) 206,548
-------- --------
Net (decrease) increase in cash and cash equivalents (5,589) 826
Cash and cash equivalents at
beginning of period 10,468 15,050
-------- --------
Cash and cash equivalents at
end of period $ 4,879 $ 15,876
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE> 6
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Falcon Holding Group, L.P., a Delaware limited partnership (the
"Partnership" or "FHGLP"), owns and operates cable television systems serving
small to medium-sized communities and the suburbs of certain cities in 23
states (the "Owned Systems"). The Partnership also controls, holds varying
equity interests in and manages certain other cable television systems for a
fee (the "Affiliated Systems" and, together with the Owned Systems, the
"Systems"). The Affiliated Systems operate cable television systems in 16
states. FHGLP is a limited partnership, the sole general partner of which is
Falcon Holding Group, Inc., a California corporation ("FHGI").
The Partnership was organized on March 29, 1993 to assume the cable
system management operations of FHGI and executed an agreement with four
partnerships that owned certain of the Owned Systems whereby the Partnership
issued partnership units in exchange for the direct and indirect ownership of
more than 99 percent of each of the partnerships (the "Consolidation"). For
accounting purposes, the Consolidation was accounted for as a reorganization of
affiliates under common control and reported in a manner similar to a
pooling-of-interests.
As noted in its latest Annual Report on Form 10-K, on December 28,
1995 the Partnership completed its acquisition of all of the direct and
indirect ownership interests in Falcon First, Inc., a Delaware corporation
("Falcon First" or "First"), which it did not already own. As of December 28,
1995, Falcon First, through wholly-owned subsidiaries, owned cable television
systems in Georgia, Alabama, Mississippi and New York. Prior to the
transaction, the Partnership had managed the First cable systems for a fee and
held an indirect, minority interest in its former parent company, Falcon First
Communications, L.P. Falcon First was previously managed by the Partnership
and, as such, classified as an "Affiliated Partnership" in periods prior to the
acquisition date. Commencing December 28, 1995, the systems owned by Falcon
First have been included as Owned Systems.
The Falcon First acquisition was accounted for by the purchase method
of accounting, whereby the purchase price was allocated to the assets acquired
and liabilities assumed based on the estimated fair values at the date of
acquisition. Due to the proximity of the acquisition date to December 31,
1995, no operating results were included for Falcon First for 1995 except for
the management fees received by FHGLP pursuant to its prior management
agreement with First. As a result, the historical results of operations for
1995 are not comparable to the 1996 results, which include the operations of
First.
On July 12, 1996, the Partnership, through a newly-formed and
wholly-owned partnership, Falcon Cable Systems Company II, L.P. ("FCSC II"),
acquired the assets of Falcon Cable Systems Company ("FCSC"), an Affiliated
Partnership, for approximately $247.4 million in cash. FCSC was previously
managed by the Partnership for a fee and, as such, classified as an "Affiliated
Partnership" in periods prior to the acquisition date. Commencing July 12,
1996, the FCSC II systems have been included as Owned Systems.
The acquisition of the FCSC assets was funded primarily by bank
borrowings under a $775 million Amended and Restated Bank Credit Agreement.
The Partnership paid transaction and financing costs of
-6-
<PAGE> 7
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - BASIS OF PRESENTATION (Continued)
approximately $5.6 million on July 12, 1996. Also in connection with the
acquisition, FCSC paid to the Partnership in cash deferred management fees and
reimbursed expenses of approximately $5.2 million.
On August 1, 1996, certain existing limited partners of the
Partnership controlled by Marc B. Nathanson, Chairman and Chief Executive
Officer of the General Partner, purchased additional common partnership units
in the Partnership for $5.0 million in cash. The proceeds were utilized to
temporarily repay outstanding debt under the Partnership's Amended and Restated
Bank Credit Agreement.
-7-
<PAGE> 8
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - BASIS OF PRESENTATION (Continued)
The following tables set forth certain pro forma combined operating
data assuming that the acquisition of the stock of First and the assets of FCSC
had occurred on January 1, 1995:
<TABLE>
<CAPTION>
Unaudited
----------------------------------------------------------------------------------
Three months ended September 30, 1995
Historical
-------------------------------------------
FHGLP as Falcon Pro Forma Pro Forma
Restated First FCSC Adjustments(1) Combined
-------- ------- ------ ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
OPERATIONS
STATEMENT DATA
Revenues $ 38,182 $ 7,953 $13,398 $(1,061) $ 58,472
Service, general and
administrative costs and
expenses 16,882 3,933 7,219 (1,061) 26,973
Depreciation and amortization 13,498 3,387 3,785 4,032 24,702
-------- ------- ------- ------- --------
Operating income 7,802 633 2,394 (4,032) 6,797
Interest income (expense), net (13,553) (3,325) (4,314) 826 (20,366)
-------- ------- ------- ------- --------
Other income (expense), net (780) (201) (32) 1,972 959
-------- ------- ------- ------- --------
Net loss $ (6,531) $(2,893) $(1,952) $(1,234) $(12,610)
======== ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
Three months ended September 30, 1996
-------------------------------------------------------------------
Historical Historical Pro Forma Pro Forma
FHGLP FCSC Adjustments(1) Combined
------------ ----------- ------------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
OPERATIONS
STATEMENT DATA
Revenues $ 59,428 $1,800 $ (90) $ 61,138
Service, general and
administrative costs and
expenses 27,360 741 (90) 28,011
Depreciation and 26,413 546 310 27,269
-------- ------ ----- --------
amortization
Operating income 5,655 513 (310) 5,858
Interest income (expense), (19,560) (386) (106) (20,052)
net
Other income (expense), net (859) 78 - (781)
-------- ------ ----- --------
Net income (loss) $(14,764) $ 205 $(416) $(14,975)
======== ====== ===== ========
</TABLE>
__________________________________
(1) The pro forma adjustments relate to the elimination of management fee income
and expense between the Partnership, Falcon First and FCSC; to adjustments to
depreciation and amortization expense to reflect the acquisitions; to
adjustments to interest expense to reflect the effects of the refinancing that
took place on December 28, 1995, as amended on July 12, 1996; to record
estimated future tax benefits related to Falcon First; and to the elimination
for the nine month period of non-recurring other income related to the
FCSC acquisition.
-8-
<PAGE> 9
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
Unaudited
Nine months ended September 30, 1995
---------------------------------------------------------------------------------
Historical
------------------------------------------
FHGLP as Falcon Pro Forma Pro Forma
Restated First FCSC Adjustments(1) Combined
-------- ------- ------- ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
OPERATIONS
STATEMENT DATA
Revenues $112,789 $ 23,464 $ 39,546 $ (3,133) $172,666
Service, general and
administrative costs and
expenses 52,898 11,612 21,363 (3,133) 82,740
Depreciation and amortization 40,593 12,407 13,037 12,096 78,133
-------- -------- -------- -------- --------
Operating income 19,298 (555) 5,146 (12,096) 11,793
Interest income (expense), (40,373) (9,849) (12,482) 1,087 (61,617)
net
Other income (expense), net 10,161 (504) 7,427 7,268 24,352
-------- -------- -------- -------- --------
Net income (loss) $(10,914) $(10,908) $ 91 $ (3,741) $(25,472)
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
Nine months ended September 30, 1996
------------------------------------------------------------------
Historical Historical Pro Forma Pro Forma
FHGLP FCSC Adjustments(1) Combined
------------- ----------- ------------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
OPERATIONS
STATEMENT DATA
Revenues $153,803 $29,037 $(1,452) $181,388
Service, general and
administrative costs and
expenses 68,991 15,397 (1,452) 82,936
Depreciation and
amortization 66,602 7,952 5,548 80,102
-------- ------- ------- --------
Operating income 18,210 5,688 (5,548) 18,350
Interest income (expense), (50,983) (8,705) (1,352) (61,040)
net
Other income (expense), net 468 1,402 (1,567) 303
-------- ------- ------- --------
Net loss $(32,305) $(1,615) $(8,467) $(42,387)
======== ======= ======= ========
</TABLE>
__________________________________
(1) The pro forma adjustments relate to the elimination of management fee income
and expense between the Partnership, Falcon First and FCSC; to adjustments to
depreciation and amortization expense to reflect the acquisitions; to
adjustments to interest expense to reflect the effects of the refinancing that
took place on December 28, 1995, as amended on July 12, 1996; to record
estimated future tax benefits related to Falcon First; and to the elimination
for the nine month period of non-recurring other income related to the
FCSC acquisition.
-9-
<PAGE> 10
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONCLUDED)
NOTE 2 - INTERIM FINANCIAL STATEMENTS
The interim financial statements for the three and nine months ended
September 30, 1996 and 1995 are unaudited. These condensed interim financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Partnership's latest Annual Report on Form
10-K and the 1995 Form 10-K filed by FCSC. In the opinion of management, such
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of such periods.
The results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results for the entire year.
NOTE 3 - MINORITY INTEREST
Included in the operations of Falcon Telecable, a wholly-owned
subsidiary partnership, are the results of operations of Lake Las Vegas
Cablevision, L.P., a Delaware limited partnership, a joint venture owned 66
2/3% by Falcon Telecable. The minority interest reflects the 33 1/3% of the
venture that Falcon Telecable does not own.
NOTE 4 - SALE OF SYSTEMS
On July 1, 1996, the Partnership sold certain Owned Systems located in
Georgia that were acquired from Falcon First in December 1995. The sales price
of $15 million approximated book value. These cable systems served
approximately 9,500 homes subscribing to cable service at June 30, 1996.
NOTE 5 - RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
NOTE 6 - RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
As a result of the December 28, 1995 acquisition of the stock of
Falcon First, Inc., the Partnership has restated the consolidated Statement of
Operations for the three and nine months ended September 30, 1995 to reflect
FHGLP's equity in the net losses of Falcon First, Inc. which were not
previously recorded. Such losses were not previously recorded because FHGLP
recorded losses only to the extent of its obligation as the ultimate general
partner of Falcon First Communications, L.P., which previously owned 100% of
the stock of Falcon First, Inc. The effect of the restatement was to increase
equity in net loss of Affiliated Partnerships and net loss for the three and
nine months ended September 30, 1995 by $801,000 and $3,022,000 respectively
and to increase partner's deficit by $10,513,000 to reflect the full effect of
the restatement through December 31, 1995.
-10-
<PAGE> 11
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996 (the "1996 Telecom Act"). This statute
substantially changed the competitive and regulatory environment for
telecommunications providers by significantly amending the Communications Act
of 1934, including certain of the rate regulation provisions previously imposed
by the Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act"). Compliance with those rate regulations has had a negative
impact on the Partnership's revenues and cash flow. However, in accordance
with policy decisions by the Federal Communications Commission (the "FCC"), the
Partnership will increase regulated service rates in the future in response to
specified historical and anticipated future cost increases, although certain
costs may continue to rise at a rate in excess of that which the Partnership
will be permitted to pass on to its customers. The 1996 Telecom Act provides
that certain of the rate regulations will be phased-out altogether in 1999.
Further, the regulatory environment will continue to change pending, among
other things, the outcome of legal challenges and FCC rulemaking and
enforcement activity in respect of the 1992 Cable Act and the completion of a
significant number of FCC rulemakings under the 1996 Telecom Act. There can be
no assurance as to what, if any, future action may be taken by the FCC,
Congress or any other regulatory authority or court, or the effect thereof on
the Partnership's business. Accordingly, the Partnership's historic interim
financial results as described below are not necessarily indicative of future
performance.
This Report includes certain forward looking statements regarding,
among other things, future results of operations, regulatory requirements,
competition, capital needs, the possible purchase or sale of assets by the
Partnership and general business conditions applicable to the Partnership.
Such forward looking statements involve risks and uncertainties including,
without limitation, the uncertainty of legislative and regulatory changes and
the rapid developments in the competitive environment facing cable television
operators such as the Partnership. In addition to the information provided or
referred to herein, reference is made to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1995 for additional information
regarding such matters and the effect thereof on the Partnership's business.
As discussed in Note 1 to Condensed Consolidated Financial Statements,
the historical results of operations of the Partnership for 1995 did not include
the results of Falcon First or FCSC, and for the period January 1, 1996 through
July 11, 1996 did not include the results of FCSC. In order to provide a more
accurate description of the changes in the Partnership's 1996 results of
operations compared to 1995, the discussion that follows is based upon the pro
forma 1996 results of operations compared to the pro-forma combined 1995 results
that are set forth in Note 1 to Condensed Consolidated Financial Statements.
RESULTS OF OPERATIONS (Pro forma)
The Partnership's revenues increased from $58.5 million to $61.1
million, or by 4.6%, and $172.7 million to $181.4 million, or by 5.1%, for the
three and nine months ended September 30, 1996 compared to the corresponding
periods in 1995. The $2.6 million net increase in revenues for the three months
ended September 30, 1996 as compared to the corresponding period in 1995 was due
to increased cable service revenues, which was caused principally by increases
of $2.9 million due to increases in regulated service rates implemented in April
1996, $748,000 due to the restructuring of The Disney Channel from a premium
channel to a tier channel on July 1,
-11-
<PAGE> 12
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
RESULTS OF OPERATIONS (CONTINUED)
1996, and $582,400 due to increases related to other revenue producing items
(primarily advertising sales), partially offset by decreases of $855,700
related to cable systems sold during 1996, $604,800 due primarily to reductions
in the number of premium subscriptions for cable service and $123,000 related
to decreases implemented in 1996 to comply with the 1992 Cable Act. The $8.7
million net increase in revenues for the nine months ended September 30, 1996
compared to the corresponding period in 1995 was due to increased cable service
revenues, caused principally by increases of $7.8 million due to increases in
regulated service rates implemented in each of April 1995 and 1996. An
additional $748,000 due to the restructuring of The Disney Channel discussed
above and $2.0 million related to increases in other revenue producing items
(primarily advertising sales). These increases were partially offset by
decreases of $855,700 related to cable systems sold during 1996, $780,700
primarily due to reductions in the number of premium subscriptions for cable
service and to $123,000 related to decreases implemented in 1996 to comply with
the 1992 Cable Act. As of September 30, 1996, the Owned Systems had
approximately 544,000 homes subscribing to cable service and 211,400 premium
service units. Management and consulting fees remained relatively unchanged at
$1.2 million and $3.3 million for the three and nine months ended September 30,
1996 compared to the corresponding periods in 1995.
Service costs increased from $16.9 million to $18.1 million, or by
7.1%, for the three months ended September 30, 1996 compared to the
corresponding period in 1995 and remained relatively unchanged at $51.6 million
for the nine months ended September 30, 1996 compared to the corresponding
period in 1995. Service costs represent costs directly attributable to
providing cable services to customers. Of the $1.2 million increase in service
costs for the three months ended September 30, 1996 as compared to 1995, $1.5
million related to increases in programming fees paid to program suppliers
(including primary satellite fees), $338,100 related to increases in franchise
and copyright fees associated with increased revenues and $121,700 related to
increases in other service costs. These increases were partially offset by
decreases of $719,800 related to increases in capitalized labor associated with
increased construction activity. Of the $77,000 decrease in service costs for
the nine months ended September 30, 1996 as compared to 1995, $1.6 million
related to increases in capitalized labor associated with increased
construction activity, and $852,900 related to decreases in property taxes.
These decreases were partially offset by increases of $1.3 million in franchise
and copyright fees (related to increased revenues), increases of $652,300 in
other service costs, increases of $255,300 in personnel costs and increases of
$206,100 in programming fees paid to program suppliers (including primary
satellite fees). The increase in programming costs for the three and nine
months ended September 30, 1996 compared to the corresponding periods in 1995
included a $275,500 increase related to the restructuring of The Disney Channel
discussed above.
General and administrative expenses decreased from $10.0 million to
$9.9 million, or by 1.6%, for the three months ended September 30, 1996
compared to the corresponding period in 1995, and increased from $31.1 million
to $31.4 million, or by 0.9%, for the nine months ended September 30, 1996
compared to the corresponding period in 1995. Of the $161,100 decrease for the
three months ended September 30, 1996 as compared to 1995, $360,400 related to
decreases in personnel costs and $312,100 related to increases in capitalized
labor associated with increased construction activity. These decreases were
partially offset by a $511,500 increase in various other expenses primarily
related to the 1995 reimbursement of expenses associated with certain
international investment activities. Of the $273,100 increase for the nine
months ended September 30, 1996 as compared to 1995, $606,600 related to
increases in marketing costs, $216,300 related to costs associated with re-
regulation by the FCC and various other expenses increased $297,900, primarily
due to the 1995 reimbursement of expenses
-12-
<PAGE> 13
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
RESULTS OF OPERATIONS (CONTINUED)
associated with certain international investment activities. These increases
were partially offset by decreases of $847,700 related to increases in
capitalized labor associated with increased construction activity.
Depreciation and amortization expense increased from $24.7 million to
$27.3 million, or by 10.4%, and from $78.1 million to $80.1 million, or by
2.5%, for the three and nine months ended September 30, 1996 compared to the
corresponding periods in 1995. Depreciation expense increased by approximately
$1.7 million due to accelerated depreciation related to asset retirements and
adjustments of the estimated useful lives of certain tangible assets due to
rebuilds and increased by approximately $2.6 million due to the depreciation of
property, plant and equipment additions. These increases were substantially
offset by intangible assets becoming fully amortized and as a result of the
estimated useful lives of certain other intangible assets being extended.
Operating income decreased from $6.8 million to $5.9 million, or by
13.8%, for the three months ended September 30, 1996 compared with the
corresponding period in 1995, and increased from $11.8 million to $18.4
million, or by 55.6%, for the nine months ended September 30, 1996 compared
with the corresponding period in 1995. The $937,400 decrease for the three
months ended September 30, 1996 was due principally to increases in operating
expenses of $3.6 million in excess of revenue increases of $2.6 million as
discussed above. The $6.6 million increase for the nine months ended September
30, 1996 was primarily due to the $8.7 million net increase in revenues
partially offset by increases in operating expenses as discussed above.
Interest expense, including the effects of interest rate hedging
agreements, decreased from $20.4 million to $20.1 million, or by 1.5%, and from
$61.6 million to $61.0 million, or by 0.9% for the three and nine months ended
September 30, 1996 compared to the corresponding periods in 1995. Lower average
interest rates (8.6% and 8.7% during the three and nine months ended September
30, 1996 compared to 9.2% and 9.4% during the corresponding periods in 1995)
partially offset by higher average borrowings accounted for the majority of the
decreases. Payment-in-kind interest expense (in which interest payment
requirements are met by an increase in the notes) associated with the 11%
Senior Subordinated Notes (and, in 1995 only, with the $20 million Falcon
Telecable 11.56% notes payable), amounted to $6.7 million and $19.6 million for
the three and nine months ended September 30, 1996 compared to $6.8 million and
$20.0 million for the corresponding periods in 1995. Interest rate hedging
agreements resulted in additional interest expense of $238,000 and $870,000
during the three and nine months ended September 30, 1996 compared to $556,000
and $1.0 million during the corresponding periods in 1995.
Other income and expense was $781,000 expense for the three months
ended September 30, 1996 and was $303,000 income for the nine months ended
September 30, 1996 compared to $958,900 and $24.3 million of income for the
corresponding periods in 1995. The $1.7 million change for the three months
ended September 30, 1996 was due principally to a reduction in income tax
benefits related to Falcon First in the 1995 period. The $24.0 million
decrease in income for the nine months was primarily due to a $20.8 million
non-recurring gain from the sale of marketable securities during 1995, and to a
$3.2 million reduction in income tax benefits recorded in the 1995 period.
-13-
<PAGE> 14
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
RESULTS OF OPERATIONS (CONTINUED)
Due to the factors described above, the Partnership's net loss
increased from $12.6 million to $15.0 million and from $25.5 million to $42.4
million for the three and nine months ended September 30, 1996 compared with
the corresponding periods of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Partnership's primary need for capital has been to
finance plant extensions, rebuilds and upgrades, and to add addressable
converters to certain of the Owned Systems. The Partnership spent $37.1 million
during 1995 on non-acquisition capital expenditures. Including capital
expenditure requirements related to the FCSC assets acquired on July 12, 1996,
management's current plan calls for the expenditure of approximately $60.0
million and $125.0 million in capital expenditures in 1996 and 1997,
respectively, including approximately $24.0 million and $80.0 million,
respectively, to rebuild and upgrade certain of the Owned Systems. The
Partnership's proposed spending plans, in general, and including those plans for
1997, are constantly being reviewed and revised with respect to changes in
technology, acceptable leverage parameters, franchise requirements and other
factors. The Partnership will also need to continue to maintain compliance with
certain covenants of the Partnership's loan agreements, of which there can be no
assurance. The Partnership spent $35.4 million on non-acquisition capital
expenditures during the nine months ended September 30, 1996.
As previously discussed in more detail in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1995, on December 28, 1995
the Partnership acquired all of the direct and indirect ownership interests in
Falcon First that it did not already own. Falcon First was previously managed
by the Partnership. In connection with the acquisition of Falcon First, on
December 28, 1995 the Partnership entered into a new $435 million Bank Credit
Agreement. As discussed in Note 1 to unaudited Condensed Consolidated
Financial Statements, on July 12, 1996 the Partnership entered into a $775
million Amended and Restated Bank Credit Agreement (the "Amended and Restated
Bank Credit Agreement") in order to finance the acquisition of the assets of
FCSC, pay transaction and financing costs of approximately $5.6 million and
prepay $28.6 million of subordinated debt. On July 16, 1996, the Partnership
received payment of approximately $5.2 million of previously deferred fees from
FCSC. On August 1, 1996, the Partnership received $5.0 million from certain
existing limited partners who purchased additional partnership units, the
proceeds of which were used to temporarily repay outstanding debt under the
Amended and Restated Bank Credit Agreement.
On July 1, 1996 the Partnership sold certain of the Falcon First
assets for $15.0 million, the proceeds being used to temporarily repay
outstanding debt under the former Bank Credit Agreement. The cable assets sold
generated approximately 1.9% of consolidated revenues for the six months ended
June 30, 1996. The Partnership has decided not to sell certain other cable
assets that were contemplated to be sold under the Amended and Restated Bank
Credit Agreement due to offers it considered inadequate, and, as a result, the
failure to sell these assets may result in the reduction of capital
expenditures permitted under the Amended and Restated Bank Credit Agreement.
The Partnership frequently considers opportunities to sell assets that it views
as non-strategic.
-14-
<PAGE> 15
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Amended and Restated Bank Credit Agreement provides for maximum
available borrowings as follows: $775 million at December 31, 1996; $774
million at December 31, 1997; $773 million at December 31, 1998; $706 million
at December 31, 1999; $611 million at December 31, 2000; $535 million at
December 31, 2001; and $439 million at December 31, 2002. As of September 30,
1996, the amount outstanding under the Amended and Restated Bank Credit
Agreement was $632 million and the Partnership had available to it additional
borrowings thereunder of approximately $77 million. At closing of the
acquisition of the assets of FCSC on July 12, 1996, the amount outstanding
under the Amended and Restated Bank Credit Agreement was $646 million, which
included $28.6 million borrowed to prepay a portion of outstanding subordinated
debt. The Amended and Restated Bank Credit Agreement requires that interest be
tied to the ratio of consolidated total debt to consolidated annualized cash
flow (in each case, as defined therein), and further requires that the
Partnership maintain hedging arrangements with respect to at least 50% of the
outstanding borrowings thereunder. As of September 30, 1996, borrowings under
the Amended and Restated Bank Credit Agreement bore interest at an average rate
of 7.9% (including the effect of interest rate hedging agreements). The
Partnership has entered into fixed interest rate hedging agreements with an
aggregate notional amount at September 30, 1996 of $600 million (including $210
million of contracts purchased from FCSC). Agreements in effect at September
30, 1996 totaled $495 million, with the remaining $105 million to become
effective as certain of the existing contracts mature during 1996 and 1997.
The agreements serve as a hedge against interest rate fluctuations associated
with the Partnership's variable rate debt. These agreements expire through May
27, 2000. The Amended and Restated Bank Credit Agreement also contains various
restrictions relating to, among other things, mergers and acquisitions, a
change in control and the incurrence of additional indebtedness and also
requires compliance with certain financial covenants. The Partnership believes
that it was in compliance with all such requirements as of September 30, 1996.
The Partnership (i.e., FHGLP) is a separate, stand-alone holding
company which employs all of the management personnel. All of the Owned
Systems are owned by subsidiaries of the Partnership. Accordingly, the
Partnership is financially dependent on the receipt of permitted payments from
the Owned Systems, management and consulting fees from both domestic and the
remaining international cable ventures, and the reimbursement of specified
expenses by certain of the Affiliated Partnerships to fund its operations.
Expected increases in the funding requirements of the Partnership combined with
limitations on its sources of cash may create liquidity issues for the
Partnership in the future. Specifically, the former Bank Credit Agreement
permitted the Owned Partnerships to remit to FHGLP no more than 3.75% of their
net cable revenues, as defined, in any year. The Amended and Restated Bank
Credit Agreement increased that amount to 4.25% effective July 12, 1996. For
1995, that limit was approximately $4.9 million ($3.0 million was actually
remitted), and for the nine months ended September 30, 1996 the limit was
approximately $6.0 million. In addition, the management fees and reimbursed
expenses earned from the Affiliated Partnerships have been adversely affected
by the FCC's rate regulations (to the extent those fees are based on revenues
of the Affiliated Partnerships), as well as by payment restrictions imposed, or
which may be imposed in the future, by the senior lenders to several of those
entities As a result, a portion of the payment of fees due to FHGLP has been
deferred in prior years due to such restrictions, which increases the amount
required to be funded by the Owned Systems. Receivables from the Affiliated
Partnerships for services and reimbursements described above amounted to
approximately $6.8 million at September 30, 1996.
-15-
<PAGE> 16
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Due to the uncertainty regarding its ability to meet the projected
liquidity needs outlined above, the Partnership cannot presently determine
whether it will have access to the capital required for it to continue to
pursue its traditional acquisition strategy if and when attractive acquisition
opportunities become available. The Partnership also possesses the right,
under certain circumstances, to acquire some or all of the remaining Affiliated
Systems. During the three months ended September 30, 1996, the Partnership's
Board of Representatives authorized its management to commence the "Appraisal
Process," as defined in the partnership agreement of Falcon Classic Cable
Income Properties, L.P. ("Classic"), one of the Affiliated Partnerships, in
order to determine whether the Partnership should exercise its right under that
partnership agreement to acquire some or all of Classic's cable systems. The
three appraisal firms were selected in October 1996, and the appraisal work has
commenced. Any exercise of the Partnership's right to purchase some or all of
Classic's assets (which will not take place prior to January 1, 1997, at the
earliest) will be dependent on the results of the appraisals and will also be
subject to approval of the Board of Representatives. Any exercise of such
rights is similarly dependent on the availability of adequate capital, of which
there can be no assurance. The costs of the Appraisal Process, anticipated to
be approximately $200,000, will be borne by FHGLP. Further information
regarding the Appraisal Process is provided in Forms 8-K filed by Classic on
August 27 and October 17, 1996.
On March 29, 1993, the Partnership issued $175 million aggregate
principal amount of its 11% Senior Subordinated Notes (the "Notes") in
connection with the Consolidation. As a result of payment-in-kind interest
payments, the aggregate principal of the Notes outstanding as of September 30,
1996 had increased to $253 million. Future interest payments are expected to be
paid in kind until the year 2000, when cash payment is required. The Notes
also contain various restrictions relating to, among other things, mergers and
acquisitions, a change in control and the incurrence of additional
indebtedness. The incurrence of additional indebtedness test limits the ratio
of the total debt of the Partnership to Operating Cash Flow (as defined in the
indenture) to 7.5 to 1 if such indebtedness is incurred through December 31,
1999 and to 6.5 to 1 thereafter.
As of September 30, 1996, the Partnership also had outstanding an
aggregate of $15.0 million in principal amount of subordinated debt (other than
the Notes).
Enstar Communications Corporation, a wholly-owned subsidiary of one of
the Owned Partnerships ("ECC"), has guaranteed the debt obligations of certain
Enstar partnerships in which it acts as general partner. The Enstar
partnerships own cable television systems through limited partnerships, most of
which are publicly-held. At September 30, 1996, the maximum exposure to ECC
pursuant to such guarantees was approximately $9.8 million, plus accrued
interest. This guarantee is recourse only to the assets of ECC, which consist
primarily of equity interests in the Enstar partnerships.
The Partnership Agreement contains provisions that may require FHGLP
to purchase substantially all of the limited partnership interests held by the
Group I, II and III limited partners (constituting approximately 60% of the
common equity of the Partnership), at the holders' option, during the period
from September 15, 1996 to June 30, 1999. Certain of these interests are
mandatorily redeemable in 1998. Limited partnership interests held by the Group
IV limited partner become redeemable in 2004, subject to certain shared
liquidity rights. The purchase price for such partnership interests (other
than Class C partnership interests), which would be negotiated based on market
conditions or determined by an appraisal, is to be paid in cash or, under
certain circumstances, through the issuance
-16-
<PAGE> 17
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
of debt or equity securities. The redemption value of the Class C partnership
interests will generally be determined based on a formula due to its preferred
status. Certain of the Partnership's debt agreements (including the Amended and
Restated Bank Credit Agreement and the Notes) will restrict the Partnership's
ability to (i) make distributions to fund the purchase of these partnership
interests pursuant to the provisions described above, (ii) incur indebtedness
or issue debt securities in connection with such purchase or (iii) sell a
substantial amount of its assets. The obligation to redeem any significant
amount of the limited partnership interests in the Partnership could result in
a material liquidity demand on the Partnership and there can be no assurance
that the Partnership will be able to raise such funds on terms acceptable to
the Partnership, or at all.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Cash from operating activities (including interest expense and
management fee income) increased from $30.2 million to $64.9 million for the
nine months ended September 30, 1996, compared to the corresponding period in
1995, an increase of $34.7 million. The increase resulted primarily from a net
increase of $35.1 million in other operating items (receivables, cable
materials and supplies, payables, accrued expenses and subscriber deposits and
prepayments) partially offset by a $428,900 decrease in payment-in-kind
interest expense related primarily to the $20 million Falcon Telecable 11.56%
notes payable repaid on July 12, 1996.
Cash used in investing activities increased from $14.2 million to
$270.6 million for the nine months ended September 30, 1996 compared to the
corresponding period in 1995. The change was due primarily to the July 12, 1996
$247.4 million acquisition of the FCSC assets as previously discussed, the
absence in 1996 of approximately $13.5 million of net proceeds received by the
Partnership during 1995 from the sale of marketable securities, to an increase
in capital expenditures of $9.6 million and to an increase in intangible assets
of $2.3 million. These increases were partially offset by $15.0 million of cash
provided in 1996 in connection with the sale of a system, by $770,400
distributions received from investee limited partnerships and by $668,100 of
investments in limited partnerships during 1995 that did not recur in 1996.
Cash from financing activities increased from a use of cash of $21.5
million for the nine months ended September 30, 1995 to cash provided of $206.5
million for the nine months ended September 30, 1996, or a change of $228.0
million. The increase was due primarily to increased borrowings of debt in 1996
of $226.7 million and to increased capital contributions of $4.7 million,
partially offset by a $3.2 million increase in expenditures for deferred loan
costs.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 53.9% to 54.2% and from 52.1% to 54.3%
for the three and nine months ended September 30, 1996 compared to the
corresponding periods in 1995. The increases were primarily caused by revenue
increases as described above. EBITDA increased from $31.5 million to $33.1
million, or by 5.2%, and from $89.9 million to $98.4 million, or by 9.5%,
during the three and nine months ended September 30, 1996 compared to the
corresponding periods in 1995.
-17-
<PAGE> 18
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
INFLATION
Certain of the Partnership's expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation. However, the Partnership does not believe that its
financial results have been, or will be, adversely affected by inflation in a
material way, provided that it is able to increase its service rates
periodically, of which there can be no assurance.
-18-
<PAGE> 19
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.39 - Limited Partnership Interest Purchase
Agreement dated July 15, 1996, by and among Falcon
Holding Group, L.P., Marc B. Nathanson, Trustee of
the Falcon Cable Trust and Advance TV of California,
Inc.
Exhibit 10.40 - Partnership Option Agreement dated
July 15, 1996, by and among Marc B. Nathanson,
Trustee of the Falcon Cable Trust and Falcon Holding
Group, L.P.
Exhibit 10.41 - Partnership Option Agreement dated
July 15, 1996, between Advance TV of California, Inc.
and Falcon Holding Group, L.P.
Exhibit 10.42 - Fourth Amendment to Note Purchase and
Exchange Agreement dated July 12, 1996, between
Falcon Telecable, AUSA Life Insurance Company, Inc.
and MONY Life Insurance Company of America.
Exhibit 10.43 - Second Restated Subordination
Agreement between Registrant and AUSA Life Insurance
Company, Inc. and MONY Life Insurance Company of
America dated July 12, 1996.
Exhibit 10.44 - Second Restated Guaranty Agreement,
dated July 12, 1996, by Falcon Cablevision, Falcon
Cable Media, Falcon Community Cable, L.P., Falcon
Community Ventures I Limited Partnership, Falcon
Investors Group, LTD., Falcon Telecable Investors
Group, Falcon Media Investors Group, Falcon Community
Investors, L.P., Falcon Telecom, L.P., Falcon Cable
Systems Company II, L.P., and Falcon First, Inc. in
favor of each of AUSA Life Insurance Company, Inc.
and MONY Life Insurance Company of America with
respect to the Notes.
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.
-19-
<PAGE> 20
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 thereunto duly authorized.
FALCON HOLDING GROUP, L.P.
a DELAWARE LIMITED PARTNERSHIP
------------------------------
(Registrant)
By: Falcon Holding Group, Inc.
General Partner
Date: November 12, 1996 By: /s/ Michael K. Menerey
-------------------------------
Michael K. Menerey, Secretary
and Chief Financial Officer
<PAGE> 21
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
10.39 Limited Partnership Interest Purchase Agreement dated
July 15, 1996, by and among Falcon Holding Group,
L.P., Marc B. Nathanson, Trustee of the Falcon Cable
Trust and Advance TV of California, Inc.
10.40 Partnership Option Agreement dated July 15, 1996, by
and among Marc B. Nathanson, Trustee of the Falcon
Cable Trust and Falcon Holding Group, L.P.
10.41 Partnership Option Agreement dated July 15, 1996,
between Advance TV of California, Inc. and Falcon
Holding Group, L.P.
10.42 Fourth Amendment to Note Purchase and Exchange
Agreement dated July 12, 1996, between Falcon
Telecable, AUSA Life Insurance Company, Inc. and MONY
Life Insurance Company of America.
Second Restated Subordination Agreement between
Registrant and AUSA Life Insurance Company,
Inc. and MONY Life Insurance Company of
America dated July 12, 1996.
10.44 Second Restated Guaranty Agreement, dated July 12,
1996, by Falcon Cablevision, Falcon Cable Media,
Falcon Community Cable, L.P., Falcon Community
Ventures I Limited Partnership, Falcon Investors
Group, LTD., Falcon Telecable Investors Group, Falcon
Media Investors Group, Falcon Community Investors,
L.P., Falcon Telecom, L.P., Falcon Cable Systems
Company II, L.P., and Falcon First, Inc. in favor of
each of AUSA Life Insurance Company, Inc. and MONY
Life Insurance Company of America with respect to the
Notes.
E-1
<PAGE> 1
Exhibit 10.39
FALCON HOLDING GROUP, L.P.
LIMITED PARTNERSHIP INTEREST PURCHASE AGREEMENT
This Limited Partnership Interest Purchase Agreement is entered into
as of July 15, 1996, by and among Falcon Holding Group, L.P., a Delaware
limited partnership (the "Company"), Marc B. Nathanson, Trustee of the Falcon
Cable Trust ("Nathanson") and Advance TV of California, Inc. ("Advance").
Nathanson and Advance are collectively referred to as the "Purchasers".
A. The Company desires an infusion of capital and has offered to
issue and sell certain of its limited partnership interests described below.
B. The Purchasers have agreed to purchase such partnership
interests on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the above and the representations,
warranties, covenants and conditions set forth herein, the parties hereby agree
as follows:
1. Purchase and Sale of Limited Partnership Interests.
1.1 Sale of Issuance of Partnership Interests. Subject
to the terms and conditions of this Agreement, each of the Purchasers,
severally and not jointly, agrees to purchase at the Closing, and the Company
agrees to sell and issue to each of the Purchasers at the Closing, partnership
interests (the "Partnership Interests") of the Company represented by a
Percentage Interest and with an Adjusted Capital Contribution Account as set
forth opposite such Purchaser's name on Schedule I for a Purchase Price as set
forth on Schedule I.
1.2 Closing. The purchase and sale of the partnership
interests being purchased by the Purchasers shall take place at the offices of
the Company on such date no later than August 15, 1996, when all conditions of
Closing are satisfied.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Purchaser, at and as of the date of the
Closing, that the Company now or will have at the Closing, all requisite legal
and partnership power to enter into this Agreement and carry out and perform
its obligations under the terms of this Agreement. All partnership action on
the part of the Company that is necessary for the authorization, execution and
delivery of this Agreement by the Company and for the issuance and delivery of
the Company's partnership interest has been taken or will be taken prior to the
Closing and this Agreement when executed and delivered by the Company (and
assuming due execution and delivery by the Purchasers) shall constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms subject to (i) judicial principles respecting
election of remedies or limiting the availability of
<PAGE> 2
specific performance, injunctive relief and other equitable remedies and (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect generally relating to or affecting creditors' rights.
3. Representations, Warranties and Covenants of the Purchasers.
3.1 Due Execution. Each of the Purchasers represents and
warrants and covenants, severally and not jointly, to the Company that this
Agreement when executed and delivered by each of the Purchasers will constitute
the valid and legally binding obligation of each of the Purchasers. All action
required to be taken by or on behalf of each Purchaser in order for such
Purchaser to execute and deliver and perform its obligations under this
Agreement and to purchase the Partnership Interests have been taken or will be
taken before the Closing. This Agreement when executed and delivered by each
Purchaser (and assuming due execution and delivery by the Company) shall
constitute the valid and binding obligation of each Purchaser enforceable
against each Purchaser in accordance with its terms subject to the exceptions
set forth in Clauses (i) and (ii) of Section 2.
3.2 Unregistered Securities. Each Purchaser understands
that the Partnership Interests have not been registered under the Securities
Act of 1933, as amended (the "Act") on the ground that the offer and sale of
securities provided for in this Agreement is exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act and Regulation D
promulgated thereunder, and that the Company's reliance on such exemption is
predicated in part on Purchasers' representations set forth herein.
3.3 Qualified Purchasers. Each Purchaser is an
"accredited investor" as defined in Regulation D promulgated under the Act and
by reason of the business or financial experience of its control persons has
the capacity to protect its own interest in an investment in the Partnership
Interests. Each Purchaser has had the opportunity to ask questions of the
Company and to obtain any information requested concerning the Company and the
accuracy of the information supplied, and all questions which have been asked
on behalf of any Purchaser have been answered by the Company to the
satisfaction of such Purchaser.
3.4 Investment Intent. The Partnership Interests are
being acquired by each of the Purchasers for investment, for their own account,
and not directly or indirectly for the account of any other person, and not with
a view to or for sale in connection with any distribution of the Partnership
Interests. Each of the Purchasers has no present intention of selling, granting
participation in, or otherwise distributing the Partnership Interests. Each of
the Purchasers does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer, or grant participations, to such person or to
any other third person, with respect to the Partnership Interests. Each of
2
<PAGE> 3
the Purchasers understands and acknowledges that this Agreement is being
executed by the Company in reliance upon the foregoing representations and
warranties.
3.5 No Public Market. Each of the Purchasers has been
advised that no public market now exists for the Partnership Interests, that a
public market may never exist and that each of the Purchasers therefore may
have to hold the Partnership Interests indefinitely.
3.6 Restrictions on Transfer. Each of the Purchasers
understands that if the Company does not register with the Securities and
Exchange Commission (the "SEC"), pursuant to Section 12 or 15 of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering
the securities under the Act is not in effect when a Purchaser desires to sell
the Partnership Interests, such Purchaser may be required to hold the
Partnership Interests for an indeterminate period. Each of the Purchasers also
understands that any sale of the Partnership Interests which might be made by a
Purchaser in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that rule.
4. Conditions to Closing. The obligation of each of the
Purchasers and the Company to issue and purchase the Partnership Interests at
the Closing is subject to each of the following conditions having been
fulfilled on or prior to the applicable Closing or having been waived by the
parties:
(a) The Company shall have acquired substantially all of
the assets of Falcon Cable Systems Company, a California limited partnership
and Falcon Cable Systems Company shall have distributed the net proceeds
received from the Company to its unit holders.
(b) The Company shall have delivered to each Purchaser an
Option Agreement to purchase additional partnership interests of the Company in
the form set forth in Exhibits "A-1" and "A-2" attached hereto.
(c) The Company shall have amended Schedule V to its
Third Amended and Restated Partnership Agreement dated as of December 28, 1995
as set forth in Exhibit "B" attached hereto.
5. Miscellaneous.
5.1 Governing Law. This Agreement shall be governed in
all respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
5.2 Successors and Assigns. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
3
<PAGE> 4
5.3 Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be deemed
effective upon personal delivery, confirmation of telex or telecopy, or upon
the fifth day following mailing by registered mail,postage prepaid, addressed
(a) if to Purchasers, at its address set forth on the records of the Company,
or at such other address as it shall have furnished to the Company in writing,
(b) if to the Company at 10900 Wilshire Boulevard, Fifteenth Floor, Los
Angeles, California 90024.
5.4 Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified so as to make it valid, legal and enforceable and to
retain as nearly as practicable, the intent of the parties, and the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
5.5 Title and Subtitles. The titles and subtitles of
this Agreement are intended for reference and shall not by themselves determine
the construction or interpretation of this Agreement.
5.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.7 Entire Agreement. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and supersedes any and all prior agreements and
understandings, whether oral or in writing.
* * * * * * * * * *
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FALCON HOLDING GROUP, L.P., a
Delaware limited partnership
By: FALCON HOLDING GROUP, INC.,
a California corporation
its General Partner
By: /s/ STANLEY S. ITSKOWITCH
-----------------------------
Title EXECUTIVE VICE PRESIDENT
-------------------------
FALCON CABLE TRUST
By: /s/ MARC B. NATHANSON
-----------------------------
Marc B. Nathanson, Trustee
ADVANCE TV OF CALIFORNIA, INC.,
a California corporation
By: /s/ GREG NATHANSON
----------------------------
Greg Nathanson, Secretary
5
<PAGE> 6
Schedule I Allocation of Purchase Price
Exhibit "A-1" Option Agreement - Nathanson
Exhibit "A-2" Option Agreement - Advance
Exhibit "B" Amended Schedule V to Third Amended and Restated Partnership
Agreement
6
<PAGE> 7
Schedule I
<TABLE>
<CAPTION>
Interests Purchased
-------------------
Purchase Price
Capital Contribution Percentage
Purchaser Account Interest
- --------- ------------------- ----------
<S> <C> <C> <C>
Falcon Cable
Trust $3,315,000 0.89489%
Advance 1,685,000 0.45487
---------- -------
Total $5,000,000 1.34976%
</TABLE>
7
<PAGE> 8
EXHIBIT A-1
FALCON HOLDING GROUP, L.P.
PARTNERSHIP OPTION AGREEMENT
This Agreement is made and entered into as of July 15, 1996, by and
among Marc Nathanson, Trustee of the Falcon Cable Trust ("Nathanson") and
Falcon Holding Group, L.P., a Delaware limited partnership ("FHGLP").
WHEREAS, Nathanson is currently a limited partner in FHGLP pursuant
to the Third Amended and Restated Agreement of Limited Partnership of FHGLP
dated as of December 28, 1995 (the "Partnership Agreement");
WHEREAS, Nathanson desires to acquire an option to purchase additional
FHGLP partnership interests from FHGLP; and
WHEREAS, FHGLP desires to cause Nathanson, under certain terms and
conditions to purchase such partnership interests.
NOW, THEREFORE, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms defined in the Partnership
Agreement are used herein with the meanings so defined.
2. Option. In consideration of the receipt of $5,000 and for
other good and valuable consideration, FHGLP on the date hereof, irrevocably
grants to the Nathanson the option to purchase partnership interests (the
"Partnership Interests") of the Company represented by a Percentage Interest of
0.4429% which will have an Adjusted Capital Contribution Account equal to the
Purchase Price (as defined below) (the "Optioned Interests") upon the terms and
conditions set forth in this Agreement.
3. Purchase Price. The purchase price for the Optioned Interests
(the "Purchase Price") shall be the applicable Purchase Price on the date of
exercise. The initial Purchase Price for the Optioned Interests for the first
twelve months of this Agreement shall be $1,685,000. On each anniversary date
of this Agreement, the Purchase Price for the next succeeding year shall be
equal to 105% of the Purchase Price for the preceding year. The consideration
received for the option shall be applied against the Purchase Price upon
exercise of this option.
4. Adjustments and Option. In the event that the outstanding
Partnership Interests of FHGLP are changed into or exchanged for a different
number or kind of units or partnership interests or any other securities of
FHGLP by reasons of merger, consolidation, recapitalization or
reclassification, or otherwise, the Optioned Interests subject to this option
shall be appropriately and equitably adjusted in number and kind to the extent
that after such event Nathanson's proportionate interest in
<PAGE> 9
FHGLP as represented by the Optioned Interests shall be maintained as before
the occurrence of such event.
5. Expiration of the Option. This option may be exercised at any
time until the first of the following events: (a) the expiration of ten (10)
years from the date the option is granted, or (b) the effective date of (i) a
merger or consolidation of FHGLP with another person, (ii) the acquisition by
another person of all or substantially all the assets or a majority of the then
outstanding partnership interests of FHGLP, or (iii) the dissolution and
liquidation of FHGLP (collectively, the "Dissolution Events"). At least thirty
(30) days prior to the effective date of any Dissolution Event, FHGLP shall
give Nathanson's notice of such event if this option has then not been
exercised.
6. FHGLP's Rights to Require Exercise of the Option. In the
event this option has not been exercised on or before fifteen (15) days prior
to a Dissolution Event, then FHGLP may require Nathanson to purchase the
Optioned Interests prior to the date of such Dissolution Event. FHGLP may
exercise its right to require Nathanson to exercise this option by delivery to
Nathanson a notice in writing signed on behalf of FHGLP stating that Nathanson
is required pursuant to this Paragraph 6 to exercise the option and upon the
receipt of such notice by Nathanson, Nathanson shall be considered to have
provided the requisite notice under Paragraph 7 and to have exercised this
option.
7. Manner of Exercise. This option may be exercised by Nathanson
by delivery to FHGLP by a notice in writing signed by Nathanson stating that
the option is thereby exercised. In the case of any exercise other than in
connection with a Dissolution Event, the Purchase Price shall be paid either by
(i) cash or check of the Purchase Price for the Optioned Interests or (ii) the
transfer by Nathanson of other Partnership Interests of FHGLP owned by
Nathanson at their then fair market value on the date the option is exercised
in an amount equal to the Purchase Price of the Optioned Interests. In the
case of an exercise in connection with a Dissolution Event, the obligation to
pay the Purchase Price shall be non-recourse to Nathanson and the Purchase
Price shall be paid solely out of distributions otherwise payable to Nathanson
by FHGLP with respect to the Optioned Interests and any other Partnership
Interests in FHGLP then held by Nathanson. FHGLP is expressly authorized to
withhold distributions with respect to the Optioned Interests and any other
Partnership Interests of Nathanson and to apply such withholdings to the
Purchase Price of the Optioned Interests.
8. Rights as a Partner. Nathanson shall not be nor have any
rights and privileges of a Partner in FHGLP with respect to the Optioned
Interests until this option is fully exercised.
9. Investment Representation.
9.1 Unregistered Securities. Nathanson understands that
neither the option granted by this Agreement the Partnership
2
<PAGE> 10
Interests covered thereby have been registered under the Securities Act of
1933, as amended (the "Act") on the ground that the offer and sale of
securities provided for in this Agreement is exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act and Regulation D
promulgated thereunder, and that the Company's reliance on such exemption is
predicated in part on Nathanson's representations set forth herein.
9.2 Qualified Investor. Nathanson is an "accredited
investor" as defined in Regulation D promulgated under the Act and by reason of
the business or financial experience of its control persons has the capacity to
protect its own interest in an investment in the Partnership Interests.
Nathanson has had the opportunity to ask questions of the Company and to obtain
any information requested concerning the Company and the accuracy of the
information supplied, and all questions which have been asked on behalf of
Nathanson have been answered by the Company to the satisfaction of Nathanson.
9.3 Investment Intent. The rights under this Agreement
and the Partnership Interests covered hereby are being or will be acquired by
Nathanson for investment, for his own account, and not directly or indirectly
for the account of any other person, and not with a view to or for sale in
connection with any distribution of the Partnership Interests. Nathanson has
no present intention of selling, granting participation in, or otherwise
distributing the Partnership Interests. Nathanson does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations, to such person or to any other third person, with respect
to the Partnership Interests. Nathanson understands and acknowledges that this
Agreement is being executed by the Company in reliance upon the foregoing
representations and warranties.
9.4 No Public Market. Nathanson has been advised that no
public market now exists for the Partnership Interests, that a public market
may never exist and that each of the Purchasers therefore may have to hold the
Partnership Interests indefinitely.
9.5 Restrictions on Transfer. Nathanson understands that
if the Company does not register with the Securities and Exchange Commission
(the "SEC"), pursuant to Section 12 or 15 of the Securities Exchange Act of
1934 (the "1934 Act"), or if a registration statement covering the securities
under the Act is not in effect when Nathanson desires to sell the Partnership
Interests, Nathanson may be required to hold the Partnership Interests for an
indeterminate period. Nathanson also understands that any sale of the
Partnership Interests which might be made by Nathanson in reliance upon Rule
144 under the Act may be made only in limited amounts in accordance with the
terms and conditions of that rule.
10. Amendments. The provisions of this Agreement may be waived,
offered, amended, modified or appealed in whole or in part only by the written
consent of all parties to this Agreement.
3
<PAGE> 11
11. Successors and Assigns. This Agreement shall be binding on
and enforceable by and against the parties to it and their respective heirs,
legal representatives and successors.
12. Notices. Any notice under or pursuant to this Agreement shall
be in writing and shall be delivered either by personal delivery, by telecopier
or similar electronic medium or by overnight courier addressed as follows:
If to FHGLP: Falcon Holding Group, L.P.
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
If to Nathanson: Marc B. Nathanson, Trustee
Falcon Cable Trust
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
All such notices shall be effective when delivered or received at the office or
by the party receiving such notice.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
* * * * * * * * * *
4
<PAGE> 12
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FALCON HOLDING GROUP, L.P., a
Delaware limited partnership
By Falcon Holding Group, Inc.
its general partner
By_____________________________
Title________________________
FALCON CABLE TRUST
By_____________________________
Marc Nathanson, Trustee
5
<PAGE> 13
EXHIBIT A-2
FALCON HOLDING GROUP, L.P.
PARTNERSHIP OPTION AGREEMENT
FOR
ADVANCE TV OF CALIFORNIA, INC.
This Agreement is made and entered into as of July 15, 1996, by and
among Advance TV of California, Inc. ("Advance") and Falcon Holding Group,
L.P., a Delaware limited partnership ("FHGLP").
WHEREAS, Advance is currently a limited partner in FHGLP pursuant to
the Third Amended and Restated Agreement of Limited Partnership of FHGLP dated
as of December 28, 1995 (the "Partnership Agreement");
WHEREAS, Advance desires to acquire an option to purchase additional
FHGLP partnership interests from FHGLP; and
WHEREAS, FHGLP desires to cause Advance, under certain terms and
conditions to purchase such partnership interests.
NOW, THEREFORE, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms defined in the Partnership
Agreement are used herein with the meanings so defined.
2. Option. In consideration of the receipt of $20,000 and for
other good and valuable consideration, FHGLP on the date hereof, irrevocably
grants to the Nathanson the option to purchase partnership interests (the
"Partnership Interests") of the Company represented by a Percentage Interest of
2.1856% which will have an Adjusted Capital Contribution Account equal to the
Purchase Price (as defined below) (the "Optioned Interests") upon the terms and
conditions set forth in this Agreement.
3. Purchase Price. The purchase price for the Optioned Interests
(the "Purchase Price") shall be the applicable Purchase Price on the date of
exercise. The initial Purchase Price for the Optioned Interests for the first
twelve months of this Agreement shall be $8,315,000. On each anniversary date
of this Agreement, the Purchase Price for the next succeeding year shall be
equal to 105% of the Purchase Price for the preceding year. The consideration
received for the option shall be applied against the Purchase Price upon
exercise of this option.
4. Adjustments and Option. In the event that the outstanding
Partnership Interests of FHGLP are changed into or exchanged for a different
number or kind of units or partnership interests or any other securities of
FHGLP by reasons of merger, consolidation, recapitalization or
reclassification, or otherwise, the Optioned Interests subject to this option
shall be appropriately and equitably adjusted in number and kind to the extent
that after such event Advance's proportionate interest in
<PAGE> 14
FHGLP as represented by the Optioned Interests shall be maintained as before
the occurrence of such event.
5. Expiration of the Option. This option may be exercised at any
time until the first of the following events: (a) the expiration of ten (10)
years from the date the option is granted, or (b) the effective date of (i) a
merger or consolidation of FHGLP with another person, (ii) the acquisition by
another person of all or substantially all the assets or a majority of the then
outstanding partnership interests of FHGLP, or (iii) the dissolution and
liquidation of FHGLP (collectively, the "Dissolution Events"). At least thirty
(30) days prior to the effective date of any Dissolution Event, FHGLP shall
give Advance's notice of such event if this option has then not been exercised.
6. FHGLP's Rights to Require Exercise of the Option. In the
event this option has not been exercised on or before fifteen (15) days prior
to a Dissolution Event, then FHGLP may require Advance to purchase the Optioned
Interests prior to the date of such Dissolution Event. FHGLP may exercise its
right to require Advance to exercise this option by delivery to Advance a
notice in writing signed on behalf of FHGLP stating that Advance is required
pursuant to this Paragraph 6 to exercise the option and upon the receipt of
such notice by Advance, Advance shall be considered to have provided the
requisite notice under Paragraph 7 and to have exercised this option.
7. Manner of Exercise. This option may be exercised by Advance
by delivery to FHGLP by a notice in writing signed by Advance stating that the
option is thereby exercised. In the case of any exercise other than in
connection with a Dissolution Event, the Purchase Price shall be paid either by
(i) cash or check of the Purchase Price for the Optioned Interests or (ii) the
transfer by Advance of other Partnership Interests of FHGLP owned by Advance at
their then fair market value on the date the option is exercised in an amount
equal to the Purchase Price of the Optioned Interests. In the case of an
exercise in connection with a Dissolution Event, the obligation to pay the
Purchase Price shall be non-recourse to Advance and the Purchase Price shall be
paid solely out of distributions otherwise payable to Advance by FHGLP with
respect to the Optioned Interests and any other Partnership Interests in FHGLP
then held by Advance. FHGLP is expressly authorized to withhold distributions
with respect to the Optioned Interests and any other Partnership Interests of
Advance and to apply such withholdings to the Purchase Price of the Optioned
Interests.
8. Rights as a Partner. Advance shall not be nor have any rights
and privileges of a Partner in FHGLP with respect to the Optioned Interests
until this option is fully exercised.
9. Investment Representation.
9.1 Unregistered Securities. Advance understands that
neither the option granted by this Agreement the Partnership Interests covered
thereby have been registered under the Securities Act of 1933, as amended (the
"Act") on the ground that the offer
2
<PAGE> 15
and sale of securities provided for in this Agreement is exempt from the
registration requirements of the Act pursuant to Section 4(2) of the Act and
Regulation D promulgated thereunder, and that the Company's reliance on such
exemption is predicated in part on Advance's representations set forth herein.
9.2 Qualified Investor. Advance is an "accredited
investor" as defined in Regulation D promulgated under the Act and by reason of
the business or financial experience of its control persons has the capacity to
protect its own interest in an investment in the Partnership Interests.
Advance has had the opportunity to ask questions of the Company and to obtain
any information requested concerning the Company and the accuracy of the
information supplied, and all questions which have been asked on behalf of
Advance have been answered by the Company to the satisfaction of Advance.
9.3 Investment Intent. The rights under this Agreement
and the Partnership Interests covered hereby are being or will be acquired by
Advance for investment, for its own account, and not directly or indirectly for
the account of any other person, and not with a view to or for sale in
connection with any distribution of the Partnership Interests. Advance has no
present intention of selling, granting participation in, or otherwise
distributing the Partnership Interests. Advance does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations, to such person or to any other third person, with respect
to the Partnership Interests. Advance understands and acknowledges that this
Agreement is being executed by the Company in reliance upon the foregoing
representations and warranties.
9.4 No Public Market. Advance has been advised that no
public market now exists for the Partnership Interests, that a public market
may never exist and that Advance therefore may have to hold the Partnership
Interests indefinitely.
9.5 Restrictions on Transfer. Advance understands that
if the Company does not register with the Securities and Exchange Commission
(the "SEC"), pursuant to Section 12 or 15 of the Securities Exchange Act of
1934 (the "1934 Act"), or if a registration statement covering the securities
under the Act is not in effect when Advance desires to sell the Partnership
Interests, Advance may be required to hold the Partnership Interests for an
indeterminate period. Advance also understands that any sale of the
Partnership Interests which might be made by Advance in reliance upon Rule 144
under the Act may be made only in limited amounts in accordance with the terms
and conditions of that rule.
10. Amendments. The provisions of this Agreement may be waived,
offered, amended, modified or appealed in whole or in part only by the written
consent of all parties to this Agreement.
3
<PAGE> 16
11. Successors and Assigns. This Agreement shall be binding on
and enforceable by and against the parties to it and their respective heirs,
legal representatives and successors.
12. Notices. Any notice under or pursuant to this Agreement shall
be in writing and shall be delivered either by personal delivery, by telecopier
or similar electronic medium or by overnight courier addressed as follows:
If to FHGLP: Falcon Holding Group, L.P.
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
If to Advance: Advance TV of California, Inc.
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
Attn: Marc Nathanson
All such notices shall be effective when delivered or received at the office or
by the party receiving such notice.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
* * * * * * * * * *
4
<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FALCON HOLDING GROUP, L.P., a
Delaware limited partnership
By Falcon Holding Group, Inc.
its general partner
By_____________________________
Title________________________
ADVANCE TV OF CALIFORNIA, INC.
By_____________________________
Greg Nathanson, Secretary
5
<PAGE> 18
EXHIBIT B
SCHEDULE ??
TO
AGREEMENT OF LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Revised Revised Paragraph (i) Paragraph (ii)
Partner (Class A and B Only) Post First For FCSC Units Units
Partner Contribution Acquisition (All Partners) (Class A Partners)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advanced Company, Ltd. 4,378,398.94 4,378,398,94 1,108.24 145.97
- -----------------------------------------------------------------------------------------------------------------------------------
Advanced TV of California, Inc. 11,385,151.07 1,685,00,00 13,070,151.07 3,308.25 --
- -----------------------------------------------------------------------------------------------------------------------------------
BancBoston Capital, Inc. 2,911,143.65 2,911,143.85 736.85 --
- -----------------------------------------------------------------------------------------------------------------------------------
Baxt. L. Leonard 280,293.11 280,293.11 70.95 10.70
- -----------------------------------------------------------------------------------------------------------------------------------
Blackhawk Holding Company, Inc. 22,836,808.43 22,836,808.43 5,780.34 691.69
- -----------------------------------------------------------------------------------------------------------------------------------
Boston Ventures IIA Investment Corp. 678,459.40 678,459.40 171.73 --
- -----------------------------------------------------------------------------------------------------------------------------------
Boston Ventures Limited Partnership II 26,249,616.23 26,249.616.23 6,644.17 --
- -----------------------------------------------------------------------------------------------------------------------------------
DIS INVESTMENTS, INC. 10,551,903.63 10,551,903.63 2,670.85 --
- -----------------------------------------------------------------------------------------------------------------------------------
Falcon Cable Trust 40,203,516.70 3,315,000.00 43,518,516.70 11,015.19 2,862.31
- -----------------------------------------------------------------------------------------------------------------------------------
Falcon First, LLC 8,072,727.03 8,072,727.03 2,043.33
- -----------------------------------------------------------------------------------------------------------------------------------
Falcon Holding Group, Inc. 43,076,082.56 43,076,082.56 10,903.20 291.47
- -----------------------------------------------------------------------------------------------------------------------------------
Hellman & Friedman Capital Partners 35,256,842.48 35,256,842.48 8,924.04 --
- -----------------------------------------------------------------------------------------------------------------------------------
Hellman & Friedman Capital Partners II, L.P. 99,378,030.13 99,378,030.13 25,154.07 1,368.13
- -----------------------------------------------------------------------------------------------------------------------------------
Frank Inuso 5,616,802.31 5,616,802.31 1,421.70 386.10
- -----------------------------------------------------------------------------------------------------------------------------------
Stanley Itskowitch 1,962.202.35 1,962,202.35 496.66 148.02
- -----------------------------------------------------------------------------------------------------------------------------------
LEEWAY & CO. 21,103,807.25 21,103,807.25 5,341.69 --
- -----------------------------------------------------------------------------------------------------------------------------------
MLC Investors, L.P. 21,297,064.74 21,297,064.74 5,390.61 --
- -----------------------------------------------------------------------------------------------------------------------------------
Michael Menerey 166,152.57 166,152.57 42.06 25.43
- -----------------------------------------------------------------------------------------------------------------------------------
Nathanson Family Trust 995,958.96 995,958.96 252.09 152.33
- -----------------------------------------------------------------------------------------------------------------------------------
Greg Nathanson 399,561.06 399,561.06 101.13 44.04
- -----------------------------------------------------------------------------------------------------------------------------------
James Pinto 727,788.22 727,788.22 184.21 --
- -----------------------------------------------------------------------------------------------------------------------------------
Steven Rattner 1,065,118.32 1,065,118.32 269.60 40.64
- -----------------------------------------------------------------------------------------------------------------------------------
Cameron Rogers Trust 145,557.66 145,557.66 36.84 --
- -----------------------------------------------------------------------------------------------------------------------------------
William L. Rogers 582,228.56 582,228.56 147.37 --
- -----------------------------------------------------------------------------------------------------------------------------------
Toronto Dominion Investments, Inc. 2,911,143.85 2,911,143.85 736.85 --
- -----------------------------------------------------------------------------------------------------------------------------------
Lillane Viadimirschi 3,203,733.85 3,203,733.85 810.91 70.23
- -----------------------------------------------------------------------------------------------------------------------------------
Total 365,436,091 5,000,000 370,436,091 93,762.95 6,237.05
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Total
Class C Partners Units
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Falcon First LLC 51,373,293
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Partner (Class A and B Only) Total Percentage Voting
Partner Units Interest Percentage
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advanced Company, Ltd. 1,254.21 1.25421% 1.25421%
- -------------------------------------------------------------------------------------------------
Advanced TV of California, Inc. 3,308.25 3.30825% 3.30825%
- -------------------------------------------------------------------------------------------------
BancBoston Capital, Inc. 736.85 0.73685% 0.73685%
- -------------------------------------------------------------------------------------------------
Baxt. L. Leonard 81.64 0.08164% 0.08164%
- -------------------------------------------------------------------------------------------------
Blackhawk Holding Company, Inc. 6,472.03 6.47203% 6.47203%
- -------------------------------------------------------------------------------------------------
Boston Ventures IIA Investment Corp. 171.73 0.17173% 0.17173%
- -------------------------------------------------------------------------------------------------
Boston Ventures Limited Partnership II 6,644.17 6.64417% 6.64417%
- -------------------------------------------------------------------------------------------------
DIS INVESTMENTS, INC. 2,870.85 2.67085% 2.67085%
- -------------------------------------------------------------------------------------------------
Falcon Cable Trust 13,877.50 13.87750% 13,87750%
- -------------------------------------------------------------------------------------------------
Falcon First, LLC 2,043.33 2.04333% 2.04333%
- -------------------------------------------------------------------------------------------------
Falcon Holding Group, Inc. 11,194.67 11.19467% 9.06011%
- -------------------------------------------------------------------------------------------------
Hellman & Friedman Capital Partners 8,924.04 8.92404% 8.92404%
- -------------------------------------------------------------------------------------------------
Hellman & Friedman Capital Partners II, L.P. 26,522.21 26.52221% 25.65677%
- -------------------------------------------------------------------------------------------------
Frank Inuso 1,807.80 1.80780% 1.80780%
- -------------------------------------------------------------------------------------------------
Stanley Itskowitch 644.69 0.64469% 0.64469%
- -------------------------------------------------------------------------------------------------
LEEWAY & CO. 5,341.69 5.34169% 5.34169%
- -------------------------------------------------------------------------------------------------
MLC Investors, L.P. 5,390.61 5.39061% 5,39061%
- -------------------------------------------------------------------------------------------------
Michael Menerey 67.49 0.06749% 0.06749%
- -------------------------------------------------------------------------------------------------
Nathanson Family Trust 404.42 0.40442% 0.40442%
- -------------------------------------------------------------------------------------------------
Greg Nathanson 145.18 0.14518% 0.14518%
- -------------------------------------------------------------------------------------------------
James Pinto 184.21 0.18421% 0.18421%
- -------------------------------------------------------------------------------------------------
Steven Rattner 310.24 0.31024% 0.31024%
- -------------------------------------------------------------------------------------------------
Cameron Rogers Trust 36.84 0.03684% 0.03684%
- -------------------------------------------------------------------------------------------------
William L. Rogers 147.37 0.14737% 0.14737%
- -------------------------------------------------------------------------------------------------
Toronto Dominion Investments, Inc. 736.85 0.73685% 0.73685%
- -------------------------------------------------------------------------------------------------
Lillane Viadimirschi 881.14 0.88114% 0.88114%
- -------------------------------------------------------------------------------------------------
Total 100,000 100.00000% 100.00000%
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Percentage Voting
Class C Partners Interests Interests
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Falcon First LLC 100.00000% 0.00000%
- -------------------------------------------------------------------------------------------------
</TABLE>
SCHVPF.XLS 7/30/96
<PAGE> 1
Exhibit 10.40
FALCON HOLDING GROUP, L.P.
PARTNERSHIP OPTION AGREEMENT
This Agreement is made and entered into as of July 15, 1996, by and
among Marc Nathanson, Trustee of the Falcon Cable Trust ("Nathanson") and
Falcon Holding Group, L.P., a Delaware limited partnership ("FHGLP").
WHEREAS, Nathanson is currently a limited partner in FHGLP pursuant
to the Third Amended and Restated Agreement of Limited Partnership of FHGLP
dated as of December 28, 1995 (the "Partnership Agreement");
WHEREAS, Nathanson desires to acquire an option to purchase additional
FHGLP partnership interests from FHGLP; and
WHEREAS, FHGLP desires to cause Nathanson, under certain terms and
conditions to purchase such partnership interests.
NOW, THEREFORE, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms defined in the Partnership
Agreement are used herein with the meanings so defined.
2. Option. In consideration of the receipt of $5,000 and for
other good and valuable consideration, FHGLP on the date hereof, irrevocably
grants to the Nathanson the option to purchase partnership interests (the
"Partnership Interests") of the Company represented by a Percentage Interest of
0.4429% which will have an Adjusted Capital Contribution Account equal to the
Purchase Price (as defined below) (the "Optioned Interests") upon the terms and
conditions set forth in this Agreement.
3. Purchase Price. The purchase price for the Optioned Interests
(the "Purchase Price") shall be the applicable Purchase Price on the date of
exercise. The initial Purchase Price for the Optioned Interests for the first
twelve months of this Agreement shall be $1,685,000. On each anniversary date
of this Agreement, the Purchase Price for the next succeeding year shall be
equal to 105% of the Purchase Price for the preceding year. The consideration
received for the option shall be applied against the Purchase Price upon
exercise of this option.
4. Adjustments and Option. In the event that the outstanding
Partnership Interests of FHGLP are changed into or exchanged for a different
number or kind of units or partnership interests or any other securities of
FHGLP by reasons of merger, consolidation, recapitalization or
reclassification, or otherwise, the Optioned Interests subject to this option
shall be appropriately and equitably adjusted in number and kind to the extent
that after such event Nathanson's proportionate interest in
<PAGE> 2
FHGLP as represented by the Optioned Interests shall be maintained as before
the occurrence of such event.
5. Expiration of the Option. This option may be exercised at any
time until the first of the following events: (a) the expiration of ten (10)
years from the date the option is granted, or (b) the effective date of (i) a
merger or consolidation of FHGLP with another person, (ii) the acquisition by
another person of all or substantially all the assets or a majority of the then
outstanding partnership interests of FHGLP, or (iii) the dissolution and
liquidation of FHGLP (collectively, the "Dissolution Events"). At least thirty
(30) days prior to the effective date of any Dissolution Event, FHGLP shall
give Nathanson's notice of such event if this option has then not been
exercised.
6. FHGLP's Rights to Require Exercise of the Option. In the
event this option has not been exercised on or before fifteen (15) days prior
to a Dissolution Event, then FHGLP may require Nathanson to purchase the
Optioned Interests prior to the date of such Dissolution Event. FHGLP may
exercise its right to require Nathanson to exercise this option by delivery to
Nathanson a notice in writing signed on behalf of FHGLP stating that Nathanson
is required pursuant to this Paragraph 6 to exercise the option and upon the
receipt of such notice by Nathanson, Nathanson shall be considered to have
provided the requisite notice under Paragraph 7 and to have exercised this
option.
7. Manner of Exercise. This option may be exercised by Nathanson
by delivery to FHGLP by a notice in writing signed by Nathanson stating that
the option is thereby exercised. In the case of any exercise other than in
connection with a Dissolution Event, the Purchase Price shall be paid either by
(i) cash or check of the Purchase Price for the Optioned Interests or (ii) the
transfer by Nathanson of other Partnership Interests of FHGLP owned by
Nathanson at their then fair market value on the date the option is exercised
in an amount equal to the Purchase Price of the Optioned Interests. In the
case of an exercise in connection with a Dissolution Event, the obligation to
pay the Purchase Price shall be non-recourse to Nathanson and the Purchase
Price shall be paid solely out of distributions otherwise payable to Nathanson
by FHGLP with respect to the Optioned Interests and any other Partnership
Interests in FHGLP then held by Nathanson. FHGLP is expressly authorized to
withhold distributions with respect to the Optioned Interests and any other
Partnership Interests of Nathanson and to apply such withholdings to the
Purchase Price of the Optioned Interests.
8. Rights as a Partner. Nathanson shall not be nor have any
rights and privileges of a Partner in FHGLP with respect to the Optioned
Interests until this option is fully exercised.
9. Investment Representation.
9.1 Unregistered Securities. Nathanson understands that
neither the option granted by this Agreement the Partnership
2
<PAGE> 3
Interests covered thereby have been registered under the Securities Act of
1933, as amended (the "Act") on the ground that the offer and sale of
securities provided for in this Agreement is exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act and Regulation D
promulgated thereunder, and that the Company's reliance on such exemption is
predicated in part on Nathanson's representations set forth herein.
9.2 Qualified Investor. Nathanson is an "accredited
investor" as defined in Regulation D promulgated under the Act and by reason of
the business or financial experience of its control persons has the capacity to
protect its own interest in an investment in the Partnership Interests.
Nathanson has had the opportunity to ask questions of the Company and to obtain
any information requested concerning the Company and the accuracy of the
information supplied, and all questions which have been asked on behalf of
Nathanson have been answered by the Company to the satisfaction of Nathanson.
9.3 Investment Intent. The rights under this Agreement
and the Partnership Interests covered hereby are being or will be acquired by
Nathanson for investment, for his own account, and not directly or indirectly
for the account of any other person, and not with a view to or for sale in
connection with any distribution of the Partnership Interests. Nathanson has
no present intention of selling, granting participation in, or otherwise
distributing the Partnership Interests. Nathanson does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations, to such person or to any other third person, with respect
to the Partnership Interests. Nathanson understands and acknowledges that this
Agreement is being executed by the Company in reliance upon the foregoing
representations and warranties.
9.4 No Public Market. Nathanson has been advised that no
public market now exists for the Partnership Interests, that a public market
may never exist and that each of the Purchasers therefore may have to hold the
Partnership Interests indefinitely.
9.5 Restrictions on Transfer. Nathanson understands that
if the Company does not register with the Securities and Exchange Commission
(the "SEC"), pursuant to Section 12 or 15 of the Securities Exchange Act of
1934 (the "1934 Act"), or if a registration statement covering the securities
under the Act is not in effect when Nathanson desires to sell the Partnership
Interests, Nathanson may be required to hold the Partnership Interests for an
indeterminate period. Nathanson also understands that any sale of the
Partnership Interests which might be made by Nathanson in reliance upon Rule
144 under the Act may be made only in limited amounts in accordance with the
terms and conditions of that rule.
10. Amendments. The provisions of this Agreement may be waived,
offered, amended, modified or appealed in whole or in part only by the written
consent of all parties to this Agreement.
3
<PAGE> 4
11. Successors and Assigns. This Agreement shall be binding on
and enforceable by and against the parties to it and their respective heirs,
legal representatives and successors.
12. Notices. Any notice under or pursuant to this Agreement shall
be in writing and shall be delivered either by personal delivery, by telecopier
or similar electronic medium or by overnight courier addressed as follows:
If to FHGLP: Falcon Holding Group, L.P.
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
If to Nathanson: Marc B. Nathanson, Trustee
Falcon Cable Trust
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, Ca 90024
All such notices shall be effective when delivered or received at the office or
by the party receiving such notice.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
* * * * * * * * * *
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FALCON HOLDING GROUP, L.P., a
Delaware limited partnership
By Falcon Holding Group, Inc.
its general partner
By /s/ STANLEY S. ITSKOWITCH
-------------------------------
Stanley S. Itskowitch
Executive Vice President
FALCON CABLE TRUST
By /s/ MARC NATHANSON
-------------------------------
Marc Nathanson, Trustee
5
<PAGE> 1
Exhibit 10.41
FALCON HOLDING GROUP, L.P.
PARTNERSHIP OPTION AGREEMENT
FOR
ADVANCE TV OF CALIFORNIA, INC.
This Agreement is made and entered into as of July 15, 1996, by and
among Advance TV of California, Inc. ("Advance") and Falcon Holding Group,
L.P., a Delaware limited partnership ("FHGLP").
WHEREAS, Advance is currently a limited partner in FHGLP pursuant to
the Third Amended and Restated Agreement of Limited Partnership of FHGLP dated
as of December 28, 1995 (the "Partnership Agreement");
WHEREAS, Advance desires to acquire an option to purchase additional
FHGLP partnership interests from FHGLP; and
WHEREAS, FHGLP desires to cause Advance, under certain terms and
conditions to purchase such partnership interests.
NOW, THEREFORE, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms defined in the Partnership
Agreement are used herein with the meanings so defined.
2. Option. In consideration of the receipt of $20,000 and for
other good and valuable consideration, FHGLP on the date hereof, irrevocably
grants to the Nathanson the option to purchase partnership interests (the
"Partnership Interests") of the Company represented by a Percentage Interest of
2.1856% which will have an Adjusted Capital Contribution Account equal to the
Purchase Price (as defined below) (the "Optioned Interests") upon the terms and
conditions set forth in this Agreement.
3. Purchase Price. The purchase price for the Optioned Interests
(the "Purchase Price") shall be the applicable Purchase Price on the date of
exercise. The initial Purchase Price for the Optioned Interests for the first
twelve months of this Agreement shall be $8,315,000. On each anniversary date
of this Agreement, the Purchase Price for the next succeeding year shall be
equal to 105% of the Purchase Price for the preceding year. The consideration
received for the option shall be applied against the Purchase Price upon
exercise of this option.
4. Adjustments and Option. In the event that the outstanding
Partnership Interests of FHGLP are changed into or exchanged for a different
number or kind of units or partnership interests or any other securities of
FHGLP by reasons of merger, consolidation, recapitalization or
reclassification, or otherwise, the Optioned Interests subject to this option
shall be appropriately and equitably adjusted in number and kind to the extent
that after such event Advance's proportionate interest in
<PAGE> 2
FHGLP as represented by the Optioned Interests shall be maintained as before
the occurrence of such event.
5. Expiration of the Option. This option may be exercised at any
time until the first of the following events: (a) the expiration of ten (10)
years from the date the option is granted, or (b) the effective date of (i) a
merger or consolidation of FHGLP with another person, (ii) the acquisition by
another person of all or substantially all the assets or a majority of the then
outstanding partnership interests of FHGLP, or (iii) the dissolution and
liquidation of FHGLP (collectively, the "Dissolution Events"). At least thirty
(30) days prior to the effective date of any Dissolution Event, FHGLP shall
give Advance's notice of such event if this option has then not been exercised.
6. FHGLP's Rights to Require Exercise of the Option. In the
event this option has not been exercised on or before fifteen (15) days prior
to a Dissolution Event, then FHGLP may require Advance to purchase the Optioned
Interests prior to the date of such Dissolution Event. FHGLP may exercise its
right to require Advance to exercise this option by delivery to Advance a
notice in writing signed on behalf of FHGLP stating that Advance is required
pursuant to this Paragraph 6 to exercise the option and upon the receipt of
such notice by Advance, Advance shall be considered to have provided the
requisite notice under Paragraph 7 and to have exercised this option.
7. Manner of Exercise. This option may be exercised by Advance
by delivery to FHGLP by a notice in writing signed by Advance stating that the
option is thereby exercised. In the case of any exercise other than in
connection with a Dissolution Event, the Purchase Price shall be paid either by
(i) cash or check of the Purchase Price for the Optioned Interests or (ii) the
transfer by Advance of other Partnership Interests of FHGLP owned by Advance at
their then fair market value on the date the option is exercised in an amount
equal to the Purchase Price of the Optioned Interests. In the case of an
exercise in connection with a Dissolution Event, the obligation to pay the
Purchase Price shall be non-recourse to Advance and the Purchase Price shall be
paid solely out of distributions otherwise payable to Advance by FHGLP with
respect to the Optioned Interests and any other Partnership Interests in FHGLP
then held by Advance. FHGLP is expressly authorized to withhold distributions
with respect to the Optioned Interests and any other Partnership Interests of
Advance and to apply such withholdings to the Purchase Price of the Optioned
Interests.
8. Rights as a Partner. Advance shall not be nor have any rights
and privileges of a Partner in FHGLP with respect to the Optioned Interests
until this option is fully exercised.
9. Investment Representation.
9.1 Unregistered Securities. Advance understands that
neither the option granted by this Agreement the Partnership Interests covered
thereby have been registered under the Securities Act of 1933, as amended (the
"Act") on the ground that the offer
2
<PAGE> 3
and sale of securities provided for in this Agreement is exempt from the
registration requirements of the Act pursuant to Section 4(2) of the Act and
Regulation D promulgated thereunder, and that the Company's reliance on such
exemption is predicated in part on Advance's representations set forth herein.
9.2 Qualified Investor. Advance is an "accredited
investor" as defined in Regulation D promulgated under the Act and by reason of
the business or financial experience of its control persons has the capacity to
protect its own interest in an investment in the Partnership Interests.
Advance has had the opportunity to ask questions of the Company and to obtain
any information requested concerning the Company and the accuracy of the
information supplied, and all questions which have been asked on behalf of
Advance have been answered by the Company to the satisfaction of Advance.
9.3 Investment Intent. The rights under this Agreement
and the Partnership Interests covered hereby are being or will be acquired by
Advance for investment, for its own account, and not directly or indirectly for
the account of any other person, and not with a view to or for sale in
connection with any distribution of the Partnership Interests. Advance has no
present intention of selling, granting participation in, or otherwise
distributing the Partnership Interests. Advance does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations, to such person or to any other third person, with respect
to the Partnership Interests. Advance understands and acknowledges that this
Agreement is being executed by the Company in reliance upon the foregoing
representations and warranties.
9.4 No Public Market. Advance has been advised that no
public market now exists for the Partnership Interests, that a public market
may never exist and that Advance therefore may have to hold the Partnership
Interests indefinitely.
9.5 Restrictions on Transfer. Advance understands that
if the Company does not register with the Securities and Exchange Commission
(the "SEC"), pursuant to Section 12 or 15 of the Securities Exchange Act of
1934 (the "1934 Act"), or if a registration statement covering the securities
under the Act is not in effect when Advance desires to sell the Partnership
Interests, Advance may be required to hold the Partnership Interests for an
indeterminate period. Advance also understands that any sale of the
Partnership Interests which might be made by Advance in reliance upon Rule 144
under the Act may be made only in limited amounts in accordance with the terms
and conditions of that rule.
10. Amendments. The provisions of this Agreement may be waived,
offered, amended, modified or appealed in whole or in part only by the written
consent of all parties to this Agreement.
3
<PAGE> 4
11. Successors and Assigns. This Agreement shall be binding on
and enforceable by and against the parties to it and their respective heirs,
legal representatives and successors.
12. Notices. Any notice under or pursuant to this Agreement shall
be in writing and shall be delivered either by personal delivery, by telecopier
or similar electronic medium or by overnight courier addressed as follows:
If to FHGLP: Falcon Holding Group, L.P.
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
If to Advance: Advance TV of California, Inc.
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, Ca 90024
Attn: Marc Nathanson
All such notices shall be effective when delivered or received at the office or
by the party receiving such notice.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
* * * * * * * * * *
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FALCON HOLDING GROUP, L.P., a
Delaware limited partnership
By Falcon Holding Group, Inc.
its general partner
By /s/ STANLEY S. ITSKOWITCH
--------------------------------
Stanley S. Itskowitch
Executive Vice President
ADVANCE TV OF CALIFORNIA, INC.
By /s/ GREG NATHANSON
--------------------------------
Greg Nathanson, Secretary
5
<PAGE> 1
Exhibit 10.42
FOURTH AMENDMENT TO NOTE PURCHASE
AND EXCHANGE AGREEMENT
This FOURTH AMENDMENT (this "Fourth Amendment") is made as of this
12th day of July, 1996, between Falcon Telecable, a California limited
partnership (the "Company"), AUSA Life Insurance Company, Inc. and MONY Life
Insurance Company of America (the "Purchasers").
WHEREAS, by a Note Purchase and Exchange Agreement dated as of October
21, 1991, as heretofore amended, (the "Agreement"), between the Company and The
Mutual Life Insurance Company of New York and MONY Life Insurance Company of
America, the Company issued its 11.56% Series A Subordinated Notes due March
31, 2001 and its 11.56% Series B Subordinated Notes due March 31, 2001
(collectively, the "Notes"); and
WHEREAS, the Purchasers are the holders of the entire outstanding
principal amount of the Notes; and
WHEREAS, the Company and the Purchasers wish to amend the Agreement as
set forth below.
NOW, THEREFORE, in consideration of the mutual covenants set out
herein, the parties hereto agree as follows:
1. Section 7 of the Agreement is amended as follows:
a. Section 7.19 is amended to read as follows:
"7.19 Compliance With Bank Credit Agreement. The
Company shall comply, and shall cause the Restricted Companies
to comply, with each of the covenants contained in Section 7
of the Bank Credit Agreement (other than Sections 7.5.2 and
7.15) as in effect on the Fourth Amendment Closing Date
(except as such covenants may be amended pursuant to Section
7.20 below, other than those set forth in the immediately
following paragraph), a copy of which is attached hereto as
Exhibit E. All references therein to Lenders, Managing Agent
and similar Persons shall be deemed, for purposes of this
Agreement, to be the holders of the Notes."
For purposes of this Agreement, the incorporated provisions of
Sections 7.5.1, 7.5.3 and 7.5.4 of the Bank Credit Agreement (as defined in
Section 3 below) are amended to read as follows and shall not be subject to
amendment or modification without the consent of the holders of the Notes:
"Consolidated Total Debt to Consolidated Annualized
Operating Cash Flow. Consolidated
<PAGE> 2
Total Debt shall not on any date exceed the percentage
indicated in the table below of Consolidated Annualized
Operating Cash Flow for the period of three consecutive months
then most recently ended for which financial statements have
been (or are required to have been) furnished in accordance
with Section 8:
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
Fourth Amendment Closing Date
through June 29, 1999 650%
June 30, 1999 through
December 30, 1999 600%
December 31, 1999 through
June 29, 2000 550%
June 30, 2000 through
December 30, 2000 500%
December 31, 2000 and
thereafter 450%
</TABLE>
Consolidated Annualized Operating Cash Flow to
Consolidated Pro Forma Debt Service. As of the last day of
each month, Consolidated Annualized Operating Cash Flow for
the period of three consecutive months ended on such date
shall exceed 100% of Consolidated Pro Forma Debt Service for
the period of twelve consecutive months beginning immediately
after such date.
Consolidated Operating Cash Flow Plus Cash and Cash
Equivalents to Consolidated Total Fixed Charges. As of the
last day of each month commencing December 31, 2000, the sum
of (a) Consolidated Operating Cash Flow for the period of
twelve consecutive months ended on such date plus (b) the
lesser of (i) cash and Cash Equivalents owned by the
Restricted Companies as of such date determined in accordance
with GAAP on a Consolidated basis or (ii) $2,000,000 shall
exceed 95% of Consolidated Total Fixed Charges for such
period."
2. Section 9.1(c) of the Agreement is amended as follows:
"(c) the Company fails to perform or observe any
covenant or condition contained in Section 2.2, Section 7.20,
Section 7.21, or, to the extent resulting from a failure to
comply with Section 7.5 through Section 7.12, inclusive,
Section 7.14, Section 7.15, Section 7.17 or Section 7.18 of
the Bank Credit
2
<PAGE> 3
Agreement (as and to the extent modified and incorporated
herein);"
3. Section 11.1 of the Agreement is amended by incorporating by
reference each of the definitions set forth in Section 1 of the Bank Credit
Agreement (as defined in this Section 11 below) as in effect on the Fourth
Amendment Closing Date (as defined in this Section 11 below) (except as such
definitions are amended pursuant to Section 7.20 of the Agreement) to the
extent such definitions are referred to in, or are necessary to construe or
further define, the provisions and terms of the Bank Credit Agreement
incorporated herein, provided, that, all references therein to Lenders,
Administrative Agent, Managing Agent or similar Persons shall be deemed, for
purposes of this Agreement, to be the holders of Notes. To the extent that any
definition so incorporated by reference from the Bank Credit Agreement shall
conflict with, or be inconsistent with, any existing definition in the
Agreement, the definition so incorporated by reference shall prevail. In
addition, the following are added or substituted for existing definitions:
"'Bank Credit Agreement' means the Amended and Restated Credit
Agreement dated as of July 12, 1996, among the Company and other
borrowers and guarantors thereunder, the banks signatory thereto as
lenders and The First National Bank of Boston, as managing agent, a
copy of which is attached hereto as Exhibit E, as amended,
supplemented or otherwise modified from time to time, including any
amendment, supplement or modification to effect the refunding or
refinancing of the indebtedness outstanding thereunder.
'Bank Pledge Agreement' means the Amended and Restated Pledge
and Subordination Agreement dated as of July 12, 1996 among Holding,
L.P., Holding, Inc., the Guarantors and The First National Bank of
Boston, as managing agent, as amended, supplemented or otherwise
modified from time to time, including any amendment, supplement or
modification to reflect the refunding or refinancing of the
indebtedness outstanding under the Bank Credit Agreement.
'Fourth Amendment Closing Date' means the date described in
Section 4 of the Fourth Amendment.
'Fourth Amendment' means that certain Fourth Amendment to Note
Purchase and Exchange Agreement dated July 12, 1996 between the
Company and the Purchasers."
There is hereby added to the Agreement a revised Exhibit E
which shall be in the form of Exhibit A to this Fourth Amendment. The Bank
Credit Agreement is set forth in Exhibit A to this Fourth Amendment.
3
<PAGE> 4
4. The following are conditions precedent to the effectiveness of
this Fourth Amendment. The date on which all such conditions are met (or
waived by the Purchasers) shall be referred to herein as the "Fourth Amendment
Closing Date".
(a) The transactions contemplated by the Bank Credit
Agreement to be completed on the Initial Closing Date (as defined in
the Bank Credit Agreement) shall be completed and all conditions
theretofore shall have been fulfilled and the Bank Credit Agreement
shall be in full force and effect.
(b) All representations and warranties set forth in
Section 8 of the Bank Credit Agreement shall be true and correct as of
the Fourth Amendment Closing Date, and each of the Purchasers shall
have received a certificate from an authorized officer of each Person
making such representations stating that such representations and
warranties are true and correct, stating that each Purchaser may rely
on such representations and warranties as though the same were made to
such Purchaser and acknowledging that each Purchaser is relying on the
truth and accuracy of such representations and warranties in entering
into this Fourth Amendment and consummating the transactions
contemplated herein.
(c) The Purchasers shall have received from Weinstein,
Boldt, Racine & Halfhide counsel to the Company and the Restricted
Companies (as such term is defined in the Bank Credit Agreement), an
opinion addressed to the Purchasers to the effect and in the form of
opinion attached hereto as Exhibit B.
(d) The fees and expenses incurred by the Purchasers in
connection with this Fourth Amendment, including the fees and
disbursements of counsel to the Purchasers, shall have been paid, or
the Company shall have agreed to pay such amounts within 10 days of
receipt of an invoice therefor.
(e) The Purchasers shall have received such certificates
and other evidence as they may reasonably request with respect to the
due authorization and the taking of all necessary corporate and
partnership action in connection with the execution and delivery by
the Company, Holding, L.P. and Holding, Inc. of the agreements and
instruments contemplated by this Fourth Amendment.
(f) All proceedings taken in connection with this Fourth
Amendment and all documents and papers relating thereto shall be
satisfactory to the Purchasers and their special counsel. The
Purchasers and their special counsel shall have received copies of
such documents and
4
<PAGE> 5
papers as they may reasonably request in connection therewith, all in
form and substance satisfactory to the Purchasers and their special
counsel.
5. Each party hereby represents to the other that the individuals
executing this Fourth Amendment on its behalf are the duly appointed
signatories of the respective parties to this Fourth Amendment and that they
are authorized to execute this Fourth Amendment by or on behalf of the
respective party for whom they are signing and to take any and all action
required by the terms of the Fourth Amendment.
6. Except as amended hereby, the Agreement remains unchanged and,
as amended hereby, the Agreement remains in full force and effect. The Company
hereby reaffirms all of its obligations and undertakings under the Agreement as
amended hereby, and the Notes (as such term is defined in the Agreement), as
amended hereby. All references to the Agreement, the 11.56% Series A
Subordinated Notes (as defined in the Agreement) and the 11.56% Series B
Subordinated Notes (as defined in the Agreement) shall mean the Agreement and
such Notes as amended by this Fourth Amendment.
7. This Fourth Amendment may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
constitute an agreement, notwithstanding that all of the parties are not
signatories on the same date or the same counterpart. A signature page may be
detached from one counterpart when executed and attached to another
counterpart.
[Remainder of page intentionally blank;
next page is signature page.]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Fourth Amendment to
the Note Purchase and Exchange Agreement as of the date first written above.
FALCON TELECABLE, A CALIFORNIA
LIMITED PARTNERSHIP
By: Falcon Telecable Investors
Group Ltd., a California
limited partnership,
Its General Partner
By: Falcon Holding Group, Inc.,
a California corporation,
Its General Partner
By_____________________________
MICHAEL K. MENEREY
Chief Financial Officer
AUSA LIFE INSURANCE
COMPANY, INC.
By_____________________________
Title________________________
MONY LIFE INSURANCE COMPANY
OF AMERICA
By_____________________________
Title________________________
6
<PAGE> 1
Exhibit 10.43
FALCON HOLDING GROUP, L.P.
FALCON HOLDING GROUP, INC.
SECOND RESTATED
SUBORDINATION AGREEMENT
DATED AS OF JULY 12, 1996
AUSA LIFE INSURANCE COMPANY, INC.
MONY LIFE INSURANCE COMPANY OF AMERICA
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Definitions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Reference to Agreements; Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1.1 "Consolidated Holding L.P. Annualized Operating Cash Flow" . . . . . . . . . . . . . . . 2
1.1.2 "Consolidated Holding, L.P. Net Income" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1.3 "Consolidated Holding, L.P. Operating Cash Flow" . . . . . . . . . . . . . . . . . . . . 2
1.1.4 "Consolidated Holding, L.P. Total Debt" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1.5 "Financial Officer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1.6 "Holder of Subordinated Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1.7 "Obligor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1.8 "Parent Companies" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1.9 "Reorganization" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1.10 "Senior Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1.11 "Subordinated Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1.12 "Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Subordination Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Specific Powers in Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Payments Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 No Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Restrictions on Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Restrictions on Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Payment in Full . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.10 Effect of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.12 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.14 Subordination by the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Organization and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Enforceability; No Legal Obstacle to Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. General Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Preservation of Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Taxes and Other Charges; Accounts Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2.1 Taxes and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2.2 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3.1 Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3.2 Quarterly Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.3 Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
4.3.4 Notice of Material Litigation; Notice of Defaults, etc. . . . . . . . . . . . . . . . . . 12
4.4 Merger and Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Restrictions on Financing Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 No Cash Payments on Senior Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 Senior Subordinated Debt Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 Certain Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Information Regarding the Obligors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Continuing Agreement, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7. Waivers; Powers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Consent to Note Agreement and Guaranty Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Power to Modify, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8. Transfers; Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11. Limited Recourse Against Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12. Venue; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
14. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
- ii -
<PAGE> 4
FALCON HOLDING GROUP, L.P.
FALCON HOLDING GROUP, INC.
SECOND RESTATED
SUBORDINATION AGREEMENT
This Second Restated Subordination Agreement (the "Agreement"), dated
as of July 12, 1996, is among Falcon Holding Group, L.P., a Delaware limited
partnership ("Holding, L.P."), Falcon Holding Group, Inc., a California
corporation ("Holding, Inc."), certain Subsidiaries (as defined herein) of
Holding, L.P. and Holding, Inc. set forth on the signature pages hereof and
AUSA Life Insurance Company, Inc. and MONY Life Insurance Company of America
(the "Purchasers").
WHEREAS, certain of the parties hereto entered into a Subordination
Agreement dated as of March 26, 1993 (the "Initial Agreement") and the Initial
Agreement was restated as of December 28, 1995 (the "First Restatement"); and
WHEREAS, the parties desire to enter into this Second Restated
Subordination Agreement to reflect that certain Subsidiaries of Holding, L.P.
have entered into a new Bank Credit Agreement and that additional amendments
have been entered into with respect to the Telecable Note Agreement (as defined
below).
NOW, THEREFORE, the parties agree that the Initial Agreement as
restated by the First Restatement is hereby amended and restated in its
entirety as follows:
1. DEFINITIONS, ETC.
1.1 REFERENCE TO AGREEMENTS; DEFINITIONS. Reference is made to:
(a) the Note Purchase and Exchange Agreement dated as of
October 21, 1991 among Falcon Telecable ("Telecable"), a California limited
partnership, The Mutual Life Insurance Company of New York and MONY Life
Insurance Company of America, which agreement has been heretofore amended,
including a Fourth Amendment to Note Purchase and Exchange Agreement dated as
of July 12, 1996 (as so amended, the "Note Agreement"); and
(b) The Second Restated Guaranty Agreement (the "Guaranty
Agreement"), dated as of July 12, 1996 and made by the Guarantors set forth
therein. The Guaranty Agreement guarantees the obligations arising under the
Note Agreement.
The Purchasers hold all of the Notes issued and outstanding
under the Note Agreement. The obligations under the Note Agreement and the
Guaranty Agreement are referred to herein as the "Obligations".
<PAGE> 5
Except as the context otherwise explicitly requires, (i) the
capitalized term "Section" refers to sections of this Agreement, (ii)
references to a particular Section shall include all subsections thereof and
(iii) the word "including" shall be construed as "including without
limitation". Capitalized terms defined in the Note Agreement are used herein
with the meanings so defined. Certain other capitalized terms used in this
Agreement shall have the meanings specified below:
1.1.1 "CONSOLIDATED HOLDING L.P. ANNUALIZED OPERATING CASH
FLOW" means the product of Consolidated Holding, L.P. Operating Cash Flow
multiplied by four (4).
1.1.2 "CONSOLIDATED HOLDING, L.P. NET INCOME" means, for
any period, the net income (or loss) of Holding, L.P. and its Subsidiaries
determined in accordance with GAAP on a Consolidated basis (giving pro forma
effect to the results of operations for such period of any Person or other
business acquired by Holding, L.P. and its Subsidiaries; provided, however,
that Consolidated Holding, L.P. Net Income shall not include:
(a) the income (or loss) of any Person
(other than a Wholly Owned Subsidiary (as defined in the Bank Credit Agreement)
of Holding, L.P. and Holding, Inc.) in which any of Holding, L.P. and its
Subsidiaries has an ownership interest; provided, however, that Consolidated
Holding, L.P. Net Income shall be reduced by the aggregate amount of all
investments, regardless of the form thereof, made by any of Holding, L.P. or
its Subsidiaries in such Person for the purpose of funding any deficit or loss
of such Person;
(b) all amounts included in computing
such net income (or loss) in respect of the write-up of any asset or the
retirement of any indebtedness at less than face value after December 31, 1995;
(c) extraordinary and nonrecurring gains or losses;
(d) the income of any Subsidiary of
Holding, L.P. (other than a Restricted Company) to the extent the payment of
such income in the form of a Distribution or repayment of Indebtedness to
Holding, L.P. is not permitted, whether on account of any Charter or By-law
restriction, any agreement, instrument, deed or lease or any law, statute,
judgment, decree or governmental order, rule or regulation applicable to such
Subsidiary or otherwise; and
(e) any after tax gains or losses
attributable to the retained surplus assets of any Plan.
1.1.3 "CONSOLIDATED HOLDING, L.P. OPERATING CASH FLOW"
means for the period of three consecutive months then most recently ended, the
total of (a) Consolidated Holding, L.P. Net
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<PAGE> 6
Income plus (b) all amounts deducted in computing such Consolidated Holding,
L.P. Net Income in respect of:
(i) depreciation, amortization and other
charges that are not expected to be paid in cash;
(ii) interest on Consolidated Holding,
L.P. Total Debt (including payments in the nature of interest under
Capitalized Leases and Interest Rate Protection Agreements);
(iii) federal (but not state or local) taxes
based upon or measured by income; and
(iv) other non-cash charges;
minus (c) revenues of Holding, L.P. that are not expected to be
received in cash within the next twelve months to the extent included
in calculating Consolidated Holding, L.P. Net Income.
1.1.4 "CONSOLIDATED HOLDING, L.P. TOTAL DEBT" means, at any
date, all Financing Debt of Holding, L.P. and its Subsidiaries on a
Consolidated basis minus the lesser of (a) cash and Cash Equivalents of
Holding, L.P. and its Subsidiaries (as defined in the Bank Credit Agreement) on
a Consolidated basis in accordance with GAAP or (b) $2,000,000 and minus
convertible debentures originally issued by Holding, Inc. (to the extent
assumed by Holding, L.P.) to Hellman & Friedman in an amount not exceeding
$5,000,000.
1.1.5 "FINANCIAL OFFICER" means the chief financial
officer, treasurer or corporate controller of Holding, Inc. in its capacity as
the managing general partner of each Investor Group Company, in such Investor
Group Company's capacity as the managing general partner of a borrower under
the Bank Credit Agreement (or other specified Person) or a vice president whose
primary responsibility is for the financial affairs of Holding, Inc. (or other
specified Person) in such capacity, all of whose incumbency and signatures have
been certified to the Administrative Agent by an appropriate attesting officer
of Holding, Inc. (or other specified Person).
1.1.6 "HOLDER OF SUBORDINATED INDEBTEDNESS" means: (a)
Holding, L.P., (b) Holding, Inc. and (c) each Person becoming a party to this
Agreement pursuant to Section 8.1.
1.1.7 "OBLIGOR" means Telecable and each other Person
obligated to the Purchasers under the Guaranty Agreement.
1.1.8 "PARENT COMPANIES" means each of Holding, L.P. and
Holding, Inc.
1.1.9 "REORGANIZATION" means any voluntary or involuntary
dissolution, winding-up, total or partial liquidation
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<PAGE> 7
or reorganization or restructuring, whether by judicial proceedings or
otherwise, or bankruptcy, insolvency, receivership or other statutory or common
law proceedings or arrangements, including any proceeding under Title 11 of the
Bankruptcy Code or any similar law of any other jurisdiction, involving the
Obligors or any guarantor of the Subordinated Indebtedness or any of their
present or future Subsidiaries (as defined in the Bank Credit Agreement) or the
readjustment of the respective liabilities of the Obligors or any such other
Person or any assignment for the benefit of creditors or any marshaling of the
assets or liabilities of the Obligors or any such other Person.
1.1.10 "SENIOR INDEBTEDNESS" means: (a) the principal of,
and premium, if any, on any indebtedness of the Obligors to any Purchaser under
the Note Agreement or the Guaranty Agreement, including the indebtedness
evidenced by the Notes; (b) all renewals, extensions, restructuring,
refinancings and refundings of Senior Indebtedness as defined in clause (a)
above; (c) all fees, costs, expenses, indemnities and other obligations payable
under Note Agreement or the Guaranty Agreement, or otherwise with respect to
Senior Indebtedness as defined in clauses (a) and (b) above, accrued to the
date of payment, whether before or after the institution by or against the
Obligors of proceedings under Title 11 of the Bankruptcy Code; and (d) all
interest arising on or with respect to Senior indebtedness as defined in
clauses (a), (b) and (c) above accrued to the date of payment, whether before
or after the institution by or against the Obligors of a Reorganization.
1.1.11 "SUBORDINATED INDEBTEDNESS" means: (a) the principal
of and premium, if any, and interest, fees, expenses, indemnities and other
obligations arising on or with respect to all indebtedness of any Obligor to
any Parent Company, including indebtedness owed by the Borrowers under the Bank
Credit Agreement to Holding, L.P. described in Section 7.6.14 of the Bank
Credit Agreement, (b) all obligations of any Obligor to pay management fees to
any Parent Company or to reimburse any Parent Company for expenses or services,
(c) all obligations of any Obligor to issue securities upon conversion of or in
exchange for any Subordinated Indebtedness as defined in clauses (a) or (b)
above, (d) other investments by any Parent Company in the Obligors with
required redemption, repurchase, interest or dividend obligations of the
Obligors and (e) any and all claims, damages and liabilities of any nature
whatsoever arising hereunder or with respect to any Subordinated Indebtedness
as defined in clauses (a), (b), (c) and (d) above which the Holder of
Subordinated Indebtedness may now or hereafter have against any Obligors.
1.1.12 "SUBSIDIARIES" means each of Falcon Cable Media, a
California limited partnership, Falcon Cablevision, a California limited
partnership, Falcon Community Cable, L.P., Falcon Community Ventures I Limited
Partnership, Falcon Telecable, a California limited partnership, Falcon Cable
Systems Company II, L.P., a California limited partnership, Falcon Telecom,
L.P., a California limited partnership, Falcon Community Investors, L.P.,
4
<PAGE> 8
Falcon Investors Group, Ltd., a California limited partnership, Falcon Media
Investors Group, a California limited partnership, Falcon Telecable Investors
Group, a California limited partnership, Athens Cablevision, Inc., Ausable
Cable TV, Inc., Cedar Bluff Cablevision, Inc., Dalton Cablevision, Inc.,
Eastern Mississippi Cablevision, Inc., Falcon First, Inc., Falcon First Cable
of New York, Inc., Falcon First Cable of the Southeast, Inc., Falcon First
Holdings, Inc., FF Cable Holdings, Inc., Lauderdale Cablevision, Inc.,
Multivision Northeast, Inc., Multivision of Commerce, Inc., Plattsburg
Cablevision, Inc., Scottsboro Cablevision, Inc. and Scottsboro TV Cable, Inc.
2. SUBORDINATION COVENANTS. The Obligors and each Holder of Subordinated
Indebtedness covenants that, until all of the Senior Indebtedness is paid in
full, each will comply with such of the following provisions as are applicable
to it:
2.1 SUBORDINATION. To the extent and in the manner provided in
this Agreement, the payment of any Subordinated Indebtedness shall be expressly
subordinated and junior in right of payment to the prior payment in full of all
Senior Indebtedness, and the Subordinated Indebtedness is hereby subordinated
as a claim against the Obligors, any guarantor of the Subordinated Indebtedness
or any of their respective assets to the prior payment in full of the Senior
Indebtedness, in each case whether such claim be (a) in the ordinary course of
business or (b) in the event of any Reorganization.
2.2 RESTRICTED PAYMENTS. The Obligors will not make, and no
Holder of Subordinated Indebtedness will receive, any payment of any
Subordinated Indebtedness, whether in cash, securities or other property or by
way of conversion, exchange or set-off or otherwise, and no such payment shall
become due; provided, however, so long as immediately before and after giving
effect thereto no Event of Default exists, that the Obligors may make
Distributions permitted by Section 7.10 of the Bank Credit Agreement (as
incorporated into the Note Agreements) to any Holder of Subordinated
Indebtedness.
2.3 REORGANIZATION. During the existence of any Reorganization,
all Senior Indebtedness shall first be paid in full before any payment is made
on account of any Subordinated Indebtedness, and in any such proceedings
seeking to effect a Reorganization any payment or distribution of any kind or
character, whether in cash or property or securities, which may be payable or
deliverable in respect of any Subordinated Indebtedness shall be paid or
delivered directly to the Purchasers for application to payment of the Senior
Indebtedness, until all such Senior Indebtedness shall have been paid in full.
2.4 SPECIFIC POWERS IN REORGANIZATION. In any proceedings with
respect to a Reorganization, until all Senior Indebtedness shall have been paid
in full, each Holder of Subordinated Indebtedness irrevocably authorizes the
Purchasers:
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<PAGE> 9
(a) To prove and enforce any claims on the Subordinated
Indebtedness owed by any Obligors to any Holder or Subordinated Indebtedness
either in the Purchasers' name or in the name of such Holder of Subordinated
Indebtedness as the attorney-in-fact of such Holder of Subordinated
Indebtedness;
(b) to accept and receive for any payment or distribution
made with respect to any such Subordinated Indebtedness and to apply such
payment or distribution to the payment of the Senior Indebtedness;
(c) To vote claims comprising any Subordinated
Indebtedness and to accept or reject on behalf of such Holder of Subordinated
Indebtedness any plan proposed in connection with any Reorganization; and
(d) To take any and all action and to execute any and all
instruments reasonably necessary to effectuate the foregoing either in the
Purchasers' name or in the name of such Holder of Subordinated Indebtedness as
the attorney-in-fact of such Holder of Subordinated Indebtedness.
2.5 PAYMENTS HELD IN TRUST. If, notwithstanding the foregoing,
any payment or distribution of the assets of the Obligors of any kind or
character in respect of the Subordinated Indebtedness (other than payments
permitted by Section 2.2) shall be received, by set-off or otherwise, by any
Holder of Subordinated Indebtedness before all Senior Indebtedness then
outstanding is paid in full, such payment or distribution and the amount of any
such set-off shall be held in trust by such Holder of Subordinated Indebtedness
and promptly paid over to the Purchasers (who shall have the right to convert
any such assets into cash in a commercially reasonable manner) for application
(including the application of such cash and cash proceeds) to the payment of
all Senior Indebtedness remaining unpaid until all such Senior Indebtedness
shall have been paid in full, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
2.6 NO SECURITY. The Obligors shall not give, and no Holder of
Subordinated Indebtedness shall demand or receive, any security, direct or
indirect, for any Subordinated Indebtedness.
2.7 RESTRICTIONS ON REMEDIES. No Holder of Subordinated
Indebtedness shall, without the Purchasers' prior written consent, accelerate
the maturity of, or institute proceedings to enforce, any Subordinated
Indebtedness notwithstanding any provision to the contrary contained in any
Subordinated Indebtedness or in any agreement or instrument relating thereto.
Without limiting the generality of the foregoing sentence, no Holder of
Subordinated Indebtedness shall, without the Purchasers' prior written consent
commence or join with any other creditor or creditors of the Obligors in
commencing any proceeding against any of the Obligors
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<PAGE> 10
seeking to effect a Reorganization of any of the Obligors or any of their
property.
2.8 RESTRICTIONS ON ACCELERATION. Notwithstanding any contrary
provision of any Subordinated Indebtedness or of any agreement or instrument
relating thereto, (a) no Subordinated Indebtedness shall become or be declared
to be due and payable prior to the date on which the Senior Indebtedness
becomes or is declared to be due and payable and (b) if any Senior Indebtedness
shall have become or been declared to be due and payable prior to its stated
maturity, the Subordinated Indebtedness shall become immediately due and
payable.
2.9 PAYMENT IN FULL. For the purposes of this Agreement, no
Senior Indebtedness shall be deemed to have been paid in full unless the holder
thereof shall have received and have been permitted to retain cash equal to the
amount thereof then outstanding and such Senior Indebtedness shall have been
fully indefeasibly discharged.
2.10 EFFECT OF PROVISIONS. The provisions hereof as to
subordination are solely for the purpose of defining the relative rights of
the holders of Senior Indebtedness on the one hand and the Holders of
Subordinated Indebtedness on the other hand, and such provisions shall not
impair as between the Obligors and any Holder of Subordinated Indebtedness the
obligation of the Obligors, which is unconditional and absolute, to pay to such
Holder of Subordinated Indebtedness the principal of any Subordinated
Indebtedness owed by any Obligors to such Holder of Subordinated Indebtedness
and interest thereon, and all other amounts in respect thereof, nor shall any
such provisions prevent any Holder of Subordinated Indebtedness from exercising
all remedies otherwise permitted by applicable law or under the terms of such
Subordinated Indebtedness upon a default thereunder, except to the extent set
forth in this Agreement.
2.11 FURTHER ASSURANCES. The Obligors and each Holder of
Subordinated Indebtedness, for itself and its successors and assigns as Holders
of Subordinated Indebtedness, covenant to execute and deliver to the Purchasers
such further instruments and to take such further action as the Purchasers may
at any time or times reasonably request in order to carry out the provisions
and intent of this Agreement.
2.12 LEGEND. The Obligors and each Holder of Subordinated
Indebtedness, for itself and its successors and assigns as Holders of
Subordinated Indebtedness, covenant to cause each instrument or certificate
representing or evidencing any of the Subordinated Indebtedness to have affixed
upon it a legend in substantially the following form:
"This instrument is subject to the Second Restated
Subordination Agreement restated as of July 12, 1996 as from time to
time in effect, among the maker, the payee,
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<PAGE> 11
AUSA Life Insurance Company, Inc. and MONY Life Insurance Company of
America, which among other things, subordinates the maker's
obligations hereunder to the prior payment of certain obligations of
the maker to the holders of Senior Indebtedness as defined therein."
2.13 FINANCIAL STATEMENTS. Each Holder of Subordinated
Indebtedness and each Obligor shall cause any financial statement describing or
listing or otherwise reflecting the existence of any indebtedness included in
the Subordinated Indebtedness to indicate the existence of such Subordinated
Indebtedness consistent with GAAP.
2.14 SUBORDINATION BY THE PURCHASERS. The Purchasers acknowledge
and confirm that the Senior Indebtedness described herein is, pursuant to the
terms of the Note Agreement and the Guaranty Agreement, subject and subordinate
to the Senior Debt, as defined in the Note Agreement and the Guaranty
Agreement. All rights granted herein to the Purchasers shall, to the extent
applicable, be subject and subordinate to similar rights granted under separate
agreements to the holders of Senior Debt.
3. REPRESENTATIONS AND WARRANTIES. In order to induce the Purchasers to
consent to the transactions contemplated by the Bank Credit Agreement and to
amend the Note Agreement, each Parent Company hereby represents and warrants
that:
3.1 ORGANIZATION AND BUSINESS. Holding, L.P. is a duly organized
and validly existing limited partnership, in good standing under the laws of
Delaware, and Holding, Inc. is a duly organized and validly existing
corporation, in good standing under the laws of the State of California, in
each case with all partnership or corporate power and authority necessary to
(a) enter into and perform this Agreement and (b) own its properties and carry
on the business now conducted or proposed to be conducted by it. Each Parent
Company has taken all partnership or corporate action required to execute,
deliver and perform this Agreement. Certified copies of the partnership
agreement or Charter and By-laws, as the case may be, of each Parent Company
have been previously delivered to the Purchasers and are correct and complete.
3.2 FINANCIAL STATEMENTS. Holding, L.P. has previously furnished
to the Purchasers copies of the Consolidated balance sheets of Holding, L.P.
and certain of its Subsidiaries for the years ended December 31, 1994 and 1995,
the Consolidated statements of earnings, changes in partners' equity and cash
flows for the years then ended, and the unaudited balance sheet of Holding,
L.P. and certain of its Subsidiaries as at March 31, 1996, and the separate
unaudited statements of earnings, changes in partners' equity and cash flows of
Holding, L.P. and certain of its Subsidiaries for the three (3) month period
then ended. Such financial statements have been prepared in accordance with
GAAP (subject, in the case of the unaudited statements, to year-end
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<PAGE> 12
audit adjustments and the absence of footnotes) and fairly present the
financial condition of the Persons covered thereby at the date thereof and the
results of their operations for the years covered thereby. Holding, L.P. does
not have any known material contingent liabilities which are not referred to in
such financial statements.
3.3 ENFORCEABILITY; NO LEGAL OBSTACLE TO AGREEMENTS. This
Agreement constitutes the legal, valid and binding obligation of each Parent
Company, enforceable against such Person in accordance with its terms. Neither
the execution and delivery by either Parent Company of this Agreement, nor the
consummation of any transaction referred to in or contemplated by this
Agreement, nor the fulfillment of the terms hereof or thereof, has constituted
or resulted, or will constitute or result in:
(a) Any breach or termination of the provisions of any
agreement, instrument, deed or lease to which either Parent Company is a party
or by which either Parent Company is bound;
(b) the violation of any law, statute, judgment, decree
or governmental order, rule or regulation applicable to either Parent Company;
(c) The creation under any agreement, instrument, deed or
lease of any Lien upon any of the assets of either Parent Company; or
(d) Any redemption, retirement or other repurchase
obligation of either Parent Company under any partnership agreement, Charter,
By-law, agreement, instrument, deed or lease.
No approval, authorization or other action by, or declaration to or filing
with, any governmental or administrative authority or any other Person is
required to be obtained or made by either Parent Company in connection with the
execution, delivery and performance of this Agreement, or the transactions
contemplated hereby.
4. GENERAL COVENANTS. Each Parent Company covenants that, until all of
the Obligations shall have been paid in full, it will comply with the following
provisions:
4.1 PRESERVATION OF CORPORATE EXISTENCE, ETC. Each Parent Company
will at all times preserve and keep in full force and effect its legal
existence, rights and franchises.
4.2 TAXES AND OTHER CHARGES; ACCOUNTS PAYABLE.
4.2.1 TAXES AND OTHER CHARGES. Each Parent Company will
duly pay and discharge, or cause to be paid and discharged, before the same
shall become in arrears, all taxes, assessments and other governmental charges
imposed upon such Parent Company and its properties, sales or activities, or
upon the income or profits therefrom, as well as all claims for labor,
materials or supplies which if unpaid might by law become a Lien upon any of
its
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<PAGE> 13
property; provided, however, that any such tax, assessment, charge, or claim
need not be paid if the validity or amount thereof shall at the time be
contested in good faith by appropriate proceedings (or if all such unpaid
taxes, assessments, charges or claims do not exceed $100,000 in the aggregate)
and if such Parent Company shall, in accordance with GAAP, have set aside on
its books adequate reserves with respect thereto; and provided, further, that
such Parent Company will pay or bond all such taxes, assessments, charges or
other governmental claims immediately upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefore (except to the
extent such proceedings have been dismissed or stayed).
4.2.2 ACCOUNTS PAYABLE. Each Parent Company will promptly
pay when due, or in conformity with customary trade terms, all other
Indebtedness incident to the operations of such Parent Company; provided,
however, that any such Indebtedness need not be paid if the validity or amount
thereof shall at the time be contested in good faith and if such Parent Company
shall, in accordance with GAAP, have set aside on its books adequate reserves
with respect thereto.
4.3 FINANCIAL STATEMENTS AND REPORTS. Holding, L.P. will maintain
a system of accounting in which full and correct entries will be made of all
transactions in relation to its business and affairs in accordance with GAAP.
The fiscal year of Holding, L.P. will end on December 31 in each year.
4.3.1 ANNUAL REPORTS. Holding, L.P. will furnish to the
Purchasers as soon as available, and in any event within ninety (90) days after
the end of each fiscal year, the Consolidated and Consolidating balance sheet
of Holding, L.P. and its Subsidiaries as at the end of such fiscal year, the
Consolidated and Consolidating statements of earnings, changes in partners'
equity and cash flows of Holding, L.P. and its Subsidiaries for such fiscal
year (all in reasonable detail), and together with comparative figures for the
preceding fiscal year all accompanied by:
(a) Unqualified reports of Ernst &
Young, LLP (or, if they cease to be auditors of Holding, L.P., independent
certified public accountants of recognized national standing reasonably
satisfactory to the Purchasers), to the effect that they have audited such
Consolidated financial statements in accordance with generally accepted
auditing standards and that such Consolidated financial statements present
fairly, in all material respects, the financial position of Holding, L.P. and
its Subsidiaries at the dates thereof and the results of their operations for
the periods covered thereby in conformity with GAAP.
(b) The statement of such accountants
that they have caused this Agreement to be reviewed and that in the course of
their audit of Holding, L.P. and its Subsidiaries no facts have come to their
attention that cause them to believe that
10
<PAGE> 14
any default exists hereunder and in particular that they have no knowledge of
any default under Section 4 or, if such is not the case, specifying such
default and the nature thereof. This statement is furnished by such
accountants with the understanding that the examination of such accountants
cannot be relied upon to give such accountants knowledge of any such default
except as it relates to accounting or auditing matters within the scope of
their audit.
(c) A certificate of a Financial Officer
of Holding, L.P. to the effect that such officer has caused this Agreement to
be reviewed and has no knowledge of any default hereunder, or if such officer
has such knowledge, specifying such default and the nature thereof, and what
action the Parent Companies have taken, are taking or propose to take with
respect thereto.
(d) In the event of a material change in
GAAP after the date hereof, computations, certified by a Financial Officer of
Holding, L.P., reconciling the financial statements referred to above with
financial statements prepared in accordance with GAAP as applied to the other
covenants in Section 4 and related definitions.
(e) Computations demonstrating, as of
the end of such fiscal year, compliance with Section 7.10.4 of the Bank Credit
Agreement (as incorporated into the Note Agreement) and Section 4.5.
4.3.2 QUARTERLY REPORTS. Holding, L.P. will
furnish to the Purchasers as soon as available and, in any event, within sixty
(60) days after the end of each of the first three fiscal quarters of each
fiscal year, the internally prepared Consolidated balance sheet of Holding,
L.P. and its Subsidiaries as of the end of such fiscal quarter and the
Consolidated statements of earnings, changes in partners' equity and cash flows
of Holding, L.P. and its Subsidiaries for such fiscal quarter and for the
portion of the fiscal year then ending (all in reasonable detail), together
with comparative figures for the same period in the preceding fiscal year, all
accompanied by:
(a) A certificate signed by a
Financial Officer of Holding, L.P. to the effect that such financial statements
have been prepared in accordance with GAAP and present fairly, in all material
respects, the financial position of Holding, L.P. and its Subsidiaries covered
thereby at the dates thereof and the results of their operations for the
periods covered thereby, subject only to normal year-end audit adjustments and
the addition of footnotes.
(b) In the event of a material
change in GAAP after the date hereof, computations, certified by a Financial
Officer of Holding, L.P., reconciling the financial statements referred to
above with financial statements prepared in accordance
11
<PAGE> 15
with GAAP as applied to the other covenants in Section 5 and related
definitions.
(c) Computations demonstrating, as
of the end of such fiscal quarter, compliance with Section 7.10.4 of the Bank
Credit Agreement (as incorporated into the Note Agreement) and Section 4.5.
(d) A certificate signed by a
Financial Officer of Holding, L.P. to the effect that such officer has caused
this Agreement to be reviewed and has no knowledge of any default hereunder, or
if such officer has such knowledge, specifying such default and the nature
thereof and what action the Parent Companies have taken, are taking or propose
to take with respect thereto.
4.3.3 OTHER INFORMATION. From time to time upon
request of any authorized officer of either Purchaser, the Parent Companies
will furnish to the Purchasers such other information regarding the business,
affairs and condition, financial or otherwise, of the Parent Companies as such
officer may reasonably request. The authorized officers and representatives of
either Purchaser shall have the right during normal business hours to examine
the books and records of the Parent Companies and to make copies, notes and
abstracts therefrom, for the purpose of verifying the accuracy of the reports
delivered by the Parent Companies pursuant to this Section 4.3 or otherwise
and ascertaining compliance with this Agreement.
4.3.4 NOTICE OF MATERIAL LITIGATION; NOTICE OF
DEFAULTS, ETC. The Parent Companies will promptly furnish to the Purchasers
notice of the occurrence of any litigation or any administrative or arbitration
proceeding to which either Parent Company may hereafter become a party which
may involve any material risk of any material final judgment or liability not
adequately covered by insurance or which may otherwise result in a Material
Adverse Change (as defined in the Bank Credit Agreement), and notices by any
lenders, trustees or investors of any defaults, acceleration of time for
payment or special prepayments with respect to any other indebtedness of either
Parent Company.
4.4 MERGER AND CONSOLIDATION. The Parent Companies will not merge
or enter into a consolidation; provided, however, that Holding, L.P. may
convert to a successor corporation that would not result in an Event of Default
immediately after such succession and that enters into assumption agreements
with respect to this Agreement reasonably satisfactory to the Purchasers in all
respects.
4.5 RESTRICTIONS ON FINANCING DEBT. Neither Parent Company shall
create, incur, assume or otherwise become or remain liable with respect to any
Financing Debt (other than notes evidencing PIK Interest Payments, Holding,
L.P. Senior Subordinated Notes and Financing Debt outstanding on the date
hereof and reflected on the balance sheets referred to in Section 3.2 above)
unless:
12
<PAGE> 16
(a) prior to the incurrence of any such Financing Debt,
the Parent Companies shall have delivered to the Purchasers a certificate
signed by a Financial Officer of Holding, L.P. demonstrating that on a
pro-forma basis (after giving effect to the incurrence of such Financing Debt)
Consolidated Holding, L.P. Total Debt shall not on the date on which such
Financing Debt is to be incurred exceed the percentage indicated in the table
below of Consolidated Holding L.P. Annualized Operating Cash Flow as of the end
of the most recent fiscal quarter for which financial statements have been (or
are required to have been) furnished to the Purchasers in accordance with
Section 4.3.2.
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
Prior to March 30, 2000 850%
March 31, 2000 and thereafter 750%
</TABLE>
(b) prior to the incurrence of any such Financing Debt
that requires either cash interest payments at a rate exceeding 14% per annum
or principal repayments or sinking fund payments prior to the final maturity
date of the Notes, the Parent Companies shall have received the prior written
consent of the Purchasers to the incurrence of such Financing Debt.
4.6 NO CASH PAYMENTS ON SENIOR SUBORDINATED DEBT. Prior to
September 30, 2000, neither Parent Company shall make any cash payment of
principal of or interest on the Senior Subordinated Notes issued by Holding,
L.P.
4.7 TRANSACTIONS WITH AFFILIATES. Each Parent Company shall not
effect any transaction with any Affiliate of a Restricted Company (other than
any Restricted Company) on a basis less favorable to such Parent Company than
would be the case if such transaction had been effected with a non-Affiliate.
4.8 SENIOR SUBORDINATED DEBT AMENDMENTS AND WAIVERS. Neither
Parent Company shall permit any amendment or waiver with respect to the
Holding, L.P. Senior Subordinated Notes.
4.9 CERTAIN CONSENTS. Holding, L.P. shall proceed in good faith
to obtain all franchise and other consents to the transactions contemplated by
the Bank Credit Agreement which consents have not been obtained on or prior to
the Fourth Amendment Closing Date.
5. INFORMATION REGARDING THE OBLIGORS. Each Holder of Subordinated
Indebtedness expressly acknowledges and agrees that such Holder of Subordinated
Indebtedness has made such investigation as it deems desirable of the risks
undertaken by such holder in entering into this Agreement and is fully
satisfied that it understands all such risks. Each Holder of Subordinated
Indebtedness waives any obligation which may now or hereafter exist on the part
of the Purchasers or any holder of any Senior
13
<PAGE> 17
Indebtedness to inform any Holder of Subordinated Indebtedness of the risks
being undertaken by entering into this Agreement or of any changes in such
risks and, from and after the date hereof, each Holder of Subordinated
Indebtedness undertakes to keep itself informed of such risks and any changes
therein. Each Holder of Subordinated Indebtedness expressly waives (except to
the extent prohibited by applicable law which cannot be waived) any duty which
may now or hereafter exist on the part of the Purchasers or any holder of any
Senior Indebtedness to disclose to such Holder any matter related to the
business, operations, character, collateral, credit or condition (financial or
otherwise) or prospects of any of the Obligors whether now or hereafter known
by any Purchaser. Each Holder of Subordinated Indebtedness represents,
warrants and agrees that it assumes sole responsibility for obtaining from the
Obligors all information concerning the Obligations and all other information
as to the Obligors and their properties or management or anything relating to
any of the above as it deems necessary or desirable.
6. CONTINUING AGREEMENT, ETC. This Agreement shall be a continuing
agreement, shall be irrevocable and shall remain in full force and effect until
the indefeasible payment in full of the Senior Indebtedness then outstanding in
accordance with the terms thereof. No action which the holders of the Senior
Indebtedness or any Obligors may take or refrain from taking with respect to
the Senior Indebtedness, including any amendments thereto, shall affect the
provisions of this Agreement or the obligations of the Parent Companies or any
Holder of Subordinated Indebtedness hereunder. No right of the Purchasers or
any present or future holder of any of the Senior Indebtedness shall at any
time be prejudiced or impaired by any act or failure to act on the part of the
Parent Companies or by any act or failure to act, in good faith, by any
Purchaser or any such holder, or by any noncompliance by the Parent Companies
with the terms of this Agreement, regardless of any knowledge thereof which any
Purchaser or any such holder may have or otherwise be charged with.
7. WAIVERS; POWERS, ETC.
7.1 SPECIFIC PERFORMANCE. The Purchasers are authorized to demand
specific performance of this Agreement at any time when the Parent Companies or
any Holder of Subordinated Indebtedness shall have failed to comply with any
provision hereof applicable to it, and each of them irrevocably waives any
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance hereof in any action brought therefor
by the Purchasers.
7.2 CONSENT TO NOTE AGREEMENT AND GUARANTY AGREEMENT. The Parent
Companies and each Holder of Subordinated Indebtedness acknowledge receipt from
the Obligors of a correct and complete copy of the Note Agreement and Guaranty
Agreement as in effect as of the date hereof, and consent to all of the
provisions of the Note Agreement and Guaranty Agreement as in effect as of such
date
14
<PAGE> 18
and agree that their consent is not required for any amendments, modifications
or waivers of the provisions thereof.
7.3 POWER TO MODIFY, ETC. Each Parent Company and each Holder of
Subordinated Indebtedness grants, to the extent permitted by applicable law
that cannot be waived, the Purchasers full power, in their sole discretion,
without notice to or consent by any Holder of Subordinated Indebtedness and
without in any way affecting the subordination of the Subordinated Indebtedness
provided in this Agreement.
7.3.1 To waive compliance with any Event of Default under,
and to consent to any amendment or change or any terms of, the Note Agreement
or the Guaranty Agreement (each as from time to time in effect);
7.3.2 To grant one or more extensions or renewals of the
Obligations (for any period, no matter how long), and any other indulgence with
respect thereto and to effect any total or partial release (by operation of law
or otherwise), discharge, compromise or settlement with respect to the
obligations of the Obligors in respect of the Obligations, whether or not
rights against the Obligors under this Agreement are reserved in connection
therewith;
7.3.3 To take security in any form for the Obligations and
to consent to the addition to or the substitution, exchange, release, failure
to perfect or any other disposition of, and to deal in any other manner with,
to the extent permitted by applicable law that cannot be waived, all or part of
any property which may from time to time secure the Obligations whether or not
the property, if any, received upon the exercise of such power shall be of a
character or value the same as or different from the character or value of any
property disposed of, and to obtain, modify or release any present or future
guarantees of the Obligations and to proceed against any such guarantees in any
order; and
7.3.4 To collect or liquidate any of the Obligations in any
manner or to refrain from collecting or liquidating any of the Obligations.
7.4 NO SUBROGATION. Until the Obligations have been indefeasibly
paid in full, each Parent Company hereby agrees with the Purchasers that it
waives all rights of reimbursement, subrogation, contribution, offset and other
claims against the Obligors arising by contract or operation of law in
connection with any payment made or required to be made by such Parent Company
under this Agreement.
8. TRANSFERS; SUCCESSORS AND ASSIGNS.
8.1 TRANSFERS. No Holder of Subordinated Indebtedness will sell,
assign, transfer or otherwise dispose of any Subordinated
15
<PAGE> 19
Indebtedness except to another Person which shall have entered into this
Agreement with the Purchasers.
8.2 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of the Purchasers and their successors and assigns
and shall be binding upon the Obligors and the Holders of Subordinated
Indebtedness and their respective successors and assigns.
9. NOTICES. Except as otherwise specified in this Agreement, any notice
required to be given pursuant to this Agreement shall be given in writing. Any
notice, demand or other communication in connection with this Agreement shall
be deemed to be given if given in writing (including telex, telecopy (confirmed
by telephone or writing) or similar teletransmission) addressed as provided
below (or to the addressee at such other address as the addressee shall have
specified by notice actually received by the addressor), and if either (a)
actually delivered in fully legible form to such address(evidenced in the case
of a telex by receipt of the correct answerback) or (b) in the case of a
letter, five days shall have elapsed after the same shall have been deposited
in the United States mails, with first-class postage prepaid and registered or
certified.
If to either Parent Company, to it at the address set forth on
the signature page hereof;
If to any Restricted Company, to it at its address set forth
in the Guaranty Agreement;
If to either Purchaser, to it at its address set forth in the
Note Agreement;
or to such other address as provided by any party hereto in writing to the
other parties hereto.
10. DEFEASANCE. When all Obligations have been paid, performed and
determined by the Purchasers to have been indefeasibly discharged in full, this
Agreement shall terminate.
11. LIMITED RECOURSE AGAINST PARTNERS. The remedies of the holders of the
Obligations, including any remedy which could be exercised upon the occurrence
of an Event of Default, shall be limited to the extent that none of the
partners of Holding, L.P. shall have any personal liability as a general
partner or limited partner of Holding, L.P. with respect to the Obligations,
and in no event shall any such partner be personally liable as a general
partner or limited partner for any deficiency judgment for any Obligation;
provided, however, that the provisions of this Section 11 shall not impair the
ability of any holder of any Obligation (a) to realize on the assets of any
Obligor or any of its Subsidiaries or (b) to pursue any remedy against any
guarantor of the Obligations.
16
<PAGE> 20
12. VENUE; SERVICE OF PROCESS. Each Parent Company and each Holder of
Subordinated Indebtedness, by its execution hereof:
(a) Irrevocably submits to the nonexclusive jurisdiction of the
state courts of The State of New York and to the nonexclusive jurisdiction of
the United States District Court for the Southern District New York for the
purpose of any suit, action or other proceeding arising out of or based upon
this Agreement, or the subject matter hereof or thereof brought by the
Purchasers, any holder of Senior Indebtedness or their successors or assigns;
and
(b) Waives to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise, in any such
proceeding, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment
or execution, that such proceeding is brought in an inconvenient forum, that
the venue of such proceeding is improper, or that this Agreement, or the
subject matter hereof or thereof, may not be enforced in or by such court.
Each Parent Company and each Holder of Subordinated Indebtedness hereby agrees
that service of process by registered or certified mail, return receipt
requested, at its address specified in or pursuant to Section 9 is reasonably
calculated to give actual notice.
13. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
THAT CANNOT BE WAIVED, EACH PARENT COMPANY AND EACH HOLDER OF SUBORDINATED
INDEBTEDNESS AND THE PURCHASERS HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY
JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND OR ACTION ARISING OUT
OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OBLIGATION OR
IN ANY WAY CONNECTED WITH THE DEALINGS OF THE PURCHASERS OR SUCH PARENT COMPANY
OR ANY HOLDER OF SUBORDINATED INDEBTEDNESS IN CONNECTION WITH ANY OF THE ABOVE,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT
OR TORT OR OTHERWISE. Each Parent Company and each Holder of Subordinated
Indebtedness acknowledges that it has been informed by the Purchasers that the
provisions of this Section 13 constitute a material inducement upon which each
of the Purchasers has relied, is relying and will rely in entering into this
Agreement, and that it has reviewed the provisions of this Section 13 with its
counsel. The Purchasers, any Parent Company or any Holder of Subordinated
Indebtedness may file an original counterpart or a copy of this Section 13 with
any court as written evidence of the consent of the Purchasers, any Parent
Company or any Holder of Subordinated Indebtedness to the waiver of their
rights to trial by jury.
14. GENERAL. The headings in this Agreement are for convenience of
reference only and shall not limit, alter or otherwise affect the meaning
hereof The invalidity or unenforceability of any term or provision hereof
shall not affect the validity or enforceability
17
<PAGE> 21
of any other term or provision hereof. This Agreement and the other documents
referred to herein constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior and
current understandings and agreements, whether written or oral. This Agreement
may be executed in any number of counterparts, which together shall constitute
one instrument. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE STATE
OF NEW YORK.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
NEXT PAGE IS SIGNATURE PAGE.]
18
<PAGE> 22
Each of the undersigned has caused this Second Restated Subordination
Agreement to be executed and delivered by its duly authorized officer as an
agreement under seal as of the date first above written.
<TABLE>
<S> <C>
FALCON HOLDING GROUP, L.P.
By: FALCON HOLDING GROUP, INC.,
general partner
By____________________________
Title_______________________
FALCON CABLE TV
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
FALCON HOLDING GROUP, INC.
By_________________________________
Title____________________________
FALCON CABLE TV
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
AUSA LIFE INSURANCE COMPANY, INC.
By_________________________________
Title____________________________
MONY LIFE INSURANCE COMPANY
OF AMERICA
By_________________________________
Title____________________________
</TABLE>
19
<PAGE> 23
FALCON CABLE MEDIA, A CALIFORNIA
LIMITED PARTNERSHIP
FALCON CABLEVISION, A CALIFORNIA
LIMITED PARTNERSHIP
FALCON COMMUNITY CABLE, L.P.
FALCON COMMUNITY VENTURES I
LIMITED PARTNERSHIP
FALCON TELECABLE, A CALIFORNIA
LIMITED PARTNERSHIP
FALCON COMMUNITY INVESTORS, L.P.
FALCON TELECOM, L.P.
FALCON CABLE SYSTEMS COMPANY II, L.P.
FALCON INVESTORS GROUP, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
FALCON MEDIA INVESTORS GROUP,
A CALIFORNIA LIMITED PARTNERSHIP
FALCON TELECABLE INVESTORS GROUP,
A CALIFORNIA LIMITED PARTNERSHIP
By: FALCON HOLDING GROUP, INC., as
general partner, or general
partner, of each of the fore-
going Restricted Companies
By____________________________
Title_______________________
FALCON FIRST, INC.
By_________________________________
Title____________________________
ATHENS CABLEVISION, INC.
AUSABLE CABLE TV, INC.
CEDAR BLUFF CABLEVISION, INC.
DALTON CABLEVISION, INC.
EASTERN MISSISSIPPI CABLEVISION, INC.
FALCON FIRST CABLE OF NEW YORK, INC.
FALCON FIRST CABLE OF THE SOUTHEAST,
INC.
FALCON FIRST HOLDINGS, INC.
FF CABLE HOLDINGS, INC.
LAUDERDALE CABLEVISION, INC.
MULTIVISION NORTHEAST, INC.
MULTIVISION OF COMMERCE, INC.
PLATTSBURG CABLEVISION, INC.
SCOTTSBORO CABLEVISION, INC.
SCOTTSBORO TV CABLE, INC.
By_________________________________
As an authorized officer of each
of the foregoing corporations
20
<PAGE> 1
Exhibit 10.44
SECOND RESTATED
GUARANTY AGREEMENT
SECOND RESTATED GUARANTY AGREEMENT (this "Agreement" or this "Guaranty
Agreement"), dated as of July 12, 1996, jointly and severally from each of
FALCON CABLEVISION, A CALIFORNIA LIMITED PARTNERSHIP, FALCON CABLE MEDIA, A
CALIFORNIA LIMITED PARTNERSHIP, FALCON COMMUNITY CABLE, L.P., a Delaware
limited partnership, FALCON COMMUNITY VENTURES I LIMITED PARTNERSHIP, a
California limited partnership, FALCON INVESTORS GROUP, LTD., A CALIFORNIA
LIMITED PARTNERSHIP, FALCON TELECABLE INVESTORS GROUP, A CALIFORNIA LIMITED
PARTNERSHIP, FALCON MEDIA INVESTORS GROUP, A CALIFORNIA LIMITED PARTNERSHIP,
FALCON COMMUNITY INVESTORS, L.P., a California limited partnership, FALCON
TELECOM, L.P., a California limited partnership, FALCON CABLE SYSTEMS COMPANY
II, L.P., a California limited partnership, and FALCON FIRST, INC., A DELAWARE
CORPORATION, (together with each other Person who is or becomes a guarantor
hereunder,herein referred to individually as a "Guarantor", and collectively,
as the "Guarantors"), in favor of each of AUSA LIFE INSURANCE COMPANY, INC. and
MONY LIFE INSURANCE COMPANY OF AMERICA (collectively, the "Purchasers", which
term shall include the successors and assigns of each, including, without
limitation, any one or more Persons holding any one or more of the Notes (as
defined below) on or after the date hereof).
W I T N E S S E T H:
WHEREAS, by a Note Purchase and Exchange Agreement dated as of October
21, 1991 (as amended from time to time prior to the date hereof, the "Old Note
Purchase Agreement") by and between Falcon Telecable, a California limited
partnership (the "Company"), and The Mutual Life Insurance Company of New York
and MONY Life Insurance Company of America, the Company issued its 11.56%
Series A Subordinated Notes due March 31, 2001 and its 11.56% Series B
Subordinated Notes due March 31, 2001 (collectively, as amended from time to
time, such notes, and any and all other notes for which such Notes, or any
successor Notes, may be substituted or exchanged pursuant to the Note Purchase
Agreement (defined below), are herein referred to as the "Notes"); and
WHEREAS, certain of the parties hereto entered into that certain
Guaranty Agreement dated March 29, 1993 (the "Original Guaranty") and the
Original Agreement was restated as of December 28, 1995 (the "Restated
Guaranty"); and
WHEREAS, concurrently herewith, the Purchasers and the Company are
entering into that certain Fourth Amendment to Note Purchase and Exchange
Agreement, dated as of July 12, 1996 (the "Amendment"), pursuant to which,
inter alia, the Company and the Purchasers are amending certain provisions of
the Old Note Purchase Agreement (as amended by the Amendment, and as amended
further from time to time, the Old Note Purchase Agreement is herein referred
to as the "Note Purchase Agreement"); and
<PAGE> 2
WHEREAS, concurrently with the execution and delivery of the Amendment
by the Company and the Purchasers, each of the Company, Falcon Cablevision, a
California Limited Partnership, Falcon Cable Media, a California limited
partnership, Falcon Community Cable, L.P., a Delaware limited partnership,
Falcon Community Ventures I Limited Partnership, a California limited
partnership, Falcon Telecom, L.P., a California limited partnership, Falcon
Cable Systems Company II, L.P., a California limited partnership, and Falcon
First, Inc., a Delaware corporation (collectively, the "Bank Borrowers") are
entering into that certain Credit Agreement (the "Bank Credit Agreement") dated
as of July 12, 1996, by and between the Company, the other Bank Borrowers, the
banks signatory thereto as lenders (the "Banks") and The First National Bank of
Boston, as managing agent; and
WHEREAS, the Old Note Purchase Agreement provides, inter alia, for a
limitation on certain actions by the Company; and
WHEREAS, in the absence of the execution and delivery of the Amendment
by the Purchasers, (i) the Company would be unable to enter into the Bank
Credit Agreement and (ii) the Banks would be unwilling to enter into the Bank
Credit Agreement with the Company and the other Bank Borrowers; and
WHEREAS, the Bank Credit Agreement will provide the Company, the other
Bank Borrowers and the Guarantors which are not Bank Borrowers access to credit
and funds in excess of the amount of credit and funds available to them in the
absence of the Bank Credit Agreement; and
WHEREAS, it is a condition precedent to the entry by the Company and
the other Bank Borrowers into the Bank Credit Agreement that the Purchasers and
the Company enter into the Amendment; and
WHEREAS, it is a condition precedent to the entry by the Purchasers
and the Company into the Amendment that the Company and the Guarantors enter
into this Agreement and guarantee the payment and performance of all
obligations of the Company arising under, or in respect of, the Notes and the
Note Purchase Agreement, as further set forth herein; and
WHEREAS, each Guarantor desires that the Purchasers enter into the
Amendment and each is willing to execute this Guaranty Agreement in order to
induce the Purchasers to do so; and
NOW, THEREFORE, in order to induce the Purchasers to enter into the
Amendment, and in consideration therefor, and in consideration of $1.00 and
other good and valuable consideration to each Guarantor paid (the receipt and
sufficiency of which are hereby acknowledged), each Guarantor hereby agrees
that the Guaranty as restated by the Restated Guaranty is hereby restated in
full as follows:
2
<PAGE> 3
1. DEFINITIONS. The capitalized terms used herein, which are
defined or referred to in Section 6 hereof, shall have the respective meanings
ascribed to them in said Section 6. All other capitalized terms used herein
but not defined herein shall have the respective meanings assigned to them
within the Note Purchase Agreement.
2. THE GUARANTY. Each Guarantor hereby irrevocably and
unconditionally, and jointly and severally with each other Guarantor,
guarantees, as and for its own debt, until final and indefeasible payment has
been made, the due and punctual payment of the principal and interest of, and
premium or Make-Whole Amount, if any, on all Notes at any time outstanding and
the due and punctual payment of all moneys payable, and all other indebtedness
owing, by the Company under the Note Purchase Agreement and all other documents
contemplated thereby (collectively, the "Indebtedness") in each case when and
as the same shall become due and payable, whether at maturity, pursuant to
mandatory or optional prepayment, by acceleration or otherwise, all in
accordance with the terms and provisions thereof; it being the intent of each
Guarantor that the guaranty set forth herein shall be a guaranty of payment and
not a guaranty of collection. Each Guarantor hereby further unconditionally,
jointly and severally with each other Guarantor, guarantees the punctual and
faithful performance, keeping, observance and fulfillment by the Company of all
duties, agreements, covenants and obligations of the Company contained in the
Notes, in the Note Purchase Agreement and the other documents to which it is a
party. In the event the Company fails to make, on or before the due date
thereof, any payment to be made of any principal amount of, or interest,
premium or Make-Whole Amount (if any) on, or in respect of, the Notes or of any
other amounts due under the Notes, the Note Purchase Agreement or the other
documents to which the Company is a party, or if the Company shall fail to
perform, keep, observe or fulfill any such obligation as aforesaid in the
manner provided in any one or more of the Notes, the Note Purchase Agreement or
such other documents, each Guarantor shall cause forthwith to be paid the
moneys or to be performed, kept, observed or fulfilled each of said obligations
in respect of which such failure has occurred as if such payment or
performance, as the case may be, were being made under the Notes, the Note
Purchase Agreement or such other documents, as appropriate.
Each Guarantor does hereby waive: notice of acceptance
hereof; notice of any purchase of Notes issued under the Note Purchase
Agreement or the extension of credit from time to time given by any Purchaser
to the Company and the creation, existence or acquisition of any of the
Indebtedness; notice of the amount of the Indebtedness, subject, however, to
each Guarantor's right to make inquiry of the Purchasers to ascertain the
amount of the Indebtedness at any reasonable time; notice of adverse change in
the financial condition of the Company or of any other fact which might
increase any Guarantor's risk; notice of presentment for payment, demand,
protest and notice thereof as to the Notes or any other instrument; notice of
default; all defenses, offsets and
3
<PAGE> 4
counterclaims which any Guarantor may at any time have to any claim of any of
the Purchasers against the Company; and all other notices and demands to which
any Guarantor might otherwise be entitled.
Each Guarantor further waives the rights by statute or
otherwise to require the Purchasers to institute suit against the Company or to
exhaust their rights and remedies against the Company or any other guarantor,
each Guarantor being bound to the payment of each and all Indebtedness whether
now existing or hereafter accruing as fully as if such Indebtedness were
directly owing to the Purchasers by each Guarantor. Each Guarantor further
waives any defense arising by reason of any disability or other defense of the
Company or by reason of the cessation from any cause whatsoever of the
liability of the Company. Until all of the Indebtedness shall have been paid
in full, each Guarantor shall have no right of subrogation, reimbursement or
indemnity whatsoever and no right of recourse to or with respect to any assets
or property of the Company. Nothing shall discharge or satisfy the liability
of each Guarantor hereunder except the full and final performance and
indefeasible payment of the Indebtedness.
The Purchasers shall have, to the fullest extent permitted by
law, the right of set-off in respect of any and all credits and any and all
other property of any Guarantor, now or at any time whatsoever with, or in the
possession of, any of the Purchasers for any and all obligations of such
Guarantor hereunder.
Each Guarantor consents and agrees that, without notice to or
by such Guarantor and without affecting or impairing the obligations of such
Guarantor hereunder, the Purchasers may, in the manner provided in the Note,
the Note Purchase Agreement or any other documents to which any is a party, by
action or inaction, compromise or settle, extend the period of duration or the
time for the payment or discharge or performance of, or may refuse to, or
otherwise not, enforce, or may, by action or inaction, release all or any one
or more parties to, any one or more of the Notes, the Note Purchase Agreement
or any other document to which any is a party, or may grant other indulgences
to the Company in respect thereof, or may amend or modify in any manner and at
any time (or from time to time) any one or more of the Notes, the Note Purchase
Agreement, or any other such document, or may, by action or inaction, release
or substitute any one or more of the endorsers or guarantors of the
Indebtedness, whether parties to this instrument or not.
Each Guarantor consents and agrees that the Purchasers shall
be under no obligation to marshall any assets in favor of such Guarantor, or
against or in payment of any or all of the Indebtedness. Each Guarantor agrees
to pay all expenses incurred by any of the Purchasers in connection with the
protection, assertion or enforcement of their rights under this Guaranty
Agreement, including, without limitation, court costs, collection charges and
reasonable attorneys' fees and disbursements. Each Guarantor further agrees
that, to the extent the Company makes a
4
<PAGE> 5
payment or payments to any Purchaser, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required, for any of the foregoing reasons or for
any other reason, to be repaid or paid over to a custodian, trustee, receiver
or any other party under any bankruptcy law or act, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, the obligation or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if said payment had not been
made and each Guarantor shall be primarily liable for such obligation.
In the event that for any reason whatsoever, the Company is
now or hereafter becomes indebted to any Guarantor, such Guarantor agrees that
the amount of such indebtedness and all interest thereon shall at all times be
subordinate as to time of payment and in all other respects to all obligations
of the Company to the Purchasers which are covered by, or referred to in, this
Guaranty Agreement, and that such Guarantor shall not be entitled to enforce or
receive payment thereof until all sums then due and owing to the Purchasers
shall have been paid in full.
Each Guarantor agrees that the liability of such Guarantor in
respect of this Guaranty Agreement shall be immediate and shall not be
contingent upon the exercise or enforcement by the Purchasers of whatever
remedies they may have against the Company or any other guarantor hereunder or
otherwise or the enforcement of any lien or realization upon any security any
Purchaser may at any time possess or have available for its benefit or upon any
action or exercise or enforcement of any right or remedies by any Purchaser
against the Company or any other guarantor hereunder or otherwise.
The guaranty set forth herein is a primary and original
obligation of each Guarantor and is an absolute, unconditional, continuing and
irrevocable guaranty of payment and performance and shall remain in full force
and effect without respect to future changes in conditions, including change of
law or any invalidity or irregularity with respect to the issuance of any
obligations (including, without limitation, the Notes) of the Company to any of
the Purchasers, or with respect to the execution and delivery of any agreement
(including, without limitation, the Amendment and the Note Purchase Agreement)
between the Company and any one or more of the Purchasers.
The Purchasers shall have the right to seek recourse against
each Guarantor to the full extent provided for herein, and against the Company,
to the full extent provided for in the Notes and the Note Purchase Agreement.
No election to proceed in one form of action or proceeding, or against any
party, or on any obligation, shall constitute a waiver of the right of any
Purchaser to proceed in any other form of action or proceeding or against other
parties unless such Purchaser has expressly waived such right in writing.
Specifically, without limiting the generality of the
5
<PAGE> 6
foregoing, no action or proceeding by any of the Purchasers against the Company
under any document or instrument evidencing obligations of the Company to any
one or more of the Purchasers shall serve to diminish the liability of any
Guarantor except to the extent that such Purchaser finally and unconditionally
shall have realized payment by such action or proceeding, notwithstanding the
effect of any such action or proceeding upon such Guarantor's right of
subrogation against the Company. Each Guarantor is fully aware of the
financial condition of the Company. Each Guarantor delivers this guaranty
based solely upon its own independent investigation and in no part upon any
representation or statement of any one or more of the Purchasers with respect
thereto. Each Guarantor is in a position to obtain, and hereby assumes full
responsibility for obtaining, any additional information concerning the
financial condition of the Company as such Guarantor may deem material to its
obligations hereunder, and each Guarantor is not relying upon, nor expecting,
the Purchasers to furnish it any information concerning the financial condition
of the Company.
At the request of any of the Purchasers, each Guarantor shall,
from time to time, prepare and deliver to such Purchaser a complete and current
financial statement of such Guarantor setting forth all the assets and
liabilities of such Guarantor (and, to the extent any person other than such
Guarantor has any interest in said assets or any person other than such
Guarantor is jointly liable for any of said obligations, said matters shall be
set forth in their entirety in the financial statements) all signed by such
Guarantor under oath as being true, correct and complete.
3. WARRANTIES, REPRESENTATIONS AND COVENANTS.
3.1 WARRANTIES AND REPRESENTATIONS TRUE AND CORRECT.
Each and every warranty and representation contained in the Bank Credit
Agreement with respect to the Guarantors (whether the Guarantors are referred
to therein specifically as the "Guarantors", as the "Restricted Companies", as
one or more of the "Subsidiaries", or otherwise), is true and correct and each
Guarantor hereby affirms, confirms, gives and makes each and every such
warranty and representation as if set forth herein in full. Each statement
contained in the introductory and recital paragraphs of this Guaranty Agreement
is accurate.
3.2 ADDITIONAL WARRANTIES AND REPRESENTATIONS. Each of
the Guarantors hereby warrants, represents and covenants that:
(a) it is in its best interest and in pursuit of
its partnership or corporate purposes as an integral part of the
business conducted and proposed to be conducted by each Guarantor, and
reasonably necessary and convenient in connection with the conduct of
the business conducted and proposed to be conducted by it, to induce
the Purchasers to enter into the Amendment, which is a condition
precedent to the transactions contemplated by the Bank Credit
Agreement;
6
<PAGE> 7
(b) the credit available to such Guarantor under
the Bank Credit Agreement will directly or indirectly inure to its
benefit;
(c) by virtue of the foregoing it is receiving at
least reasonably equivalent consideration from the Purchasers for its
guaranty and the other undertakings and premises contained herein;
(d) it will not be rendered insolvent as a result
of entering into this Agreement;
(e) after giving effect to the transactions
contemplated by this Agreement, the Amendment and the Bank Credit
Agreement, such Guarantor will have assets having a fair saleable
value in excess of the amount required to pay its probable liability
on its existing debts as they have become absolute and matured;
(f) it has, and will have, access to adequate
capital for the conduct of its business;
(g) it has the ability to pay its debts from time
to time incurred in connection therewith as such debts mature; and
(h) it has been advised by the Company, the
Purchasers and the Banks that the Purchasers are unwilling to enter
into the Amendment unless the guaranties and other undertakings
contemplated hereunder are given by it.
3.3 NO AMENDMENT TO BANK CREDIT AGREEMENT; COMPLIANCE
WITH COVENANTS.
(a) The Guarantors and the Company covenant,
individually and together, jointly and severally, that they will not
enter into any amendment, modification, supplement or other alteration
to, or extension of, the Bank Credit Agreement or the Pledge and
Subordination Agreement dated as of July 12, 1996 among Falcon Holding
Group, L.P., Falcon Holding Group, Inc., the Company, the Guarantors
and The First National Bank of Boston, which would materially
interfere with the ability of the Guarantors and the Company to pay
the indebtedness without the written consent of the Purchasers.
(b) Each of the Guarantors will comply, or cause
the Company to comply, with each of the covenants, terms and
requirements contained in Section 7 of the Note Purchase Agreement.
4. SUBORDINATED NATURE OF CERTAIN OBLIGATIONS. The Indebtedness
guarantied by each of the Guarantors hereunder is subordinate and junior to
"Senior Debt" (as defined in the Note Purchase Agreement), as provided in the
Note
7
<PAGE> 8
Purchase Agreement. The obligations of the Guarantors hereunder in respect of
the Indebtedness are subordinate and junior in right of payment to Senior Debt
with respect to which such Guarantors are liable, in the same manner and with
the same effect as "Subordinated Debt" (as defined in the Note Purchase
Agreement) is subordinate and junior to Senior Debt as provided in section 10
of the Note Purchase Agreement.
5. DEFAULTS--REMEDIES.
5.1 NATURE OF EVENTS. An "Event of Default" hereunder
shall exist if an "Event of Default" under, and as defined in, the Note
Purchase Agreement, occurs and is continuing.
5.2 DEFAULT REMEDIES. If an Event of Default exists
hereunder, then the Purchasers (as provided in the Note Purchase Agreement)
shall have certain rights, including, without limitation, the right to declare
the entire principal (and in certain cases, premium or Make-Whole Amount) and
all interest accrued on, or payable in respect of, all the Notes then
outstanding to be, and such Notes and interest shall thereupon become, together
with certain other sums as provided in the Note Purchase Agreement, forthwith
due and payable, without any presentment, demand, protest or other notice of
any kind, all of which have been expressly waived by the Company and each
Guarantor. In any such event, the Purchasers shall have immediate recourse to
each Guarantor to the fullest extent set forth herein.
All covenants, conditions, provisions, warranties,
guaranties, indemnities and other undertakings of each Guarantor contained in
this Guaranty Agreement and in any other document to which any of the
Purchasers and any Guarantor are party shall be deemed cumulative to and not in
derogation or substitution of any of the terms, covenants, conditions or
agreements of such Guarantor herein or therein contained.
5.3 OTHER ENFORCEMENT RIGHTS. The Purchasers may proceed
to protect and enforce this Guaranty Agreement by suit or suits or proceedings
in equity, at law or in bankruptcy, and whether for the specific performance of
any covenant or agreement herein contained or in execution or aid of any power
herein granted or for the recovery of judgment for the obligations hereby
guaranteed or for the enforcement of any other proper, legal or equitable
remedy available under applicable law.
5.4 DELAY OR OMISSION; NO WAIVER. No course of dealing
on the part of any of the Purchasers nor any delay or failure on the part of
any of the Purchasers to exercise any right shall impair such right or operate
as a waiver of such right or otherwise prejudice any Purchaser's rights, powers
and remedies. Every right and remedy given by this Guaranty Agreement or by
law to the Purchasers or any of them may be exercised from time to time as
often as may be deemed expedient by any Purchaser.
8
<PAGE> 9
5.5 RESTORATION OF RIGHTS AND REMEDIES. If any Purchaser
shall have instituted any proceeding to enforce any right or remedy under this
Guaranty Agreement or under any one or more of the Notes or the Note Purchase
Agreement and such proceeding shall have been discontinued or abandoned for any
reason, or shall have been determined adversely to such Purchaser, then and in
every such case such Purchaser, the Company and each Guarantor shall, subject
to any determination in such proceeding, be restored severally and respectively
to their respective former positions hereunder and thereunder, and thereafter
all rights and remedies of such Purchaser shall continue as though no such
proceeding had been instituted.
5.6 CUMULATIVE REMEDIES. No delay or omission of any of
the Purchasers to exercise any right or power arising from any Default or Event
of Default hereunder shall exhaust or impair any such right or power or prevent
its exercise during the continuance of such Default or Event of Default. No
waiver by any of the Purchasers of any Default or Event of Default hereunder or
under the Note Purchase Agreement, whether such waiver be full or partial,
shall extend to or be taken to affect any subsequent Default or Event of
Default hereunder or under the Note Purchase Agreement, or to impair the rights
resulting therefrom except as may be otherwise expressly provided herein. No
remedy hereunder or under any of the Notes, the Note Purchase Agreement or any
other document to which the Company or any of the Guarantors and any of the
Purchasers are party is intended to be exclusive of any other remedy, but each
and every remedy shall be cumulative and in addition to any and every other
remedy given hereunder or under any of the Notes, the Note Purchase Agreement,
such other documents or otherwise existing; nor shall the giving, taking or
enforcement of any or any additional security, collateral or guaranty for the
payment or performance of the Indebtedness operate to prejudice, waive or
affect the security of this Guaranty Agreement or any rights, powers or
remedies hereunder, nor shall any Purchaser be required to first look to,
enforce or exhaust any such other or additional security, collateral or
guaranties.
6. INTERPRETATION OF THIS AGREEMENT.
6.1 CERTAIN DEFINITIONS. For purposes of this Guaranty
Agreement, the following terms shall have the respective meanings set forth
below or provided for in the section of this Guaranty Agreement referred to
immediately following such term (such definitions to be equally applicable to
both the singular and plural forms of the terms defined).
AGREEMENT -- preamble to this Agreement.
AMENDMENT -- third "whereas" clause hereof.
BANK BORROWERS -- fourth "whereas" clause hereof.
BANK CREDIT AGREEMENT -- fourth "whereas" clause hereof.
9
<PAGE> 10
BANKS -- fourth "whereas" clause hereof.
COMPANY -- first "whereas" clause hereof.
DEFAULT -- an event or condition the occurrence of which
would, with the lapse of time or the giving of notice or both, become
an Event of Default.
EVENT OF DEFAULT -- Section 5.1.
EXCLUDED PERSON -- means, at any time, (a) each current or
former general or limited partner of any Guarantor, (b) each current
or former general or limited partner of any Person referred to in
clause (a) of this definition and (c) each partner, director, trustee
or other fiduciary, officer, employee, stockholder or controlling
Person of any Person referred to in clause (a) or (b) of this
definition.
GUARANTY AGREEMENT -- preamble to this Agreement.
GUARANTOR, GUARANTORS -- preamble to this Agreement.
INDEBTEDNESS -- Section 2 hereof.
MAKE-WHOLE AMOUNT -- has the meaning ascribed to it in the
Note Purchase Agreement.
NOTE PURCHASE AGREEMENT -- third "whereas" clause hereof.
NOTES -- first "whereas" clause hereof.
OLD NOTE PURCHASE AGREEMENT -- first "whereas" clause hereof.
PERSON -- means any individual, firm, partnership, joint
venture, corporation, association, business enterprise, trust,
Governmental Body or other entity, whether acting in an individual,
fiduciary or other capacity.
PURCHASERS -- preamble to this Agreement.
SENIOR DEBT -- Section 4 hereof.
SUBORDINATED DEBT -- Section 4 hereof.
6.2 HEADINGS, ETC. All headings and captions preceding
the text of the several sections hereof are intended solely for convenience of
reference and shall not constitute a part of this Guaranty Agreement nor shall
they affect its meaning, construction or effect. Each covenant contained in
this Guaranty Agreement shall be construed (absent an express contrary
provision therein) as being independent of each and every other covenant
contained herein and compliance with any one covenant shall not (absent such
10
<PAGE> 11
an express contrary provision) be deemed to excuse compliance with any and all
other covenants.
6.3 DIRECTLY OR INDIRECTLY. Where any provision in this
Guaranty Agreement refers to action to be taken by any person, or which such
person is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such person.
7. MISCELLANEOUS.
7.1 NOTICES. Any notice or other communication required
or desired to be served, given or delivered hereunder shall be in writing, and
shall be deemed to have been validly served, given or delivered upon deposit in
the United States mails, as registered or certified mail (return receipt
requested), with proper postage prepaid and addressed to the party to be
notified as follows:
(a) if to the Guarantors, at the addresses in
respect thereof set forth on Exhibit A attached hereto; and
(b) if to the Purchasers or any of them, at:
The Mutual Life Insurance Company of New York
MONY Life Insurance Company of America
1740 Broadway
New York, New York 10019
Attn: MONY Capital Management Unit
and
Aegon USA Investment Management, Inc.
1111 N. Charles Street
Baltimore, MD 21201
Attn: Don Chamberlain
or to such other address as any Guarantor or any Purchaser may hereafter
designate for itself by written notice to such other person in the manner
herein prescribed.
7.2 SURVIVAL; BENEFIT OF GUARANTY. All warranties,
representations and covenants made by each Guarantor herein or on any
certificate or other document or instrument delivered by it or on its behalf
under this Guaranty Agreement or the Note Purchase Agreement shall be
considered to have been relied upon by the Purchasers and shall survive the
delivery to the Purchasers of the Notes and the payment thereof regardless of
any investigation made by the Purchasers or on their behalf. All statements in
any such certificate or other instrument shall constitute warranties and
representations by each Guarantor hereunder. This Guaranty Agreement shall be
binding upon each Guarantor and its successors and assigns and inure to the
benefit of and be enforceable by the Purchasers and their respective successors
and assigns. No provision of this Guaranty Agreement shall be waived, amended,
11
<PAGE> 12
modified or supplemented except by a written instrument consented to by the
party or parties against whom such waiver, amendment, modification or
supplement would be sought to be enforced.
Each Guarantor agrees to take such action as may be
requested by any of the Purchasers in connection with the transfer of the Notes
of any Purchaser in accordance with the requirements of the Note Purchase
Agreement in connection with providing an executed copy of this Guaranty
Agreement to the new holder or holders of such Notes, it being the intention of
this provision that no additional obligations of any Guarantor shall thereby be
created but rather that the existing obligations of the Guarantors shall be
more particularly stated in respect of one or more future holders of Notes that
are the subject of this Guaranty Agreement.
7.3 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
7.4 COUNTERPARTS. This Guaranty Agreement may be
executed and delivered in any number of counterparts, each of such counterparts
constituting an original but all together one and the same Agreement.
7.5 MISCELLANEOUS. Each Guarantor (to the fullest extent
that it may lawfully do so) expressly waives any claim of any nature arising
out of any right of indemnity, contribution, reimbursement or any similar right
in respect of any payment made under this Guaranty Agreement or in connection
with this Guaranty Agreement, or any claim or subrogation arising in connection
with respect to any payment made under this Guaranty Agreement, against the
Company or the estate of the Company (including liens on the property of the
Company or the estate of the Company), in each case if, and for so long as, the
Company is the subject of any proceeding brought under Title 11 of the United
States Code, or any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and further agrees that it will not file
any claims against the Company or the estate of the Company in the course of
such proceeding in respect of the rights referred to in this paragraph, and
further agrees that the Purchasers may specifically enforce the provisions of
this paragraph.
7.6 LIMITED RECOURSE AGAINST CERTAIN PERSONS.
(a) The remedies of the Purchasers including, without
limitation, any remedy which could be exercised upon the occurrence of
an Event of Default, shall be limited to the extent that no Excluded
Person shall have any personal liability hereunder as a general
partner or limited partner of any Guarantor with respect to the
indebtedness as guarantied hereunder, and in no event shall any
Excluded Person be
12
<PAGE> 13
personally liable as a general partner or limited partner for any
deficiency judgment in respect of any such obligation; provided,
however, that the provisions of this Section 7.6 shall not impair the
ability of any Purchaser (i) from proceeding against any Guarantor,
(ii) from realizing on the assets of any Guarantor or (iii) from
proceeding against any general partner of any Guarantor with respect
to actions such general partner caused such Guarantor to take
involving such Guarantor's obligations under this Agreement which
would constitute fraud, gross negligence or willful misconduct by such
general partner
(b) The Purchasers acknowledge and agree that Excluded
Persons are express third party beneficiaries of this Section 7.6, and
that the provisions hereof may be enforced by any Excluded Person
directly against any Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
NEXT PAGE IS SIGNATURE PAGE.]
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Second
Restated Guaranty Agreement to be executed by their duly authorized
representatives as of the date first hereinabove mentioned.
GUARANTORS:
FALCON CABLEVISION, A CALIFORNIA
LIMITED PARTNERSHIP
FALCON CABLE MEDIA, A CALIFORNIA
LIMITED PARTNERSHIP
FALCON COMMUNITY CABLE, L.P.
FALCON COMMUNITY VENTURES I LIMITED
PARTNERSHIP
FALCON TELECOM, L.P.
FALCON CABLE SYSTEMS COMPANY II, L.P.
FALCON INVESTORS GROUP, LTD., A
CALIFORNIA LIMITED PARTNERSHIP
FALCON TELECABLE INVESTORS GROUP, A
CALIFORNIA LIMITED PARTNERSHIP
FALCON MEDIA INVESTORS GROUP, A
CALIFORNIA LIMITED PARTNERSHIP
FALCON COMMUNITY INVESTORS, L.P.
BY: FALCON HOLDING GROUP, INC., AS
GENERAL PARTNER, OR GENERAL
PARTNER OF THE GENERAL PARTNER,
OF EACH OF THE FOREGOING
By_____________________________
Name_________________________
Title________________________
FALCON FIRST, INC.
By_________________________________
Name_____________________________
Title____________________________
14
<PAGE> 15
ATHENS CABLEVISION, INC.
AUSABLE CABLE TV, INC.
CEDAR BLUFF CABLEVISION, INC.
DALTON CABLEVISION, INC.
EASTERN MISSISSIPPI CABLEVISION, INC.
FALCON FIRST CABLE OF NEW YORK, INC.
FALCON FIRST CABLE OF THE SOUTHEAST,
INC.
FALCON FIRST HOLDINGS, INC.
FF CABLE HOLDINGS, INC.
LAUDERDALE CABLEVISION, INC.
MULTIVISION NORTHEAST, INC.
MULTIVISION OF COMMERCE, INC.
PLATTSBURG CABLEVISION, INC.
SCOTTSBORO CABLEVISION, INC.
SCOTTSBORO TV CABLE, INC.
By_________________________________
As an authorized officer of each
of the foregoing corporations
ACKNOWLEDGED BY THE COMPANY:
FALCON TELECABLE, A CALIFORNIA
LIMITED PARTNERSHIP
BY: FALCON HOLDING GROUP, INC., AS
GENERAL PARTNER, OR GENERAL
PARTNER OF THE GENERAL PARTNER
By_____________________________
Name_________________________
Title________________________
15
<PAGE> 16
ACKNOWLEDGED AND ACCEPTED:
AUSA LIFE INSURANCE COMPANY, INC.
By______________________________
Name__________________________
Title_________________________
MONY LIFE INSURANCE COMPANY OF AMERICA
By______________________________
Name__________________________
Title_________________________
16
<PAGE> 17
EXHIBIT A
ADDRESSES OF GUARANTORS
Communications to each Guarantor should be addressed as follows:
[Name of Guarantor]
10900 Wilshire Boulevard
Fifteenth Floor
Los Angeles, CA 90024
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1996, AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,876
<SECURITIES> 0
<RECEIVABLES> 17,009
<ALLOWANCES> 399
<INVENTORY> 4,716
<CURRENT-ASSETS> 0
<PP&E> 519,041
<DEPRECIATION> 214,241
<TOTAL-ASSETS> 790,716
<CURRENT-LIABILITIES> 57,430
<BONDS> 900,989
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 790,716
<SALES> 0
<TOTAL-REVENUES> 153,803
<CGS> 0
<TOTAL-COSTS> 135,593
<OTHER-EXPENSES> (468)
<LOSS-PROVISION> 2,166
<INTEREST-EXPENSE> 50,983
<INCOME-PRETAX> (32,305)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,305)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,305)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
